The future of Australian property prices

[See Change]

However if you believe most of Australia is based on your reality of "home & away" Sydney's northern beaches, then its too removed from the average citizen of this country IMHO. Probably a symptom of never having lived in many states or experienced anything outside your idyllic lifestyle.
.

Again incorrect assumptions . I have never lived on the northern beaches . I quoted that as an example .

What I did do was work for longs 19 years in the social deprived area of mt Druitt , so I probably know more about different levels of the community than most people on this forum .

.....sigh ...

Most people aspire to improve their lives . You seem to want to drag everyone down and say want can't be done . Is that the underlying motivation of D & G 's . A sort of my life's crap so no one else should be better than me jealousy .

 

[See Change]

Mmm

I really do need to prof read better before replying .

Can't go back and correct typos on iPad

 

[13ugs13unny]

Most people aspire to improve their lives . You seem to want to drag everyone down and say want can't be done . Is that the underlying motivation of D & G 's . A sort of my life's crap so no one else should be better than me jealousy .

Mt Druitt is high class compared to my beginnings. And your assumptions are quiet inaccurate and are just assumptions- water of this ducks back.

My call is about being realistic, and not actually make dreams and aspirations unobtainable, bragging rights on how property prices are or will be north of squillions actually disempowers incentive and exacerbates hopelessness.

If people on here think rubbing wealth or success in peoples faces even in forums will help then they are mistaken.

I've believe in a tone that is measured so people can actually see there is a path to obtain their dreams , aspirations & desires. I prefer levelling mountains to seem like hills so to speak.

So would you believe me & be gullible enough if I was bullish and said property prices are going to double in 10 years and achieve 7-10% growth year on year? Do you want interest rates to double to 8-10% with mortgages north of million dollars? Just to send these people into mortgage stress and default all for naught? How do you think this will be received by Y-geners trying to make a go of it it from Mt druitt? or x-geners?

Tone is everything. Course property in Australia will be fine, but you don't make it impossible for people. With extremely bullish overtones.

Those that want to improve their lives need to see opportunity to do so, and I think cost of living and housing affordability and employment security is a real concern, just as much of a concern as welfare being addictive and feeding hopelessness as it once did to me many decades ago.

Again as I said before I probably should have made it more clearer, its about bridging the generations so there is no disconnect, the y-geners need to see the opportunity to start out, the established xgeners need to buy off the retiring boomers, so they can retire comfortably, and bridging the generations by saddling x-geners and Y geners with debt is not the way {personal, state, or country}and that is my opinion, respect it.

 

[See Change]

BB

Good luck with changing the world. Most people don't look at the big picture . The reality is that most people don't look at all . All I control are my own actions and personally I want to be in as stong a financial position as I can , and property is enabling me to do that .

The hardest think anyone can do is change themselves . On a large scale very few people will make an impact in changing the work . I know I'm not someone like that .

By coming here I'm not seeking to hype up the market . You might be able to ramp a spec on hot copper but I do not think that my opinion / our discussion here will move the property market at all .

As this thread is about " the future of the property market " I'm here giving my opinion of the future of the property market . This opinion is based on personally watching the market since the late 60's , much statistical research and reading and ongoing conversations with everyday people on a regular basis . It's the individuals who come together and create markets. Understanding what they think helps make informed decisions.

It's my opinion , and I believe it's a fairly informed one . So far since I became actively involved in property every investment I've made has out performed my expectations.

I watch the market with interest .

 

[craft]

Rainy Sunday afternoon and I’ve got a sore head – must be time to post on the property thread.

After readings Smurfs usual insightful post I decided to dig out some data from the national accounts – that should help the head.





Household income (from GDP Income components) in the National accounts is post interest on dwellings. So a large % of the decrease in the ratio over the last few years is interest rate reductions.

If the ratio pushes higher here that ignores the screams of the younger generations on affordability which strikes me as ultimately unsustainable. Or it suggests that property buyers are thinking (consciously or otherwise) current interest rates are fairly permanent. Not a view I would take a leveraged long term bet on.

ps

It’s nice to see some humility in some posters here that have benefited from a certain set of circumstances that are no longer in place.

 

[ftw129]

It was quite reasonable for a low-mid income earner to pay off a house on single income, supporting a family only 30 years ago, and now, that is impossible... and by house I mean a house, not some dog box single bed unit that some here will spurt out as an option.

Actually I remember watching tv shows and movies (i'm 32) that portrayed the mother at home looking after the family of 2 or 3 children, in a big 2 story house and the father (a mechanic, a factory worker, a car salesman etc), supporting the whole family, which still went on holidays and had big christmasses with lot's of presents under the christmas tree.

Was this really possible back then?

 

[Smurf1976]

Was this really possible back then?

As long as nothing went wrong, yes.

