The future of Australian property prices

Mr Z said:

Not great but not backwards.

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That certainly was not what we experianced in the outer north of brisbane. As I said My dad's house went no where for years, and the house that I bought for $218,000 in 2001 had cost almost that much to build 7 years earlier.

Mr Z said:

Not great but not backwards.

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ahh and so we see the great bubble of 99 onwards......i wonder where we will be left after the pop? if history has shown us anything(and it has) your castle hill home will be worth slightly more than what you paid for it in 01 tyson...MO

on a side note, very nice buy. some nice houses in there(i can only assume yours is one of them being in castle hill) not the greatest run to work on the highway in the morning though

oh and my comment on investing when i was 12, was just clowning around, as you said hindsight makes it all too easy

Tysonboss1 said:

That certainly was not what we experianced in the outer north of brisbane. As I said My dad's house went no where for years, and the house that I bought for $218,000 in 2001 had cost almost that much to build 7 years earlier.

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haha outer north? if i were to try and by a home in the same km ring as castle hill(obviously not in castle hill itself) i would be accused of trying to buy a 'mcmansion'. outer north now means caboolture

Some interesting points here. My thoughts on Baby Boomers:

My parents bought a house in a beachside suburb in Adelaide in 1975 when I was just a kid. It cost about 4 times my parents' income. Life wasn't easy and we had few mod cons. What we did have though was amazing surroundings (for a kid to play in). Vast areas of swampland, greenhouses, and wild bush surrounding the nearby river.

My point is that is was considered "in the sticks". No-one really wanted to live there.

Jump forward to today and my parents house is worth ten times my current income. But that's with all their renovations and improvements over the decades. It is annoying that I can't afford to buy a house in the suburb I grew up in. But the swamp was drained and became West Lakes, with lake-front and canal-front homes. The greenhouses were removed and houses developed. The river was cleaned, turned into Linear Park. Now the area is very popular as it is near the beach, near the river, near lakes and not far from the CBD either.

Basically my parents bought in an area that was, at the time, considered the outer suburbs, because that's all they could afford, back in 1975. I remember we had a kerosene-powered fridge for years, because they couldn't afford a new electric one. And a manual washing machine. I remember going to friend's houses to watch their TV. My parents scrimped on everything to own their house.

Looking at the outer suburbs of Adelaide now, I could buy a place for 4 times my income. Its just that I don't want to live out "in the sticks", like my parents did. And I don't want to scrimp. I want the iPad and the flatscreen TV and a nice car, nice clothes, regular nights out etc etc etc.

And I think that's due to our entitlement culture. Blaming the Boomers seems pointless. They just had a bit of luck on their side. And that luck was a 15-year global credit expansion. That is now ending with a massive global debt hangover. So interesting times ahead.

For the record I rent a great place right by the beach in Adelaide for 15% of my income. I have made another 10% profit on my investment portfolio this financial year already on share/forex/bullion trades. So my savings keep going up while house prices seem to be slowly coming back down. Hoping the cross-over point comes in about 3-4 years time, when I'll be able to buy a house near the beach with cash and no mortgage.

For a real picture of current market conditions in your desired suburb, check out www.refindhouseprices.com Lots of property in my area sitting on the market for hundreds of days despite big discounts. RE spruikers won't tell you that.

And speaking of Brisbane, has everyone seen the articles about how the median house price in Brisbane is now below the median house price in Adelaide? Bizarre.

I live in Adelaide but have worked in Brisbane twice this year. So to me this is surprising. Think about it --- the median house price in a city of 1 million is higher than the median house price in a city of 2 million!!! Prices in the capital of a state of 1.5 million people are more expensive than houses in the capital of a state with a population of over 3 million!!! Bizarre.

For the record I rent a great place right by the beach in Adelaide for 15% of my income. I have made another 10% profit on my investment portfolio this financial year already on share/forex/bullion trades. So my savings keep going up while house prices seem to be slowly coming back down. Hoping the cross-over point comes in about 3-4 years time, when I'll be able to buy a house near the beach with cash and no mortgage.

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grebly24, I like your plan and patience will in my view be rewarded.

Tysonboss1 said:

not in the brisbane market they didn't,

My Dad bought our family home in 1992 for $200,000 in 2000 it was valued at $195,000.

The northern brisbane market went no where for years, offcourse during that time there was inflation, and population growth, so when the boom happened dads property went from $195,000 to $425,000 within 3 years.

Now any one looking at that growth rate might think it is part of a bubble, and no doubt there is some froth there, but when you factor in all the stagnation of prior years there is much less froth than appears at first glance.

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Ever increasing house prices is a ridiculous modern day construct which I can't understand how people think it is a good thing or a logical thing to be happening.

Yeah, my folks struggled too, but you know what ? That means nothing. If they were in the same situation today, they probably wouldn't even get a loan and the suburb I'm talking about is STILL the sticks.

You can't compare the situation of people on crap incomes 20 years ago to the situation of SAVERS of GOOD incomes today.

greebly24 said:

For a real picture of current market conditions in your desired suburb, check out www.refindhouseprices.com Lots of property in my area sitting on the market for hundreds of days despite big discounts. RE spruikers won't tell you that.

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REfind may be useful but they clearly have data accuracy problems. Two properties listed as advertised for 256 and 254 days in my area (very close to me) have in fact been on the market for 2 and 3 months respectively. So you need to validate the information posted on REfind for any property listed there as reliability is clearly an issue.

Mrmagoo said:

Ever increasing house prices is a ridiculous modern day construct which I can't understand how people think it is a good thing or a logical thing to be happening.

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Do you understand the concept of inflation, The currency we use to buy houses goes down in value by atleast 3% per year, So to think property would not go up over time in $$$ terms is a bit crazy.

