Was the last Boom a 'fluke'

So, we all hear people say 'ohh you got lucky' 'its lucky you bought when you did, that wont happen again' luck has little to do with property prices.

I also hear the 'lucky' people who bought well having the last laugh, not like that has anything to do with anything but anyway,
I got to thinking, do you think that prices will just keep performing well into the future like they have in the past over time or do you think we will see less growth?

Im actually a little sceptical personally, I still expect decent growth otherwise I wouldnt be investing but I dont think we will see great growth like we have in the past for quite some time, I want to hear from people who have been in the game for many years, did you too think the same way back when? I know that some thought the same as me,

want2bewealthy

I think it was a bit of a fluke, in that there was a lot of gains in a short time, and I think that happens rarely. I'm thinking more of the timeframe since 2000, when properties have gone nearly triple or so ( I don't do links or facts, your welcome to source your own )

(Dare I say it) There is a good thread on the forum that shan't be named that shows Australian property prices have increased by inflation + 2.97% over the last 40 years or so. Remembering that inflation was much worse for most of that time than the last 10 years we're used to, this still equates to about a 7.5% growth, which matches with the "Property doubles every ten years" spiel, so I don't think it's too far off.

I'll be happy with inflation plus 3% for the next 20 years. Should take my $400K properties to about $1m and the debt stays at $400K. What's not to like? In the meantime interest rates are at bugger all, will be fixed for 5 years and we're cashflow neutral on the portfolio. Eventually rents will go up and you can ask folks who have been around a bit longer than me what it's like to own a property they bought 20 years ago and rent it at today's prices...

I think inflation plus 10% +++ growth is unlikely going forward, and there's probably some short term pain to get through to make up for the last decade... But the long term trend will continue: In the big argument about supply and demand, the doomsayers miss the point that the supply of properties within 10k's of a major metropolitan area is never increasing, but demand for these is always increasing (population growth alone increases demand in this scenario). This is the supply and demand argument that never fails.

want2bewealthy said:

So, we all hear people say 'ohh you got lucky' 'its lucky you bought when you did, that wont happen again' luck has little to do with property prices.

I also hear the 'lucky' people who bought well having the last laugh, not like that has anything to do with anything but anyway,
I got to thinking, do you think that prices will just keep performing well into the future like they have in the past over time or do you think we will see less growth?

Im actually a little sceptical personally, I still expect decent growth otherwise I wouldnt be investing but I dont think we will see great growth like we have in the past for quite some time, I want to hear from people who have been in the game for many years, did you too think the same way back when? I know that some thought the same as me,

Click to expand...

Since they are predicting that 45% of Australia will be renting in 2035, I can't see how property would be a "bad" investment. People need to live somwhere... shares on the other hand...

want2bewealthy said:

I got to thinking, do you think that prices will just keep performing well into the future like they have in the past over time or do you think we will see less growth?

Im actually a little sceptical personally, I still expect decent growth otherwise I wouldnt be investing but I dont think we will see great growth like we have in the past for quite some time, I want to hear from people who have been in the game for many years, did you too think the same way back when? I know that some thought the same as me,

Click to expand...

Want2bewealthy,It would depend on the location,i have been investing in property for over 26 years and i have never experienced anything like it before over the past 9 years of what's happened in inner Brisbane there were times when some we control were going up 10k a month, but that has stopped 14 months ago,if you read most invesment books the rule is every 6-9 years the property should double in value,so with that in mind what happens if you have several booms in less that 7 years, that's the only part that i think about,2009 may well turn into a major property slump and prices will go nowhere,but as most property markets are markets within markets,and the value is always in the site, i don't think huge profits are out there in this market,and may well not be for the next three years,the ASX will run skywards a long time before property ever does ,
unless you are like the "Doctor",and buy something 30-40% undervalued in a upmarket area..
imho.. willair..

In Sydney in 1988 - 89 we saw properties double in around one year . That was more than what happened in the last cycle .

From my recollection of the last 40 odd years I don't think what happened in the last cycle was much different to what has happened in most cycles. My parents have owned properties in Sydney / Melb since 69 and I watched what was happening . Dad was annoyed when we bought our first house in Warrawee. He'd been over ( from England ) about one year earlier and properties had prettty well doubled so he couldn't afford the type of house he'd been hoping for .

Since then I've seen good properties go up , and down on a regular basis , though the overall trend has always been the same . Having been caught on the wrong side of a seven year flat period I can vouch for the tendancy of the market to go up quickly over a short period of time and then go sideways for long periods of time.

http://www.somersoft.com/forums/showthread.php?t=11656&highlight=rocky

Have a look at the charts on this post from 2003 ( don't have access to the same data now ) but you can see the cyclical nature of the property movements . You can also see the long ( 9 years ) period in the 90's during which prices went sideways . So if we're looking at a doubling every 7 or so years, any boost above that after " the recession we had to have " was probably catch up .


