The future of Australian property prices

Beej · 23 November 2009

billv said:
Where do these statistics come from?
Maybe they are last year's because this year employers have the upper hand.
I have yet to find 1 person who got more than 3% % payrise this year

Bill- figures are published by the ABS - latest release here (data to Aug 2009):

http://www.abs.gov.au/AUSSTATS/abs@...7F76D15354BB25D5CA2575BC001D5866?OpenDocument

PS: This is why we collect stats - you may not know anyone who got more than a 3% payrise, but your "sample" will be biased based on where you live, the industry in which you work, your age and so on. Personally, I know many people who got a lot more than a 5% payrise this year (including myself).

The ABS stats give us the big picture, rather than just our own personal view-point. The facts are that wages have continued to grow over the last year, even as the *rate* of unemployment was heading upwards, however the rate of wage growth does seem to be slowing rather than accelerating.

OzWaveGuy said:
some insights from Trends Research on property....
http://www.globalresearch.ca/index.php?context=va&aid=14680

The Commercial Real Estate Bubble
......
.....
http://www.trendsresearch.com/forecast.html

OzWaveGuy - doesn't all that seem to apply in the US rather than Australia though? Australia hasn't been bailing out banks or other companies willy nilly, or printing money and so on - so how do you see a supposed "bail-out" bubble affecting the Australian residential market?

PS: ~70% auction clearance rate in Sydney on the weekend again - good volume and a median auction price around $750k.

Cheers,

Beej

OzWaveGuy · 23 November 2009

There will be blow back from the US in several forms....

http://www.propertyoz.com.au/Blog/archive/2009/03/03.aspx

and more recently

http://www.abc.net.au/am/content/2009/s2739192.htm

How much all this will have on property values...I really don't know yet.

robots · 23 November 2009

hello,

check check:

http://www.theaustralian.com.au/kor...-office-building/story-e6frg8zx-1225801836421

further evidence of the power of this joint (Australia), paradise brothers and all here on the ride man, enjoy it

thankyou
robots

Gerkin · 23 November 2009

Billy,
To clarify my post.
Check any paper with a business section last Thursday for the ABS figuers on wage growth.

Secondly, its not an IP, I said run the loan interest only and divert the principal repayments to other assets.

BTW, I mean the term "property Investment" as any property, be it PPOR, or IP

gfresh · 24 November 2009

Most in the public service receive at least ~3% pay rise per year, indexed to CPI, or years in service. Fair percentage of people out there work for the public service out there. So they receive a pay rise no matter what. These are making up for the lack of rises in the private sector.

http://www.news.com.au/business/story/0,27753,26367799-462,00.html

The Australian Bureau of Statistics' wage price index showed private-sector wage costs crawled to a rate of 3.2 per cent, a level not seen in seven years.

But in stark contrast public-sector wage growth accelerated by 4.6 per cent, the fastest pace in five years.

Mofra · 24 November 2009

gfresh said:
Most in the public service receive at least ~3% pay rise per year, indexed to CPI, or years in service. Fair percentage of people out there work for the public service out there. So they receive a pay rise no matter what. These are making up for the lack of rises in the private sector.

http://www.news.com.au/business/story/0,27753,26367799-462,00.html

gfresh,

It's also worth noting that the ~3% payrise doesn't include the upgrade in payscale that occurs independant of annual payrises; for example, an APS6 will normally have 4 paypoints (6.1, 6.2 etc) which correspond to an additional payrise for the first 4 years a person is in a level 6 position. Actual payrises for a large portion of APS staff will be above the ~3% increase.

Cheers

drsmith · 24 November 2009

Pay points though should not distort the overal public service pay rise figures as when someone retires from a position it will most likely be from the highest pay point and the replacement will start at the lowest paypoint (depending on how much they have acted at that level beforehand).

satanoperca · 24 November 2009

'Bogey mansion' bought for $10m discount or 37% discount on previous sale price

http://www.news.com.au/business/money/story/0,28323,26393981-5013951,00.html

and even better.

Interest rate rises send house prices into reverse

http://www.domain.com.au/Public/Art...est rate rises send house prices into reverse

Residex has placed responsibility squarely on the blunt weapon of RBA interest rate increases and the fear-inducing spectre of their use.

IR up 0.5% big deal. If and when the IR's go back to normal, it will be interesting to see how buoyant the market really is.

