Agreed. Just personally don't think housing is the best choice at the moment.
The future of Australian property prices
- Thread starter Joe Blow
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Agreed. Just personally don't think housing is the best choice at the moment.
Agree with him (flat market not necessarily growth) with the caveat that employment holds and there are no shocks leading to investors needing to sell up. Our businesses have held up well since the actual GFC and increase in AUD but your now starting to see many going into liquidation as capital buffers vanish.
Similarly, investors may need to sell up. If that happens then you will see prices starting to fall.
Not surprising with what is happening in Europe etc. Also as soon as there is any weakness in the AUD, foreign funds will get pulled out. Why? If AUD goes from say 105 to 90 in a few short months, you've lost 15% compared to whatever you might have earned in the meantime.
Agree about the rates as well. They are hopping to increase local consumption but with this they will also require a boost in exports to be effective. We're too small an economy to be driven by local consumerism alone. Just in the Waikato region of NZ at the moment. It's surprising the changes and growth of the area in the last four years (think normal growth not china type new city in a few months growth), mainly driven by Fonterra and dairy exports.
1) Agreed. A major factor I believe will be the change in attitude of younger gens on home ownership.
2) Agreed.
3) We're probably already in one (maybe not technically).
4) Land is expensive because it is allowed to be. I have read a figure somewhere that some of the larger developers have land banked up to 30 years worth of land supply and are drip feeding the market. Agree on the wages as well. Not only that but due to "shortages" they are probably disproportionately high on the trades side.
ftw129
Sell crap and manage risk
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It's been quite interesting reading everyone's opinions on where the Australian property market is going in the future.
Property investors are best to have a long term view, especially in a peaceful country such as ours with less than 23 million people. We are the envy of the world and our land is abundant in valuable resources.
We are an expensive country so those abroad wishing to settle on our shores are likely to bring with them more money and opportunity.
Sure, like any asset property can't keep travelling up in a straight line and therein lies the opportunity.
Just like in the past, those that do not accumulate property over their life time will be bitterly disappointed as they watch the wealth grow around them.
Property is for the long haul.
Carry on.
Property investors are best to have a long term view, especially in a peaceful country such as ours with less than 23 million people. We are the envy of the world and our land is abundant in valuable resources.
We are an expensive country so those abroad wishing to settle on our shores are likely to bring with them more money and opportunity.
Sure, like any asset property can't keep travelling up in a straight line and therein lies the opportunity.
Just like in the past, those that do not accumulate property over their life time will be bitterly disappointed as they watch the wealth grow around them.
Property is for the long haul.
Carry on.
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Agree that we're all connected and what happens in one economy will affect another. The point I was trying to make is that you need to be aware of that author's agenda when they created that graph. They picked three distinct economies but excluded all the rest. These three happen to be very different to one another.
E.g. Japan has one of the most dense populations per square km. It is also in a deflationary climate. Australia on the other had is still inflationary and is a sparsely populated with large, unhabitable land areas. Australia and the US have very different tax regimes particularly around income tax and property tax although Aus and US are a decent comparison.
Of course there are many more differences but these I see as the bigger, structural differences.
I'd love to see Australia, Dubai and Canada together. Different countries yet again but they'd paint a very different picture (they'd look almost normal i'd bet). All depends on what the author wants you to see
No this wasn't directed at prawn_86 - he/she was referring to credit growth limiting property price growth, which as per my other post above, I agree with. Credit growth is very low and that will (and has been) translating to lower prices and we're unlikely to see growth return in the short term to really continue driving up prices significantly.
Agree with your points above - at the moment we have a LOT of situation (2) occuring (in fact, it really scares me) but not a lot of situation (1)... yet. (1) will come back with a vengeance and probably quicker than most realise. By the time people will realise it's happening prices will be at/above peaks.
I'm really really worried about inflation - or more specifically, the devaluation of money. A lot of people are going to suffer a lot over the coming years. The divide between the upper and lower class is going to get a lot bigger - the middle class will be hollowed out. You can see a lot of it happening in the US and it is happening here too.
I'm not saying to rush out on an asset buying frenzy (i would tread very carefuly right now, particularly around property) but everyone should be in a reading/learning frenzy to raise their financial awareness to help protect them from the coming pain.
... wow reading back on it I sound like such an alarmist!! Very unlike me but just goes to show how much current developments worry me.
prawn_86
Mod: Call me Dendrobranchiata
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I would argue that it is more like the same type of fruit just grown in 3 different regions.
What do you think will cause inflation to come back? With a high dollar, manufacturing continually declining, building down in the dumps, i just cant see what is going to kick off inflation agin. Obviously i could be wrong but a 5 - 10 yr sideways cycle a la Japan certainly isn't out of the question imo.
Or is it money printing you are more worried about? IE those holding cash at bank who will be effected the most and those holding assets such as houses will at least keep even.
