101% performer: house prices double in a decade

Sure, "it's all going to be different this time".:rolleyes:

Alan

I hope you're right but the way things are going I'll be surpriced if prices double in the next 10 years.

I say this because with such a low inflation environment we'll only be getting minimum pay increases so who will be able to afford to buy property at double the current prices?

At my work and with record profits, our biggest pay increase was 2% this year and some of us got no pay increase at all.
I got 1.5% so I shouldn't complain but it's obvious that corporate greed has taken over and workers have no say anymore so something needs to change..........
 
I say this because with such a low inflation environment we'll only be getting minimum pay increases so who will be able to afford to buy property at double the current prices?
I'm not so sure it is an affordability issue Bill. Rents keep on tracking up and prices (to maintain min 5% av. yield seem to follow)

At my work and with record profits, our biggest pay increase was 2% this year and some of us got no pay increase at all.
The fact that anyone gets a pay increase in the middle of a GFC is just...well, what can you say? ....staggering. :confused:

....... but it's obvious that corporate greed has taken over and workers have no say anymore so something needs to change..........
I think the pendulum swings both ways. Before it was union power (I remember consulting to the construction industry in Victoria only a few short years ago), now it is back to the management and the corporate greed...then its back to workers' pay rises. Same ole, same ole.
 
I'm not so sure it is an affordability issue Bill. Rents keep on tracking up and prices (to maintain min 5% av. yield seem to follow)

The fact that anyone gets a pay increase in the middle of a GFC is just...well, what can you say? ....staggering. :confused:

I think the pendulum swings both ways. Before it was union power (I remember consulting to the construction industry in Victoria only a few short years ago), now it is back to the management and the corporate greed...then its back to workers' pay rises. Same ole, same ole.

Although I wish you are right on prices going forwards, I suspect the next 10 years will bring much lower price increases for many, many reasons (interest rates are only going up, yields in metro areas (leaving aside outer poorer suburbs) are at historic lows, house prices as a multiple of wages are at the upper end of historic norms, and inflation looks to be muted for the next few years, etc..).

I also feel that you beat the drum too hard propertunity for the sake of drumming up buyers agency clients. Some of your posts are just plain spruiking.
 
Although I wish you are right on prices going forwards,
Well I hope so too because I hold an awful lot of property personally and one day I'm going to retire (not soon I assure you, although I have done so twice before so you never know ;)).

I suspect the next 10 years will bring much lower price increases for many, many reasons (interest rates are only going up, yields in metro areas (leaving aside outer poorer suburbs) are at historic lows, house prices as a multiple of wages are at the upper end of historic norms, and inflation looks to be muted for the next few years, etc..).
Well these are the counter arguments to not enough housing being built, immigration still very high, not enough land being released where people want to live, interest rates at all time lows, cheaper to rent than own in some parts and so on.

I also feel that you beat the drum too hard
I understand how you can think that but in reality I've been on the planet a little too long and have seen too many recessions (both real and predicted) come and go, and too many housing booms & busts come and go and a few stock market crashes come and go.....and in the wash-up of them all - prices still continue on their upward march.

So I just get a little wary of believing that it is all going to be different this time. I have heard that line all too many times before only to see that it wasn't all that different at all. I actually cost myself money by listening to some of it too - maybe that's what makes me even more wary :cool:

And to add to that, I get really annoyed when I see newbies starting out that listen too much to that kind of bad advice......so they waver and while they dilly dally wondering if the sky is going to fall in, they cost themselves, in some cases, many tens of thousands of dollars. So I don't make excuses for putting the bullish argument as there are enough around to speak up for the bears. (And for the record, newbies make up zero point something of a % of our total clients but I'm still happy to help them where I can).
 
Sure, "it's all going to be different this time".:rolleyes:

A few years ago, most are saying properties double in 7 years. Now it's 10 years (even with a property boom earlier in the decade). Probably, nowadays if you buy an average home with an average price (without haggling for it) and don't do anything to renovate and upgrade, it might take more than 10 years to double. But if you're the type of person who knows how to look for value and further knows what to do to improve the value of the property it would probably not take that long. It depends on your skills, I guess and what you with it... and some luck, of course!
 
Although I wish you are right on prices going forwards, I suspect the next 10 years will bring much lower price increases for many, many reasons (interest rates are only going up, yields in metro areas (leaving aside outer poorer suburbs) are at historic lows, house prices as a multiple of wages are at the upper end of historic norms, and inflation looks to be muted for the next few years, etc..).

I also feel that you beat the drum too hard propertunity for the sake of drumming up buyers agency clients. Some of your posts are just plain spruiking.

Rewind the clock back to 2007

Inner melbourne yields were averaging 3%

Interest rates were around low 7's.

Employment rate was a little better

Rents had peaked with little vacancy

However a lot more new stock arrived with very high construction activity

And yet inner Melbourne experienced the appreciation in property values which happened to be the highest growth in any 12 months in history.

