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.
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.