Good points xoa. The HIA released it's New Home Sales report today showing a 7.2% drop in new homes sales.
If you factor in inflation, the real fall has been 15%. There's probably another 2 or so years of falls to come.
I wonder whatever happened to the UK's "housing shortage" and formerly low rental vacancy rates.
HIA Chief Economist, Harley Dale said new home sales dropped by 7.2 per cent in July 2008 , reinforcing industry evidence that home building conditions hit the wall in early July.
“Budgeted sales levels are well down on expectations and that runs the clear risk of the next step being a shedding of labour in the industry,” said Mr Dale.
HIA’s New Home Sales Report showed a 7.5 per cent dip in detached house sales in July. Multi-unit sales fell by 5.2 per cent. The weak result reflects a final bout of mortgage rate increases clashing with sharply higher fuel and food bills....
....In the month of July new home sales fell by 24.5 per cent in Western Australia and sales were down by 11.7 per cent in New South Wales, 11.2 per cent in South Australia, and 7.2 per cent in Victoria. Sales increased by 13.4 per cent in Queensland, the first rise in six months.
One point for discussion, since houses are now treated as a commodity shuldn't supply and demand dictate prices?
No Credit price and availability combined with peoples ability to pay does - why dont you people understand that ?
Of course we understand that! But why don't you people understand that if what you propose was correct then the housing market should have collapsed years ago and would never have got to where it currently is?? Ie supply demand is an equally important factor.
Case in point - in the "olden" days, most families consisted of a married couple, single income earner, couple of kids. Nowadays most families have 2 incomes, and those incomes are considerably higher in real terms than they ever have been. In addition, the cost of many other goods have decreased compared to the "olden days", in real terms, eg, cars, whitegoods, and luxuries such as TVs, stereos and other consumer electronic goods.
Ergo, people can AFFORD to service higher debt in order to get the things they desire - like the best house they can afford for their family. That is why the market is where it is, and why currently it is basically staying there. Credit is a little tighter and more expensive than in *recent* times, but go back 10 years or so and the conditions now are not that different.
Cheers,
Beej
Of course we understand that! But why don't you people understand that if what you propose was correct then the housing market should have collapsed years ago and would never have got to where it currently is?? Ie supply demand is an equally important factor.
Case in point - in the "olden" days, most families consisted of a married couple, single income earner, couple of kids. Nowadays most families have 2 incomes, and those incomes are considerably higher in real terms than they ever have been. In addition, the cost of many other goods have decreased compared to the "olden days", in real terms, eg, cars, whitegoods, and luxuries such as TVs, stereos and other consumer electronic goods.
Ergo, people can AFFORD to service higher debt in order to get the things they desire - like the best house they can afford for their family. That is why the market is where it is, and why currently it is basically staying there. Credit is a little tighter and more expensive than in *recent* times, but go back 10 years or so and the conditions now are not that different.
Cheers,
Beej
Good points xoa. The HIA released it's New Home Sales report today showing a 7.2% drop in new homes sales.
Of course we understand that! But why don't you people understand that if what you propose was correct then the housing market should have collapsed years ago and would never have got to where it currently is?? Ie supply demand is an equally important factor.
Case in point - in the "olden" days, most families consisted of a married couple, single income earner, couple of kids. Nowadays most families have 2 incomes, and those incomes are considerably higher in real terms than they ever have been. In addition, the cost of many other goods have decreased compared to the "olden days", in real terms, eg, cars, whitegoods, and luxuries such as TVs, stereos and other consumer electronic goods.
Ergo, people can AFFORD to service higher debt in order to get the things they desire - like the best house they can afford for their family. That is why the market is where it is, and why currently it is basically staying there. Credit is a little tighter and more expensive than in *recent* times, but go back 10 years or so and the conditions now are not that different.