Add to that population growth, there is population growth in Australias capital cities, this increasing density will also have some effect of pushing up values.

young-gun said:

haha outer north? if i were to try and by a home in the same km ring as castle hill(obviously not in castle hill itself) i would be accused of trying to buy a 'mcmansion'. outer north now means caboolture

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There is plenty of modest homes in that ring that would be affordable,

http://www.realestate.com.au/property-unit-qld-petrie-107991546

Obviously not a mc mansion, But it would be a good starter home for a young couple.

Tysonboss1 said:

Do you understand the concept of inflation, The currency we use to buy houses goes down in value by atleast 3% per year, So to think property would not go up over time in $$$ terms is a bit crazy.

Add to that population growth, there is population growth in Australias capital cities, this increasing density will also have some effect of pushing up values.

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It is the growth in excess of 3% that is the concern.

Also, they are actually building new houses in Australia.

Also, there is not a shortage of houses.

MW

PS - nice to be back after some well earned holidays, to see that some things never truly change... except the clearance results, which though characteristically fudged, are trending around low 50%. Does this mean anything?

medicowallet said:

It is the growth in excess of 3% that is the concern.

Also, they are actually building new houses in Australia.

Also, there is not a shortage of houses.

MW

PS - nice to be back after some well earned holidays, to see that some things never truly change... except the clearance results, which though characteristically fudged, are trending around low 50%. Does this mean anything?

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The comment I was making is that for over 7 years there was zero growth in my suburb, But then it all came at once along with a surge in migrants which pushed up the prices over a realtively short time, So you can't say all the growth over that time was a bubble.

Yes new dwellings are being built, But when they are knocking down houses to rebuild town houses and apartment buildings, those decreasing number of houses will go up in value and people that want to live in house and land options will start moving to outer suburbs and push up prices there.

young-gun said:

ahh and so we see the great bubble of 99 onwards......

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Just remember any chart that shows compounded growth will have a hockey stick shape and give the impression of a bubble. eg a chart that starts at $25,000 and ends at $1000,000 will have the growth from $25,000 to $50,000 look far less dramatic than the growth in later years from $500,000 to $1,000,000. even though they are the same growth rate.

If you think that property chart was a bubble, what are your thoughts on this one, and keep in mind it is actually $300 higher since this chart was published.

Heres an interesting fact,

The average Australian mortgage holder is 9 months ahead in their payments, No doubt the most recent interest rate cut is going to extend that figure,

Tysonboss1 said:

Heres an interesting fact,

The average Australian mortgage holder is 9 months ahead in their payments, No doubt the most recent interest rate cut is going to extend that figure,

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Interesting. Is this figure at all distorted by those who have taken out 30 year loans with the intention of paying it off far quicker...?

A historical graph of this figure would be very interesting...one of the first positive facts ive heard for property in a while...

VSntchr said:

Interesting. Is this figure at all distorted by those who have taken out 30 year loans with the intention of paying it off far quicker...?

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No doubt it caused by all sorts of reasons,

1, People maintaining the same monthly repayment even though interest rates have gone down, clearing their home loan quicker.

2, People storing cash in offset accounts are reducing their loan quicker

3, lumps sums from bonuses etc.

4, even just paying an extra $20 a week seriously increases the speed your loan is cleared.

There has been an increase in savings over the last few years in Australia, and no doubt home owners divert their portion of the savings to clear their loan at 7% or sit it in an offset account than in a high interest bank account at 6%.

Tysonboss1 said:

Just remember any chart that shows compounded growth will have a hockey stick shape and give the impression of a bubble. eg a chart that starts at $25,000 and ends at $1000,000 will have the growth from $25,000 to $50,000 look far less dramatic than the growth in later years from $500,000 to $1,000,000. even though they are the same growth rate.

If you think that property chart was a bubble, what are your thoughts on this one, and keep in mind it is actually $300 higher since this chart was published.

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That spike started when the US govnt decided to start running huge deficits and printing vast amounts of USD, thereby devaluing their currency in relation to hard assets, such as gold. Chart the USD against other commodities and base metals and the picture is similar.

Junior said:

That spike started when the US govnt decided to start running huge deficits and printing vast amounts of USD, thereby devaluing their currency in relation to hard assets, such as gold. Chart the USD against other commodities and base metals and the picture is similar.

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I am not really looking for an arguement about gold, Been there done that,

One thing I will say though, if it is simply the currency devaluing, then why has the price of every thing else not followed the same path. eg, other commodities, land etc.etc

Tysonboss1 said:

Heres an interesting fact,

The average Australian mortgage holder is 9 months ahead in their payments, No doubt the most recent interest rate cut is going to extend that figure,

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Interesting. What would be more interesting is to see who is actually 9 months ahead. I'm guessing, given the number of people who bought homes since 2008 in mortgage stress, it is probably those people who bought 5+ years ago. Do you have a cite?

Tysonboss1 said:

There has been an increase in savings over the last few years in Australia, and no doubt home owners divert their portion of the savings to clear their loan at 7% or sit it in an offset account than in a high interest bank account at 6%.

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I think this is probably the case. The rainy day account is now just the mortgage; if you lose your job you end up redrawing on the mortgage.

McLovin said:

Interesting. What would be more interesting is to see who is actually 9 months ahead. I'm guessing, given the number of people who bought homes since 2008 in mortgage stress, it is probably those people who bought 5+ years ago. Do you have a cite?



.

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Yeah, obviously the longer to have owned the more time you have had to get infront,

The figure was quoted by a westpac finance guy on bloomberg radio today, he was qouting from various sources that have come out recently.