Mofra · 25 November 2009

satanoperca said:
IR up 0.5% big deal. If and when the IR's go back to normal, it will be interesting to see how buoyant the market really is.

True, although how quickly they do return to normal levels will also have a big impact on prices.

MACCA350 · 25 November 2009

Mofra said:
True, although how quickly they do return to normal levels will also have a big impact on prices.

I say jack the rates back up to where they were pre GFC and let the market sort itself out.

.............I mean we're different here right, and we never went into recession..............it's all sunshine and lollipops...........so why can't I get a half decent return on cash in the bank

If they want to talk the talk.........then why not walk the walk

Don't worry, it's all sunshine and lollipops*

cheers

*subsidised by yours truly........Krudd

Beej · 26 November 2009

http://www.smh.com.au/business/hous...th-it-says-rba-20091125-jrta.html?autostart=1

Some selected quotes:

House prices to rise further but they're worth it, says RBA
PETER MARTIN
November 26, 2009, SMH

WORRIED that $607,000 is too much to pay for a Sydney house? The Reserve Bank isn't and it expects prices to climb even higher.

In a speech that amounted to a defence of Australia's historically high house prices the Reserve Bank deputy governor, Ric Battellino, told a housing conference yesterday to expect worse and to recognise home buyers were getting value for money.

............

Australians had been spending more of their income on housing than ever but had been getting bigger and better houses as a result. Almost half of the $250 billion shelled out on housing each year was spent on alterations and additions, Mr Battellino said.

......

While there was ''a common perception that house prices relative to household income in Australia are high'', the country's population was ''more concentrated in a few large cities'' than other populations and Australians had more free income with which to pay for housing.

''Australians seem to spend less of their income on non-housing consumption than is the case for US households, with a significant part of this difference explained by lower health costs in Australia,'' Mr Battellino said. ''Australian households as a whole appear to have the financial capacity to sustain a relatively high ratio of housing prices to income.

'It is certainly the case that the ratio is higher now than it was 20 years ago. However, this is largely explained by the fact that lower interest rates have allowed households to take out bigger home loans without increasing housing loan repayments. In turn this has given households more buying capacity in the housing market, which has been reflected in house prices.''

......

So this RBA dude saying it's likely house prices will be rising further into the future due to ongoing economic growth and corresponding real wage growth. But argues that we are in fact getting more value for our higher prices than in the past, as the housing stock has been improved considerably compared to periods past (an argument I have consistently made on the housing threads here as well).

Also points out (correctly) that a reason why our average/median prices are higher than countries like the US and others because we are more urbanised, and I also note that all our stats measure the capital city prices only, and therefore ignore all the more affordable regional centres around the country, whereas the US and UK stats includes a much larger number of cities/regional centres as they have more evenly distributed populations.

Anyway interesting to read a key RBA guys views - and I think this article is spot on with respect to this threads title!

Cheers,

Beej

satanoperca · 26 November 2009

Read the same article Beej and first thoughts were inline with yours but my second thought was that the RBA were just making room, softening the environment for further rate rises.

Don't worry property prices are going to keep going up, oh and we are going to rise interest rates back to normal very quickly.

Always two sides to a coin.

Cheers

Quincy · 26 November 2009

satanoperca said:
Read the same article Beej and first thoughts were inline with yours but my second thought was that the RBA were just making room, softening the environment for further rate rises.

Don't worry property prices are going to keep going up, oh and we are going to rise interest rates back to normal very quickly.

Always two sides to a coin.Cheers

http://www.smh.com.au/business/bhp-surprised-by-strength-of-chinas-recovery-20091126-jt11.html

BHP surprised by strength of China's recovery
November 26, 2009 - 1:37PM

Resources giant BHP Billiton believes the powerhouse of Chinese growth will continue.

http://www.theaustralian.com.au/china-bubble-puts-our-recovery-in-doubt/story-e6frg8zx-1225803955693

Rowan Callick, Asia-Pacific editor From: The Australian November 26, 2009 12:00AM

China bubble puts our recovery in doubt

CHINA'S economy is facing a breakdown, one of the Asian giant's most influential economists warned last night.

This would derail Australia's dependence on China's rapid growth to drive it clear of the global downturn.

Yu Yongding, economics professor at the Chinese Academy of Social Sciences, said China was suffering resurgent asset bubbles, overcapacity and inflation, likely to be followed swiftly by overheating, a breakdown of its rapid growth, and deflation.