Job security was a big part of it. So long as you had a job, you had an income. And for most workers the only reason to leave a job was to get a better one, quite possibly with the same employer. And in the unlikely event that the employer did go broke, then it was fairly straightforward to get another secure, permanent job somewhere else.

You only have to go back a generation or so to find a time when most things that people owned were made in Australia. Furniture, white goods, TV's, cars, clothes, tools - of course you bought Australian made. Sure, there were foreign goods around, but most things were made right here.

We have since gone down the track of trying to compete against countries with minimal standards for safety, environment etc and which pay wages an order of magnitude less than Australian rates of pay. It's a game we'll never win, the end result being that we've become reliant on selling rocks and borrowing money to keep the game going.

A current one which symbolises the change is at Burnie, Tas. The Pulp, which once employed 3500 people on high wages, is now just a pile of rubble being carted off to the tip. In its' place is to be a national chain hardware store which sells mostly imported goods and which might employ 100 or so on much lower wages than the Pulp provided. Sure, that factory had a downside in the form of very visible and undeniable pollution, but it actually made something of value, exported it and employed people by doing so. If it were still viable to manufacture in Australia, modern technology would have fixed the pollution, indeed there was considerable improvement in that regard happening in the latter years anyway. But it's gone now, all those jobs and those of suppliers and contractors with it, and it's not coming back.

There are countless stories like this right across Australia. Where once something was made locally, now there's either nothing or at best a warehouse distributing imported product on the site. Hundreds or thousands of stable, high wage jobs in each case replaced with a lesser volume of lower paid work with far less stability.

Against that backdrop, it's inevitable that continuing to inflate house prices will leave many "locked out" of the market. Aside from mining and a few select trades and professional services, the economy no longer is able to provide the types of employment for the masses that would sustain such growth in the long term. If the best you can get is a casual job on $20 an hour then you're not going to be buying anything resembling a decent house anytime soon.

 

[medicowallet]

Actually I remember watching tv shows and movies (i'm 32) that portrayed the mother at home looking after the family of 2 or 3 children, in a big 2 story house and the father (a mechanic, a factory worker, a car salesman etc), supporting the whole family, which still went on holidays and had big christmasses with lot's of presents under the christmas tree.

Was this really possible back then?

Well I see the doctors flipping around between specialities and all lovey dovey in the tv shows and I can tell you that it aint like that in the hospitals I go to!

But I stand by my comment, as many people I know did it.

It is truly a shame that young people today cannot.

MW

 

[moXJO]

There are a few investors that have started out on low incomes and at a young age. One young kid Tony fleming out of a mag I was looking at started on a pizza delivery wage bought his first property in 2009 and now owns 8.

 

[See Change]

For those who like graphs , here is one ( copied from this thread on Somersoft ) which shows a nice long term up trend.

Obviously the comments relate to posters on Somersoft , in particular some of the resident Doom and Gloomers over there.

Notice at the moment the prices are below the long term average . If it was a share , what would you do ?

I know the D & G answer will be " The fundamentals suck and it's about to reverse " ......



Cliff

 

[FxTrader]

Notice at the moment the prices are below the long term average . If it was a share , what would you do ?

Not bad, so in the 8 years from 2005 until now the Sydney median has risen ~38% (~$200,000 profit on the median of $520K). That gives us an average annual return of 4.75% on capital invested (before any tax or expense considerations). Unfortunately. the average risk free rate of return on bank interest over this period was about the same.

Let's see now (there are so many examples but one of my recent favorites will do) the share price of Carsales.com has risen 100% in 21 months. Never compare the returns available on property with that of quality businesses like this, property doesn't even come close.

What would I do with a share that returned on average 4.75%/yr for 8 years - look elsewhere. I always find it amazing that property investors roll out such charts and crow about how great the returns are in property. Compared to what and over what period?

 

[See Change]

My mistake Fx Trader

I thought this was a " Future of the Property Market " thread , not a Shares Vs Property thread , though I must admit I did raise the share thing , so I shouldn't really complain. I have actually found the skills that I've learnt in share investing have been very useful in Property . I started out in shares before I went into property and have found taking ideas from one area of investing and using them in another area has been a useful tool.

I misunderstood the game rules , so as I have suggested that property can potentially go up . with some evidence to suggest that is a plausible argument , you change the argument ....

If I'd seen this as one of those Share Vs Property threads I won't have wasted my time. They both work.

I thought people on this thread might have actually been interested on " the future of the property market "....

That's what my last post was about.

I came over here ( ASF ) to catch up on what was going on in the share market and seeing this post , and knowing something about property investing , I thought I would contribute . It would seem that there are many people on here with closed minds . I find that disappointing.

