The future of Australian property prices

[sydboy007]

*WOW* so our economy is built on houses? HUH ? Very small factor of the economy in general. We are nothing like Greece.

Government income is tied to the size and growth of the economy, usually expressed as gross domestic product. And when we convert the debt growth shown in the chart to GDP terms, the picture looks very different. The 2011-14 debt growth is as follows: Slovenia 23.9 per cent of GDP, Spain 26.4 per cent, the UK 12.6 per cent, Greece 10.3 per cent, total OECD 9.6 per cent and the United States 8.1 per cent. Australia's increase is 6.7 per cent.
By 2014, every other country on the chart has a debt-to-GDP ratio between 1.25 and 5.6 times as big as Australia's. The chart's ''best'' performers, Germany and Switzerland, are cutting debt but, relative to GDP, still owe significantly more than Australia does.

Commonwealth debt is equal to about 10 months' revenue - most mortgage holders can only dream of such a burden.


Read more: http://www.theage.com.au/comment/de...re-isnt-one-20130816-2s289.html#ixzz2iyulspJR


I think the mining companies contribute to our economy as well http://www.thisisourstory.com.au/our-contribution.aspx

I don't see current Govt debt as a problem, I do see private sector debt as THE PROBLEM.

The below chart is a bit old, but from what I've read there's been little deleveraging in the household sector, more a flat lining the last few years. So if the Coalition claimed Guv'ment gross debt at at < 20% is a CRISIS, then household debt at 100% must be <expletive> high.

For every property winner there's going to be a property loser. I know the idea is to be on the winning side, but with prices where they are, and the high transaction costs involved, I fear it's easy to be trapped on the losing side.

I think it all boils down to unemployment and how far it increases during the current slow down. Income growth per capita is turning negative in real terms, which to me is not supportive of rising prices, but if the media reports of the Chinese being big investors here then that external influence may make local economic conditions a moot point till China has it's own debt crisis.

Certainly the trend is for prices to start looking on the up in Sydney, but I'd say Perth is going nowhere for awhile, and lifestyle areas are probably still to be avoided.

 

[trainspotter]

Heathmont is a good example of why a median price can be misleading. I live nearby and know Heathmont well, it's an established area with a diverse mix of 50+ year old dilapidated weatherboard shacks, old ugly BVs, renovated and new homes. $400 to $500k buys a shack or old BV or townhouse. If you want a well presented renovated home or something modern try $700k to 1 million.

A friend has a beautiful renovated home there that's probably worth $900k+. Next door is an awful unrenovated and poorly kept 50+ yo weatherboard. The location is great but it's a mix of the good, bad and just plain ugly all on the same street.

Sensational report on Heathmont, FxTrader ... glad to hear a person with experience on the ground zero POV.

Me personally I would look for the most structurally built dilapidated weatherboard shack in the best street you can afford and renovate the FECK out it and take lotsa photos on the way to prove how clever you are.

Spend 500k and another $100k to make $900+ works for me every time.

Real Estate ... ya gotta love it.

 

[medicowallet]

Spend 500k and another $100k to make $900+ works for me every time.

a $599100 loss. (or are you selling it for $600900)

Sounds like my investments in MFS, BBG, PDN.

MW

 

[trainspotter]

a $599100 loss. (or are you selling it for $600900)

Sounds like my investments in MFS, BBG, PDN.

MW

Hey MW .... property thread Budge. Rental value would cover the interest component adequately.

 

[trainspotter]

Thanks TS...fishing must good there too I'm guessing...

Have a look at my mate Chris "Spess" "Crispy" on the deck doing a Starfish in the hook line and sinker thread. Property is showing signs of recovery is all I am saying.

$750 a week for a 400k house in Logan ... ask agents to present signed "potential" lease agreements to take to bank for finance. 1/2 hour to Gold Coast excites me personally.

Off to NT to fish for Barra in December during the rainy season. Pics to follow mate.

 

[sptrawler]

Have a look at my mate Chris "Spess" "Crispy" on the deck doing a Starfish in the hook line and sinker thread. Property is showing signs of recovery is all I am saying.
.

I hope your wrong I just sold a triplex block.lol

 

[im sparticus]

Time to get the moon boots back on!!!!

 

[satanoperca]

Spend 500k and another $100k to make $900+ works for me every time.

