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!
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WA has a population of over 2 million people though.
Gorgon will employ how many of those?
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
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.But my question is, what ratio of house price to wages is actually unsustainable? Is it a factor of 5? 10? 15? 20?
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 rate the research from the RBA is little higher than Mr Maudlin .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/
You are looking at property in isolation.
No..... see the RBA charts in the above link. It's currrently ~4.8X.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.
Yes.. as does the RBA.... as do the 100,000's of FHBs who recently bought.2 - You guys think that housing, as it is at the moment, is rightly considered affordable?
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 ?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?
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.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.
Remember that those who buy an average house with an average income you also have an average deposit .Sorry to say fellas, but when you need dual incomes to afford the AVERAGE Australian home, that speaks volumes.
Dual incomes are meant to make people happier.... and if that means a bigger house than the Jones....Dual incomes are meant to provide better than average lifestyles, not run of the mill.
You also need to forget about averages.....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
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
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!
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?
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.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.