Don't know what you are on about Tehanu but at least you can admit your mistakes. That is an honourable thing to do. Cheers.
Demographia 2011
- Thread starter Graemsay
- Start date
Don't know what you are on about Tehanu but at least you can admit your mistakes. That is an honourable thing to do. Cheers.
charlieandkath - yes I do own properties, but that's a mistake on my part and am trying to get out. Not sure how that takes away from the credibility of my arugments.
Numbers are numbers. You can throw up all sorts of qualitative arguments against me and make pointless qualitative statements, but what's important is to look at numbers for what they are.
Oracle - didn't I say I knew someone would make the argument you did (ie that you don't have to buy a $600k median price house)? My response to such an argument is in my previous post, which is that median prices and median incomes are simply a means of comparing across different countries. No one's holding a gun to homebuyers' heads that they HAVE TO buy a median priced home or HAVE TO earn a median income. The point is, using median prices provides us with a means to compare countries, and the analysis and conclusion of the analysis is that Australia is very unaffordable...
hua_qiu - I didn't use a PMT calc. I simply took the loan amount and divided it by 30. Of course I do realise that as interest goes down the loan repayment goes up, but didn't specifically run it in excel. Haven't done annuity calcs in a long time - remind me if the PMT includes interest.
Numbers are numbers. You can throw up all sorts of qualitative arguments against me and make pointless qualitative statements, but what's important is to look at numbers for what they are.
Oracle - didn't I say I knew someone would make the argument you did (ie that you don't have to buy a $600k median price house)? My response to such an argument is in my previous post, which is that median prices and median incomes are simply a means of comparing across different countries. No one's holding a gun to homebuyers' heads that they HAVE TO buy a median priced home or HAVE TO earn a median income. The point is, using median prices provides us with a means to compare countries, and the analysis and conclusion of the analysis is that Australia is very unaffordable...
hua_qiu - I didn't use a PMT calc. I simply took the loan amount and divided it by 30. Of course I do realise that as interest goes down the loan repayment goes up, but didn't specifically run it in excel. Haven't done annuity calcs in a long time - remind me if the PMT includes interest.
I have nfi what you're saying...
Good stuff deltaberry, you are fair dinkum.
Once again I reiterate we are the lucky country and the premium we are paying is because of all the factors why people want to move here in droves.
Cheers
Yes, the result of PMT formula include both principal and interest. I am not against your point. 60% is still a lot. But I think should do the math right.
The last time I checked there was no written rule or law that says someone on a median salary should be able to comfortably afford a median priced house. The price of a house is set by the forces of demand and supply. If there are more buyers than sellers and if those buyers have the money to pay higher prices then that is what the new price becomes.
Your argument about Australia being very unaffordable doesn't hold much merit either since Australia has a very low number of homeless people living on streets compared to most countries.
To me your argument only holds true if there were countless number of people without homes but there were thousands of vacant property since no one can afford to live in it. That is certainly not the case yet in Australia. Although, I have seen plenty of such cases in third world and developing countries.
Cheers,
Oracle.
Oracle - I undrstand what you're saying but it seems you don't understand what I'm saying.
I know a median person doesn't have to buy a median house, no duh. They can even choose to buy nothing, or buy a $30m house if the banks would lend to them...
All I'm saying is that these figures are simply used to compare affordabiltiy across countries. And I'm just saying Australia is, relatively speaking, the least affordable.
Let's flip it the provocative the other way around: how about you use some ratios (eg House Prices / Income, Income / Average Repayment & Interest) to demonstrate how US is less affordable than Australia.
I know a median person doesn't have to buy a median house, no duh. They can even choose to buy nothing, or buy a $30m house if the banks would lend to them...
All I'm saying is that these figures are simply used to compare affordabiltiy across countries. And I'm just saying Australia is, relatively speaking, the least affordable.
Let's flip it the provocative the other way around: how about you use some ratios (eg House Prices / Income, Income / Average Repayment & Interest) to demonstrate how US is less affordable than Australia.
Mmm...Maybe I shouldn't have said anything then...
In that thread in which I am now ashamed of, one of the (many) things I said was that your arguments were not sincere because you have negatively geared investment properties.