Professor Yu, formerly a member of the central bank's monetary policy committee and of the committee that drafted the current national five-year plan, said: "China's investment-driven and export-led growth pattern is not sustainable."

http://www.theaustralian.com.au/bus...-says-upbeat-rba/story-e6frg926-1225803729121

Australian economy is new upswing after 18-years of expansion, says upbeat RBA

AUSTRALIA'S 18-year economic expansion will continue for years to come, bolstered by an expanding mining sector and growth at its Asian trading partners, Reserve Bank of Australia deputy governor Ric Battellino said today.

Contradicting articles.

If China's bubble bursts then Australian government revenue and Australian mining and associated jobs would be adversely affected and would have a significant affect on the Australian economy and could flow on to parts of the housing sector and house prices.

MACCA350 · 28 November 2009

Reiv Auction Results shows a 78% clearance rate for this week

This is the first time it's dropped below 80% for a while now............maybe that's why Robots forgot to post them:

cheers

satanoperca · 29 November 2009

Went to two auctions over weekend in South & Port Melbourne both selling well above there listed price. In one case 25% and not fit for man or beast.

It would seem that both were bought by Chinese. Whether they were Australian Chinese or Chinese Nationals is impossible to determine without asking.

It would seem that real estate is in the process of a major up thrust at the moment and the bargains that came onto the market at the start of the year are long since gone.

Looking at the current environment to determine the masses musicology I noted :

1) Australia did not go into a recession unlike nearly everyone else in the world
2) Interest rates are still extremely low historically and for them to be increased is only a vote of confidence that the economy is recovering and will be returning the pre GFC GDP grow
3) Residential property as an asset class has weathered the storm better than any other asset class
4) RE has shown high CG in the last two reported qtrs in most major cities
5) The top end has rebound and record prices are being paid
6) Along with the normal stuff like increasing population, lack of supply, govnuts determination to support property prices in Oz, overseas investors, using super to buy etc.
7) Unemployment still relatively low
8) Credit(Debt) still available with relatively little contraction over the year

So from this I can see why property prices are were they are today.

But next years is another story. Many FHB have been seduced into the market with fattened up FHBG and low interest rate rises over the last year, demand from this market will be the first to show any signs of weakness especially if IR's continue to climb.

Cheers

overule · 29 November 2009

Just my opinion.

There's always a boom and recession in any economy.
Looking at the history, Property in Australia is doing very well.
I am in for the long term and prices will only go up.

schnootle · 29 November 2009

overule said:
I am in for the long term and prices will only go up.

Isn't that what created the GFC

overule · 29 November 2009

schnootle said:
Isn't that what created the GFC

I'll never win trying to talk you guys over.
I am just saying. If you keep worrying about things like GFC, you'll never buy a single property.

Remember the 1990s recession in asia? Everyone is saying property prices are going to crash or the late 80s where interest rates are so high.

if you're not into property. Go for GOLD. DYOR.

UBIQUITOUS · 30 November 2009

overule said:
I am just saying. If you keep worrying about things like GFC, you'll never buy a single property.

...and if you don't worry about things like the GFC, you may end up with a property which you may end up working to the bone to make payments for, due to inevitable high interest rates. All in the HOPE of some capital gains 30 years down the track.

It's not the life for me.

.

aleckara · 30 November 2009

It's easy to predict housing movements.

Stop looking at fundamentals. Just look at the trend of debt growth. If it is still rising you can bet that housing is rising. If it isn't it's falling. Any subsidy only serves to support the debt growth trend and in turn rising house prices.

I think housing will rise. The government definitely saved the housing market last year though with the FHOB and lower interest rates. Moral hazard is rife now "if the government will save me from the GFC I better get in before I can't afford it at all". Sad the government is encouraging poor financial decision making from households.

House prices will fall eventually but how much and when no one here really knows. Everyone knows that a house at today's prices isn't worth it but unfortunately you need a home; most people don't have the luxury of saying no to buying/renting a home.

The future of Australian property prices

Beej

OzWaveGuy

robots

hello

Gerkin

gfresh

Mofra

drsmith

satanoperca

Mofra

MACCA350

Beej

satanoperca

Quincy

Jack of all trades master of 0

MACCA350

satanoperca

overule

schnootle

overule

UBIQUITOUS

aleckara

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The future of Australian property prices

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Jack of all trades master of 0

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