Real Estate ... ya gotta love it.

Simple as just trading shares.

& why stop at $500K, why not by 10, then you are talking, nice $3M k profit. We should all be doing, living the dream.

Got to love it.

 

[trainspotter]

Simple as just trading shares.

& why stop at $500K, why not by 10, then you are talking, nice $3M k profit. We should all be doing, living the dream.

Got to love it.

Now you are just being unrealistic .. back to sleepy timez .. g'night.

Ya got to start somewhere satanoperca ... babies crawl before they walk.

If you had that kind of money to splurge there are far better things out there to make coin on in the long term.

 

[againsthegrain]

Now you are just being unrealistic .. back to sleepy timez .. g'night.

Ya got to start somewhere satanoperca ... babies crawl before they walk.

If you had that kind of money to splurge there are far better things out there to make coin on in the long term.

LOL this is coming from a gay that wanted to go door to door and swap out people's light bulbs for used bulbs saying they are new at 50c profit a pop.

TS the truth is you bought one overpriced property and are still in the red thinking you can talk up the market on the internet.

All you ever do is quote news.com.au which everybody knows is hardly a credible source and when people make smart comments about the economy you attack their "lack of spelling" or anything else to change the topic.

 

[trainspotter]

LOL this is coming from a gay that wanted to go door to door and swap out people's light bulbs for used bulbs saying they are new at 50c profit a pop.

TS the truth is you bought one overpriced property and are still in the red thinking you can talk up the market on the internet.

All you ever do is quote news.com.au which everybody knows is hardly a credible source and when people make smart comments about the economy you attack their "lack of spelling" or anything else to change the topic.

Oh why do I bother entering into discussions with people who are not equipped to defend themselves?

The light bulb idea was to show an example of a low cost start up business and I asked anyone else if they had any good ideas ... ipso facto. But it would seem that your lack of comprehension of the written word has come to the fore yet again.

As for calling me "gay", I do hope that you are saying that I am a "happy" person and not a person who is attracted to the same male gender. How churlish of you if it is the former and not the latter part of the aforementioned sentence.

Please if you have nothing to say about property why even bother posting in here?

I bid you adieu my mean spirited friend and I do hope that one day you find whatever it is you are looking for that will make you "gay" like me.

P.S. Go and read several years and a coupla thousand posts or so where I have explained in great detail as to the whereabouts of property during its cyclical phases.

 

[maffu]

As a potential IP buyer in the next few years I'm interested in the discussions about NG IP's not necessarily being a good investment due to low rental returns and the prospect of limited capital gains in the medium/long? term.
BUt most of this discussion seems to be metro based and I am in a regional centre (Albury/Wodonga). Do the warnings equally apply to region centres?

Thanks

Any post I have made is generally Sydney focused, where on average the rental yield looks to be about 2-3% (less than a bank account!), which I personally find unacceptable as you are then just gambling on capital gains.

I have never been to Albury/Wodonga so can't comment on that, but in other regional areas in NSW that I have looked, there is much better rental yields available than those in Sydney, so while I think Sydney is over valued, there are other areas that seem fairly priced and that would give a reasonable yield.

 

[trainspotter]

No no no no this cant be true ...... its from a News Limited source! Oh wait ... the information is from the HIA and also from CommSec chief economist Craig James.

A RISE in new home construction appears to be gaining traction with new home sales hitting their highest level in over two years. Sales of new homes increased by 6.4 per cent in September, seasonally adjusted, the strongest monthly growth since April 2012, according to the Housing Industry Association (HIA).

The increase reflected a 4.5 per cent rise in sales of detached houses and a 19.9 per cent boost in multi-unit sales.

Over the September quarter, detached house sales rose 3.7 per cent - and by 25.2 per cent compared to the same period in 2012.

Total new home sales reached their highest level in over two years in September, HIA chief economist Harley Dale said.

"Given the recovery in sales is occurring from a record low and that the upward momentum appeared to be stalling in mid-2013, this September outcome is very positive," Dr Dale said.

http://www.news.com.au/business/bre...ear-high-in-sept/story-e6frfkur-1226749628921

 

[satanoperca]

No no no no this cant be true ...... its from a News Limited source! Oh wait ... the information is from the HIA and also from CommSec chief economist Craig James.

