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The future of Australian property prices

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Detroit is a good example of how house prices should be. No artificial maintenance by limiting supply, flooding with cheap foreign money from America to banks or China corruption to Australia, home buyers grants. if we had proper highways and smartly designed cities with 130km/h 4 lane freeways leaving the cities with no traffic lights then land shortage would be no problem.
 

Yeahhh let's all go to Detroit where the unemployment rate is killer ...

Nov. 30, 2015 10.70%
Oct. 31, 2015 13.00%
Sept. 30, 2015 11.50%
Aug. 31, 2015 12.70%
July 31, 2015 13.90%
June 30, 2015 13.10%
May 31, 2015 13.00%
April 30, 2015 10.20%
March 31, 2015 11.70%
Feb. 28, 2015 12.50%
Jan. 31, 2015 14.30%
Dec. 31, 2014 12.90%
Nov. 30, 2014 13.90%
Oct. 31, 2014 16.00%
Sept. 30, 2014 16.30%
Aug. 31, 2014 17.70%
July 31, 2014 19.30%
June 30, 2014 17.40%
May 31, 2014 16.90%
April 30, 2014 15.60%
March 31, 2014 17.80%
Feb. 28, 2014 18.10%
Jan. 31, 2014 18.00%

https://ycharts.com/indicators/detroit_mi_unemployment_rate

The 4 lane freeway leaving Detroit serviced them well with over 400,000 people leaving the city since 1990 or approximately 26,667 people per year

No artificial stimulus from the guvmint and all that dirty China money propping up the system certainly helped the residents of Detroit ... yeah let's be like Detroit.

As Junior has pointed out ... Jobs is the key *wink*
 

To clarify I am not a property bull. Have been anticipating a fall in prices for a few years now, and I have been very wrong!

It's hard to see a significant fall until unemployment and/or interest rates rise.

Income and availability/cost of credit are key drivers, Aussies love property and prices won't fall until participants are restricted in their ability to pay, IMO. That day will come, when is the difficult question.
 
Yes but Detroit house prices means that the city can easily rise from the ashes. People can now buy houses for cash.
Once some employer sorts out all the union issues anyone buying in Detroit gets to start a good life in the future. Detroit will be. The best city in America within 12 years time.

Here the young are stifled from spreading their wings, from risking. You can't risk anything in Australia because everything is expensive and everyone from the baker to the government to the landlord has their knife out waiting for you to not pay and you can fall off the train quickly here and land up on **** street. In America or Europe you can live in a house with roaches druggies for neighbours and a leaky roof and pay $100 a week while the really nice place is $700 a week. Food is super cheap as is transport. Soup kitchens and cheap canteens everywhere.
In Australia the roaches, druggies and leaky roof are pretty standard but the rent is $350 and food is super expensive as is transport and then taxes screw you massively. A nice house costs $800 but that's like the $600 place in America. No soup kitchen in sight.

Tradies in Australia thick as planks earn massive money while highly educated scientists and engineers have to fix their own houses and do their own plumbing.


Let's chat about when the next stock crash is coming. I really thought it was going to be in 2015. I put my super into cash last April and reaped the benefits of a massive increase in value. I am waiting for the crash so that I can invest in high growth funds again.
 
Why Germany's housing policies are never brought up as a sterling example, is beyond me. Europe's most productive country, with banking policies that encourage business loans and where large deposits are required for residential property loans.

Most people will argue that large deposits would make property less attainable, but in Germany's case this has halted the insane mortgage debt expansion we have seen in other countries (including Australia). Thus, property prices have tracked inflation, the cost of living has remained competitive and private debt has remained low.

http://www.economist.com/blogs/dailychart/2011/11/global-house-prices

Large gains in the property market, is almost always associated with credit expansion (more debt) - people will argue that this time it is different due to "these" fundamental reasons - but in the end you have to pay the piper...
 
Trendnomics said:
Why Germany's housing policies are never brought up as a sterling example, is beyond me. Europe's most productive country, with banking policies that encourage business loans and where large deposits are required for residential property loans.
Click to expand...

I wrote this over 5 years ago ... still rings true today.

29th-August-2010 09:00 AM POST #2782

There are differences between most countries property markets that result in anomalies to their relative performance.

1) Relative population growth rates (high in Australia, but much lower in the US and UK and negative in Japan)

2) Mortgage default rates ”” the 90 day default rate on Australian home loans is about 15 and 30 per cent of the level of equivalent default rates on US and UK loans despite historically higher interest rates.

3) Tax treatment of housing - in the US capital gains tax is levied on owner-occupied housing while mortgage interest repayments are tax deductible, neither applies to Australia.

4) Size of their public housing markets - the public housing market share in the UK is far larger than Australia, which in turn has a much bigger private rental market.

