The future of Australian property prices

[moXJO]

Most things in finance deal with averages and aggregate data.

I'd say a lot of investors are buying on a PE of around 30 these days.

Whatever the figure is, you'd have to be lucky to buy at a PE of say 14 these days.

From a purely financial perspective I just don't see the benefit of buying, especially since most people can only afford to buy in areas with poor public transport and generally long commute times to work.

I look at the shares i sold to buy my home in 1997. Those shares are all 8-13 times higher, and I have no idea how much the dividends would total to. My house is maybe 2.5 times increased in value, but then need to account for the purchase and holding costs.

Personally, I think I could be retired now if I'd not bought my house and had continued investing in shares for the last 16 years.

So you invest in shares by looking at the market average not the fundamentals of the individual stock.
If Id bought the property I wanted in 97 Id be smoking hundred dollar bills. Im not discounting the sharemarket either.
Buying a home to live in is a risky investment imo and more about lifestyle

 

[tech/a]

Most things in finance deal with averages and aggregate data.

I'd say a lot of investors are buying on a PE of around 30 these days.

Whatever the figure is, you'd have to be lucky to buy at a PE of say 14 these days.

From a purely financial perspective I just don't see the benefit of buying, especially since most people can only afford to buy in areas with poor public transport and generally long commute times to work.

I look at the shares i sold to buy my home in 1997. Those shares are all 8-13 times higher, and I have no idea how much the dividends would total to. My house is maybe 2.5 times increased in value, but then need to account for the purchase and holding costs.

Personally, I think I could be retired now if I'd not bought my house and had continued investing in shares for the last 16 years.

I started buying in 1995
Why?
I could finance 100%
I could be positively geared immediately
I was buying 4 bed homes for $97K
$280/ week rent and Interest only at 6.5%

Just kept buying while the bank supplied the money.
Still hold 4 properties all freeholded from the initial
buys.

Now supplying passive income. (Which is my
primary investment goal).

Just showing how I recognised opportunity.
Not that hard!

 

[prawn_86]

I was buying 4 bed homes for $97K
$280/ week rent and Interest only at 6.5%

PE ratio of about 15. Almost half what it is now according to report linked a few posts ago.

Personally I think if you can get a property under 20PE it is probably worth further investigation

 

[McLovin]

PE ratio of about 15. Almost half what it is now according to report linked a few posts ago.

It's a pre-tax yield of close to 15% but a pre-tax PE ratio of 6.65

Good luck finding something yielding 15%!

 

[sinner]

It's a pre-tax yield of close to 15% but a pre-tax PE ratio of 6.65

Good luck finding something yielding 15%!

LOL the irony, as Earnings Yield (reciprocal i.e. E/P) of a 6.65 P/E is 15%! :

 

[McLovin]

LOL the irony, as Earnings Yield (reciprocal i.e. E/P) of a 6.65 P/E is 15%! :

As much as I enjoy irony, I don't see any?

 

[sinner]

As much as I enjoy irony, I don't see any?

It's not ironic that the correct P/E of 6.65 for techs historical example just so happened to be almost the exact number you said good luck finding something yielding that (incorrect P/E)? :

I thought it was anyway.

 

[McLovin]

It's not ironic that the correct P/E of 6.65 for techs historical example just so happened to be almost the exact number you said good luck finding something yielding that (incorrect P/E)? :

I thought it was anyway.

In 1995 apparently 15% yield on property was achieveable. I can't imagine you can get it anywhere today, so good luck finding it, which was my point.

ETA: A pe of 15 is probably achieveable if you looked hard enough.

 

[tech/a]

In 1995 apparently 15% yield on property was achieveable. I can't imagine you can get it anywhere today, so good luck finding it, which was my point.

ETA: A pe of 15 is probably achieveable if you looked hard enough.

Just rememberr the signs for when it happens again in our lifetime.

I'll be too old to give a damn but you younger ones may well get on it!

 

[satanoperca]

Just rememberr the signs for when it happens again in our lifetime.