A RISE in new home construction appears to be gaining traction with new home sales hitting their highest level in over two years. Sales of new homes increased by 6.4 per cent in September, seasonally adjusted, the strongest monthly growth since April 2012, according to the Housing Industry Association (HIA).

The increase reflected a 4.5 per cent rise in sales of detached houses and a 19.9 per cent boost in multi-unit sales.

Over the September quarter, detached house sales rose 3.7 per cent - and by 25.2 per cent compared to the same period in 2012.

Total new home sales reached their highest level in over two years in September, HIA chief economist Harley Dale said.

"Given the recovery in sales is occurring from a record low and that the upward momentum appeared to be stalling in mid-2013, this September outcome is very positive," Dr Dale said.

http://www.news.com.au/business/bre...ear-high-in-sept/story-e6frfkur-1226749628921

Typical of news, just keep on smiling and don't mention any fall please.

“Sales of multi-units fell by 5.7 per cent in the quarter and were largely flat compared with the same period in 2012.” noted Harley Dale.

Yes good old news, reports just the good stuff.

But on a positive note, TH as you are far more worldly on these matters than certainly I am, is there anything in this :-
"CBA, Westpac and ING have all recently increased their interest rates despite expectations of further interest rate cuts by the Reserve Bank of Australia.

CBA added 0.44% to 6.19% to its 3-year fixed rate. Westpac lifted by 0.40% to 5.79% while ING increased it by 0.20% to 5.89%."

Great rates still, but why the move up if everyone believes the next more is down. I like to see how this new boom we power through just a 1 or 2% increase in IR's.

Cheers

 

[trainspotter]

Typical of news, just keep on smiling and don't mention any fall please.

“Sales of multi-units fell by 5.7 per cent in the quarter and were largely flat compared with the same period in 2012.” noted Harley Dale.

Yes good old news, reports just the good stuff.

But on a positive note, TH as you are far more worldly on these matters than certainly I am, is there anything in this :-
"CBA, Westpac and ING have all recently increased their interest rates despite expectations of further interest rate cuts by the Reserve Bank of Australia.

CBA added 0.44% to 6.19% to its 3-year fixed rate. Westpac lifted by 0.40% to 5.79% while ING increased it by 0.20% to 5.89%."

Great rates still, but why the move up if everyone believes the next more is down. I like to see how this new boom we power through just a 1 or 2% increase in IR's.

Cheers

Ummm Harley Dale also said this in the link I inserted in the post "Given the recovery in sales is occurring from a record low and that the upward momentum appeared to be stalling in mid-2013, this September outcome is very positive,".

Ummmm yes there is something in this because A LOT of people are fixing their home loans for a 3 year fixed rate and it is the banks job to maximise profits back to it's shareholders. The old supply and demand thingy ya know? If something becomes popular then let's bump the price up and make a killing. ( look back a few posts where I placed an article as to how our banks are some of the most profitable in the WORLD )

Never said the word BOOM ... said that "property is showing signs of recovering." I believe that when banks etc do their sums when assessing the applicant for finance to purchase property that they have a duty of care to the client to make sure that their is a "buffer" on the interest rate side of things ... usually they will qualify you at a 3% margin higher than current standard variable rate.

Hope that clears this up for you satanoperca.

P.S. Interest rates rising is a good thing both for self funded retirees and for property investors !

 

[im sparticus]

Any post I have made is generally Sydney focused, where on average the rental yield looks to be about 2-3% (less than a bank account!), which I personally find unacceptable as you are then just gambling on capital gains.*******TRY TELLING THAT TO THE GOLD BUGS ON THIS THREAD****

I have never been to Albury/Wodonga so can't comment on that, but in other regional areas in NSW that I have looked, there is much better rental yields available than those in Sydney, so while I think Sydney is over valued, there are other areas that seem fairly priced and that would give a reasonable yield.

Nope according to rpdata gross yield is currently 4.1% in sydney, melbourne has the lowest at an average of 3.6% and brisbane highest with around 4.8%. 5 capital city average is 4.1%



A real world example of mine: Currently 5.4% gross as of latest lease renewal and recent valuation and 7.5% as of original purchase price 8 years ago.
original yield was 5.2% ant total capital appreciation 40% on last val (probably closer to 50% on latest news) over some very hard times the returns have still outperformed cash. even more so if i only had 20% deposit.