I just thought that nooo...someone didn't read my apology (sometimes people don't necessarily follow a thread the whole way through) and I was afraid that my accusations were besmirching you now.
So I thought I'd step in to correct the wrong impression because I felt guilty.
Of course as it turns out it wasn't really related. So maybe it would have been better if I hadn't said anything at all now...
But ah, yeah, if this is not related, continue as if I hadn't said anything...I am very very embarrassed now.
*Sigh* Why do I always seem to make the situation worse, well, at least more confusing.
i think this way of thinking is very dangerous. Yes there is no written rule, but it does act as a very good guideline.
Of course there are individual exceptions to the rule (or guideline).
But these sought of generalisations give a good indication into the rough overall value of the market.
A bit like a PE ratio for the overall stock market. (and lets non enter a debate about the risk of the stock market vs property market, i am only talking about value indicators here).
Remember with the residential property market, as a general rule of thumb people are looking for price growth to support negative gearing (or at least neutral gearing). The vast majority of total return on investment is made up of capital growth (again generalisations here).
Over the long term capital growth of the medium priced property has to be supported by affordability. Mathematically it cant be exist otherwise (it can over periods of time, but not into perpetuity).
Tehanu, you are funny. As someone who has followed both threads it's really no big deal. The only person feeling bad about you is you.
Your argument about value would make sense but you need to factor in human emotional factor with property. To you a house in Toorak at $3m is overpriced when you can get a bigger house for far less elsewhere in the outer suburbs. But if I have $100m in the bank and I feel like I want to live in Toorak at any cost. Would the $3m matter to me that much? Not really, the concept of value is thrown out of the window when you have money and the emotional attachment to something.
Secondly, I would have really been worried about rising property prices had we got rising unemployment and a lower homeownership rates. Currently we are sitting at 5% unemployment (historically low) and 70% Owner occupiers rate. You can bet people are not just going to walk out of their houses just become the prices dipped 10%.
Mind you no where am I saying they are undervalued or going to boom. Yes, in the long term property growth will average out to the long term trend, but the averaging out phenomenon can take place in many different ways. Major drop in prices (US, Japan) or slight drop and stagnation in prices. (More likely scenario for Australia).
Cheers,
Oracle.
OK, I know this was apparently dealt with right at the beginning but I have still been confused about the $63k median household income. I thought this was about median salary for a single person.
So I just checked and it IS about a single salary, but the AVERAGE salary, not the median.
So a couple who are both on an AVERAGE salary (before overtime) would have a household income of $130k
Now, I know that median is a better figure & we're not talking about average household incomes nor average wages. Moreover, not every household has 2 people working full time. But this just goes to show the incredible wealth divide, as half of all households bring in less than $63k (using Melbourne as an example). But imagine how large the incomes are on the top of the scale to push the average to $130k.
I read an article in the Age this morning in which ACOSS figures were quoted of 11% of Australians living in poverty. That was in 2006 & is expected to have increased:
I know this thread is about house affordability not socio-economic demographics but it is related. It looks like less & less folk (% wise) can afford to buy in the inner eastern suburbs, and yet simultaneously those who can are able to pay more & more.
So I just checked and it IS about a single salary, but the AVERAGE salary, not the median.
So a couple who are both on an AVERAGE salary (before overtime) would have a household income of $130k
Now, I know that median is a better figure & we're not talking about average household incomes nor average wages. Moreover, not every household has 2 people working full time. But this just goes to show the incredible wealth divide, as half of all households bring in less than $63k (using Melbourne as an example). But imagine how large the incomes are on the top of the scale to push the average to $130k.
I read an article in the Age this morning in which ACOSS figures were quoted of 11% of Australians living in poverty. That was in 2006 & is expected to have increased:
Amazing.
I know this thread is about house affordability not socio-economic demographics but it is related. It looks like less & less folk (% wise) can afford to buy in the inner eastern suburbs, and yet simultaneously those who can are able to pay more & more.
OK, I know this was apparently dealt with right at the beginning but I have still been confused about the $63k median household income. I thought this was about median salary for a single person.
So I just checked and it IS about a single salary, but the AVERAGE salary, not the median.
