House Prices doubling every 7 to 10 years

If the rate of population growth is the primary driver of prices (which it isn't), we should expect prices to grow more slowly than at any other time in history except the two world wars (falling nominal and real prices), the great depression (falling nominal and real prices), the mid 1970s (price growth < inflation) and the 1990s (price growth < inflation).

Hi MaxCarnage,

Shadow is only looking at the Demand/Supply side of the equation without taking any note of the debt to equity that many Australians have recently binged on. Debt and Unemployment are the key drivers that will bring house prices down. This is going to be long and drawn out as Governments try to inject stimulus packages and confidence back into the economy. Can they get the mix right? I doubt it very much.


Cheers markcoinoz
 
Shadow said:
Um, no. Not rubbish. Australia's current absolute population growth is the highest ever. Please point out one year in the past where the population has grown by more than 336,800 people.
Click to expand...

The bit that is rubbish is the causality (or even a correlation) - there isn't any.

I retired debating this stuff with you a while ago because typically you keep moving the debate just a bit off centre everytime - somebody says that their is no relationship between variable A and B and the reply is "look it variable A - it is the highest ever" (variable B drops off the discussion). It's like watching a politician answer questions from Kerry Obrien. It gets frustrating.

All I can say is those with high levels of debt who have put all their eggs in one asset category, and do work that has highly cyclical demand (e.g. contractors) must be a bit worried - even spending loads of times on forums convincing themselves of some rather illogical arguments about Australia being the only country in the world that is "different".
 
yieldmatters said:
The bit that is rubbish is the causality (or even a correlation) - there isn't any.
Click to expand...

Are you saying there is no correlation between population growth and house prices? Really?

yieldmatters said:
I retired debating this stuff with you a while ago because typically you keep moving the debate just a bit off centre everytime - somebody says that their is no relationship between variable A and B and the reply is "look it variable A - it is the highest ever" (variable B drops off the discussion). It's like watching a politician answer questions from Kerry Obrien. It gets frustrating.
Click to expand...

Huh? :confused:

yieldmatters said:
All I can say is those with high levels of debt who have put all their eggs in one asset category, and do work that has highly cyclical demand (e.g. contractors) must be a bit worried - even spending loads of times on forums convincing themselves of some rather illogical arguments about Australia being the only country in the world that is "different".
Click to expand...

Sounds like sour grapes there YM. Sorry, I probably shouldn't have mentioned that bit about selling up just before the boom. It must be painful to remember.

Oh, and I'm not a contractor by the way.

Shadow.
 
Shadow,


If you are talking about an increase in population from previous years, at least show the representation in percentage terms of total population.

1.6% increase is nothing out of the ordinary when viewing it over the last few years.

1.3% 2005 or 267,428
1.5% 2006 or 303,089
1.5% 2007 or 317,162

and now 1.6% 2008.

Big deal!!!

What is so special about that?

Not exactly mind blowing stuff.

From a historical perspective we have had much larger percentage increases from a year on year basis as have already been highlighted by Max Carnage.

If anything, there is more likelihood of a slight decrease as a percentage over the next few years as Australia digs deep into a prolonged recession.

That, i have no doubt.

The government can inject all it likes into FHB.

Long term it will only add to the fire.

The smart money are leaving in droves Shadow.

Many have been caught with their pants down and they know it.

Have you checked recently at the top end of town what has been happening?

Try Melbourne for a good place to start.

Population has nothing to do with trying to forecast supply and demand for housing when people know we are about to enter one of the darkest moments of economic history in Australia.

The sharemarket in this instance has been the forerunner.

Get ready for the real carnage.

Cheers markcoinoz
 
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markcoinoz said:
1.5% 2007 or 317,162

and now 1.6% 2008.

Big deal!!!
Click to expand...
I'm trying to work out why 330,000 additional people had trouble fitting into 144,140 additional dwellings... a whole heap apparently ended up sleeping on couches (according to Shadow) - leaving hundreds of thousands of dwellings worth of mythical 'pent-up demand'...

Somebody is failing primary school maths here.
 
Anyone ever tried to "debate" geology with a Young Earth Creationist or evolutionary biology with a Creation Scientist (sic)?

Shadow, do you fall into either of those categories, perchance?
 
Shadow said:
Are you saying there is no correlation between population growth and house prices? Really?
Click to expand...

There's a striking correlation!

In my town, the population has dropped 90%*. And house prices have tripled!!!!!111!!!eleven!!!