You will generally find that the assets with anticipated future growth or growth in yield price to put gross yeild below borrowing costs and vice versa same goes for shares.......the highes P/E asset doesnt always win. Ya dig!

 

[satanoperca]

Hope that clears this up for you satanoperca.

P.S. Interest rates rising is a good thing both for self funded retirees and for property investors !

Yes thank-you for your response, appreciated, makes perfect sense.

Just one more question, I understand that self funded retirees would like higher rates like my mum and dad, but how does it benefit PI's. Please don't tell me because they can claim a greater tax loss. I cannot see PI's getting any capital gains if IR's go back up.

Also, I don't believe the banks show that much duty of care to the customer but certainty do to themselves. Of the four friends that I know of who have bought in the last year, if IR's increased 300 points then they all would be living at my place, unless you meant 3% above what they are currently paying. Ie 5% to 5.15% but that makes no sense. So given that if you are currently paying 5% on $600K and they went up to 8% that is only an increase of $346 pw or $1500 p.m or around 50% increase. Not much but those $3 pizzas from Coles would be looking mighty good.

 

[sydboy007]

Falling yields across most markets over the last quater, and not looking pretty over the last 12 months either.

I'd love to know what the median net yield is these days.

 

[maffu]

Nope according to rpdata gross yield is currently 4.1% in sydney, melbourne has the lowest at an average of 3.6% and brisbane highest with around 4.8%. 5 capital city average is 4.1%



A real world example of mine: Currently 5.4% gross as of latest lease renewal and recent valuation and 7.5% as of original purchase price 8 years ago.
original yield was 5.2% ant total capital appreciation 40% on last val (probably closer to 50% on latest news) over some very hard times the returns have still outperformed cash. even more so if i only had 20% deposit.



You will generally find that the assets with anticipated future growth or growth in yield price to put gross yeild below borrowing costs and vice versa same goes for shares.......the highes P/E asset doesnt always win. Ya dig!

So when I said 2-3% yield, I should have specified Net Yield and our numbers are in the same ball park based on current sale prices in Sydney. I personally find that unacceptably low. Regional centers as the original poster mentioned can have much higher yields than Sydney, and would then be less reliant on capital gains to be a worthwhile investment.

I agree with you on the gold bugs. I also think they are gambling on capital gains with no yield.

Historical averages on the stock market show firms with the highest P/E ratios under perform shares with the lowest P/E ratios. Same with high M/B compared to low M/B. So you are correct, the highest P/E on average will lose out compared to the lowest P/E firm. I expect the same trends in Real Estate, which is why I would prefer low P/E real estate, which is why I think on average Sydney is over priced.

 

[trainspotter]

Yes thank-you for your response, appreciated, makes perfect sense.

Just one more question, I understand that self funded retirees would like higher rates like my mum and dad, but how does it benefit PI's. Please don't tell me because they can claim a greater tax loss. I cannot see PI's getting any capital gains if IR's go back up.

Also, I don't believe the banks show that much duty of care to the customer but certainty do to themselves. Of the four friends that I know of who have bought in the last year, if IR's increased 300 points then they all would be living at my place, unless you meant 3% above what they are currently paying. Ie 5% to 5.15% but that makes no sense. So given that if you are currently paying 5% on $600K and they went up to 8% that is only an increase of $346 pw or $1500 p.m or around 50% increase. Not much but those $3 pizzas from Coles would be looking mighty good.

PI's would benefit if rates go up due to rental income increasing. Also means if rates are going up the only trigger the RBA has left in an attempt to slow inflation. Inflation = property prices increasing as well as rental income increasing to cover the interest component. A very simplified version of events but I don't want to go into projections and net yields of 2.3% of a blah blah blah *yawn*

I meant that the banks would qualify you on the current variable rate of approx 5.8% plus add a FULL 3% above this rate ie 9% or thereabouts to see if the applicant can afford the debt levels they are getting themselves into.

But but but the banks are offering a 10 year rate of 7.33% so the chances of this MASSIVE interest rate rise is not likely to happen IMO.

http://www.anz.com/promo/ANZ-home-loans/choosing_a_home_loan.asp

Start stocking up on the tin food and prepare a vege garden in the back yard mate ... it's all doom and gloom in property !