“Are we about to see one of the greatest property booms ever?” Lets debate!
- Thread starter Peter 14.7
- Start date
Hi Boomtown... why do you think Perth and Brisbane will take over from Sydney?
Certainly in recent times there has been strong internal migration from NSW to Queensland, due in part to the fact that house prices were so much higher in Sydney by 2003. But that gap has narrowed. Prices in Sydney have fallen while Brisbane and Perth boomed. House prices in Brisbane and Perth are now much closer to Sydney prices, and the population drain is starting to reverse...
Net Internal Migration
It is also interesting to note that Australia's net population growth is running at 1.6%, which is the highest rate for 20 years, and the highest absolute growth ever. Over 50% of this growth comes from overseas migrants, most of whom come to Sydney...
Net Population Growth
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Was it sustainable for the past 40 years?
Remember... nominal house prices are always increasing as inflation devalues the currency, and in recent times the money supply has been increasing at a much higher rate than CPI. If the money supply is increasing at a faster rate than the increase in prices of consumable goods (as measured by CPI) then this excess money has to go somewhere, and it tends to go into asset prices.
Property prices in desirable locations such as major cities can continue to outstrip average incomes for the following reasons...
1) Shortage of supply in desirable locations means that sought after properties tend to flow towards those with most wealth.
2) Existing stock is passed down to children, which captures past property wealth for future generations to build upon.
3) Natural population increase and immigration, without adequate supply-side response, increases demand for existing stock.
4) Disposable household income is rising faster than average income, and there is a tendency to direct this disposable income toward housing.
If you consider before 2003 it averages less than 4%.
The growth over the past 5 years isn't representative of the growth over a larger time scale. And shouldn't be used to predict the future IMO.
My chart goes back 30 years. Growth has been fairly steady at around 8% per annum over that time period if you average out the booms and busts. Sydney has been in negative growth for the past 5 years. Time to revert to the trend perhaps...
darwin should be built to a cyclonic standard, hence should be the dearest?
Nahh....Canberra should be the dearest, cos they should all have really big 5 ft thick walls to keep out the snow, not to mention a moat to soak up the drivel flowing down from capital hill.
But then, having lived in Sydney for 3 years, I know they'll all get their noses out of joint if anyone is dearer than them.
Hi all,
In thinking of the next boom, we need to look a bit at history to give us a guide, no it wont repeat exactly.
After the late '80's boom in prices came the recession we had to have. During the recession interest rates crashed from 17% in '89/90 to 10/11% by '93/94. There was no boom in prices until later. To me one of the reasons for no boom, were the concerns that interest rates would go back up again to the 17% level.
It appears to me that property takes its time to respond, so just as prices kept rising during interest rate rises, it will take time for lower rates/recession etc to work through the system. We may get falling interest rates AND falling prices next year, enough to scare many off property purchases.
I feel the next boom may be when interest rates start to rise again in a couple of years time, after the completion of the interest rate cutting cycle.
Whether that is 2 years away or 5, I have no idea, but I do agree that it could be one of the greatest booms in history, just like all the others.
bye
In thinking of the next boom, we need to look a bit at history to give us a guide, no it wont repeat exactly.
After the late '80's boom in prices came the recession we had to have. During the recession interest rates crashed from 17% in '89/90 to 10/11% by '93/94. There was no boom in prices until later. To me one of the reasons for no boom, were the concerns that interest rates would go back up again to the 17% level.
It appears to me that property takes its time to respond, so just as prices kept rising during interest rate rises, it will take time for lower rates/recession etc to work through the system. We may get falling interest rates AND falling prices next year, enough to scare many off property purchases.
I feel the next boom may be when interest rates start to rise again in a couple of years time, after the completion of the interest rate cutting cycle.
Whether that is 2 years away or 5, I have no idea, but I do agree that it could be one of the greatest booms in history, just like all the others.
bye
I don't see how property prices can continue to outperform average incomes.. Sure the rich can afford to keep accumulating assests but if the average family can't buy, then the growth can't be sustainable? The general population should dictate the market value.
I'd like to see average properties prices compared to average incomes over the past 30yrs. Do you know where to get the historic stats for income? I think this might help to show that 8% growth shouldn't be used to predict the future..
The growth between 2001-04 skews the graph... 8% isn't really representative of the past 30yrs.
Hi,
as my nick suggests I'm noob in PI, so it might be dumb question, but anyway
- I keep reading about demand/supply issue, but don't fully understand it.
Everywhere I go in Sydney there is heaps of houses and units for sale, even more so I can see on realestate.com.au etc.