I just cant see how as per Techs example that in 20yrs time the average house price will be double what it is now (well maybe 20 but i highly doubt 10yrs). Hopefully for my sake i'm not wrong... At this stage i am just not willing to put our entire savings in to one asset class that i do not understand how it will perform/grow over the coming years
EDIT - with that being said i would be happy to purchase a property through a SMSF for a long term hedge, just dont have enough funds in Super ot make it viable as yet
Agree. I think there is going to be increasing amounts of unrest amongst "the 99%" in Australia. I hope we never see protests such as those that took place in USA etc against "the 1%", but if young people feel strongly enough about affordability issues it's a possibility I guess.
The more I ponder the situation from a parent's perspective, the more I wonder if gen Y might not be better off (at least in lifestyle terms) to purchase a property they can afford as an investment property, but rent themselves in an area that suits them but in which they couldn't afford to buy. This option gives them the dual advantages of being "in the market" and exposed to any capital gains property might enjoy, yet still able to live a reasonable commuting distance to work. This way they could also take advantage of the negative-gearing and capital gains tax rules
: As they age, and equity is increased and lifestyles alter, they could choose to sell the investment property and use the equity and capital gain (if any) to get into their own home, or continue to rent themselves and add to a portfolio of rental properties, share investments etc. Of course, this scenario is dependent upon there remaining a pool of tenants for the investment properties - but there's always going to be a segment of the population that can afford only the cheaper rental options.The rent vs buy argument only makes sense if one is investing at least most of the savings made by renting vs mortgage in some way - otherwise you're up the proverbial come retirement.
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- Grown in three regions that will have different climates that will affect supply (and thus demand). Kind of house each of the countries have a different economy both at the macro and local levels that will affect supply and demand
- They each are shaped differently and weigh a different amount. If bananas cost $2 per kg and apples cost $3 per kg does that make apples 50% overvalued? I liken this to comparing Japanese property to ours - they have a higher comparitive density of aparments and units owing to their population. We have very few in comparison (as a % of population) we're more McMansion style. Different sized homes, different sized land, different prices
On the surface it's just fruit (property) but dig a bit deeper and it becomes hard to make direct comparisons.
Now if we had a graph with all major countries on it that would be quite interesting
I'm mostly concerned about the money printing aspect. It will indirectly cause inflation at some point down the track as currencies are being devalued. We're all connected and it's only a matter of time before it hits our shores. Money will flow into the Sharemarket and RE and other assets to compensate for the devaluation. You'll then cause inflation as price of assets go up -> goods go up -> wages follow. The RBA will then come in and ramp up the cash rate (quickly - i'm talking 50-80 bp moves a quarter) and bring it all to a screeching halt.
Either that or we get runaway inflation and cop another 80's/90's 'recession we had to have'
Maybe i'm being alarmist here and have it all wrong I don't know. All I know is you can't print the huge volumes they're printing now without devaluing your currency and stoking inflation (after all, they're doing this to stoke inflation). As we're all connected it's only a matter of time before we feel it too.
prawn_86
Mod: Call me Dendrobranchiata
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I wonder how this will affect properties held under a SMSF if it was to be changed:
https://www.aussiestockforums.com/forums/showthread.php?t=24666
https://www.aussiestockforums.com/forums/showthread.php?t=24666
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they not printing anymore because the paper is starting to cost too much ... just making trillion dollar coins
Both sides are talking about reducing super concessions, been all over the news in the past few days. CGT concessions and negative gearing might be next on the block. Sydboy might just get his wishes....
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they not printing anymore because the paper is starting to cost too much ... just making trillion dollar coins
The original will be made out of platinum, followed by some type of alloy coated in platinum, followed by just an alloy.
To the above posts/posters, Australia is no different, not special, not unique, this will become evident soon enough.
There are many ways to compare these statistically. We're not saying that property here is expensive because it costs X dollars. We're comparing stats like price/income and price/rent. These tend to be more comparable. Moreover
If you compared Australia to most other countries I think you will come to the conclusion that house prices are out of whack and may correct at some point (look at US, UK, Ireland, even Dubai). As for Canada, most commentator's agree that their house prices are overvalued as well (mining?).
I'm mostly concerned about the money printing aspect. It will indirectly cause inflation at some point down the track as currencies are being devalued. We're all connected and it's only a matter of time before it hits our shores. Money will flow into the Sharemarket and RE and other assets to compensate for the devaluation. You'll then cause inflation as price of assets go up -> goods go up -> wages follow. The RBA will then come in and ramp up the cash rate (quickly - i'm talking 50-80 bp moves a quarter) and bring it all to a screeching halt.
Either that or we get runaway inflation and cop another 80's/90's 'recession we had to have'
Maybe i'm being alarmist here and have it all wrong I don't know. All I know is you can't print the huge volumes they're printing now without devaluing your currency and stoking inflation (after all, they're doing this to stoke inflation). As we're all connected it's only a matter of time before we feel it too.
No I agree with you on this. And this will have a flow on effect as well into RE; look at Germany. It used to be the typical description of what a normal housing market should be. Prices changed at or about inflation until 2011 and mainly 2012. Last year they went up about 10%. However in Aus, we are already way ahead of the curve.
