Housing affordability & long term gains

[boz]

seriously though TC, what's Australia's equivalent to

Robert Shiller and the Case Shiller Index
Nouriel Roubini
John Williams and his Shadowstats
Meredith Whitney's unsurpassed bank sector analysis.

So much of the finance and economics coverage in Australia is by way of the employees of the Big 4 banks or the RBA.

There's very little impartial thought given broad exposure in Oz.
We need more people to understand and value how the market economy works, and have an appetite for good impartial analysis....

I've been partial to Gottliebsen, Kohler, et al for some time, but have started to note the limits of their reading.

Anyways, who do you have in mind when you allude Australia has good analysts and commentary?

good post WW, you are so right on this.
the 4 banks report are very crappy in comparison to international standard, also the media in australia to me look like part of a big lobby.
I don't like any commentator in australia, I find Kohler very shallow when I see him on TV, I guess if the reason is the lack of time on air he should get a different job...
The good thing about it is that there are few people that know what is the economic situation in Australia and would be more easy for them to make money out of it.
The bottom line is that shouldn't be that difficoult to get a job as economic adviser in australia, may be we should all start organise seminar around australia...

 

[WinstonWolfe]

The good thing about it is that there are few people that know what is the economic situation in Australia .

I think Kohler, Minack, Gotliebsen et al saw the need Boz when they started up Business Spectator and The Eureka Report. Unfortunately, I don't think they have the mix right.....

Talking about the quality of media coverage, the ABC used to be reliable for impartial reporting of events. Now!!!! Gawd....

I just turned QnA off.....it was about migration and illegals.......

 

[Trogdor]

I think Adam Carr does a great piece in Business Spectator.

Makes economics very accessible to non-economists.

 

[yorke]

I'm no educated Economics expert. ...

I don't find houses unaffordable.

If you were you'd probably find them unaffordable as well.

I just think they will be the same or cheaper next year with half a million people who are unemployed, just like they were after the early 80's recession, and the early 90's recession. The bulls who think we are about to have a house price boom at the start of a recession are delusional.

Maybe so, but depending of the price range and location you look at it could be all 3. The recession has began a while ago yet thanks to the increased FHOG the low end prices have been moving up in recent months.

What a load of garbage. So we can't discuss what half a million who have lost their jobs will do to house prices, or the slump in export earnings, or the dire straights of our manufacturing industries?
I'd much rather talk about the 'big picture' stuff.

The "big picture" stuff makes for good topics of conversation and arguments but at the end of the day its all speculative BS and is not as important. The half a million people who are expected to lose their jobs will still need a roof over their head, the slump in export prices is tempered by the lower AUD and manufacturing in this county has never recovered from the 90's recession so you'd think they'd be used to being in dire straights by now.
Looking at the "smaller picture" things are still rosy in WA. The job loses won't be near as large as in NSW because of our smaller and locally focused manufacturing sector, the rents here are still affordable even to unemployed, the slump in export prices is of some concern but nothing we can't handle.

 

[Shadow]

Germany, Austria, The Netherlands, Sweden...hell most of Western Europe. No gaps, beautifully engineered windows and doors, pre-fab componentry that puts our stuff to shame, incredibly energy efficient, angles what they should be, innovative design etc. etc.

Yeah but who wants to live there. I guess they have to have something to make up for the nasty weather, overcrowding and lack of decent beaches. I'll stick to my 'poorly built' house overlooking a nice sunny Aussie beach.

So why bang on about auction clearance rates?

I just mentioned them briefly. It was the gloomers who started getting themselves worked up into a lather and 'banging on' about them. The gloomers are always on the hunt for some minor point they can quibble about.

My bad. I thought you were talking about something that has a material impact on housing prices (the availability of loanable capital) as distinct from something that doesn't (foreign residents buying resi property in Australia).

No worries, it was Boz and Yieldmatters who started the whole foreign currency stuff. Basically Boz stated that Australian property prices had fallen in USD. YM misunderstood and thought they had fallen in AUD. It all just kind of went downhill from there...

 

[boz]

No worries, it was Boz and Yieldmatters who started the whole foreign currency stuff. Basically Boz stated that Australian property prices had fallen in USD. YM misunderstood and thought they had fallen in AUD. It all just kind of went downhill from there...

That is kind of funny,

Did you mean the topic went downhill once you join in
or perhaps you mean the SS view of australia house market price went downhill?

 

[yorke]

Yeah but who wants to live there. I guess they have to have something to make up for the nasty weather, overcrowding and lack of decent beaches.

Probably the reason they all want to come here and support our property market. No wonder its different over here.

I just mentioned them briefly. It was the gloomers who started getting themselves worked up into a lather and 'banging on' about them. The gloomers are always on the hunt for some minor point they can quibble about.

