The future of Australian property prices

Mrmagoo · 7 November 2011

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.

No, never heard of inflation.

You ever heard of nominal inflation ?

House prices should at beast increase by inflation, not four or five times inflation, which leads to a real price increase. Ever increasing house prices are ridiculous and we're seeing the result of decades of ridiculousness right now.

If I earn $100 an a can of coke costs $1 then in 5 years time if I multiply both numbers by 5 it is still the same percentage of my income.

If a can of coke all of a sudden cost 15% of my income, rather than 1% would you call that "progress" or a backwards step, because the average worker can no longer afford a basic item like a can of coke.

Or ... all those coke investors... making society better my making coke cost $500 a can.

Mrmagoo · 7 November 2011

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.

Gold may or may not be in a bubble but it is clear from that graph thhat SOMETING happened.

Growth rates like that, are they sustainable ?

Probably not.

Are they usually followed by sharpy falls.

Probably.

Is that one a heck of a lot steeper and gargantuan than normal.

Yes.

Should you be worried ?

Yes.

young-gun · 7 November 2011

Tysonboss1 said:
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.

haha i know i was slightly over-exaggerating. this type of property is unsuitable for us unfortunately, we run a business from home also so we need a reasonable amount of room(not ridiculous amounts).

on the gold topic without elaborating too much, it's a bubble, but not inflated quite as badly as house prices IMO. obviously the 2 graphs arent comparable anyway(apples n oranges) as im sure you're aware.

and id like to point out that once upon a time you could bury a jar filled with 1000$ and a hundred years later you could dig it up and buy the same things for the same amount

Tysonboss1 · 8 November 2011

young-gun said:
1, on the gold topic without elaborating too much, it's a bubble, but not inflated quite as badly as house prices IMO.

2, and id like to point out that once upon a time you could bury a jar filled with 1000$ and a hundred years later you could dig it up and buy the same things for the same amount

1, well, different people would argue the point, but gold went from $250 to over $1850 in the time property went from $218,000 to $450,000. A comparible bubble in property would have property go from $218,000 to over $1,700,000.

2, Yeah I know, different currency (gold and silver backed) the economy didn't run to hot back then either, there are pros and cons, the current system is much better ( although it does have weaknesses ), I don't think it is healthy to have a currency that is fixed, But thats a whole other disscussion.

Mrmagoo · 9 November 2011

And if I could walk down the street and see blocks of gold on every street I'd be concerned about the gold price too.

Especially if everyone lived in gold.

Tysonboss1 · 9 November 2011

Mrmagoo said:
1, House prices should at best increase by inflation, not four or five times inflation, which leads to a real price increase. Ever increasing house prices are ridiculous and we're seeing the result of decades of ridiculousness right now.

2, If I earn $100 an a can of coke costs $1 then in 5 years time if I multiply both numbers by 5 it is still the same percentage of my income.

If a can of coke all of a sudden cost 15% of my income, rather than 1% would you call that "progress" or a backwards step, because the average worker can no longer afford a basic item like a can of coke.

Or ... all those coke investors... making society better my making coke cost $500 a can.

1, that would only be true if there was not also population growth, ofcourse if there was a stagnant population with zero growth in the number of households then yes, houses prices would only increase over time with inflation, However if population and the number of house holds increases in an area houses on land will increase at a rate above inflation.

2, Yes, provided that the supply of coke = the demand. if the number of people buying coke every day increased but the number of cokes stayed the same the price would rise.

It is true that the price of accomadation should remain within a certain percentage of a persons income over time, However for this to be achieved in an area with a growing population, the type of property must change

eg. in the 1940's it would have been possible for every family in sydney to live in a house on a 1/4 acre block, however once the population has tripled, that is no longer possible, People have to accept that the person of lower means must choose to live in an apartment of town house.

Offcourse if a person decides they want to live in a house on a 1/4 acre block, they will find that the price has risen faster than inflation and they must use a great % of their earnings, simply because over time the number of 1/4 blocks has diminished as they are subdivided into town houses and apartment blocks and the number of people who hold the dream of owning a house with a back yard has increased.

It's simple supply and demand, Offcourse provided there is not to much red tape the price of accomadation should stay within their budget if they are willing to change the type of property they live in, or move out of the city.

Tysonboss1 · 9 November 2011

Mrmagoo said:
Especially if everyone lived in gold.

Thats the thing isn't it, No one lives in gold, or eats it. It is not a nessesity of life, unlike dry land,

Humans need space, We need space to live, do business, manufacture and produce food, and the population is still growing, which inturn will put more pressure on the price of that space,

As I said in an earlier post, the free market system (provided there is not tomuch red tape) will ensure you can always afford the space you need to live, But it can not ensure that space consists of a 1/4 arce block within a close circle of a capital city, it will most likly be an option with less land content, eg. an apartment or town house.

