According to the 100yr chart, we will drop !

[Sunfish]

I dunno.

Houses in 1880? The average house would have been a slab hut. With an outdoor dunny over a hole.

My Grandfather's was built around then and would still be a nice home today. Better than "nice" actually.

So it's hard to see how houses are going to halve in price, as then they will be half of their replacement value.


See ya's.

I can picture the Yanks saying something similar. There is a lot of "fat" in building costs and if times got tough a lot of people and councils could do things at a lesser profit margin and still make a living.

But many things change over the years. The outrageous "headworks" and planning fees by councils are relatively new. And the construction is far more efficient today. My B in law was a subbie once and it would take him and his partner a week to "pitch a roof". Today the trusses come on a crane truck and are done in a day. They had some tools in a belt and a hand saw they sharpened daily.

So such charts can't be taken literally. We agree there.

 

[Sunfish]

*yawn*

wake me when this thread is finished.

No interest in history, BC?

 

[MrCrumbpacker]

House prices might come back a bit if our economy goes to crap. If China blows up, put the crash hat on. If our economy stays strong, I can't see it happening. Houses in my parts are based purely on replacement value. If it's a brand new 4 bed brick home it's going to be worth 350k, and every other house is valued accordingly. This would be the same around the edges of the big cities. Then when you move into the big cities you add on the land value.

So it's hard to see how houses are going to halve in price, as then they will be half of their replacement value.


See ya's.

Good analysis and good points, it is important to remember we are talking about a whole range of markets. The 90's UK crash was almost exclusivley a South Eastern thing, with much of the country relatively unscathed. The areas that had shown silly growth in retrospect dropped 40%.

There are obviously large areas of Australia where (crucially in my view) rents bear some relation to prices.

When I first moved here,on the other hand, it was suprising to move into a house that had just been bought for 1.4m,(Sydney) and only be paying 550 a week rent particularly as I knew zip about negative gearing, and the various tax issues.

 

[Aaron Sice]

No interest in history, BC?

nope, not when we're having a debate over ONE graph that we no idea about what was included and omitted form it's inputs.

 

[Neophyte]

Except perhaps for Canberra?

No one thinks Canberra has any impact on a national housing figure. Its not really a capital anyway other than being the seat of government as opposed to being a real city.

 

[Aaron Sice]

No one thinks Canberra has any impact on a national housing figure. Its not really a capital anyway other than being the seat of government as opposed to being a real city.

yeah Port Hedland is the nation's capital.

 

[topcropper]

I can picture the Yanks saying something similar. There is a lot of "fat" in building costs and if times got tough a lot of people and councils could do things at a lesser profit margin and still make a living.

True. I'm not saying prices can't get below replacement costs. In rural areas in 2003 houses were way below replacement costs. Then we had our boom and bought prices up to about replacement costs.

Have a look at this to see how far below replacement costs things can get if things go how it did in the US,.....

http://realestate.msn.com/slideshow.aspx?cp-documentid=23986567#2#q=What $300,000 buys now: Detroit


See ya's.

 

[Reality Cheque]

If you drive in a straight line for too long eventually you'll hit a tree.

The only thing uncertain is the size of the tree.....

RC

 

[Sunfish]

If you drive in a straight line for too long eventually you'll hit a tree.

The only thing uncertain is the size of the tree.....

RC

Tried it and ran into the sea.

 

[random]

Tried it and ran into the sea.

Didn't have that damn thong on again did ya ?

 

[Sunfish]

Didn't have that damn thong on again did ya ?

Go for a walk on the beach and you will prolly find it washed up. But you will never find both left and right at the same time. LOL

 

[bene313]

Might be time to revisit:

Shadow's house prices since 1970's thread

Be good to see the data updated for the last 6 years.

From the thread:

'Between 1970 and 2003, Australian real house prices rose by over 3 per cent per annum. On a quality-adjusted basis, house prices rose by about 2.3 per cent per annum. Over this period, there were four house price booms: 1972-74, 1979-81, 1987-89 and 1996 to 2003. In between these booms, real house prices tended to fall.'

 

[rambada]

House prices might come back a bit if our economy goes to crap. If China blows up, put the crash hat on. If our economy stays strong, I can't see it happening. Houses in my parts are based purely on replacement value. If it's a brand new 4 bed brick home it's going to be worth 350k, and every other house is valued accordingly. This would be the same around the edges of the big cities. Then when you move into the big cities you add on the land value.

So it's hard to see how houses are going to halve in price, as then they will be half of their replacement value.