Cheers,
Beej
Regardless anyway, time will eventually reveal everything. It's long due that we all need to face the consequences of living beyond our means and end this credit boom. Country can only increase its wealth through production and saving, not spending and borrowing, which is what we have been doing mostly for the past 20 years.The facts
The following chart shows nominal average dwelling prices from 1880 to 2007. Highlighted in red are two periods when house prices most certainly did not double over any period. In fact, following the booms of the 1880s, prices fell sharply from 1890 and did not regain their previous highs until 1914, twenty-four years later. A similar situation occurred between 1929 and 1942. So we have two long periods where prices failed to appreciate at all, let alone double.
Now turning to years when the doubling theory hold true, the following charts highlight such periods:
The top chart has years where the average price has doubled over ten years highlighted. 40 out of 128 years or 31%. The lower chart highlights years where the average price has doubled over the previous seven. 22 out of 128 years or 17%. Incredibly, the myth was entirely false for the period from 1996 to sometime during 2002. Yet by 2003 it had become common knowledge, repeated at property investment seminars; in books, magazines and newspapers; on television current affairs, infomercials and property pr0n?; as well as property websites and dinner tables around the country!
Clearly, the 'rule' didn't hold prior to the middle of the twentieth century. Even then, apart from the rapid appreciation of prices of 1950 that was associated with the return of many men from the war, all the doubling action has taken place since 1970.
The future
If you are an investor wanting to buy a property, should you bank on the price rising 7.2% per annum? Let's have a look at the fact.
The average income in Australia at present is approximately $52,000 per annum. The average house price is approximately $345,000 — 6.6 times the average annual income.
Now, let's assume that house prices rise at 7.2% per annum, while wages grow at 5% (quite a generous growth).
In 20 years, the average house price will be about $1,385,000. At the same time, the average income will be about $138,000. So, despite there being only a 2.2% difference between wage growth and house price growth, the average house price will be 10 times that of the average wage.
If we continue another 20 years into the future (40 years from now), the average house price jumps to $5,567,000, while the average wage is $366,000. So, the average house price is about 15 times the average wage. This assumes a 5% increase in salaries per annum, which could be higher, or more likely, lower.
Many recent, double-income home buyers are paying well over 30% of their combined net income to pay their mortgage, and are at risk of losing their home. For the 7.2%-rule to hold, double-income families in 20 years will have to pay almost 50% of their take home income to pay their mortgage, and this number will continue to grow. This would mean that the general cost of living: food, entertainment, raising kids, will have to drop by about 30%. If you are considering investing in property, you can choose to believe that this is going to happen, and go ahead and buy; or you can accept that the 7.2% is a generalisation from a very short period of time that cannot hold in the future. Despite the forecast population increase, demand for housing is strongly related to affordability, and property in Australia is currently the most unaffordable in the world, despite being one of the least densely populated countries.
This decade brought with it a combination of low rates and property fan boys/fanatics the likes of which has never been seen in modern history hence the spike in price and debt.
You are spot on about dual income households. 100% right, but this has over the last 20 years alsonbeen overcomitted to property. It shows in the household income to debt numbers.
You are right that some costs have fallen, but there are many increased and new costs of living today which outweigh the falls.
Today prices are falling. A waterfront reserve house in cremorne just had its 3rd failed auction in 6 months and is listed for under 1.7m.
PPORs are not an investment unless you plan to downgrade one day. They certainly dont provide an income.
The indoctinated "property investors" are TODAY too mortgage stressed to buy more or are folding (2 of my wealthier friends this year). Gen Yers realise the wont get ahead doing the same thing as everyone else with their $$.
Borrowing for property is at 20 years lows THIS MONTH. Its over people. In the best parts of sydney prices are back to almost 4 years ago and anyone that bought in that period would have done better in term deposits.
PPOR buying was never a way to get rich and today, once again, is a lifestyle decision.
Those looking to get rich are looking elsewhere. The sheeple chasing the dream wont bring about another spike for many years.
And i dont care if some paper shows gains ... on these volumes one or 2 $10m buys by old money bargain hunters will give wacky nos but like for like prices are shocking.