:D

*since 1970. But the newspapers have used this fact (and it is a fact) to get us on the front page of the paper once as a drought-stricken town and neglected to mention that it was because the railway closed. And house prices here have tripled in the last 5 years (after they dropped with the population, but y'know).
 
Hmmm, getting bored of this now. Too many gloomers with their heads in the sand. OK, you guys can go on believing that population growth has no impact on demand for housing and the sky is falling in etc.

2007 Population Growth
NetMigration.jpg


Oh yes, and vacancy rates are not really at historic lows. Rents are not really rising. Perhaps if you squeeze your eyes really hard and clench your fists it might come true.

AdvertisedRents.jpg


VacancyvsRents.jpg


I'll just keep on buying property. It's been working out very well for me so far.

NorthernBeachesResidexSep08.jpg


I'll let the armchair economist doom squad here continue to sell their houses just before the boom, or buy shares or whatever they were recommending last year. Even better - hoard your money in the bank and get that whopping 6% interest and then lose 3% in tax and 5% in inflation. :rolleyes:

Shadow.
 
Max Carnage said:
I'm trying to work out why 330,000 additional people had trouble fitting into 144,140 additional dwellings... a whole heap apparently ended up sleeping on couches (according to Shadow) - leaving hundreds of thousands of dwellings worth of mythical 'pent-up demand'...

Somebody is failing primary school maths here.
Click to expand...

Better let the government know. Obviously the government should employ smart people like you instead of primary school maths dropouts... I guess the government probably just make this stuff up for fun so that they can build 100,000 extra houses that will sit empty because nobody actually wants them. Silly government. Foundation for PM! :rolleyes:

FederalGovtUnderlyingDemand.jpg
 
markcoinoz said:
Shadow,

If you are talking about an increase in population from previous years, at least show the representation in percentage terms of total population.
Click to expand...

Already did. See top right chart.

USvsAustraliaCharts1.jpg


markcoinoz said:
1.6% increase is nothing out of the ordinary when viewing it over the last few years.
Click to expand...

One of the highest population growth rates in the world. Yeah, no biggie, we have heaps of caves and fields for tents.

markcoinoz said:
Have you checked recently at the top end of town what has been happening?

Try Melbourne for a good place to start.
Click to expand...

Didn't Melbourne prices boom by 25% last year. A correction after that is inevitable. That's why I'm not buying property in Melbourne, or at the top end of town.

I fully expect property prices across Australia as a whole to fall moderately (around 5%) over the next year or two. The falls in Perth and in those cities where prices boomed by 20%+ last year may be slightly sharper (5-10%). But a 40% fall in the Australian median house price is out of the question, and there are plenty of places where property prices are rising (Sydney Northern Beaches for example).

The Sydney median house price is currently 15% below the 2003 peak in real terms, while interest rates are plummeting, making housing much more affordable. Especially to overseas buyers who will also benefit from a 40% fall in the AUD. And this is in a climate of strong population growth.

Selection of the right property at the right time is always important. There is always a good deal to be found somewhere. I'm not expecting strong growth until 2010, which is when Sydney will start to surge again, and then the other cities will follow a couple of years later.

No crash, sorry.

Shadow.

PS: Regarding the thread title and OP. No I don't believe all houses have doubled in value every 7-10 years for the past 100 years.
 
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yieldmatters said:
The smell of desperation is strong
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Agreed! Can't believe there are so many desperate gloomers coming over here from the other forum to try and convert us property investors. I think it started to happen when the RBA slashed interest rates more than expected.

I really noticed a new sense of desperation on cphg from that point, and then when the government introduced the increased FHOG, the mood over there seemed to move from desperation to panic.

I love the thread over there at the moment where everyone is stressing that the government might introduce negative gearing for PPORs after one member heard a rumour from a contact in the government... :rolleyes:

Treasury Desperate to Keep Bubble Inflated, Anecdotal evidence

My older brother's sister in law is an economists with the Australian treasury. Apparently their very concerned that if house prices fall to far in Australia (greater then 10%) in could trigger panic and a sever economic slowdown. She said there's going to be a huge economic stimulas if this happens. Apparently their considering making interest payments on owner occupier residential proeprty tax deductable for 2 years, to keep the bubble inflated while where in the economic slump.
Click to expand...

The fear is strong. Their hopes for a big crash are gradually slipping away! :D

I also love the posts from this guy below - he is always so angry and frustrated!

Permanent High said:
Re: FirstMac fights back with a new 3.99% home loan!


It's available to investors. And refinancers.

And to FHBs armed with up to $29k in government grants and $20k in credit card debt (20% deposit on a $250k loan).