One recurring theme I see from long term property investors / watcher is the shake of the head and the raised eyebrows when ever they see investors talking about or read in the newspapers that the last cycle was something so unusual .

IMHO it wasn't , though if Michael Croft or Gee Cee Cee came on and said it was I'd listen to them.

Cliff

Invest said:

Since they are predicting that 45% of Australia will be renting in 2035, I can't see how property would be a "bad" investment. People need to live somwhere... shares on the other hand...

Click to expand...

I often hear that trite line "people have got to live somewhere" as some sort of proof/evidence for property being better than shares, as seems to be implied here. But it overlooks the whole range of other necessities of life apart from accommodation. You know the ones that people and enterprises actually produce and sell for a profit, thus increasing the value of their enterprise.

Yeah, I mean how could owning a part of a company that actually produces something hope to compete with residential properties. We better let all those shareholders on the BRW rich list know that they have got it all wrong. They should be buying rental properties.

I like property as much as the next person, but there is a whole world of investment opportunities out there beyond an IP.

The recent boom did not have the largest price increase within one year but over the space of about 3-5 years (98-03), it had the largest increase in property prices ever seen. In some places (Outer Brisbane, Tassie for eg) they tripled and more!!)

The major cause of that boom was pent up demand during the 90s where property was pretty much on the nose. Yields had risen and prices had stagnated or fallen for years. It was a perfect set up for the boom.

It started slowly in the late 90s with not many noticing and then in the early 2000's was really going off (as investors piled in) and petered out about Nov 03 when rising prices had reduced yields so much that investors totally dropped out of the market.

Yields still havn't fully recovered to pre boom levels.

So, in my opinion, it was a one off. I don't think the planets will align like that again. If they do, it wont be for a long time.

evand said:

Yields still havn't fully recovered to pre boom levels.

Click to expand...

What were the yields like pre-boom?
Yields in the areas I am watching are getting up to 7ish%. Looks good to me so is everyone else thinking there is some upside starting to appear again?

Gools

Hoffy said:

Yeah, I mean how could owning a part of a company that actually produces something hope to compete with residential properties. We better let all those shareholders on the BRW rich list know that they have got it all wrong. They should be buying rental properties.

Click to expand...

I suggest you read "The Millionaire Mind" and see how relatively unimportant share ownership of public companies is to many American millionaires.

boomtown said:

I suggest you read "The Millionaire Mind" and see how relatively unimportant share ownership of public companies is to many American millionaires.

Click to expand...

Who cares, i can be nearly certain that over the next 5yrs shares as indicated by the ASX accumulation index will out perform residential property + net rents.

Hi all,

This thread/topic has been covered several times before, seems to come up a couple of times a year.

My take based on history is that median prices seem to rise by inflation plus a couple of % over the longer term. However the median house has changed character over the last 40 years, so that takes out some of the gain.
Likewise, older houses are renovated and added to, that also takes out some of the gain.

Basically, an individual property seems to have risen by about inflation plus 1% over the longer term (40 years), yet the growth is not consistent. For those worried about the size of the last boom, remember that it started off a lower base (ie prices were undervalued at the start compared to the previous boom or two).

I would not expect anything to change over the next 20-40 years. I think that property will go up by inflation plus 1%.

All we have to do is guess what inflation will be in the future.

The one proviso I have is a continuation of a growing population.

bye

evand said:

So, in my opinion, it was a one off. I don't think the planets will align like that again. If they do, it wont be for a long time.

Click to expand...

Any guess on how long?

I think it's too early to call on how long before the next "good" jump in average house prices.

Latest headlines are along the lines of "Australia yet to feel the full impact of the GFC", "unemployment set to rise", etc. Don't like taking notice of headlines, but hard to see anything much happening in terms of good capital growth. Prices may move mostly sideways. Keeping up with inflation.

I know it's been done to death on here but any guess on when the next boom will happen and why would be interesting?

Back in 1978 House at $23,000.

I have posted a similar story to this some years back.
Not being a computer buff i don't know where it is
In 1978 i purchased my first investment. a small 2 Br home in suburbia on 700m block for $23K.

It doubled in value to be worth over $50k in 2 yrs .(I was a 17 yr old apprentice on about $120 p/w) $25k tallied up to a number of weeks work
From 1980 to 1989 there was limited growth if any. Interest rates up to 18%.
From 1989 to 1991 it more than doubled again to be worth around $120k
From 1991 to 1999 it did nothing spectacular. Recession we had to have.
From 1999 to 2002 it more than doubled again. Latest boom!
Today for a quick sale it would sell for around $250 - 280k.
It has always been rented and has only ever had basic maintenance done on it. It has only ever been vacant for the odd week over that time. Usually for maintenance.
Today it rents for around $ 250 per week.
I think from memory in 1978 it was $40 p/w.

