House Prices Need 'US Style' Collapse

[Tim]

Michael, with respect, you are wrong.

The FHOG is not about affording a higher price it about getting the deposit. Most FHO can afford the repayments but dont have the deposit. I.e. on a common 80% LVR on $300k the deposit is 20% so $60k plus SD and legals so another $10k. So FHO, regardless of income, a PPOR at $300k needs $70k to put down as deposit.

AND on the point Housing is too expensive now. Guess what.....it has always been expensive.

In 89 we had just bought out first home. Cost us $72.5K. Wifes dad loaned us $7k, I cashed super in for $3k and we had savings from our teenage years for therest. How did we save? well my wife and I honeymooned in backpackers and Bnb. We drove a 15 year old car for six years. We never holidayed anywhere we could not drive. I worked at night as well as day. Wife worked as a cleaner in between main jobs.

How many young ones that complain prices are too high are willing to pay that price now?

Peter

PS we still owe the $7k, he refuses to take it back.

Peter that is actually a very valid point. We bought our first home in Brisbane (Logan) for $74k in '91. We scrimped and saved severely for a deposit - and continued to live very cheaply to afford the loan.

I'm sure many people are still willing and able to do this, but I think that society promotes 'get it now' so much that it must be harder for people.

Tim

 

[yieldmatters]

Hi Ym
Tried it in real terms, still well short of 50%.

I wouldn't say "well" short. In nominal terms down from the peak around 32% right? Inflation of about 10% over that time so you are north of 40% in real terms. Remember too a 40% decline is the reversal of a much bigger gain on the way up (~60%).

Still - sounds like you are technically correct though, 50% is too high. I suspect they have focused on the "bubble" states (California, Nevada, Florida) and ignored the "normal" states that took the edge off the average.

 

[yieldmatters]

AND on the point Housing is too expensive now. Guess what.....it has always been expensive.

Relative to wages - yes - always difficult.

Relative to the price of everything else - BIG NO - they were much cheaper back then. House prices in real terms are UP enormously. There is no disputing this - it is a fact.

So as a buyer from the 90s you participated in the much higher real incomes that has eventuated since then AND received the real house price appreciation. Lucky you. Do you think the same will happen for current buyers?

 

[Bill.L]

Hi all,

YM,

House prices in real terms are UP enormously. There is no disputing this - it is a fact.

Which houses?? Why is it relevant??

bye

 

[Shadow]

as a buyer from the 90s you participated in the much higher real incomes that has eventuated since then AND received the real house price appreciation. Lucky you. Do you think the same will happen for current buyers?

For at least one more cycle, yes. And if the fundamentals have not changed by then (choked supply, population growth, strong banking sector, government support for high house prices etc.), then it will happen for another cycle. And so on until the fundamentals change. That's what you need to watch out for - a change in the fundamentals. Your big mistake in selling in Brisbane when you did a few years ago, is that you did not pay attention to the fundamentals. They haven't changed yet.

 

[blaster]

What garbage, how dare these people suggest Australian property is over priced and due for a correction, its obvious our property is not nearly as expensive as other property around the world.....

http://www.news.com.au/business/money/story/0,28323,26070663-5013951,00.html

It's actually an outrage that someone can suggest these things with no concrete prooof..... highly disturbing.

Personally I think there has to be a correction at some point which would have been happening as we speak if not for the stimulus, Jesus I hate that word. Where was I , now though , I couldn't wait to get back here actually, see what the latest thoughts were.
I say we will definitely have to have one but it could be a few years off now .
Rudds next move is the key for now though imo. Gonna be interesting because his created himself a catch 22 .

Cheers

 

[blaster]

Houses are way overpriced for what you get here compared to in the US. I can buy 3x2 homes with 2+ car garage on a nice lot with all the latest appliances for $100k - $150k all day long there.

Design is so poor here and the quality of appliances is poor and way overpriced.

Gotta agree , we Aussies have blinkers on, the values shocking.
Cheers

 

[blaster]

Exactly!! And to put it in better perspective, the last I looked, the type of properties I'm interested in living in or investing in were no where near the prices that were suggested.

I'd challenge anyone who says that US houses are 'cheaper' than Australian ones.

Ask Oprah and any number of wealthy Americans, ask even a middle of the road banker, or someone more 'ordinary'.

KY

Would you really KY , well at least thats something . Got any examples ?

Cheers

 

[Aaron Sice]

Hi BC, are you missing a or form above?

Peter

no, funnliy enough...

the developers i work with want $50k per house profit. that doesn't change regardless of project.

they'll sell at 10-15% under median if they make that $50k - it just means they can sell and move on.

it's a very interesting strategy and one that fits my buying criteria perfectly.

 

[Peter 14.7]

no, funnliy enough...

the developers i work with want $50k per house profit. that doesn't change regardless of project.

they'll sell at 10-15% under median if they make that $50k - it just means they can sell and move on.

it's a very interesting strategy and one that fits my buying criteria perfectly.

Interesting strategy.

Most I know here in the East want 25% clear profit + (and the banks wants that or no finance). So what does $50k equate to as a percentage%.

Peter

 

[Peter 14.7]

Relative to wages - yes - always difficult.

Relative to the price of everything else - BIG NO - they were much cheaper back then. House prices in real terms are UP enormously. There is no disputing this - it is a fact.

Agree houses prices have gone up.

Why? You cannot build houses in China.

Please explain? Houses prices are not overvalued,....the other items are vastly undervalued... and hence rubbish.

Example: In 1988 at 19 I set up my first home. I earned $180 clear after tax. I bought a Microwave. It was the latest model. It cost $599. It took 2 months pays in savings. It is still going strong in 2009

In 2009 I can buy microwaves for office fitouts with simiilar features to my old girl for $80. They fail after 12 months use. I throw then out and buy another one.

Applying the 1989 ratio the new Microwave should cost $3000 (which ironically is almost ($2900) what i just paid for my personal Miele Combiset Microwave Oven). So I have $2920 spare.

Cars have not gone down but are vastly superior. Clothes have gone down, electronics, communication has been slashed! Why? technology.

But land cannot be made by technology and you cannot import whole homes from China (yet).

So as a buyer from the 90s you participated in the much higher real incomes that has eventuated since then AND received the real house price appreciation. Lucky you. Do you think the same will happen for current buyers?

Yes...honestly yes.

Climate change, traffic grid lock, green space and lack of water will force Aussies to live in apartments in Cities. There is only so much land suitable. Prices will rise. A sperate house on 800m2 willbe luxury within 15kmof the CBD.

And technology will continue to make most other things cheaper. Phones are already free, PC/PDAs with internet will be next to be given away with contracts. Music is getting cheaper. Travel is crashing. In 1990, Sydney Melbourne was $500 one way. It can now be $39 only.

The next great leap will be medicine. Bad heart? Forget surgery, inject nanobots and they will clean out the fatty deposits and clots. Blind? insert bionic ear.

A fundamental shift must occur in the Aussie mindset for any huge drops in housing to occur and that is not going to happen.

My 2 cents, Peter

 

[HiEquity]

Blind? insert bionic ear.

Hi Peter! Excellent post - I agree with the gist of everything you say...

except this bit!

 

[Peter 14.7]

Hi Peter! Excellent post - I agree with the gist of everything you say...

except this bit!

Call me George W! Peter