The future of Australian property prices

[trainspotter]

yeah

i like to make lollipops when the sun shines

and when the day ends i sleep, i usually brush my teeth.. i sometime snore but i noticed in the last months i have done so less

and when i wake up i ride, then i shower then i go to work. ohh yeah, i forgot to mention i get dressed after the shower and have breakfast.. lol nearly forgot that one..

which is why the future of the Australian property prices is a topic that cant be discussed, as its now all about daily routines

anyone cut their toe nails today?

LOLOL ...... add a bit of input Agentm why don't ya?

Look at what the average price is and % change from last year in your capital city. +4.7% nationally. HEY ...... I thought property was going down?

Sydney $525,000 +6.6%
Melbourne $505,000 + 8.4%
Brisbane $435,000 -1.0%
Adelaide $387,000 +3.6%
Perth $465,000 -2.3%
Darwin $481,000 +4.8%
Canberra $510,000 +2.5%
National $475,000 +4.7%
Hobart* $325,500 +1.3%

Now the problem with these figures is the outlier does not include REGIONAL property which in some areas has TANKED. Mandurah in WA has had up to 40% wiped off apartments. Ipswich (prior to the flooding) was a massive graveyard of mortgage stress (some great bargains to be had because the vendor would rent back from you ??)

Anyone else for some meaningful input?

 

[againsthegrain]

I don't like living in the city, would never, living in mid city suburb its ok, long term I want to live in outer suburbs. Nothing beats a nice backyard, view of the mountains and life in slow pace.

Right now its about convinience and saving money. When I am ready I will buy a house in the outer suburbs without the city premium.

BUT I will only do this once I can get a small enough mortgage not to worry about a full time job, no way I will be traveling to the city then for a job.

Will settle for something local, part time even just to bring in enough, keep my hobbies investments and secondary means of wealth generation.

Living in the burbs is great for me, personal prefrence but I will be doing it in the right order, not buying on 100% loan in the burbs and spending most of my life traveling to the city to pay it off by the time im 50 lol

(going back to the example of my friends who bought in Keysborough and only paid off 15k in 4 years)

Definately not knocking living in outer suburbs, and I hope the rush to live in the city will just make it that much easier for me to buy in the burbs at a decent price when im ready.

 

[awg]

1 hour each way on the train is 10 hours a week for those who work. At a very conservative time value of $20ph this means you should be 'saving' at least $200pw to live out there.

If you live in Sydney though, 1 hour would be standard imo

But I do agree, which is why my long-term workplace was 8 mins

Now takes 15 mins to the premises, but mostly work from home

had an argument with superior who wanted me to go work somewhere 45min drive each way, I told him without increased compensation, why the hell would I do that.
He was cranky, he drove 1hr+ each way, per day, to boost his stinking career.

So chuck in almost $100pw petrol extra.

my kids all walked to school

If I had my way, I would have a collection of shacks on good blocks.

Unfortortunately, I didnt pursue this strategy, I would have been in a better position than I am know..would have bought one last week, but it got snapped up

 

[robots]

hello,

oh gidday everyone, professor real deal in the house

great discussion, i dont know if you can claim the top Nun, my town (ballarat) is still going strong, i dont know mate

and how's this, today i got the train from Southern Cross to Ballarat in 1hr and 4mins, EXPRESS straight up to Victoria's No.1 regional town. amazing brothers

oh well, what page all you traders up to in the text book?

thankyou
professor robots

hello,

oops, didnt see anything in the above thread about work! and then off went the reply button across australia and world about travel time, time i get up etc etc

the textbooks were pulled out and the usual assumptions were made like the rest in this thread

oh well, another great day, beautiful

thankyou
professor robots

 

[greebly24]

My story.

I live in a popular beachside suburb in Adelaide. I board with the owner of the house and pay $150 per week rent & bills ($7800 per year). I earn $47kpa after tax. I've got $40k saved and am saving another $20k per year for a house deposit. Got cash/shares/bullion/forex invested and up 14% this financial year. Hope to have $200k with zero debt in five years time.

