brisbane what is going to happen now?
- Thread starter keneth
- Start date
How much has the average wage increased in the last 40 years in relation to the median house price over the same period?
Hehe, no... my 'boss' is going to outsource everything to Romania and the Philippines for a fraction of the amount
According to Mattnz my entire investing career is stuffed.
I like Bargain Hunter's theory instead. Think I will mortgage my dogs and two kids to get some undervalued inner city townhouses to profit from in a couple of years when the next bunch of Southerners decide our realestate is so cheap compared to Sydney's. As soon as the next tragedy comes along (historically in Australia, it is every January) they will forget all about Brisbane flooding and these cheap little townhouses will increase in value.
As someone said recently, "you cant insure against Stupidity". There will always be emotional buyers when you paint it fashionable colours and put in a new bathroom.
I like Bargain Hunter's theory instead. Think I will mortgage my dogs and two kids to get some undervalued inner city townhouses to profit from in a couple of years when the next bunch of Southerners decide our realestate is so cheap compared to Sydney's. As soon as the next tragedy comes along (historically in Australia, it is every January) they will forget all about Brisbane flooding and these cheap little townhouses will increase in value.
As someone said recently, "you cant insure against Stupidity". There will always be emotional buyers when you paint it fashionable colours and put in a new bathroom.
40 years ago house prices were at the historical norm of 3 times average income, so house prices have clearly outpaced wages by far too much to be 8 times average income and in time must revert to the historical norm for them to be affordable again.
Seems the same rose coloured glasses worn by investors in USA, UK and Europe before their property prices crashed are still being worn in Australia and there is even an expectation that property should become an even great bubble!
Hehe, no... my 'boss' is going to outsource everything to Romania and the Philippines for a fraction of the amount
Yesterday while sitting on a bench at the airport, there was a couple of men behind me talking.They were talking about their business, with the expense of workers. One man said it costs $26hr for an Australian. They plan on using men in Tawaiin, as they can have 6-7 bodies for that same price per hour.(It was an inport/export type of business)
Seems like he is a true believer of the theories of SK, Demographia and Jeremy Grantham as there is no hint of any balance from following the reports of MacQuarie Bank, Reserve Bank of Australia and Christopher Joye.
I have purchased 3 properties in Australia.
I purchased 2 in Melbourne's West which would have been twice the price in an equivalent location in Sydney and appeared great value. I have since onsold one under a vendor finance deal and will be onselling the other for a significant profit this year.
My other property is in Gladstone, which has huge upside potential due to the massive projects happening there and have a 3 year time horizon before selling this property after developing it with townhouses.
I'm definitely about timing the right market at the right time, rather than time in the market.
I purchased 2 in Melbourne's West which would have been twice the price in an equivalent location in Sydney and appeared great value. I have since onsold one under a vendor finance deal and will be onselling the other for a significant profit this year.
My other property is in Gladstone, which has huge upside potential due to the massive projects happening there and have a 3 year time horizon before selling this property after developing it with townhouses.
I'm definitely about timing the right market at the right time, rather than time in the market.
Can you provide factual figures for wages, house prices & rents over last 40 years?
Anyone can write 3 times & 8 times etc.
What will happen to rents if what you suggest plays out?
Here you go, this is Melbourne, Sydney is worse.
http://www.simplesustainable.com/topic/2463-melbournes-median-house-prices-vs-wages-1965-2010/
Both rents and mortgages are capped at what people can afford to pay.
One of the dysfunctions of the current market is the imbalance between what it costs to pay the interest on a mortgage vs the cost to rent.
Typical returns here in Sydney are 3-4% while interest rates are 7-8%.
Rents reflect the demand for property and affordability, the 4% premium that investors pay to own a property for someone else to rent reflects their expectation that values will continue to go up.
One of the dysfunctions of the current market is the imbalance between what it costs to pay the interest on a mortgage vs the cost to rent.
Typical returns here in Sydney are 3-4% while interest rates are 7-8%.
Rents reflect the demand for property and affordability, the 4% premium that investors pay to own a property for someone else to rent reflects their expectation that values will continue to go up.
Thanks for that.. What the graph fails to show is that the average wage to house price ratio is not comparing apples to apples in today's society.. For its household income to house price ratio is what should be graphed.
The working demographics 40 years ago is totally different to today. We now have full time employees, part time employees, casual employees, self employed and double income households.
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As long as there is relatively low vacancy rates, my thoughts are that rents would remain relatively stable, even if house prices dropped significantly.
Have a look at some of the rental returns in USA at the moment, in some areas house prices halved, but rents remained relatively constant. Returns of up to 15-20% are possible in some markets.
As soon as there is uncertainty with dropping house prices, the premium reverses, with people preferring to rent, rather than buy due to the risk of prices falling even further.
Prices in Japan's main cities are still lower than they were 20 years ago when their market crashed, despite extremely low interest rates for this period.
The USA appears to be a great place to buy properties for bargain basement prices with great returns. Would you rather buy an average house in Sydney for $600k or in a similar sized city like Houston for $200k.
Have a look at some of the rental returns in USA at the moment, in some areas house prices halved, but rents remained relatively constant. Returns of up to 15-20% are possible in some markets.
As soon as there is uncertainty with dropping house prices, the premium reverses, with people preferring to rent, rather than buy due to the risk of prices falling even further.
Prices in Japan's main cities are still lower than they were 20 years ago when their market crashed, despite extremely low interest rates for this period.
The USA appears to be a great place to buy properties for bargain basement prices with great returns. Would you rather buy an average house in Sydney for $600k or in a similar sized city like Houston for $200k.
This graph shows the changes in workforce participation (blue line) and household debt as a percent of disposable income (red line). http://www.moneymorning.com.au/images/mm20101115b_lge.jpg
The changes in working demographics are not that significant when compared with the amount of extra debt that people have taken on in the past 30+ years.
Id like to compare other more detailed independent studies in relation to substantiating that claim further.
Speculative property investing in Brisbane over the next decade will more than ever be a mug's game. If you truly believe there is the potential for house prices to double over the next decade, then I have a beautifully re-furbished riverfront house in Graceville to sell you. Buyers are obviously going to be a little more risk averse, so will pretty well draw a line through a large radius of Graceville, Bulimba, Yeronga, Fairfield, Bellbowrie, Auchenflower, Jindalee, etc. Top that off with banks (and insurers) reeling in credit, and it's hard to see the same kind of demand for those affected areas. So where do they buy in that price range to stay close to the city but clear of the river and potential infrastructure damage? Holland Park, Tarragindi, Greenslopes, Coorparoo, Annerley, Bardon, Enoggera, etc. But with the lure and risk premium of riverfront property now diminished for a decade or so, those high and dry dwellers are probably going to be less inclined to sell. So, put it all together for relatively better medium-term price growth for those elevated suburbs and some long-term value opportunities in the low-lying riverfront areas. I wouldn't be touching anything, though, until it's clearer how council is going to respond wrt changes to planning.
Alright then, Matt, that makes sense. Our babies are way out in the boonies so a different demographic from inner-city Trendies.