Cliff

 

[TheUnknown]

Property bugs will always throw charts around showing big gains , yes big gains but what period of time captain cook times until the early 2000s

 

[So_Cynical]

For those who like graphs , here is one ( copied from this thread on Somersoft ) which shows a nice long term up trend.

Obviously the comments relate to posters on Somersoft , in particular some of the resident Doom and Gloomers over there.

Notice at the moment the prices are below the long term average . If it was a share , what would you do ?

Price break below the long term trend, coupled with poor fundamentals, neutral sentiment and record low credit growth and record low capacity to borrow...most people would be selling.

 

[moXJO]

We have a chart on guys that made it big in property vs those in shares. I find it funny there is still this argument one is better than the other. For me developing pisses on anything I could make in shares. Business is better again.

 

[Bill M]

I came over here ( ASF ) to catch up on what was going on in the share market and seeing this post , and knowing something about property investing , I thought I would contribute . It would seem that there are many people on here with closed minds . I find that disappointing.

Cliff

Hello Cliff, I am enjoying your imput, keep it up I love it. I myself have been investing in property since the late 70's. I've heard all the doom and gloom stories many times before and this time it is no different.

I attach an article I cut out of the northern beaches local rag 19 years ago. Have a look at the prices back then. Now you need to pay between 400K and 500K for a 1 br unit on the Northern Beaches and at this present time prices are rising rapidly. All the best.

 

[kid hustlr]

I thought people on this thread might have actually been interested on " the future of the property market"

It is.

Hopefully we can get the thread back on track. The needless argument about baby boomers vs the rest or shares vs property is not required.

 

[sydboy007]

Hello Cliff, I am enjoying your imput, keep it up I love it. I myself have been investing in property since the late 70's. I've heard all the doom and gloom stories many times before and this time it is no different.

I attach an article I cut out of the northern beaches local rag 19 years ago. Have a look at the prices back then. Now you need to pay between 400K and 500K for a 1 br unit on the Northern Beaches and at this present time prices are rising rapidly. All the best.

View attachment 54643

what would the inflation adjusted prices be now?

That is the problem with most property investors, they hold the asset for a long period of time and never adjust up the purchase costs, and other associated holding costs, to give a true current valuation and profit / loss.

Considering the high inflation rates of the 70s and early 80s I dare say we're talking at least tripling the CPI adjusted prices on the left hand column. I'd also say the units that were available for purchase back then, well not many people looking to buy a property today would want to live in one of them.

I must admit I've been surprised the property ponzi scheme has lasted as long as it has, but each time we get another leg up it just makes the eventual popping of the bubble that much bigger. The household sector isn't able to take on much more debt, though if the anecdotal reports of Chinese buys and SMSFs now being a new source of buyers, maybe things can continue on as they are for a fair bit longer.

Oh for a major party to come up with a credible plan for affordable housing.

 

[satanoperca]

A good friend has recently purchased her first property :

Inner city 2 bedroom house in Melbourne
Buy price $700k
Stamp Duty $28K
Mortgage Insurance $25K
Other Fees $2K
Loan Amount $650K

LVR 95% Loan repayments of $3.8K per month

Equivalent property to rent : $2.1K per month

Original deposit $90K

Her Salary $120K pa divorced with one child.



Why did she buy, her family convinced her that it was a good investment. I tried to convince her she was better off with a margin loan + her deposit and build up a share portfolio. But she is convinced her property will double within 10 years.

Her property needs to rise by 10% for to break even if she is forced to sell. When asked could she cope with IR's increasing by 2% she would have to sell. Responsible lending, no. Banks are just drug dealers pushing debt as the new cocaine.

Cheers

 

[DocK]

A good friend has recently purchased her first property :

Inner city 2 bedroom house in Melbourne
Buy price $700k
Stamp Duty $28K
Mortgage Insurance $25K
Other Fees $2K
Loan Amount $650K

LVR 95% Loan repayments of $3.8K per month

Equivalent property to rent : $2.1K per month

Original deposit $90K

Her Salary $120K pa divorced with one child.



Why did she buy, her family convinced her that it was a good investment. I tried to convince her she was better off with a margin loan + her deposit and build up a share portfolio. But she is convinced her property will double within 10 years.

Her property needs to rise by 10% for to break even if she is forced to sell. When asked could she cope with IR's increasing by 2% she would have to sell. Responsible lending, no. Banks are just drug dealers pushing debt as the new cocaine.

Cheers

Do you know which bank/credit union/society she has borrowed from? I'm well out of touch with modern home loans, but once upon a time the majors worked on a maximum monthly repayment/gross income ration of 30% (her's would be 38%) and mortgage ins would be required on a 95% lvr & they'd do likewise. It is indeed alarming that lending is still taking place where the slightest rise in interest rates, or heaven forbid a period of unemployment, would result in a forced sale in a very short time period.