Getting a bit hot?

In fairness to the article - I think it doesnt actually predict these rises it just states that if the market continues to rise as in the previous 10 years then this is the result!
 
WA has a population of over 2 million people though.

Gorgon will employ how many of those? Engineers are the most highly paid profession in Australia now and that is set to continue if the boom is indeed back. Still, money becomes more expensive by the day and just because resource wages are climbing does not mean public sector or retail wages will climb to match it.

As I said before, the australian economy cannot afford housing to become even more expensive. It will lead to massive unemployment which will lead to a crash in property prices.

Foreign ownership of property is not a good thing at all
 
DeanoC

Unfortunatley the Australian economy is what it is. We have had sustained high housing for some time now.

Consider this. We have some of the highest house prices in the world and yet the GFC didnt touch us. We already have some of the highest house prices in the world yet they keep appreciating.

The big key here is that the rest of the world sees Australian property as safe. Look at the options - where else would you invest? If you can name another good asset class that the worlds millionairs (asian mostly) should park their money then let me know.

The chinese are paying heaps for our resources and figure that a nice hedge is to atleast own our property. Iie if they are making aussies rich - they might as well try and grab a piece)

Therefore there is life left in the beast imo.

Cheers
Aussie
 
WA has a population of over 2 million people though.

Gorgon will employ how many of those?

are you living under a rock?

what about the "what about me" anthem unionists sing at the top of their lungs....?

the flow on effect won't be too far away as the socialists want their slice of the action too.

Gorgon might only employ 10,000 to build Barrow Island. then there's all those "poor" landlubbers that the unionists want looked after too.

10,000 becomes 250,000.

sustainable? dunno. good? dunno. but there's a wave coming and if you aint on it, you're sunk.
 
DeanoC & Co,

You are right. The cost of housing relative to wages is rising in Australia.

But my question is, what ratio of house price to wages is actually unsustainable? Is it a factor of 5? 10? 15? 20?

Yes, relative to other countries our housing looks expensive, but might that not be because other countries have undervalued housing (or those countries just aren't worth emmigrating to)?

And why must purchasing a house be affordable to all . . . in just 25 or 30 years?

God's not making any more easily habitable land either, and one day it will all be built on. Like Manhattan Island, for example. Then, what you call a house will be redeveloped as an apartment building, the price will re-rate accordingly, and the whole ball will just keep rolling along like it has for hundreds - nay, thousands - of years.

As I see it, all other things being equal, if population grows in a given territory, prices will trend upwards inexorably. The ol' supply and demand thing, you know? Of course, if population density declines you've got a problem (eg Japan, but that's because they just don't do immigration).

And anyway, isn't a greater ratio of renters good for our IPs?

What are you worried about???

Belbo
 
DeanoC & Co,

You are right. The cost of housing relative to wages is rising in Australia.

But my question is, what ratio of house price to wages is actually unsustainable? Is it a factor of 5? 10? 15? 20?

Yes, relative to other countries our housing looks expensive, but might that not be because other countries have undervalued housing (or those countries just aren't worth emmigrating to)?

And why must purchasing a house be affordable to all . . . in just 25 or 30 years?

God's not making any more easily habitable land either, and one day it will all be built on. Like Manhattan Island, for example. Then, what you call a house will be redeveloped as an apartment building, the price will re-rate accordingly, and the whole ball will just keep rolling along like it has for hundreds - nay, thousands - of years.

As I see it, all other things being equal, if population grows in a given territory, prices will trend upwards inexorably. The ol' supply and demand thing, you know? Of course, if population density declines you've got a problem (eg Japan, but that's because they just don't do immigration).

And anyway, isn't a greater ratio of renters good for our IPs?

What are you worried about???

Belbo

You are looking at property in isolation.

The more expensive property becomes the larger the portion of income we have to allocate to rent and mortgages. The more money we spend on that, the less money we have for other things.

If people are spending more money paying interest on large loans or paying high rents to cover the interest on landlords large loans, HOW MUCH DISPOSABLE INCOME IS AVAILABLE FOR OTHER PURCHASES?

It means we buy fewer cars. We spend less on consumables. We spend less on entertainment. We spend less on private healthcare. More people resort to using public transport, public schools. They go on fewer holidays. More and more jobs moved offshore as local Australians demand higher wages to cover their rising living costs.