Its all that pent-up frustration. Its now half way through April and the turning point for the fabled property crash is nowhere to be seen. (again) .

 

[yorke]

That is kind of funny,

Did you mean the topic went downhill once you join in
or perhaps you mean the SS view of australia house market price went downhill?

If the bears didn't come with claims of 25% falls in their area (still waiting to find out which area is that) and claims of poorly built houses as excuses of why they think houses are overpriced here the discussion about Australian house prices may not have gone down hill.
At least the actual house prices are holding up reasonably well and the FHB end of the market is even heading UPhill.

 

[AUSPROP...]

and claims of poorly built houses as excuses of why they think houses are overpriced here

this was a strange point to argue. If anything I would say aussie houses are of such over the top construction and with such high expectation (size, bathrooms, fittings etc) that it would be an argument for higher prices in Aus vs the world

 

[chilliaa]

It won't be 5.91% over 30 yrs. We are currently in a monetary expansion part of the cycle. Using long term bond yields as a guide a better assumption might be 7.5%.

Don't forget super (9%) will come out of the $57 K too - I think the stats are gross.

But putting that aside you still have 45% of after tax income dedicated towards housing. Sounds sort of high to me - higher than history anyway and it is probably a dump to live in on top of that. $518 / week tight? A little I reckon - with kids it would be. Hard for me to judge as my own situation is different. House maintenance (and furnishings), Rates, Electricity and Gas, Car expenses, Insurance, Phone, Health care, Groceries - you could eat it all up.

Hand on Yld matters, i might be spliting hairs here, but why 7.5%? I agree that using 40year low RBA interest rates can distort the pricture, but you can currently BORROW from the banks on a long term(10years+) fixed rate less than 7.5%, so 7.5% given curent market knowledge is not an appropriate discount factor.

 

[topcropper]

The recession has began a while ago yet thanks to the increased FHOG the low end prices have been moving up in recent months.
.

The recession started in the US and Japan and Europe a while ago, but we had the commodity boom at the time. I've said all along that we would be 18 months behind. Unemployment figures are showing where we are at, and they have just started moving.

The FHOG..?? Wow, what an amazing economic policy? Bringing forward a heap of buyers, construction and employment to now when things aren't really too bad, and have no buyers left in 6 to 12 months when the real recession really hits. Amazing bit of thinking there.

See ya's.

 

[yieldmatters]

No worries, it was Boz and Yieldmatters who started the whole foreign currency stuff. Basically Boz stated that Australian property prices had fallen in USD. YM misunderstood and thought they had fallen in AUD. It all just kind of went downhill from there...

This isn't correct. Show me where I misunderstood.

You miss the whole point. You put up a list to show how affordable we are that is calculated at market exchange rates ... the list is ridiculous.

 

[yieldmatters]

Hand on Yld matters, i might be spliting hairs here, but why 7.5%? I agree that using 40year low RBA interest rates can distort the pricture, but you can currently BORROW from the banks on a long term(10years+) fixed rate less than 7.5%, so 7.5% given curent market knowledge is not an appropriate discount factor.

It's not about a fixed interest rate. It is about trying to put a number on what a "normal" rate of interest would be over the term of a loan. Looking at the term premium on long term bonds gives you a clue as to what it might be. It might not be as high as 7.5% but it is definetly higher than where we are now.

The real interest rate is not nearly as volatile by the way. The oldies here bang on about the 17% rates but look at inflation back then! Real interest rate wasn't that bad.

 

[yieldmatters]

The recession started in the US and Japan and Europe a while ago, but we had the commodity boom at the time. I've said all along that we would be 18 months behind. Unemployment figures are showing where we are at, and they have just started moving.

The FHOG..?? Wow, what an amazing economic policy? Bringing forward a heap of buyers, construction and employment to now when things aren't really too bad, and have no buyers left in 6 to 12 months when the real recession really hits. Amazing bit of thinking there.

See ya's.

Spot on topcropper. Couldn't agree more.

 

[topcropper]

The "big picture" stuff makes for good topics of conversation and arguments but at the end of the day its all speculative BS and is not as important. The half a million people who are expected to lose their jobs will still need a roof over their head, the slump in export prices is tempered by the lower AUD and manufacturing in this county has never recovered from the 90's recession so you'd think they'd be used to being in dire straights by now. .

I'd disagree there. Perhaps it shows how some of us on here can have such different views on where things are going. I, and I'd guess most of the others who are bearish are starting at the top and working down. Going from bottom up, I agree, things look great. Where's the doom and gloom?

Manufacturing is buggered. Meaning primary industries in Australia are even more important to us than they've ever been. It's either primary or secondary industry that starts generateing the wealth, which then allows most people to work in tertiary or service industries where the wealth then snowballs as it moves on.