However by most developed countries housing prices, German prices were undervalued (I say normal) as were many other European cities. I have a colleague from Antwerp who has a townhouse just outside of the city that they bought a few years back for ~150-180K Euro. They were living in East Malvern and they couldn't cover their rent here with the rent they got back home. They def are not planning on buying as comparable prop in Melb would be 2-3 X higher.
This is not the best thread to discuss printing so I won't add much but have a think about why they're printing and how much and how much bad debt is the US gov paying from propping up companies. Also at demographic factors in JP and Italy for example. The inflation we are seeing now may not be a direct result of the printed money flowing into the economy or lent but because everyone with money is chasing yields as bonds/deposits etc are at all time lows. They may still have a very hard time getting 2%.
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The problem I can't reconcile with buying a property in a SMSF is the historic rental return is quite poor after costs.
As the property is revalued annually and assuming its value is increasing, there will be a requirement to make larger drawdowns on your capital. It doesn't really stack up well against franked dividends.IMO
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How does one deal with the increasing draw down requirement if you own property in your SMSF?
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How does one deal with the increasing draw down requirement if you own property in your SMSF?
Property prices have far outstripped rent rises, therefore the increase in value increases the amount of pension that must be drawn.
I was pointing out that you could end up in a situation of being assett rich and cash poor.
This could lead to a situation of having to sell assetts at a time not of your choosing.
If you have tons of money, it obiously isn't an issue, but for the punter with say $1m, it is worth being aware. Especially if an extra impost of an exit tax is introduced, as prawn was sugesting in his post. .
Maybe I'm just cautious, it comes with age.
If property prices rise faster than income then the guy who bought will be laughing.
The problem is if the price already factors in those future gains, which I suspect it does.
Which puts you in my point of view ; buy what you can afford for a place to LIVE not as a 100% risk free 10% return on 100% leveraged investment.
Garpal Gumnut
Ross Island Hotel
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One can imagine an advertisement for a mansion in Herculaneum in 78 A.D.
In a good situation, overlooking the bay, faithfully restored by a Procurator for his family.
Quick access to Via, markets, slaves, and baths.
Centrally heated.
Cost : Knocked down due to owner heading off to a War.
200,000 Sestertii
Then in 79 A.D. Mt. Vesuvius erupted.
So, property prices historically have not trended upwards in a predictable manner, in Herculaneum.
I would imagine the same would apply to Sydney, Hiroshima, Baghdad, Brisbane, Kabul, Port Douglas or any other place at risk of unforeseen events.
Basically anywhere.
gg
In a good situation, overlooking the bay, faithfully restored by a Procurator for his family.
Quick access to Via, markets, slaves, and baths.
Centrally heated.
Cost : Knocked down due to owner heading off to a War.
200,000 Sestertii
Then in 79 A.D. Mt. Vesuvius erupted.
So, property prices historically have not trended upwards in a predictable manner, in Herculaneum.
I would imagine the same would apply to Sydney, Hiroshima, Baghdad, Brisbane, Kabul, Port Douglas or any other place at risk of unforeseen events.
Basically anywhere.
gg
I’m a bit thick – could somebody please explain this money printing concept discussed in this thread.
All I can see is sovereigns increasing their balance sheet to offset private balance sheet shrinkage but lack of velocity is making the job difficult even at near / actual negative real interest rates, a sign of deflation risk rather than inflation.
At no stage has any sovereign (Zimbabwe excluded) printed without a corresponding commitment to repay at some stage so I see no lack of tools for containing inflation if/when velocity does pick up.
The real money creation enabler occurred prior to the GFC and was a result of trade imbalances and manipulation of some currencies causing major run ups in those countries foreign reserves and in turn funding lower than appropriate interest rates in an optimistic period. – That all seems to be currently and continuing to unwind.
It’s not just my understanding of capital creation that is at odds with the printing press story; the actual statistics don’t compute either.
If somebody could explain it to me I would be pleased to learn something.
All I can see is sovereigns increasing their balance sheet to offset private balance sheet shrinkage but lack of velocity is making the job difficult even at near / actual negative real interest rates, a sign of deflation risk rather than inflation.
At no stage has any sovereign (Zimbabwe excluded) printed without a corresponding commitment to repay at some stage so I see no lack of tools for containing inflation if/when velocity does pick up.
The real money creation enabler occurred prior to the GFC and was a result of trade imbalances and manipulation of some currencies causing major run ups in those countries foreign reserves and in turn funding lower than appropriate interest rates in an optimistic period. – That all seems to be currently and continuing to unwind.
It’s not just my understanding of capital creation that is at odds with the printing press story; the actual statistics don’t compute either.
If somebody could explain it to me I would be pleased to learn something.
IFocus
You are arguing with a Galah
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If you print enough money then inflation follows no ifs no buts.
What is holding the show up at the moment is the amount of de-leveraging going on which causes a deflationary environment.
What I think most people miss is the current shenanigans has never been attempted on this scale before.............ever, what the end game is I don't think anyone really knows but inflation will absolutely be part of the picture.
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CIA - The World Factbook
Country Comparison - Debt - Internal/External
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html
Country Comparison - Debt - Internal/External
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html