The long term impact of that is economic stagnation and eventually unemployment will rise. Why do you think the RBA has been making so much noise lately? No economy can afford housing at those prices if it wants to maintain a high quality of life and standard of living for its citizens.
 
The RBA make noises becauses rising house prices is a huge issue in terms of liveability for aussie citizens. We collectively ride every bump. The RBA also needs to be cautious.

It doesnt mean there will be armageddon. They are just being prudent financial managers.
 
But my question is, what ratio of house price to wages is actually unsustainable? Is it a factor of 5? 10? 15? 20?
My question is - Why is Price/Income a relevant ratio ? Surely Debt/Household Income is more relevant, and that's always been at reasonable levels.

Price/Income is only relevant for those with no equity ie FHBs.
Debt/Income is relevant to both FHBs and OOs who have equity.

OOs have the advantage of years of investment gains & paying down principle. The simplistic Price/Income ratio fails to take this into account.

The RBA isn't especially worried about Price/Income ratio provided the Income of the 25-35 age group maintains it's historical ratio with the lower quartile of house prices. And according to it's figures the ratio is the best it's been for a generation :).
 
Australia has the highest debt/disposable income ratio in the world???

Where do you come with the best in a generation?

http://www.dailyreckoning.com.au/au...-disposable-income-ratio-in-world/2010/02/03/


I think you'll see he stated in his paragraph below

"The RBA isn't especially worried about Price/Income ratio provided the Income of the 25-35 age group maintains it's historical ratio with the lower quartile of house prices. And according to it's figures the ratio is the best it's been for a generation "

Cheers

Shane
 
OK, so let me get this straight

1 - You guys believe that median prices which are 15-18 times median wage are not a long term problem for the economy and very sustainable.

2 - You guys think that housing, as it is at the moment, is rightly considered affordable?

I think you are both dreaming and living a bubble that housing is headed for. You are also suggesting that Australia's residential property will rewrite history when it manages to sustain a property market that would be triple the traditional affordability index?

http://www.demographia.com/dhi.pdf

Housing at a median of 5.1 x average wage or over is considered unaffordable and bad for the larger economy as a whole. What you chaps are suggesting is that capital gains of "doubles every ten years" which puts average homes at 15-18 x median wage will actually be sustainable.

Sorry to say fellas, but when you need dual incomes to afford the AVERAGE Australian home, that speaks volumes. Dual incomes are meant to provide better than average lifestyles, not run of the mill. Aussie homes are not going to crash anytime soon, I just dont think we are being realistic here to think that massive capital gains will be sustainable if not kept in check
 
DeanoC

People are saying nothing of the sort.

Offcourse it is unaffordable for many people. And offcourse there will be a correction at some point.

The issue here is that the bubble can be explained (rationally) and if the correction does happen it could be years and years away or it could happen slowly.

Btw you cant keep in check capital gains - they will either happen or not - thats called market forces. The governments tries to do things but truth is government policy is not the reason for high property prices.

Your arguement seems to be that Australias property bubble is somehow irrational and armagedon is around the corner!
 
You are looking at property in isolation.

last time i checked property HAD to be looked at in isolation. you can't project macro values across meso and micro markets.

that's called "the cash rate" and is attempted by the RBA.

how effective is that?
 
1 - You guys believe that median prices which are 15-18 times median wage are not a long term problem for the economy and very sustainable.
No..... see the RBA charts in the above link. It's currrently ~4.8X.

2 - You guys think that housing, as it is at the moment, is rightly considered affordable?
Yes.. as does the RBA.... as do the 100,000's of FHBs who recently bought.

I think you are both dreaming and living a bubble that housing is headed for. You are also suggesting that Australia's residential property will rewrite history when it manages to sustain a property market that would be triple the traditional affordability index?
Why is the traditional Affordability Index correct ? Why shouldn't it change as circumstances change ? Why don't you consider the Debt/Income Ratio to be valid ? Why don't you consider the Wages of the FHB demographic to lower quartile house price to be relevant ?


http://www.demographia.com/dhi.pdf

Housing at a median of 5.1 x average wage or over is considered unaffordable and bad for the larger economy as a whole. What you chaps are suggesting is that capital gains of "doubles every ten years" which puts average homes at 15-18 x median wage will actually be sustainable.
As I mentioned above the simplistic Price/Income ratio fails to take existing equity/deposit into account. My granny takes home a pension of $15K, but she lives in a $1.5M house. There must be millions like her with no debt.