Got 20 weeks paid leave oweing. Not sure whether to cash some in for house deposit? Just backpacked North Queensland for a month. Wicked.

Got recent First Home Buyer friends who don't have money to do anything.

Plan on buying a home in about five years time. Think housing around here is currently overpriced. Think it might be different after five more years of baby boomers retiring with inflation & interest rates rising.

Housemate owns our house ($500k) plus one next door ($420k). Owes $600k. Earns $100kpa (before tax). Trying to rent next door for $350/wk but no takers after one month.

Houses either side for sale. One for $450k, the other extensively renovated hoping for $600k at auction. RE Agent @ $450k home said other home dreaming, "given the current market".

Any thoughts/advice/opinions? I'll let you know about the rental/sales if anyone interested in my current Adelaide market anecdote.

 

[KurwaJegoMac]

My story.

I live in a popular beachside suburb in Adelaide. I board with the owner of the house and pay $150 per week rent & bills ($7800 per year). I earn $47kpa after tax. I've got $40k saved and am saving another $20k per year for a house deposit. Got cash/shares/bullion/forex invested and up 14% this financial year. Hope to have $200k with zero debt in five years time.

Got 20 weeks paid leave oweing. Not sure whether to cash some in for house deposit? Just backpacked North Queensland for a month. Wicked.

Got recent First Home Buyer friends who don't have money to do anything.

Plan on buying a home in about five years time. Think housing around here is currently overpriced. Think it might be different after five more years of baby boomers retiring with inflation & interest rates rising.

Housemate owns our house ($500k) plus one next door ($420k). Owes $600k. Earns $100kpa (before tax). Trying to rent next door for $350/wk but no takers after one month.

Houses either side for sale. One for $450k, the other extensively renovated hoping for $600k at auction. RE Agent @ $450k home said other home dreaming, "given the current market".

Any thoughts/advice/opinions? I'll let you know about the rental/sales if anyone interested in my current Adelaide market anecdote.

Taking the house next door as an example:

House price: $450k
Taking a conservative 5% yoy growth on the property: $22,500 from year 1, increasing every year.

Rate of savings $20,000 per year.

So taking your rate of savings away from growth, the house is going up in price a couple of $k every year more than you can save.

Of course that's assuming house prices grow at 5% every year (who knows what the future will bring). Using a growth of 3 or 4% your rate of savings will outpace the price rise but only marginally. Enough to make it worthwhile? Your choice.

If you believe that house prices will stagnate or decline, then saving is the way to go. But if you believe house prices will continue to rise, you need to predict if it will not outpace your rate of savings - otherwise you'll actually be going backwards by saving.

My advice would be to form your own opinion on the future direction of the market and whether it will decline, or whether your savings will outpace the rate of increase of the sort of property you're after.

 

[robots]

My story.

I live in a popular beachside suburb in Adelaide. I board with the owner of the house and pay $150 per week rent & bills ($7800 per year). I earn $47kpa after tax. I've got $40k saved and am saving another $20k per year for a house deposit. Got cash/shares/bullion/forex invested and up 14% this financial year. Hope to have $200k with zero debt in five years time.

Got 20 weeks paid leave oweing. Not sure whether to cash some in for house deposit? Just backpacked North Queensland for a month. Wicked.

Got recent First Home Buyer friends who don't have money to do anything.

Plan on buying a home in about five years time. Think housing around here is currently overpriced. Think it might be different after five more years of baby boomers retiring with inflation & interest rates rising.

Housemate owns our house ($500k) plus one next door ($420k). Owes $600k. Earns $100kpa (before tax). Trying to rent next door for $350/wk but no takers after one month.

Houses either side for sale. One for $450k, the other extensively renovated hoping for $600k at auction. RE Agent @ $450k home said other home dreaming, "given the current market".