Offcourse, if land is a must have, we do live in a large country and you can move out of the city to a place where there is less competition for land.

Mr Z · 9 November 2011

Humans need money to live the way they do in organized economies. Gold is money that is no one else's debt, that is its function. Admittedly money is a little more abstract than a roof over ones head but none the less an important concept. When FIAT money is under siege from bad management gold fills the void and allows ordinary folk to buy protection in the form of a recognized monetary commodity that has survived the ages with value intact.

In a true free market we'd choose our money as well... think about what you would trust?

You persist in degrading gold as useless and you refuse to acknowledge its role in the system. Central banks keep gold for a reason... a little more complex a reason that hiding under it or eating it but then again humans are a little more complex than that are they not?

P.S. We have not got a free market, free market arguments are a nonsense in this country. We have a regulated and manipulated market that is full of unintended consequences born of government interference.

Mr Z · 9 November 2011

Tysonboss1 said:
and the population is still growing, which inturn will put more pressure on the price of that space

You know that is not 100% correct, the cost and availability of finance determines the level that real estate prices can rise to. It has never been simply supply and demand of housing that determine the price of a house. It is the supply and demand of housing combined with the supply and demand of housing credit that determines house prices. This is true for all things, most analyses fixes the supply and demand for money and only addresses the other supply demand balance in the equation. This works over the short term but when you consider assets held across a longer term you have to consider the state of the credit market that underpins price. We have just witnessed what happens in commodities when the credit part of the equation falls away despite nothing like that level of softening in physical commodity movements (iron ore set records across the slump!). People accept that as not only possible but a probable event from time to time YET when you talk real estate the same dynamic becomes an unthinkable and unmentionable option. Funny really, when you think about it!

Beware talking your book, it can and will lead you down a mental box canyon.

This is all about credit.

satanoperca · 9 November 2011

Mr Z said:
This is all about credit.

& govnuts needs to collect revenues through stamp duties and rates. The higher the price of a home, the more people selling and buying, the more revenue they collect.

The govnuts have a vested interest in keeping property prices growing yoy.

What % of state revenues comes from transaction costs of property?

Cheers

Mr Z · 9 November 2011

You presuppose that government will be able to achieve that aim sustainably.

I'd challenge that notion .

satanoperca · 9 November 2011

Mr Z said:
You presuppose that government will be able to achieve that aim sustainably.

I'd challenge that notion .

Of cause not, it is not sustainable, however, they will try everything they can to keep it going. Just need to look at the effect the FHBG had, while I'm against this form of so called stimulation, the last one had the desired effect from the govnuts view.

On the money the govnuts spent on the FHBG, I wonder what return on their expenditure they got through increase stamp duties and increase prices over the last few years.

Cheer

Mr Z · 9 November 2011

satanoperca said:
On the money the govnuts spent on the FHBG, I wonder what return on their expenditure they got through increase stamp duties and increase prices over the last few years.

An excellent return I would imagine... much like the return a heroin dealer gets on 'free' samples, it is all great until the customer ends up in rehab.

young-gun · 9 November 2011

Mr Z said:
An excellent return I would imagine... much like the return a heroin dealer gets on 'free' samples, it is all great until the customer ends up in rehab.

Best to invest in rehab facilities then?;-)

Mr Z · 9 November 2011

young-gun said:
Best to invest in rehab facilities then?;-)

Debt restructuring businesses are doing well as are "My Business Angels"

Mofra · 9 November 2011

satanoperca said:
& govnuts needs to collect revenues through stamp duties and rates. The higher the price of a home, the more people selling and buying, the more revenue they collect.

Otherside of the coin too; they need happy voters, and by and large growing asset prices = happy voters.

Worth remembering of course, the assets only need to grow until the next election (and if you get turfed out, there is suddenly an "affordability crisis")

Mr Z · 9 November 2011

Damn you lot are cynical! :

young-gun · 9 November 2011

Mr Z said:
Damn you lot are cynical! :

Given the magnitude and severity of the crisis the world is about to face how can you not be?

Mr Z · 9 November 2011

I think it is about time Robots turned up and chided us for wandering off topic and desecrating the haloed subject of The future of Australian property prices. I mean seriously you lot! Get a grip, get a loan and get a McMansion, do your patriotic duty damn it! :

explod · 9 November 2011

On the ball Z. Sumada bulls are so wowwied they are explainin all sortsa things alloverdaplace.

The future of Australian property prices

explod

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