Fortunately back in 1978 & 1979 I purchased a couple of other dogs of properties.
Can still remember ALL the 40 yr old workmates saying I was getting ripped off and why would you buy that dump.

Those few dumps kick started a property addiction


My father said I was a idiot when i purchased it as the papers were saying houses were going to drop in price.

I still remind him of his wonderful advise as he complains about his lack of money and pension problems.

Another home I purchased had a place next door for sale at $18k. I wanted my father to buy it. Just lately it sold as a demolition job for $330k.

I believe we will see markets again repeat the past. But at this stage I am not pinning a date to it.

However if you see me start gradually buying then I must be getting bullish
or I have found the old Crystal Ball.

Gee Cee


Greg

Off for my afternoon nap

A fluke is something that occurs against the odds of it happening. Like a hole-in-one.

Before the last boom we had good yields, reasonably low rates, strong demand and easier access to credit to kick it along. To me, the boom should have happened based on this, and it did.

I think when property has historically gone up on average at around 7% per annum, then a boom really isn't a fluke.

It's an unusual spike in prices for sure, with a great combination of factors at one time to contribute to the spike.

I'm more inclined to think that if housing remains limited while the population keeps growing then a longer term drop or dramatic slowdown in price rises is more the fluke.

I have limited investing runs on the board so to speak but i hear what older people around me say about our area.On the NSW south coast prices barely moved from the early 90s up to 2001. Then they double over the following 2 years. Since then they have droped of a little.Thats not a unrealistic movement over a 20 year period. So no i dont feel it was a fluke. Infact im sure similar gains will happen again eventually.

Hi, maybe someone can examine whether there were any 'triggers' fuelling the sharp increases [booms].

I remember clearly my decision to 'go big' [don't laugh at my paltry 4 houses] in 2000 when my accountant & tax relatives all were sure that John Howard & GST would become reality. I was that convinced that GST would push house prices skyward.

Had I been on a forum like this then, I might even have bought 40! As it is, I joined this forum only very recently.

There was another trigger long ago, which my sister calls the Whitlam years. Wages went up many times [said sister recalled her $29.50 per fortnight take home money in the 70s went up to $60 K in 2000 and $80K in 2003 Sydney]

The next trigger may well be when they decide to do away with the 5 cent piece.

Anyone wants to speculate?
KY

I have the feeling that a few more rate drops might do it, depending on how much and how easy the credit is to get.

If the economic news over the next few months is not too bad, we may see an earlier recovery/boom towards the end of next year or early 2010.

With my whole 5 years of property experience, I am going to have a go...

The 2005-2007 "mini-boom" which I have had the pleasure of experiencing is making me think we are going to have a stagnant period for a few years. I believe markets do a lot of movement after the New Year, which is what we will see in a few months time when the data hits the shelves. I see the next catalyst as wage increases. Yes, corporate Australia is struggling, but a Labor Government will ensure wage growth is strong and this will push up property. When this wage increase will happen? Funnily enough, I bet it will be timed nicely along with the economic recovery, which has been tipped by many experts to be approximately 2 years.

So in summary, as the economy stabilises, wages will increase and property prices will go through another "mini-boom" (at least) in about 2 years time. Let's hope the rates stay low for this period...

Of course its a fluke
Everything is just luck
So often its the ones who did nothing, that notice how lucky the ones who did something are.

If we succeed, well that was good luck,
If we crash and burn, they'll be able to see the flames from space

Bill.L said:

Hi all,

This thread/topic has been covered several times before, seems to come up a couple of times a year.

My take based on history is that median prices seem to rise by inflation plus a couple of % over the longer term. However the median house has changed character over the last 40 years, so that takes out some of the gain.
Likewise, older houses are renovated and added to, that also takes out some of the gain.

Basically, an individual property seems to have risen by about inflation plus 1% over the longer term (40 years), yet the growth is not consistent. For those worried about the size of the last boom, remember that it started off a lower base (ie prices were undervalued at the start compared to the previous boom or two).

I would not expect anything to change over the next 20-40 years. I think that property will go up by inflation plus 1%.

All we have to do is guess what inflation will be in the future.

The one proviso I have is a continuation of a growing population.

bye

Click to expand...

Inflation plus 1% is essentially wage growth. Which makes sense.

What doesn't make sense is that 1% growth over inflation is (roughly speaking) the nations productivity improvement. So instead of making us more prosperous as a nation(productivity improves standards of living), we just blow it all on more expensive houses, losing the benefits of productivity improvements. In common sense terms, it's utter madness....

Oh well, at least we get cheap chinese sh*t. haha