Any thoughts/advice/opinions? I'll let you know about the rental/sales if anyone interested in my current Adelaide market anecdote.

hello,

top effort Greebly24, doing well brother

keep saving and remember it will most likely be "work", that beautiful risk free technique of amassing wealth that will drive your savings and subsequent financial rewards

i would look at getting a property as soon as you can, buy within your capabilities and relax man

thankyou

professor robots

 

[kincella]

you need to look at the bigger picture when comparing property to other assets....
especially cash......firstly consider that inflation is a constant, most of you do not consider....supposedly its running around 3% (but costs of housing are not included in that figure) housing is one of the biggest running costs for the majority out there...
use a real figure of 10% for CPI for starters....
so your dollar sitting in the bank earning 5% before tax, is actually being eroded each and every year...it has reduced buying power.....so when you take it out, it will buy 10% less every year....unless of course you keep topping it up by 10% every year

whereas houses usually keep pace with inflation.....so a house can sit there for several years, and retain its buying power when you cash it in..or it can greatly exceed all expectations

the other side of the coin with all the arguments here....all those who make money from trading whatever.....there are plenty of choices out there..... when using the argument to compare the other markets....gold, stocks, whatever.....to property....
seem to forget.....you cannot live without a home.....
all still need a home to live in....either buyers or renters.......... it makes no difference

housing is like food, and energy...everyone needs it.....but they can do without stocks gold etc in their lives.....

apparently 40% of sydney siders would consider moving out to the regional centres... nsw ecocities or similar term, 7 of them.....look it up....would be interesting if even 10% actually moved..

 

[robots]

hello,

gidday Kincella, good to see you pop in

great info, I also especially like your explanation why banks like to loan against property

gonna be a nice day tomorrow

thankyou
professor robots

 

[kincella]

Hi Robots,
I would love to have a fast train to Albury, like say 300 kph and do the trip in an hour or a bit....in the meantime its 3 hours by car, from house to house....
looks like I will be staying in Albury, its grown on me now....I should be able to work remotely, well i know I can, then just go to Melb every few months...if I have to

beautiful scenery to watch on the travels....magical transformation since the droughts gone...
I used to either read or sleep on the 4 hour train trip...then they stopped allowing the dog to travel.....so its by car now, and so much faster...
plus the little dog loves the country house, with a backyard, and garden to offer some respite from the otherwise boring days
magical working for yourself, gives you so much more choice....I work from home so there is very little travel involved....
enjoy whatever you do....this is one great country......full of opportunity for everyone
cheers

 

[medicowallet]

Taking the house next door as an example:

House price: $450k
Taking a conservative 5% yoy growth on the property: $22,500 from year 1, increasing every year.

Rate of savings $20,000 per year.

So taking your rate of savings away from growth, the house is going up in price a couple of $k every year more than you can save.

.

Might I suggest you shop around for your cash return
At call of 6.51% = $29295 at Ubank. Term deposits would be better still.

So a part of your argument is framed to serve your purposes. I hope this wasn't intentional.

Fair enough there would be $350 in rent per week coming in, but there are also insurances, other outgoings, maintenence etc.

This stuff has been done to death in the thread before, and even though on historical returns, property outperforms cash, at the moment there is a clear case for arguments that short to medium term, even cash can be competitive with or outperform housing.

How about you do some examples of ROI of $450k for a few of the capitals listed in the above thread.

I have done many, and at the moment I am hold on my properties ( and expecting decent 20%+ corrections ) and heavy in cash.

 

[Tysonboss1]

Might I suggest you shop around for your cash return
At call of 6.51% = $29295 at Ubank. Term deposits would be better still.

So a part of your argument is framed to serve your purposes. I hope this wasn't intentional.

Fair enough there would be $350 in rent per week coming in, but there are also insurances, other outgoings, maintenence etc.