Looking at the "smaller picture" things are still rosy in WA. .

Yep, rosey in my parts too. I don't know a single person who's lost a job nor anyone even in trouble. My part of the world has never had it better. New industries in town started up, couple of good seasons and prices so the farmers are cashed up, worker shortage, rental shortage. Plenty of tree changers getting out of the big smoke and setting up here. Admittedly our economic cycle would be closer in timing to Perth than Sydney, we even had our property boom start in 03, just like you blokes.

See ya's.

 

[Shadow]

You miss the whole point. You put up a list to show how affordable we are that is calculated at market exchange rates ... the list is ridiculous.

You are getting mixed up again YM. If you go back and look at my post you will see that I linked to nine separate surveys, each of which addresses the affordability question from a different angle. You seem to have developed a fixation on just one of those surveys.

It's like the time I produced a list of about 10 differences between the UK and Australian property markets, but you isolated one of them (population growth) and tried to say that my whole argument was based on that one point. It wasn't.

Similarly, in this case, my argument is based upon many factors that I outlined in the post. I posted at length explaining why property in Australia is affordable, to Australians, to foreign investors, on a price per square metre basis, on a rental basis, prime property, related to disposable income etc etc. I addressed the affordability question from many angles. But yet again, you seem to be fixated on just one of those angles, and for some reason you are fighting your little heart out to try to disprove it! You have taken one of the surveys in isolation (the one related to affordability to foreign investors) and are now tying yourself up in knots trying to suggest that this is the sole basis of my argument therefore I am wrong.

I shouldn't be surprised though. This is a common tactic employed by the gloomers. I don't think they even realise how desperate it makes them look.

 

[yorke]

this was a strange point to argue. If anything I would say aussie houses are of such over the top construction and with such high expectation (size, bathrooms, fittings etc) that it would be an argument for higher prices in Aus vs the world

Yep, even the typical brick veneered stick house we build over East is going to outlast a young FHB. The type of double brick, engineered foundation, 100mm concrete slab we build in the West will outlast his great grandchildren as well.
Compare that with the overseas FHB buying the typical prefab stapled cardboard and plywood house with stapled brick veneer lookalike which will probably need replacing before his mortgage is paid off and prices here are incredibly cheap.
OK, double and triple glazing is mandatory overseas but why not mention that overseas outside temperature can get well bellow -20C and you'll need double glazing to stop the water in the toilet bowl freezing solid. Over here the glazing is used mostly to keep the rain, bugs and dry leaves out.

 

[yorke]

The FHOG..?? Wow, what an amazing economic policy? Bringing forward a heap of buyers, construction and employment to now when things aren't really too bad, and have no buyers left in 6 to 12 months when the real recession really hits.

Firstly, unless the furry ones lent you the use of their fully functioning crystal ball, you are only guessing that a "real recession" will hit here in 6 to 12 months.

Secondly, if you are right , in 6 to 12 months there is going to be a lot of building activity going on because it takes a few months to actually start work on the house that a FHB signed up for today. Once the house is completed and the FHB moves in it he will start spending on furniture and landscape.

So you see ? Either way the threat of a real recession is eliminated so it is a truly amazing piece of economic policy.

 

[yorke]

Manufacturing is buggered.

You keep saying that but the fact remains that our manufacturing has been buggered for over a decade, ever since the manufacturers discovered how much cheaper is to produce in China and other low wage countries.
Just imagine what the real inflation numbers would be if we could only buy locally manufactured goods.

Yep, rosey in my parts too. I don't know a single person who's lost a job nor anyone even in trouble. My part of the world has never had it better. New industries in town started up, couple of good seasons and prices so the farmers are cashed up, worker shortage, rental shortage. Plenty of tree changers getting out of the big smoke and setting up here. Admittedly our economic cycle would be closer in timing to Perth than Sydney, we even had our property boom start in 03, just like you blokes.

If things are rosy for you then why the D&G, have you been frequenting the other forum without a protective tinfoil hat ?

 

[RumpledElf]

There's rosy spots everywhere - I'm moving to one next week. They spruik it as 'the fastest growing postcode in SA' or the highest average wage increase in X years anywhere in SA or other drivel. Basically its a nice spot to live and a lot of people are moving there and building themselves stonking great big houses to live in.

Conversely I can point out a number of really crap places quite close by that are going to get hit really hard when people realise its not worth $150k for a house there, there's no jobs, and the only reason the population is holding steady at all is because of the number of locals with 6 kids each.

Then there's the capital cities and their crazy high prices ... which probably explains the glowing regional spots as the oldies in the city sell up to young greater fools and move outwards to places that have nice bowling greens.