Damn. Cant copy/paste the graph.

But a few points. I have seen charts where the Dow is linked to Gold. This makes for interesting viewing as it removes currency influence and the investment value of the Dow has been falling for ages. A similair graph for property would be sensational - but I cant figure out how to do it.

The prices in this graph take a launch from 1970 when the $US removed the gold standard and has printed currency ever since. But what is the real value of these houses? If there is more and more currency in the pool and this buys property, then of course prices will escalate.

I think a key point is that the price of houses and its public perception are different from its value. For example, how much was a cup of coffee in the 70's? And now? So this impending crash, correction, whatever, may not necessarily present as a 'halving' in the written valuation. But the rising costs of living and diminishing purchasing power in relation to that valuation is more perceptive of property as an investment.
In simple terms, what is its actual value, not its fiat currency value? And will this asset increase in actual value? If an asset class can be identified as being under valued in real terms, not currency terms, then an informed decision can be made.

 

[Sunfish]

'Between 1970 and 2003, Australian real house prices rose by over 3 per cent per annum. On a quality-adjusted basis, house prices rose by about 2.3 per cent per annum.

I haven't seen that stat before. What they are saying is that 25% of the increase in median price is due to improvements in quality. (A point ignored by most)

This means that for the optimist who works on prices doubling every seven years, the house you buy and hold will still only double every ten years. If you have the more moderate view that the median doubles every ten years, then your buy/hold house will take 13 years to double and return 5.5% pa cap growth. (rounding errors excepted)

The difference is significant IMHO.

 

[VYBerlinaV8]

It seems to me that there are several reasons why houses cost more today than in the past:

1) Many (most?) houses are supported financially by more than 1 earner.
2) Houses are much bigger and better than they used to be.
3) People have a higher disposable component of their income.
4) Credit is easier to obtain.

We can see fluctuations happening with regard to point 4, but I don't see the others changing much.

 

[random]

Thanks for those correlations cropper , very very interesting stuff.

Cheers

I dunno.

Houses in 1880? The average house would have been a slab hut. With an outdoor dunny over a hole. Probably on half an acre with a vege patch, but it would be hard to believe that much land in 1880 would have much land content value as there'd have been land everywhere back then and not many people. Who'd care about an ocean view? You would rather be close to a creek with water and a paddock to park the horse. Considering all this I'm surprised real house prices today are only 3 or 4 times as much. A house today is 50 times better than one in 1880.

There was a big dump in 1929 with the depression. That figures.

Another dump to 1950, then a boom. Just a guess, but there was a massive inflation spike in 1950 to 1952, and inflation went to 30% annual for a very brief time. Might be something to do with that.

A peak in 1973 with the oil crisis and then a decade of high inflation and falling real prices. We must remember that houses really went up a lot in this time, but if they were going up at 12% a year, and if inflation was 14%, then real house price growth was negative.

Then the 1987 to 1990 price boom with the Oct 87 stock market crash. Real prices then dropped till 97. Everyone was worn out from 2 decades of high inflation and high interest rates. I suspect houses everywhere were super duper cheap in 1997. That's when the real smart money got in, 1997.



House prices might come back a bit if our economy goes to crap. If China blows up, put the crash hat on. If our economy stays strong, I can't see it happening. Houses in my parts are based purely on replacement value. If it's a brand new 4 bed brick home it's going to be worth 350k, and every other house is valued accordingly. This would be the same around the edges of the big cities. Then when you move into the big cities you add on the land value.

So it's hard to see how houses are going to halve in price, as then they will be half of their replacement value.


See ya's.

 

[random]

Got some bad news guys . I researched Nigal Stapelton , his an economics professor at the University of NSW , ok well I didn't know that .

Ahh Keen I hear you say , but no Keen is forecasting , Stapledons chart is on real past data , big difference .

That red line is real people . Google his work , his site has all the references and details to every drop of info he produces.

 

[Aaron Sice]

so tell me, what data was included and omitted from said graph?

 

[random]

so tell me, what data was included and omitted from said graph?

I knew some lazy sod would ask that , go check out his stuff , there's a lot of it , far too complex to include here.

What are you doing back here anyway weren't you yawning last I heard !

 

[Propertunity]

Ahh Keen I hear you say , but no Keen is forecasting , Stapledons chart is on real past data , big difference .

They are probably the same person - like Elizabeth Taylor and Michael Jackson - you never see them in public together - or Bruce Wayne & Batman.