I'll be too old to give a damn but you younger ones may well get on it!

Thinking I will be push up daisies before I see interest rates above 10% again, aka 1995. That was a time when having money was worth something, today, better to borrow it seems than save.

Cheers

 

[FlyingFox]

Thinking I will be push up daisies before I see interest rates above 10% again, aka 1995. That was a time when having money was worth something, today, better to borrow it seems than save.

Cheers

You never know ... all the savers just need to start their own union or something lol.

 

[satanoperca]

You never know ... all the savers just need to start their own union or something lol.

Why save when central banks can just print it, our own government will sell out future governments to keep it for the short term.

Bankers have become the drug dealers of choice.

 

[FlyingFox]

Why save when central banks can just print it, our own government will sell out future governments to keep it for the short term.

Bankers have become the drug dealers of choice.

SOrry if it offended, it was tongue in cheek comment. Agree with what your saying. However short of just handing out the cash, the printing requires people to borrow to be effective. Yes if people keep taking ever increasing amount of debts, than the circus continues. However any crisis of confidence and things can change quiet quickly.

 

[Mrmagoo]

Just rememberr the signs for when it happens again in our lifetime.

I'll be too old to give a damn but you younger ones may well get on it!

We've been sold out by baby boomer politicians, we all know that. Expensive toll roads for rich people instead of public transport for young family bread winning gen y workers.

Things do change with time, people die of old age ect ...

I don't think there will be another housing boom in our life time, people have no appetite for it, it will likely be the next true generation of people (i.e those who are born after the last of the baby boomers are dead) who experience what the baby boomers experienced.

The world will be ****ed and it will be up to gen y who will fix it and make things cheap and accessible again and then our grand children will be the new spoiled (i.e baby boomer) generation who will ruin it for two more generations yet again.

I could swear that there is a cycle like this.

First generation (silent generation) builds it.
Second generation (those who fought it WW2) builds on it.
Third generation (the baby boomers children of those who fought in WW2) destroy it.

Gen y builds it.
Their children build on it.
Their granchildren destroy it.

- - - Updated - - -

Exactly and because property cycles tend to be longer you can be in two completely different positions in 22 years time depending on when you bought/buy in.

One thing to keep in mind is that the baby boom and the years leading to the GFC (1960-2005) are unlike any other point in history. We had the quickest and largest population doubling EVER! These people have gone through the cycles and have accumulated wealth and increased demand. Than came the credit growth. I doubt this will ever happen in human history again.

Property cycle is made up, it is not a cycle because all it has ever done is gone up.

Pushing people out of housing. Just like a 3rd world country.

 

[FlyingFox]

Property cycle is made up, it is not a cycle because all it has ever done is gone up.

Pushing people out of housing. Just like a 3rd world country.

Look again and past the baby boomer generation. Look at the US. Prices fell 30-40% and are on the way up.

Agree with your earlier comment though. Will not happen in our lifetime. Probably not ever because we will not have another boomer generation or the current debt explosion ever again.

 

[medicowallet]

Just showing how I recognised opportunity.
Not that hard!

Lol

More like you were just in the right place at the right time. Now I am not saying you don't know anything about the market, but every know it all mum and dad investor has made a killing with property during the boom, you are not special in this regard..

The true special person is the one who runs with the herd, and turns before the edge of the cliff, which is why over the last couple of years I was always asking A/Prof when he thought it was going to end. If I could have my time over again, THIS is what I would be trying to learn, is the psychology around the herd mentality of investing, and how to spot the initial turning points with greater accuracy (as most people who have been investing successfully for at least 15-20 years can probably see some signs earlier than the people whose money they will be receiving)

So, when is it going to end? Has it already ended? Did it end 2 years ago?

imo, the market is flat, and will be in real terms for years, until there is either a shock (eg atm China is looking interesting) or underlying earnings have a decent catchup.

MW

 

[sydboy007]

imo, the market is flat, and will be in real terms for years, until there is either a shock (eg atm China is looking interesting) or underlying earnings have a decent catchup.

