http://www.news.com.au/business/money/story/0,25479,24043852-5013951,00.html
2nd most popular article - GHPC has gone mainstream!
2nd most popular article - GHPC has gone mainstream!
Debunking housing myths
- Thread starter HiredGoon
- Start date
"...Investors renting out houses will be squeezed by rising rates and realise capital losses are possible. Rents will rise and house prices fall until housing returns are comparable with other assets. That will improve housing affordability for first-home buyers and eventually stimulate the next upturn."
And life will go on.
And life will go on.
From the article and only source quoted to back the claim:
"Nigel Stapledon from UNSW has published house price data back to 1880 showing Australian house prices fell sharply several times. "
Rest is typical wishy washy mambo jambo sensationalitsic stuff that news.com.au is well known for..!
You seem happy HG.. I am happy for you !
Hope you are enjoying your weekend smelling some fresh air and not cocooned in a dark room analysing the "housing debunking" to the enth degree..!
Harris
Also from today's press:
Oopsies.
If you are paying $420pw now thats $614pw. Hope your wages keep pace.
Source: http://www.news.com.au/business/money/story/0,25479,24031735-5013951,00.html
Oopsies.
If you are paying $420pw now thats $614pw. Hope your wages keep pace.
Source: http://www.news.com.au/business/money/story/0,25479,24031735-5013951,00.html
It would be interesting to see what the prices of say, 100 randomly picked houses or units around Aus, in a mainstream suburb of each cap city, were in 1980, and then compare that price to today's recently sold comparables in the immediate area.
No linear graphs, "real terms" models, or any of that anally (sorry; analytically) intense stuff.
Just 2 prices; then, and now.
Would anyone care to have a wild guess at the difference?
No linear graphs, "real terms" models, or any of that anally (sorry; analytically) intense stuff.
Just 2 prices; then, and now.
Would anyone care to have a wild guess at the difference?
I thought that this might be a good exercise for a quiet Sunday arvo and as I have RP Data on line, I thought that I would have a quick look at the Suburb of Coorparoo approx 5k from GPO.
I had to vary LA's criteria as on the searches no same properties recorded sales in 1980 and 2008 (Units or Houses). The criteria that I used was to copy into an excell spreadsheet all sales recorded for Houses and Units for both 1980 and 2008. I then deleated the top 10% and bottom 10% of sales totaled the remainder and devided by the number of sales to give a median value.
Note: The reason for the removal of top and bottom 10% is to cover those few mansions that every suburb has (which are not the norm) and to cover the occurance of false low values due to Partnership buy outs (Divorce).
These are the results
House 1980 $41,657 2008 $676,727
Unit 1980 $40,860 2008 $363,370
I was very surprised to see that the median for House and Unit in 1980 were very close to the same.
Looking at this result it proves that Houses are a better investment than Units doesn't it.
The only problem with statistics is that they don't always show a true picture. I believe that it is a safe bet that very little was spent on Units over this period by way of renovation but who can suggest a realistic figure on how much was spent on Housing improvements and spliter block replica new houses (of which there are a few). If we were to assume a figure of $200,000 per property then the house growth would be $476,727. Still better than units but when the rent return and building depreciation is considered the Unit actually shows a better rate of return.
I had to vary LA's criteria as on the searches no same properties recorded sales in 1980 and 2008 (Units or Houses). The criteria that I used was to copy into an excell spreadsheet all sales recorded for Houses and Units for both 1980 and 2008. I then deleated the top 10% and bottom 10% of sales totaled the remainder and devided by the number of sales to give a median value.
Note: The reason for the removal of top and bottom 10% is to cover those few mansions that every suburb has (which are not the norm) and to cover the occurance of false low values due to Partnership buy outs (Divorce).
These are the results
House 1980 $41,657 2008 $676,727
Unit 1980 $40,860 2008 $363,370
I was very surprised to see that the median for House and Unit in 1980 were very close to the same.
Looking at this result it proves that Houses are a better investment than Units doesn't it.
