Has the inner west done its dash?

I know there is much chatter on these boards regarding the future of CG in places where CG has already run rampant over the last growth cycle (10 years). So, when push comes to shove, is such growth truly sustainable?

This article gave me pause when I read it this morning:

http://www.whocrashedtheeconomy.com/blog/2013/04/renting-vs-buying-half-right/

Hot inner west suburbs such as Newtown, Enmore, Alexandria and Erskineville (and now Marrickville) have all shot up multiples /100's of percentage of points in the last 10 years. Now in the same suburbs, you're lucky to find a 2 bed terrace under $700k in decent condition.

Okay ,so if we interpolate on the CG basis for the next 10 years in these blue-chip inner west suburbs, can we honestly say that the same 700k 2 bedder will cost 1.4 2million, going on a similar growth patterns?

Without wages rising quick enough, will this market top out at a certain figure? How sustainable is this growth? Can Sydney support the average home price within 15km of the city well over 1million in the next decade?

You could argue the same thing for much of the north shore and northern beaches, where similar desirable suburbs for houses now average 1millon +. At what point will future couples be unable to keep up with this?

I can't see the average wage in 10 years being 160k, which is pretty close to what it needs to be service these much larger future loans. Granted, the growth of the dual income household has changed the game, but that still does not make it easy to grasp how property in these suburbs will be worth double what they are now and how people will service these loans. Heaven forbid interest rates climb as inflation eventually jumps.

That is also discounting any deflation of any bubble which may or may not exist now. Even stagnant capital growth does not argue well when paying top price for these properties, given rental yield is poor on top-end properties in top-end suburbs.

Steve Keen, whom we know is a fairly terrible prophet when it comes to all things housing, has an interesting point to stir the pot (and I'm sure will offer a siren call to many on this forum to take offence with):

http://www.businessspectator.com.au/article/2013/4/15/property/house-prices-shoot-towards-ceiling#ixzz2QUFV7fFv

I know it's easy to get caught up doom and gloom forecasts, but I just want to hear some realistic discourse from the experts on these forums.
 
Interesting topic. I wonder if they do keep going upwards do you get things that might sustain it - like two families or couples sharing homes, or groups of friends buying together to get into the market - although hard if they all wanted to share in the inner west in small spaces. Or government changing policy to allow super to be used to buy a family home. Something "else" that comes it to mean a house can be worth 1.4 million in your example without wages being at 160K. Guess we could all try and push polygamy or polyandry and have three people in a "couple' pooling their wages to get our CG in these areas ;-)

(Ha. Just read the article and saw the same comment about more breadwinners per property)
 
Okay ,so if we interpolate on the CG basis for the next 10 years in these blue-chip inner west suburbs, can we honestly say that the same 700k 2 bedder will cost 1.4 2million, going on a similar growth patterns?
Yes

Without wages rising quick enough, will this market top out at a certain figure?
You are assuming house prices are linked to wages. I don't believe they are. I think it has some influence BUT is more linked to availability of credit AND foreign investment.

How sustainable is this growth?
Very, IMO.

Can Sydney support the average home price within 15km of the city well over 1million in the next decade?
Yes, I believe so.

You could argue the same thing for much of the north shore and northern beaches, where similar desirable suburbs for houses now average 1millon +. At what point will future couples be unable to keep up with this?
I see no reason why not.
Also you are neglecting the huge foreign investment you get (e.g. from cashed up Chinese etc) into a place like Sydney.

I can't see the average wage in 10 years being 160k, which is pretty close to what it needs to be service these much larger future loans. Granted, the growth of the dual income household has changed the game,
Dual income household has changed the game.

Steve Keen, whom we know is a fairly terrible prophet ........
You can stop talking now, I've stopped listening. :p
 
Who knows.
I remember people in the 90s saying Newtown had done its dash. It hadn't.
Sydney is a big city that keeps getting bigger. I imagine the distance from the city of affordable houses will keep growing. That means the value of places in the Inner West should keep increasing. How much they will keep growing is anyone's guess.
 
Yes

You are assuming house prices are linked to wages. I don't believe they are. I think it has some influence BUT is more linked to availability of credit AND foreign investment.

Very, IMO.

Yes, I believe so.

I see no reason why not.
Also you are neglecting the huge foreign investment you get (e.g. from cashed up Chinese etc) into a place like Sydney.

Dual income household has changed the game.

You can stop talking now, I've stopped listening. :p

Thanks for chiming in Proper, it's always good to get one side of the coin. :)
 
When people suggest that housing prices are linked to wages, they mean the price of starter homes is linked to wages. Homes in the lowest price sector cant rise too much too fast. But once people have gotten onto the property ladder and been there a while, they can then upgrade depending on several factors other than their incomes.
 
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