Forward it to 2010

Interest rates expected to go up, peaking at 6.5%

Employment levels expected to stabilise

National and International economies slowly gaining steam

Inner Melbourne yields still around 3%

Significant reduction in construction activity with less credit available for developers however population growth levels at an all time high

Pressure on demand for new dwellings very high

Property prices will double in next 10 years

Harris
 
Inner Melbourne yields still around 3%

Such a low yield worries me.
Right now I wouldn't touch such a property because rents have probably maxed out for now, and property prices have already moved
so we could be entering a period of low rental increases and low capital gains at a time when interest rates are on the increase.
 
yep 800k for them average home , you bet ya! its just around the corner, i tell the youngens i bought our first 3 bed, for 95k that was in 94 ish and my father tell of how he bought his first for 11k and once apon a time somone will be telling there kids how they were lucky to buy there first for 800k, :D
 
I have seen prices in some areas triple in the last 6 years, Carole Park in Brisbane for one, also houses in Rocky were $65k in late 2003, now $250k, I sold mine in 2004 for 98k.:eek:
A ten acre block of land I purchased in 2003 for $150,000 is now worth $400,000, in fact I just sold it.
I agree though that prices will be flat for a while yet with another big jump in around 5-7 years.
 
so we could be entering a period of low rental increases

Not convinced yet. I think we've already seen a little pause the last few months while many took advantage of the FHOG. As the grant winds back demand will start to increase again forcing pressure on rents.
 
Such a low yield worries me
.....
rents have probably maxed out

????:confused:

Rents are too low but they have maxed out?

People can afford to buy houses at those prices on an average of 7% IRs over the last few years so they should also be able to afford to pay the rent on a 7% yield surely?

Plenty of upside to rents IMO. In fact with credit not as easy to get I would expect most of the growing population / lack of construction action to come in the form of rent increases in the near future. You can push down a bubble in one spot but it will only find somewhere else to surface...
 
G'day

I think property prices will do as they have always done:

Improve in fits and starts, but over the period still double in about ten years on average for established metropolitan areas

However, growth corridors may take a bit longer while they establish, competition reduces and demand stabilises.

Areas with no real purpose or substance may take a bit longer

Recreation areas will play 'catch up' as larger numbers of the population move towards retirement and want to retire out of the suburbs

I have had 5 changes of tenant so far this year (5th this coming weekend) and a lease renewal, and in each case rents have increased with no quibbles.

For one property, bought for $105,000 in 1994 at the tail end of the Recession We Had To Have the Council Valuation has come back at $345,000 and I have just signed a new 3 year lease for $320 per week. That's 15.85% gross return on purchase price.

Judging by the expected population growth in Melbourne - 7,000,000 in the not too far distant future, I would say that 100% in 10 years would not be too much to expect.

Cheers
Kristine
 
Although I wish you are right on prices going forwards, I suspect the next 10 years will bring much lower price increases for many, many reasons (interest rates are only going up, yields in metro areas (leaving aside outer poorer suburbs) are at historic lows, house prices as a multiple of wages are at the upper end of historic norms, and inflation looks to be muted for the next few years, etc..).

I also feel that you beat the drum too hard propertunity for the sake of drumming up buyers agency clients. Some of your posts are just plain spruiking.

I have no idea is property prices will double in 10y, 20y or ever. However, if they don't continue to grow for some or all of the reasons mentioned, people will stop investing in IP's. Which mean that developers won't build much of them since there are no much buyers. AUS has a growing population which will mean that residential property yield will go up just because of the offer/demand equation. Now that will be a very intersting situation. Lots of people competing for a few rental properties. What do you think will happen to the price of the few existing IP's? and the rents?

Personally, I feel that in AUS we still have a long way to go. I know that in Singapore you can have leases for 30y since the 60y and 90y are already to expensive (pls notice that we are not talking about purchasing). Also, you can JV with your Super to get into those leases. In Switzerland the same. You can partner with your Super to purchase your PPOR. In Switzerland, via credit control, property prices are kept in check. You could say that it is only allowed to index by inflation which is very low. But rents are very positive and only the very rich people has IP's. Rents in Switzerland fluctuate with interest rates which I found interesting. In the big european cities like Paris, Rome, etc, people live in very small "units'. Some of the studio apartments in Sydney will be palaces in comparison and still cost a fraction of the price. Renters are not looking for renting houese nor even units but, rooms in units (share accommodation). That high are the rents that that's the only way they can afford a roof over their heads. That's what I say we still have a long way to go before we meet that reality.

As I said, I don't know what's gonna happen in the future but, whatever it is, I prefer to be the guy with a lot of properties than the guy with no properties or only a PPOR.
 