Have a quick look at this post to see how an average income earner can easily afford a house costing 8X the average income :).

Sorry to say fellas, but when you need dual incomes to afford the AVERAGE Australian home, that speaks volumes.
Remember that those who buy an average house with an average income you also have an average deposit ;).

Dual incomes are meant to provide better than average lifestyles, not run of the mill.
Dual incomes are meant to make people happier.... and if that means a bigger house than the Jones....
Aussie homes are not going to crash anytime soon, I just dont think we are being realistic here to think that massive capital gains will be sustainable if not kept in check
You also need to forget about averages.....

My granny (yes the same one) bought her house 70 yrs ago.... 'twas the crappiest house on the outskirts of Sydney - a whole 15km out. Since then many more houses have been built & 90% of them are in inferior locations, ie 16-40km from CBD. All these inferior houses have dragged down the mean for the city.... hers has done approx 11%pa over the 70yrs.

So it's not EVERY house that appreciates at 7%pa..... some appreciate faster than average, and new (usually inferior) ones are added to the sample at a relatively fast rate. So beware of the big picture D&Gers with their 'proof' that future capital gains are impossible.
 
Sorry to say fellas, but when you need dual incomes to afford the AVERAGE Australian home, that speaks volumes. Dual incomes are meant to provide better than average lifestyles, not run of the mill. Aussie homes are not going to crash anytime soon, I just dont think we are being realistic here to think that massive capital gains will be sustainable if not kept in check

all aussies ever want to do is pour out their pockets to own property. spare cash from second job goes to a bigger and/or more houses. it's our culture currently.

price is driven by the market desire - not some background force.

there's no conspiracy theory here, and medians mean nothing.

if you can't afford a particular house don't buy it - buy one that you can afford. simple, really.
 
DeanoC

Btw you cant keep in check capital gains - they will either happen or not - thats called market forces. The governments tries to do things but truth is government policy is not the reason for high property prices.

Your arguement seems to be that Australias property bubble is somehow irrational and armagedon is around the corner!

Market forces?

Mate, we just came of the back of a massive FHB grant and government easing legislation on foreign ownership. You cannot for a minute suggest that government intervention has had nothing to do with current prices!

Im not even suggesting that Australia is currently in a property bubble. I am not even suggesting that we are going to see price drops just yet. I am not suggesting that current prices are not sustainable. What I am saying is that this nonsense where median prices will hit a million bucks, and that will be sustainable, is a complete joke. It cannot be sustainable because the impact on the larger economy would be so severe that it would lead to unemployment and a housing crash.

Read the thread again, put my posts into context, and stop assuming so much.
 
last time i checked property HAD to be looked at in isolation. you can't project macro values across meso and micro markets.

that's called "the cash rate" and is attempted by the RBA.

how effective is that?

My jaw is on the floor here. Im actually at a loss for words at the sheer level of stupidity in that statement. Sorry folks, I dont mean to be abusive, but this is ridiculous.

Its quite simple. More money spent on shelter means less money spent on other areas of the economy. With less money spent on other areas of the economy, industry outside property and finance suffers.

Now do you disagree with that statement? Yes or no: Expensive housing means less disposable income for other areas.

YES OR NO

If its YES, then surely you have to agree that higher property prices mean a droip in consumer spending. And if consumer spending was not important to our economy, RUDD WOULD NOT BE HANDING OUT XMAS PRESENTS.

Medians of 15x-18x average aussie wage? If that is the consensus on this forum, I wont be spending much time here anymore. Im surrounded by raving lunatics in the Steve Keen mould.
 
Its quite simple. More money spent on shelter means less money spent on other areas of the economy. With less money spent on other areas of the economy, industry outside property and finance suffers.

Now do you disagree with that statement? Yes or no: Expensive housing means less disposable income for other areas.
Disagree. Inflation has averaged 3%, wage growth 4.5%, some of that additional disposable income goes towards higher house prices, some goes towards more consumer spending....it's a win-win.
 
Back
Top