This stuff has been done to death in the thread before, and even though on historical returns, property outperforms cash, at the moment there is a clear case for arguments that short to medium term, even cash can be competitive with or outperform housing.

How about you do some examples of ROI of $450k for a few of the capitals listed in the above thread.

I have done many, and at the moment I am hold on my properties ( and expecting decent 20%+ corrections ) and heavy in cash.

Over time cash never beats property,

 

[medicowallet]

Over time cash never beats property,

Which is wrong.

because it depends upon the timeframe.

I said that historically property outperforms cash, so I fail to see why you wrote your post.

But again, there are arguments over the short to medium term that cash could outperform property.

Let's just see how the current government can pressure people into spending money on an idealistic and stupid war for which, we cannot win alone, and may not be worth fighting. Yes I am a climate realist.

 

[Tysonboss1]

But again, there are arguments over the short to medium term that cash could outperform property.

.

Well they are not really arguements they are facts, Over 1 year or maybe even 2 cash will beat property simple because of the entry and exit fees of property. but from 3 years on the inflation effect on the cash starts to kick in and the exponetial decay of the cash buying power will see a property investment race away.

Getting into property with a time frame of 1 or 2 years is just plain silly.

 

[schnootle]

use a real figure of 10% for CPI for starters....

Gee that makes me feel a lot better about my HECS debt, by that reasoning it is exponentially deflating at 6% pa. It will be worthless soon.

 

[medicowallet]

Well they are not really arguements they are facts, Over 1 year or maybe even 2 cash will beat property simple because of the entry and exit fees of property. but from 3 years on the inflation effect on the cash starts to kick in and the exponetial decay of the cash buying power will see a property investment race away.

Getting into property with a time frame of 1 or 2 years is just plain silly.

Sorry to burst your bubble (pardon the pun)

But the inflationary effect applies to the capital in property as well.


You can keep believing that property will always beat cash over a 3 year period, but unfortunately history does not agree with you, and in the future it will defy your beliefs again.

There are surely pressures to come against housing including, but not limited to

1. China interest rates increasing
2. Great big new tax on everything
3. People overgeared
4. Food and fuel inflation

I prefer to be buffered from these risks for the medium term (well at least until the fallout of our naive attempts to stop the world warming have crystallised)

How people manage risk is their own personal choice, but some of us try to identify it and manage it, and the majority of the others have massive gearing in property at the moment.

 

[Tysonboss1]

But the inflationary effect applies to the capital in property as well.

Being that a property owner owns a real thing, (land with a house on it), the capital value of the house will be maintained, as the value of the paper money decreases obviously inflation devaules the cash not assets

 

[kincella]

hmmm, some people do not understand...... inflation is the result of the prices rising, at the same time it devalues your cash....ie you need more money to buy the same item next quarter.......hence so much emphasis on the CPI by all involved

hence why property keeps rising, for other reasons apart from the devaluatiion of your cash, but also the costs of inflation on new houses, or renovations etc.....

and for others it is purely the land value that increases the value.....ie in a desired location... for eg;.there is a block in Hampton, Vic with beach views, a horrid old dump on it, not lived in for 20 years...on the market at auction for over 1 million bucks.... the sea views adds xxxxxxxx amount of a premium to the property

oh, and look at this.....those fhb's are doing pretty well....
funny ,a survey of over 800 new home buyers, who bought in the last 2 years....83% had no regrets, they are happy,63% are paying off more than they need to off their mortgages...
average mortgage size is 240k's against a 280k home...
*******what no 600k prices for these savvy buyers.....as if a fhb would, or even could, pay those sums......as some on these property forums would have you believe

I note they were older than last years fhb's

extract only.............