The only problem with statistics is that they don't always show a true picture. I believe that it is a safe bet that very little was spent on Units over this period by way of renovation but who can suggest a realistic figure on how much was spent on Housing improvements and spliter block replica new houses (of which there are a few). If we were to assume a figure of $200,000 per property then the house growth would be $476,727. Still better than units but when the rent return and building depreciation is considered the Unit actually shows a better rate of return.
Matusik has done similar research: Page 7 of this PDF
500 random resales (without improvements) across SEQ in march 2008 found:
5-year average tenure
all positive price growth
$299,500 avg on original purchase
$555,800 avg on resale (2008)
86% gain, or 16.4% per annum 82% investors selling
mostly owner-residents buying
Over a smaller timeframe than 1980 in this particular case. I personally use Residex housing index data to go back to 1979. I have real sales data for a couple of suburbs I follow in Brisbane from the 80's on, and have researched older sales going back to the original sub divisions of farming land.
On a more simple note, I remember selling brand new low set spec homes in Capalaba in 1980 for around $35,000 (they were around 100m2 3 brm 1 batroom 1 car with absolutly no landscaping or fencing) today you will pay around $550,000 for a brand new spec but it will be around 200m2 4 brm 2 bath room family room 2 car fully fenced and landscaped.
Thank you for that Jon - very interesting.
It would not surprise me if those homes were worth $6m each in 2028. Of course the dollar will be worth much less but still - makes you worry less that you overpaid by $20k
Yeah i pretty much agree with him, but that doesnt mean im selling my properties. Only a fool would bank on perpetual increases in house prices with out there EVER being a correction.
Its just like shares, it goes up it goes down, but in the long term, so long as nominal salaries go up, it will go up.
Hiya John
One of the statisical challenges with RP, Residex et al when looking at RPs vs Sp and community titles, is that its hard to ascertain, whats a unit ( ie apartment) , or whats a townhouse, villa or dual occ
ta
rolf
One of the statisical challenges with RP, Residex et al when looking at RPs vs Sp and community titles, is that its hard to ascertain, whats a unit ( ie apartment) , or whats a townhouse, villa or dual occ
ta
rolf
In 1995 I had a 2 bed double brick unit in Greenslopes (next suburb to Coorparoo) that had a bank valuation of $116,000. There was a wooden 2 bed + sleepout house in next street for sale for $120,000 - approx 700sqm block. At the time I thought it was a bargain! I think wooden houses were out of vogue at the time as you had to paint them so they were quite cheap. Peoples attitudes have changed since then!
I don't think wooden houses were out of vogue in Coorparoo and surrounding areas in 1996. Perhaps there was some other reason. We bought into Coorparoo in 1996 and my mother was still selling houses in Coorparoo at that time.
There are pockets of brick houses in Coorparoo, built in the 1960's and 1970's and I remember my mother saying that these areas didn't hold their value like the timber houses, mainly because people looking to buy in Coorparoo were generally looking for timber, not brick.
I also remember a number of my mother's sellers moving to Carindale to buy brick because they were sick of painting and maintenance. I also remember several of these families who, a couple of years later, got my mum to sell their places in Carindale to buy back into Coorparoo and surrounding suburbs because they missed the "character" of the tin and timber suburbs.
Same thing with several families my mother sold houses for that moved to acreage. Several of them also moved back to Coorparoo area as their kids got to the stage where they were going to uni and wanting go go into the city. The parents told her they were sick of the travel time for kids to attend sports etc when they were not old enough to drive themselves, but wanting to socialise with their mates back in the 'burbs.
Horses for courses, of course. But I know when we bought in Coorparoo, timber houses were not "cheap" compared to units.
There are pockets of brick houses in Coorparoo, built in the 1960's and 1970's and I remember my mother saying that these areas didn't hold their value like the timber houses, mainly because people looking to buy in Coorparoo were generally looking for timber, not brick.
I also remember a number of my mother's sellers moving to Carindale to buy brick because they were sick of painting and maintenance. I also remember several of these families who, a couple of years later, got my mum to sell their places in Carindale to buy back into Coorparoo and surrounding suburbs because they missed the "character" of the tin and timber suburbs.