This decade brought with it a combination of low rates and property fan boys/fanatics the likes of which has never been seen in modern history hence the spike in price and debt.
You are spot on about dual income households. 100% right, but this has over the last 20 years alsonbeen overcomitted to property. It shows in the household income to debt numbers.
You are right that some costs have fallen, but there are many increased and new costs of living today which outweigh the falls.
Today prices are falling. A waterfront reserve house in cremorne just had its 3rd failed auction in 6 months and is listed for under 1.7m.
PPORs are not an investment unless you plan to downgrade one day. They certainly dont provide an income.
The indoctinated "property investors" are TODAY too mortgage stressed to buy more or are folding (2 of my wealthier friends this year). Gen Yers realise the wont get ahead doing the same thing as everyone else with their $$.
Borrowing for property is at 20 years lows THIS MONTH. Its over people. In the best parts of sydney prices are back to almost 4 years ago and anyone that bought in that period would have done better in term deposits.
PPOR buying was never a way to get rich and today, once again, is a lifestyle decision.
Those looking to get rich are looking elsewhere. The sheeple chasing the dream wont bring about another spike for many years.
And i dont care if some paper shows gains ... on these volumes one or 2 $10m buys by old money bargain hunters will give wacky nos but like for like prices are shocking.
My main contention is I don't believe there will be a massive, long term "crash" in property prices - instead there will be a period of flat prices followed by a slower uptick.
Beej,I don't disagree with much of what you say. My main contention is I don't believe there will be a massive, long term "crash" in property prices - instead there will be a period of flat prices followed by a slower uptick. I also agree that the recent 7-10%pa capital value returns were unique, but I think going forward prices will still increase at least in line with inflation (after this adjustment period). That's still a nice tax free return for PPOR owners, and if you add 5% rental returns (which will only go up during this period) still provides something approaching a 10%pa return for property investors.
Temjin
Nigel's study has some serious methodological flaws so I'd be careful trying to extrapolate too much from history over the long term. Simple questions raised are;
1.What was the average life expectancy in early 20th century? Has this changed and made long term assets such as property more desirable?
2. How many "average" people were able to purchase their home pre WW2? How many now have that option via easier access to credit?
3. What deposit criteria were required over time to fund the loan? Has this changed and made access to the property market easier?
4. Has household "income" changed ie working mothers? Where does the extra income go?
5. Has there been an increase in disposable income over time and where have people chosen to put that income?
6. Inflationary periods related to house price growth by?? Perhaps rising commodity costs affect cost of new stock making older stock more attarctive and maintaining prices in real terms?
So many more questions related to Nigel's study. Only time will tell us what lays ahead regardless of what the perma bulls or D&G crowd have to say.
Cheers
Shane
Beej said:I don't disagree with much of what you say. My main contention is I don't believe there will be a massive, long term "crash" in property prices - instead there will be a period of flat prices followed by a slower uptick.
PS - thanks for the tip re that Cremorne place - I'm going to go and have a look at that today is it seems like a real "opportunity"!!Although I do wonder if there is something wrong with the house as it seems to be way below the rest of the current market for the area....
hello,
in will be great in 20 or 30yrs time with the research being conducted here on ASF to get some results regarding buying vs. renting,
even more important will be the ABS stats on owners vs. renters in 20-30yrs to see if anything has really changed
hello,
no worries number, will touch base again at Q3
Quote:
Originally Posted by robots
hello,
no worries number, will touch base again at Q3
Average price of sales is more about the types of properties being sold ... about as useless as auction clearance rates. Esp av sales in only 3 months
You yourself said the only way to find out was to get out there ... speaking of which, what happened to the weekly clearance rate as gospel report. Are they that bad down there ... or did you realise they were pretty pointless.
Speaking of silly numbers ... we had 36% house clearance rate on syd north shore a week back.:
Brisbane, Adelaide, Perth are especially bad in terms of clearance. Withdrawn on Sydney is an interesting one.. 15%: Maybe they realise they're wasting their time with an auction sale
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