????:confused:
Rents are too low but they have maxed out?
Plenty of upside to rents IMO.
I don't know about your area but I feel that rents in many areas are high in comparison to earning

????:confused:
People can afford to buy houses at those prices on an average of 7% IRs over the last few years so they should also be able to afford to pay the rent on a 7% yield surely?.
When we have a mortgage we pay what the bank is charging us.
We pay the 7, & 8% because we have no choice.

However, the situation with tenants is different.
People will pay a higher rent but there is a limit to what they'll accept to pay.
In recent times in some Sydney suburbs rents started to hurt so people downsized, moved back in with parents, moved further out or bought their own place.
Then many properties became empty and rents stopped rising.

I think many Sydney suburbs have now reached their peak
and sure, we'll still see some rent increases but I don't expect to see the recent 15-20% increases every year.

And those who believe that the shortage of properties will save us, think again.
State & federal governments will not just stand back and watch rents double overnight, they'll take measures to ease the rental squeeze and everyone knows that there is a lot of vacant land out there.....

IMHO
 
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When we have a mortgage we pay what the bank is charging us.
We pay the 7, & 8% because we have no choice.

Sorry but I disagree here - of course we have a choice to buy the property in the first place! I'm saying that the purchasers who are buying properties at these levels are paying a 3yr average of 7% by choice, instead of renting at much lower cost (circa 3-4%).

If a large slab of the population can do that with purchasing, they can also do that with renting, if push came to shove...

However, the situation with tenants is different.
People will pay a higher rent but there is a limit to what they'll accept to pay.

Or what? Go live in a tent? They will have to pay what it takes to rent a house, or bunch up with other families to afford the rent. Keep in mind they will only bunch up if rents keep rising...

In recent times in some Sydney suburbs rents started to hurt so people downsized, moved back in with parents, moved further out or bought their own place.
Then many properties became empty and rents stopped rising.

But rents didn't fall back? My point is that without significant new construction and a rising population, the pressure on rents remains... although I stress I know next to nothing about the Sydney residential market.

State & federal governments will not just stand back and watch rents double overnight, they'll take measures to ease the rental squeeze and everyone knows that there is a lot of vacant land out there.....

There is plenty of land out there already with DAs approved, ready to go but developers are not building... there are many reasons for that, some of which are under govt control but they are showing no signs of slowing down their gravy train - just like pokies - they can't cut off their own money supply!

Anyway, if the rental affordability scheme is anything to go by govt will just bring a lump of nasty, cheap stuff onto the market that makes a nice house all that more attractive.

I usually classify govt action in this space as "tinkering around the edges". IMO the trick is to see past the chest beating of govts...
 
....the next 10 years will bring much lower price increases for many, many reasons (interest rates are only going up.......

I have said it before and I'll say it again. Interest rates are tied closely to inflation. If interest rates are to rise considerably then that will only be as a result of inflation getting a bit out of hand. You don't have to be a rocket scientist to work out what that >3% inflation means for house prices......

Now, people can choose to sit on the sideline and not gear into investment property but when inflation picks back up then they'll be the ones counting the real terms cost of not having any debt.

Rising costs as inflation dragon awakens
 
I have said it before and I'll say it again. Interest rates are tied closely to inflation. If interest rates are to rise considerably then that will only be as a result of inflation getting a bit out of hand. You don't have to be a rocket scientist to work out what that >3% inflation means for house prices......

Now, people can choose to sit on the sideline and not gear into investment property but when inflation picks back up then they'll be the ones counting the real terms cost of not having any debt.

Rising costs as inflation dragon awakens

Yep,

A crash course in Economics will tell you a very simple FACT: Interest Rates Rises are TIED to Inflation.

Playing Devil's Advocate here, housing price rises are not ALWAYS the case and NSW has certainly been a poor performer in the most recent Inflation/Int hike (depending on which year or part of the cycle you compare it to.)

However, if you have your eggs in enough baskets (spread into different states) - your portfolio will benefit from Inflation.

In any case, it sounds like NSW is trying to make up for lost time.:)

In regards to rents: The population increase and lack of supply in well situated areas will do well for rental increases. The greatest increases will occur in those areas.

As Kristine implies, if the rent gets too high, that person will move on to a cheaper suburb and the person/people with better incomes will move in.

This is the time where you see if your potentially CG suburbs come to fruition. I'm talking about the suburbs that people bought/buy into that have a lower socio-eco demographic but have excellent proximity to sea/schools/transport etc.:) ..I have one of those....:D

Regards JO
 
Playing Devil's Advocate here, housing price rises are not ALWAYS the case and NSW has certainly been a poor performer in the most recent Inflation/Int hike (depending on which year or part of the cycle you compare it to.)
Buy in gloom, sell in boom. (Or the Buffet quote in my sig)...

If you didn't learn that one through this latest nasty little business cycle then you must be comatose.

Now I ask you, which of Melbourne and Sydney is Boom and which one Gloom... ;)

Cheers,
Michael
 
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