This is pure predatory lending. There is no excuse for these people offering a rate that will likely rise by 20% (if we have a recession) to 100%+ (if we don't) after 12 months. There is no excuse for government and regulators to allow this practise to occur. And there is absolutely no ****ing excuse for OUR OWN GOVERNMENT TO BE FUNDING IT!!! :mad:

I'll be making my thoughts known to every journalist and opposition/minor party politician this weekend. With a bit of luck it won't be hard to stir up some public backlash against this. It's just so easy to draw the parallels between this and the kind of desperate lending that the US had in the blow-off top of their bubble (when they'd largely run out of qualified buyers)...
Click to expand...

Poor Foundation... terrified that the boom will just keep on going! Quick - call the pollies and complain! :)

Shadow.
 
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DCI said:
Though the magnitude of long term CG over time can be at large, location specific. It can however, be attributed to the long term creative genious of councils and government bi-laws, restructuring of land parcels and allowances towards multi lot zoning. This has and will continue to play an important part in value adding to many existing properties now and in the future.
Rezoning can,and has doubled property values over night.
I believe future rezoning of existing areas will be a price driver for future CG.
Doubling CG in less than 7 years.....definately. But not all properties in general.
Click to expand...

This is an excellent point DCI.. I know with my IP in buranda, I paid 126k for it in 2000.. Developers are offering nearly 8 times this amount because it has recently been rezoned where you can now go to 3 storeys.. I guess these type of scenarios somewhat distort the median.
 
I've just been listening to an interview with Daniel Amerman, "author, speaker, consultant" and he says the BBs were the big influence in the recent asset price increases. I like the idea because I think the effects of immigration and population per see, are overstated.

My interpretation of what he said (it was a long interview covering inflation generally) is that it had it's genesis in the '70s when the young boomers made it big buying a house and then having their debt inflated away while the asset and their wages rose at least as fast as inflation. (This certainly is a perfect fit with what happened to me and my friends, :D) As he said, inflation doesn't destroy wealth, it merely transfers it and mostly from the older to the younger generations.

With this solid base of having plenty of home equity they were able to invest in their own retirement. Previous generations had neither the capital nor confidence to take "self determination" seriously. (My parent's lived in tumultuous times.) Naturally, the asset which treated them so well before figured highly in their considerations.

How long can their influence persist? They are a large demographic group on the decline which is a big neg, but many genXers have an investment mindset too so the drop should be muted. The rise and fall of the boomers tells the story, methinks.

I think that cycle is about to repeat. We are entering another inflationary cycle (not sure if asset prices and wages will keep up though) which will transfer wealth to the young, willing to take on the debt and responsibility of buying a PPOR. Patience and prudence will set you up later in life. It won't allow you to retire in ten years but nor will gearing into IPs. It looks like a long cycle and it is well past 12 o'clock.
 
Shadow said:
Agreed! Can't believe there are so many desperate gloomers coming over here from the other forum to try and convert us property investors. I think it started to happen when the RBA slashed interest rates more than expected.

I really noticed a new sense of desperation on cphg from that point, and then when the government introduced the increased FHOG, the mood over there seemed to move from desperation to panic.

I love the thread over there at the moment where everyone is stressing that the government might introduce negative gearing for PPORs after one member heard a rumour from a contact in the government... :rolleyes:



The fear is strong. Their hopes for a big crash are gradually slipping away! :D

I also love the posts from this guy below - he is always so angry and frustrated!



Poor Foundation... terrified that the boom will just keep on going! Quick - call the pollies and complain! :)

Shadow.
Click to expand...

No Shadow, the fear is that by trying to keep house prices high, the government undermines the basis of the economy. An economy doesn't grow based on house prices, as little as you can understand that.
 
Just to get back on topic here...

Prices doubling "in recent times" has indeed followed a pattern. Will this pattern continue??? I believe yes, but only for another 2-3 cycles (just my prediction).

I think the question is, what do you do with the info??? Lets say that for the next 100 years, the growth rate will only be 2% pa. and it becomes apparent after 10 years or so. Will you stop investing in property? Probably. Will you look to other asset classes? Probably.

Finally, speaking long term, house prices will continue to rise. Whether it's 1% or 7% or 12%, it will continue to rise in the medium (10-20 years) to long term (100years+). Will there be falls, yes, but overall, inflation and wage increases will continue to push "living costs, including rent/owning a property" up and hence property will remain an asset class.

Knowing whether property doubles every 7-10 years is a distraction to investing in this asset class.
 
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