For example house next to where I live is on the market for >6 months now, people dropped price and yet can't sell.
The way I see it, if there is lots of property for sell and not many people are buying then it can't be a supply problem?
Or I'm missing something in how supply/demand for property works?
Thanks for any comments.
Boomtown,
I have also been thinking along those lines for about 3 years now. I almost "knew" the recent boom was coming in SE Qld and stocked up on QLD properties for that reason.
I've started researching NSW again as it is only a matter of time, but as you say.....I feel a change in the air....the sea and sun type.
Shadow,
Kudo's to you for all of these graphs and links. Thanks.
Regards Jo
this ratio of disposable income to median house prices still has an increase around 2001-04.
shouldn't this ratio be constant in order to be sustainable??
They rpobably won't, I agree. At least not as much.
What it will do is change the general sentiment. What once seemed unaffordable in the pessimist's eyes will suddenly become more affordable to the optimist.
Regards Jo
The demand / supply argument is about the number of houses vs the number of occupants. This includes both rentals and owner occupiers. At the moment we have lots of people coming into the country and not enough construction to keep up and this is causing a blow out in rents. The forces surrounding property prices revolve more around finance and lots of stock for sale doesn't mean there are too many houses in the country. If finance was cheap, we would see lots of construction and a price boom, with rents fairly stagnant.
The market price is set by the marginal purchaser. This is slowly and steadily becoming the "rich" as property is increasingly being held in the hands of a few rather than spread across the population as has historically been the case. It's a slow process though and hence has a long time yet to run - and rising prices will only make it accelerate.
Shadow,
Kudo's to you for all of these graphs and links. Thanks.
Regards Jo
Jo,
Just wondering.. do you think the (log) graph showing Sydney having 9% growth over the past 30yrs is useful for predicting the next 30yrs say?
And on the graph plotting disposable income vs house prices, why is the disposable income 3 times as much as the average wage?
Shadow - I am speaking mainly for Brisbane and only Perth by extrapolation (as I do not know the Perth market).
I am proceeding by way of analogy to Vancouver Canada and Toronto Canada. Vancouver is the "desirable" place to live due to climate but Toronto is the financial centre. House prices in Vancouver are significantly more expensive than Toronto now that Vancouver has become a business centre in its own right.
Furthermore the so-called commodities boom will be with us for awhile yet. Sydney may get the bulk of migrants but they are taxi drivers from the Middle East. Brisbane's migrants are mining managers from South Africa and lawyers from England who have come to play in the big sandpit.
Wages between Brisbane and Sydney for professionals are now starting to equalise. Brisbane used to be half of Sydney. Wages in Vancouver are still less than wages in Toronto but houses are still more expensive in Vancouver than Toronto.
I’m not sure if you can use that analogy. Vancouver started it's momentum only after Hong Kong (very rich) migration. Some people are sarcastically calling Van Kong now
We are going to get skill migrants. I expect them to be mostly from China and India. They would come here with enough money to rent and enough skills to find a job then eventually buy a property.
- devank
Funny... Here I am on Sydney's Northern Beaches and noticing how the English migrants are creeping further and further up the coast. The last boom carried them and their cashed up pounds stirling as far as Collaroy. The Manly Daily and most REAs now agree they've moved into Narrabeen and are now crossing the bridge to Pittwater and moving in on my home suburb of North Narrabeen. Most of my wife's friends at Playgroup are Poms, some of whom are actively looking to buy properties at present. In fact, my wife suggested a property in our street to one of the playgroup Pom mum's for her and her family. Its perfect as it has two separate living areas which is what they want as she's bringing her parents out next month too.
A lot of English migrants end up on Sydney's Northern Beaches. Too many episodes of Home and Away I think.
That, and an inordinate number of South Africans end up on the Northern Beaches too. I read the census data on the beaches and we cop a lot of the affluent migrants due to the appeal of the area. It also still has the white surf culture and is less receptive to non-anglo immigrants. Not saying that is a good thing, but it does mean mostly anglo type immigrants moving in to the Northern Beaches.
I can't wait for the next boom as I think the three storey beach front developments will carry on from their current end point in Collaroy and roll all the way through to connect up with Mona Vale. This bridges my little investment haven and will lift the whole area as the cafe style cosmopolitan infrastructure builds up around it. Pittwater Council is already doing the public input process for North Narrabeen revitalisation. They call it the gateway to Pittwater and want it to have a serious face lift. No arguments from me!
Cheers,
Michael
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