5) Rates of home ownership (APPROXIMATES ONLY - 54 per cent in the Netherlands, 42 per cent in Germany, and 35 per cent in Switzerland, but about 70 per cent in Australia)

6) Responsiveness of housing supply to changes in demand - low in supply-constrained countries such as Australia, but higher in many countries such as the US, which has had a problem of excess supply.

7) Urbanisation of their population living in their largest cities as measured by the so-called “Zipf curve” (high in Australia but considerably lower in the US, UK)

Zipf's law, an empirical law formulated using mathematical statistics, refers to the fact that many types of data studied in the physical and social sciences can be approximated with a Zipfian distribution, one of a family of related discrete power law probability distributions.

http://en.wikipedia.org/wiki/Zipf's_law

Some of the reasons as to why "It's different here" - Now this does not mean we are bullet proof to a possible correstion but are some "reasons" that IMO believe when the rates start biting and the IRS & CDF's and USD falter then we have a slightly stronger model that the "other countries". Then again I could be completely wrong and the whole housing market will collapse by 40% at 11.37am on the 11th January 2011 compliments of Steven Keen.

Pretty boring stuff these informative posts. Can't we go back to the name calling again?

Things have changed ... the more they stay the same.
 
Germany prices have risen 30% compared to Australia 20% since 2010.

Can probably angle that stat to suit a few different points of view.
 
wayneL said:
Only with a healthy dose of confirmation bias
Click to expand...

A report yesterday showed Australia to be the 2nd most expensive place to buy a house in the entire world. Just behind Hong Kong.

Average house in Syd is 12.2 times avg. income. Anything above 4 or 5 times is considered unaffordable.

But maybe we're special and it will all end just fine.
 
German house prices have had stable increases over the last decade, not the massive jumps caused by cheap money.

The Australian government acted scandalously in allowing cheap money to flood the country since 2004 and be used for mortgages. This is plain economic terrorism. Without it Australia would have had house prices that would be about 50% lower and salaries that were high but not so high as to cripple the country. Right now we would have a low personal debt and innovation would be thriving. The government would probably have a trillion dollars in surplus and it could be used for real nation building.

Instead now the governments of Australia have a policy of making money from taking away from the children's pocket money. Inventing taxes for everything and using any means to raise revenue moral or not.
 
shouldaindex said:
Germany prices have risen 30% compared to Australia 20% since 2010.

Can probably angle that stat to suit a few different points of view.
Click to expand...

Reply - Part #1

That is correct - Germany was playing a little catch-up:



But if we add an extra 10 years on the time frame you have provided (i.e. 2000 - now), then Germany +28% and Australia +196%:



If we add an extra 10 years on top of this adjusted time frame (i.e. 1990 - now), then Germany +55% and Australia +327%:



Furthermore, if we apply an inflation adjustment to the prices from 1990 to now, then we can clearly see that the German prices have tracked inflation almost perfectly (slight dip in the 2000's, hence the recent run to catch up to the actual inflation adjusted price):



The strong economic machine of Germany has also delivered excellent wage growth, thus housing is actually more affordable today than in the early 1990's:

 
shouldaindex said:
Germany prices have risen 30% compared to Australia 20% since 2010.

Can probably angle that stat to suit a few different points of view.
Click to expand...

Reply - Part #2

Property price increases have also closely tracked rent increases (a sign of sound housing policies - i.e. not choking supply or over expanding credit):



In conclusion:
  • The fact that Germany is Europe's most productive nation is no coincidence - sound housing policies have ensured that housing prices (which directly impacts living costs) have remained low, thus ensuring the maintainability of cost competitive productivity;
  • Germany's "poor" housing price performance was the laughing-stock of Europe during the "boom" years in the 2000's (but you can't build true wealth from ever expanding debt - a nation's true wealth lies in it's productivity - un-afordable housing leads to high living costs - which results in the death of cost competitive productivity - see dutch disease);
  • Government policies have forced German banks to focus more on business loans (i.e. productive nation building loans), instead of private sector property loans - for a long time the average deposit for a home-loan was 50% of the purchase price (this slowed credit expansion);
  • All people are greedy - I recently watched The Big Short (Movie) and was quite annoyed by the fact that all the blame was assigned to the banks - Yet the un-servicable loans were taken up at free-will by everyday people (greedy people) - in this lies the crux of the issue - i.e. people will borrow as much as they can, up to their eyeballs, if they are allowed to (i.e. low deposit requirements) - resulting in credit expansion - which inflates house prices (everyone feels rich - but this is not true wealth - i.e fool's gold) and then when it all comes crashing down (i.e. time to pay the piper), only blame the banks.
 
ghreat simple and detailled explanations.Like it and agree with it, and thinking Germany has just added 1m people in a year (a disaster but that is another thread), the same thing in Australia would have doubled house price with local psyche.
 
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