Same thing with several families my mother sold houses for that moved to acreage. Several of them also moved back to Coorparoo area as their kids got to the stage where they were going to uni and wanting go go into the city. The parents told her they were sick of the travel time for kids to attend sports etc when they were not old enough to drive themselves, but wanting to socialise with their mates back in the 'burbs.
Horses for courses, of course. But I know when we bought in Coorparoo, timber houses were not "cheap" compared to units.
Looking back in time since 1980 doesn't prove anything about the future though - it just proves house prices have gone up in the past. Most people (bears included) would agree with that. Hence people who aren't [spew]"on the ladder"[/spew] are ticked off.
Question is - will it repeat itself? The debt fueled part of it won't - I am convinced of that. Well not for a long time anyway - because banks have to forget about risk again which will take time. Other drivers of higher house prices might continue. But looking back from 1980 to now the next question would be what part of it was debt driven and what was driven by other factors? (e.g. icreased wages - particularly for an area, increased urban sprawl, infrastructure distribution etc)
Hired Goon,
I actually agree with the article...yes prices are falling not the 40% you have said before but maybe 5-15% depending on the area.
Inverse to the falling prices rental yields start to increase...in some suburbs of Sydney you are getting close to 7%.
This means shortly a new upward cycle will commence. This will start when interest rates start moving down. With the pent up demand...this cycle will move quickly.
So the moral of the story is....falling house prices are just one point in the cycle. It is not a permanent feature. Though I will acknowledge that some area will be out fashion and some become in fashion.
I actually agree with the article...yes prices are falling not the 40% you have said before but maybe 5-15% depending on the area.
Inverse to the falling prices rental yields start to increase...in some suburbs of Sydney you are getting close to 7%.
This means shortly a new upward cycle will commence. This will start when interest rates start moving down. With the pent up demand...this cycle will move quickly.
So the moral of the story is....falling house prices are just one point in the cycle. It is not a permanent feature. Though I will acknowledge that some area will be out fashion and some become in fashion.
It will. It has. And it will again.....and sooner than you think!
From wikipedia ..................for the current generation who cant remember pre internet
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis
While not part of the Savings and Loan Crisis, many other banks failed. Between 1980 and 1994 more than 1,600 banks insured by the Federal Deposit Insurance Corporation (FDIC) were closed or received FDIC financial assistance. [13]
During the Savings and Loan Crisis, from 1986 to 1995, the number of US federally insured savings and loans in the United States declined from 3,234 to 1,645. [14] This was primarily, but not exclusively, due to unsound real estate lending.[15]
The market share of S&Ls for single family mortgage loans went from 53% in 1975 to 30% in 1990.[16] U.S. General Accounting Office estimated cost of the crisis to around USD $160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government from 1986 to 1996. [17] That figure does not include thrift insurance funds used before 1986 or after 1996. It also does not include state run thrift insurance funds or state bailouts.
The concomitant slowdown in the finance industry and the real estate market may have been a contributing cause of the 1990-1991 economic recession. Between 1986 and 1991, the number of new homes constructed dropped from 1.8 to 1 million, the lowest rate since World War II. [18]
A taxpayer funded government bailout related to mortgages during the Savings and Loan crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher risk loans during the 2007 subprime mortgage financial crisis. [19]
Sound familiar?
Cheers
Shane
Hi Wylie, Here's some stat's from 1994. http://www.onthehouse.com.au/sold_i...LD&SortBy=date_asc&Age=&Mode=Search&PageNum=2
I think that there will always be a movement back to the mean.
I think another good comparison is what is the rentals compared to house values. All of my properties are currently renting at over 6%, which isn't too bad historically for Australia. I know that there are areas on the South Coast where the rentals are still down around 3% but these are isolated areas where people bought houses out of the reach of locals.
What is it like in other parts of Australia?
I think another good comparison is what is the rentals compared to house values. All of my properties are currently renting at over 6%, which isn't too bad historically for Australia. I know that there are areas on the South Coast where the rentals are still down around 3% but these are isolated areas where people bought houses out of the reach of locals.
What is it like in other parts of Australia?