MW

My hope is the market limps along with no real price increases for an extended period, but rents have above CPI increases till there's a fundamental realignment between rental income and property prices.

How much the Governments help or hinder this process will determine how much pain we experience.

 

[Mrmagoo]

Rents won't climb.

The fundamental sand block of the economy that is the consumerist working class person is ****ed.

There is no productivity left in the economy namely because of housing and transportation issues.

People are stuck working within a region close to them or paying huge amounts in money and time for transport.

We haven't invested in our economy and that is going to create capacity constraints.

Compare us to a place like europe whrere people are :

1) SMARTER
2) Better looking
3) Younger
4) Better educated
5) Willing to work for a whole lot less
6) an abundance of skills

because in europe :

1) You can live cheap in good quality apartments and good quality food for bugger all so your $8 euro an hour works out pretty good and easily catch public transport to work
2) The women all put out anyway so you don't need a huge wage to demand a fast card and flash apartment, plus the average looking girl is no obese so you don't need a hot one anyway
3) the education system is not run by nutbag left wing women

Australia is just a cash grab to escape the fact others are demanding more cash, compared to the rest of the world I don't see how we'll be sustainable in anything

this is not just about wages, it is about the whole lot.

ok so my post is tongue in cheek but there is a middle ground between the slavery of asia and the madness of australia

we can do it and it is about giving people the opportunity to buy MORE not LESS with their dollar

this mean sending a lot of bad businesses and investors to the wall

and investing in housing to make it dirt cheap for all

that is at least one to three hundred dollars in wage cuts we could all just take for nothing (or spend in the economy) and years of wage increases we won't be demanding for surival sake.

- - - Updated - - -

Rents won't climb.

The fundamental sand block of the economy that is the consumerist working class person is ****ed.

There is no productivity left in the economy namely because of housing and transportation issues.

People are stuck working within a region close to them or paying huge amounts in money and time for transport.

We haven't invested in our economy and that is going to create capacity constraints.

Compare us to a place like europe whrere people are :

1) SMARTER
2) Better looking
3) Younger
4) Better educated
5) Willing to work for a whole lot less
6) an abundance of skills

because in europe :

1) You can live cheap in good quality apartments and good quality food for bugger all so your $8 euro an hour works out pretty good and easily catch public transport to work
2) The women all put out anyway so you don't need a huge wage to demand a fast card and flash apartment, plus the average looking girl is no obese so you don't need a hot one anyway
3) the education system is not run by nutbag left wing women

Australia is just a cash grab to escape the fact others are demanding more cash, compared to the rest of the world I don't see how we'll be sustainable in anything

this is not just about wages, it is about the whole lot.

ok so my post is tongue in cheek but there is a middle ground between the slavery of asia and the madness of australia

we can do it and it is about giving people the opportunity to buy MORE not LESS with their dollar

this mean sending a lot of bad businesses and investors to the wall

and investing in housing to make it dirt cheap for all

that is at least one to three hundred dollars in wage cuts we could all just take for nothing (or spend in the economy) and years of wage increases we won't be demanding for surival sake.

 

[FxTrader]

So, when is it going to end? Has it already ended? Did it end 2 years ago?

imo, the market is flat, and will be in real terms for years, until there is either a shock (eg atm China is looking interesting) or underlying earnings have a decent catchup.

If you accept the premise that the rise in house prices since 2002 was driven primarily by a large rise in household debt facilitated by loose lending standards by banks competing for market share then yes, the party ended about 2 years ago now.

Now that the end of massive intervention by central banks to keep interest rates artifically low is winding down, it's seems quite likely that there will be downward pressure on house prices from here. The RBA lowering interest rates may cushsion the market for a time but there is clearly a reluctance to lower rates much further.

 

[odds-on]

Just rememberr the signs for when it happens again in our lifetime.

I'll be too old to give a damn but you younger ones may well get on it!

Hi Tech/A,

Do you think it was a once in a lifetime opportunity for your generation?

Cheers