When it came to the top three key motivations for buying their first home, respondents were most likely to point to ?set myself up financially for the future by getting my foot in the property market door? (68% of respondents). 42% said ?rising rents made owning a property more attractive than renting? and 26% said ?I see more benefits in investments such as property than I do in the share market?.


hmmm, obviously they did not come to these property forum sites to get advice from the bears.....
it all flies in the face of what most of the punters here have been predicting....

https://www.mortgagechoice.com.au/a...ecent-first-homeowner-survey-revelations.aspx

oh and look at this.....
2 SA suburbs, one up 45% another 38% wow, obviously there is another story over there....will check later to find out whats going on...

http://blog.mortgagechoice.com.au/
hmm food for thought, for some

 

[Agentm]

a lot of analysts see the canada and australia property bubbles as remarkably similar

canada has the strongest banks and australia the third strongest banks

this from Capital Economics and its Canada Economic Outlook Report (Q1 2010)

Because Canada emerged from the global financial crisis largely unaffected, many Canadians now appear to believe that the economy is somehow invincible. This level of hubris is disconcerting when housing valuations have lost all touch with the fundamentals, driven up by a massive surge in household debt. We’ve seen this story played out in countless other countries and it never has a happy ending…

Relative to incomes, our calculations suggest that Canadian housing is now just under 40% over-valued, which is about the same level of excess that the US market reached before it collapsed. We have pencilled in a 25% cumulative decline in house prices over three years, mirroring what happened south of the border…

Canadian household debt is now up to 150% of disposable income, well in excess of what we saw in the US…

Over the last several years, growth in consumption has far outstripped income gains, as households have gone on a spending binge, funded by credit growth and home equity extraction.

With household balance sheets stretched and house prices expected to fall, however, we forecast that growth in consumption spending will lag income growth for the next couple of years, as households focus on rebuilding their saving rate…

The biggest downside risk is that an adverse feedback loop could develop, as it did in the US, with rapidly falling house prices leading to a contraction in both output and employment, which puts even more downward pressure on house prices…

Unfortunately, the end of the housing boom will have a serious detrimental impact on total employment and housing activity as well as asset values…

Overall, we anticipate that domestic demand growth will slow from 5.5% in 2010, to 2.2% in 2011 and only 1.9% in 2012…



some see the canadian bubble ending..

its obvious that the australian bubble is in full force, with the following figures for last year

Sydney $525,000 +6.6%
Melbourne $505,000 + 8.4%
Brisbane $435,000 -1.0%
Adelaide $387,000 +3.6%
Perth $465,000 -2.3%
Darwin $481,000 +4.8%
Canberra $510,000 +2.5%
National $475,000 +4.7%
Hobart* $325,500 +1.3%

its all go go go for 2011 imho.. massive false clearance rates of 66% touted last weekend but the actual is 59.7% after those dastardly unreported properties were found..

all good thought for 2011, the bubble in the invincible australian property sector is not showing any signs of abating imho..

sunshine and lollipops again this weekend with some record auctions coming up..

plenty out there dead keen to soak it all up and inflate it further..

 

[medicowallet]

Being that a property owner owns a real thing, (land with a house on it), the capital value of the house will be maintained, as the value of the paper money decreases obviously inflation devaules the cash not assets

Being that a property owner owns a real thing, (land with a house on it), the capital value of the house will be maintained, as the value of the paper money decreases obviously inflation devaules the cash not assets

No,

Please show me anything that guarantees that house prices increase in line with inflation every year.

In fact, if it did we would not have the bubble we have now.

So in fact, a house growing at $20000 as in the example above, which through inference you support, the $20000 increase is chewed up by inflation, exactly the same as interest on the cash.

Because the VALUE of the house is maintained by capital gain (as is the value of the cash by interest on earnings), but the purchasing power of a house worth

$470000 after year 1 ($20000 capital growth on $450000)

is exactly the same as

$470000 in cash after year 1.

What you are obviously saying is that house prices will always outperform inflation, which is clearly wrong.

I know it is impossible for you to believe that cash can outperform property, but perhaps you were not alive during the last time it did, but as with other generation y and younger, you will see it one day, perhaps within the next couple of years ( or if you live in Brisbane or Hobart, perhaps last year)