So a couple who are both on an AVERAGE salary (before overtime) would have a household income of $130k
Now, I know that median is a better figure & we're not talking about average household incomes nor average wages. Moreover, not every household has 2 people working full time. But this just goes to show the incredible wealth divide, as half of all households bring in less than $63k (using Melbourne as an example). But imagine how large the incomes are on the top of the scale to push the average to $130k.
I read an article in the Age this morning in which ACOSS figures were quoted of 11% of Australians living in poverty. That was in 2006 & is expected to have increased:
Amazing.
I know this thread is about house affordability not socio-economic demographics but it is related. It looks like less & less folk (% wise) can afford to buy in the inner eastern suburbs, and yet simultaneously those who can are able to pay more & more.
another perfect example of people misuing stats to achieve their own ends.
1) using average salary and median prices - apples and oranges.
2) using medians to calculate anything.
And that's exactly what the Demographia survey does. No two countries compared are alike so any comparisons are pointless. I believe in the US you can deduct interest payments from your tax, so that makes comparisons between us and them worthless on its own.
Tehanu, you are funny. As someone who has followed both threads it's really no big deal. The only person feeling bad about you is you.
Yea Tehanu - seriously no biggie... I don't mind at all.
Oracle - you're still talking about specific examples. Intrinsic-Value and I just are saying that the Price / Income is simply a ratio to compare countries.
Sure you can get cheaper stuff here and therefore not buy at 9.0x. You can probably buy at 4.0x if you tried. But if that's your argument, my response is simply you can get EVEN CHEAPER stuff in countries with lower multiples, and in fact you can find MORE of them. You can probably get stuff in LA for 1.5x. So who's overpriced now?
They don't have to for prices to fall dramatically.
I can show you plenty of stocks where the top 20 hold 70% of a company (with no intention to change) and yet the share price still rises and falls dramatically based on what the other holders are prepared to buy and sell for.
The market price of an asset is not set by those that hold through thick and thin, it's set by those who are selling and buying.
I think you are underestimating another human emotion... fear.
Will that emotional attachment to the house remain intact if the homeowner sees large price falls of nearby properties as investors flee an overpriced investment class??
I agree with this. Using the same measuring stick we appear to be at the pointy end of the stick with house values.
But is it still a fair measure when the countries compared are in the depths of recession/depression.
If say the US recovered tomorrow to a stable economic situation etc. Where would we expect the house value/income ratio to be.
We all agree many parts of the US are crazy cheap.
I guess what I'm getting at is with a solid recover in other countries and a slowdown/flatening/ slight drop in hours. The gap would close quick.
Jusst saaaying thatz aallll.
Deltaberry, I understand your point of view, where you are trying to show me that why is housing for an average house in average suburb so expensive in relation to the average income of the mass population compared to the same metrics used for another country? My answer to that question is sure it definitely looks expensive and from an investing point of view the yields are pretty low. Which makes a case for prices to either fall or yields to catchup or put it another way income to catchup. My point is there are two ways this imbalance can be achieved. First is either house prices fall significantly (30%+) or secondly house prices fall moderately (10-15%) and then remain there until the yield improves. And I believe for Australia the latter scenario is much more likely.
Also, to point out another point of view which I mentioned which is applicable to me right now is I am planning on upgrading my PPOR. I am looking to buy in a decent suburb where I feel like I want to live. Its median price is above that of the median price for the city and in all honesty I don't care much about whether it is good value or not, what would be the yield of the property I would end up buying for myself to live in. It is purely an emotional decision. So for me the important stuff is can I afford the repayments? If the answer is yes then whether it's a bargain or what yield I would get is rather not that important. This is how I believe majority of ppl who buy their PPOR (70%) think.
Hobo, you are confusing on how people value houses compared to shares. Share price can go up or down but sooner or later it reverts to it's true value which is mostly tied to it's current earnings and future earning potential. You don't have to sell your shares just because the price has dropped today if you believe in the company and it's earnings.
On the other hand if the price of my property falls and I need a place to stay I am not going to get rid of it just coz it's value is less now then it was yesterday. It is still serving me the purpose of providing shelter. Just because of the fear of properties declining in value is not going to force me to sell unless I am in financial trouble. And except a majority of FHO I expect rest of OO must have atleast 30% equity in their properties. So even a 30% drop will get them to break even.
Cheers,
Oracle.