IMO this is a very big point. That is why a lot of official figures need to be adjusted so much for inflation. $1 million used to mean a lot even until the recent past. Now, not so much. In the near future, even less.
Increasing doomers and gloomers , another indicator to buy ?
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IMO this is a very big point. That is why a lot of official figures need to be adjusted so much for inflation. $1 million used to mean a lot even until the recent past. Now, not so much. In the near future, even less.
People overthink things. It is all very simple.
Sometimes prices go up sometimes they go down. In the long run it trends up. When it goes up too quickly it comes back down. When it goes down too quickly it goes back up. The art to making mediocre albeit positive returns is very simple.
Sometimes prices go up sometimes they go down. In the long run it trends up. When it goes up too quickly it comes back down. When it goes down too quickly it goes back up. The art to making mediocre albeit positive returns is very simple.
[QUhindsigherry;1150200]People overthink things. It is all very simple.
Sometimes prices go up sometimes they go down. In the long run it trends up. When it goes up too quickly it comes back down. When it goes down too quickly it goes back up. The art to making mediocre albeit positive returns is very simple.[/QUOTE]
Yes but people on ss aren't average and we are chasing above average returns
The majority of average people become property millionaires over 30 years because they buy a ppor because it's the great Australian dream and because they usually want to live in low risk areas.
Ie buy anywhere, wait 30 years and you are a millionaire, harslyhardly rocket science
I think.most ssers are seeking more, including me
And In hindsight, yes teal estate rises long term but, if it was back in 08 or 09, would you simply be buying because of it
Any decent investor would be at least half anticipating a crash or a drop and would have adjusted accordingly
I know heaps of people who basically offloaded all their shares because they thought the market could fall at this time, while every herd follower werein a buying frenzy
Sometimes prices go up sometimes they go down. In the long run it trends up. When it goes up too quickly it comes back down. When it goes down too quickly it goes back up. The art to making mediocre albeit positive returns is very simple.[/QUOTE]
Yes but people on ss aren't average and we are chasing above average returns
The majority of average people become property millionaires over 30 years because they buy a ppor because it's the great Australian dream and because they usually want to live in low risk areas.
Ie buy anywhere, wait 30 years and you are a millionaire, harslyhardly rocket science
I think.most ssers are seeking more, including me
And In hindsight, yes teal estate rises long term but, if it was back in 08 or 09, would you simply be buying because of it
Any decent investor would be at least half anticipating a crash or a drop and would have adjusted accordingly
I know heaps of people who basically offloaded all their shares because they thought the market could fall at this time, while every herd follower werein a buying frenzy
The point is the amount that you owe on it , becomes tomorrows dollars , or yesterdays dollars become todays dollars
Doesn't happen over night but with time , the initial borrowings become less and less relevant.
eg IP ( block of four units ) bought around 2003 was 220 . Now worth around 5-600 . Still owe 220 .
Rent now around 825 / Week .
Cliff
Exactly, here's a longer term example - parents house * PP $10,000
45 years later / Sold last year: $1,338,000
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Any forecast that property prices are going to rise ahead of wages over the long term is optimistic. Shiller's research showed that rises tend to be inline with inflation.
As a simple example, I believe Australian wages have been growing around 3% to 4% a year for the last decade, and house price inflation has tended to be 7% to 10%. Taking the extreme ends of that would mean property becomes roughly twice as expensive per decade. If we start at a median price of four times earnings...
So what do I think could happen?
In my opinion the bullish case would be that prices remain flat in real terms, perhaps rising by 3% or so in nominal terms. Roughly what Sydney has been doing for the last decade.
Basically demand is underpinned by what an individual can afford to pay, and if values are stretched relative to wages then there isn't the money to bid things up further.
The only possible driver at that point would be foreign buyers entering the market in numbers, which you're seeing in London and Australia. The problem with that is that voters who're increasingly priced out start to get uppity at that point, and eventually politicians pay attention. It's starting to happen in London, but I don't think it's crossed a sufficient tipping point to change things.
The bear case would be that there are steep falls in property prices to the point that an average house is affordable on an average wage, and the cost of renting is broadly similar to buying.
If that happens you'd be looking at a pretty serious recession, banks getting into trouble, and various other upsets. A lot of the bears on the Global House Price Crunch forums think that any reset will be painless, but I think that they're being overly optimistic.
I agree with Deltaberry's comments above, but in a world of 3% or 4% growth, it's going to be very, very difficult to make spectacular returns.
As a simple example, I believe Australian wages have been growing around 3% to 4% a year for the last decade, and house price inflation has tended to be 7% to 10%. Taking the extreme ends of that would mean property becomes roughly twice as expensive per decade. If we start at a median price of four times earnings...
- Year 0: 4 times
- Year 10: 8 times
- Year 20: 16 times
- Year 30: 32 times
- Year 40: 64 times
- Year 50: 128 times
- Year 60: 256 times
- Year 70: 512 times
- Year 80: 1024 times
So what do I think could happen?
In my opinion the bullish case would be that prices remain flat in real terms, perhaps rising by 3% or so in nominal terms. Roughly what Sydney has been doing for the last decade.
Basically demand is underpinned by what an individual can afford to pay, and if values are stretched relative to wages then there isn't the money to bid things up further.
The only possible driver at that point would be foreign buyers entering the market in numbers, which you're seeing in London and Australia. The problem with that is that voters who're increasingly priced out start to get uppity at that point, and eventually politicians pay attention. It's starting to happen in London, but I don't think it's crossed a sufficient tipping point to change things.
The bear case would be that there are steep falls in property prices to the point that an average house is affordable on an average wage, and the cost of renting is broadly similar to buying.
If that happens you'd be looking at a pretty serious recession, banks getting into trouble, and various other upsets. A lot of the bears on the Global House Price Crunch forums think that any reset will be painless, but I think that they're being overly optimistic.
I agree with Deltaberry's comments above, but in a world of 3% or 4% growth, it's going to be very, very difficult to make spectacular returns.
Don't forget.. the number of double income households have been increasing.
I was thinking to sell one at the beginning of 2008 due to more than 8% interest rate and feel pressure to hold them, actually.
Then, by the end of 2008, GFC came and interest rate was falling 1% each time. Instead of selling, I was buying from its first interest rate big drop, because I can afford to do so.
Key - Buy whenever I can afford.
Last year, I bought 4 in Brisbane.
I just finished my 3 purchases in Adelaide.
My plan is to sell one or two Sydney properties (only 2% rental return) when interest rate is going up. If I can hold all of them, I will.
And again, buy whenever I can, in the areas (capital cities) where their prices haven't gone up for many years.
I suspect that has largely played out.
I'm in the middle of Generation X. When I was growing up most of my parents' peers were single income families, but now most of my contemporaries are dual income. It's not uncommon for one parent to take a few years out, or even work part time, but they remain in the workforce.
So my expectation would be that dual incomes are now priced in, particularly as my generation is of an age where they're getting on for peak earnings, and hence buying the big, family home.
I'd expect the number of dual income families to increase for a few years yet as the older generation, who are more likely to be on a single income, retire.
...and the number of wealthy chinese who can buy a house for cash and don't need a tenant
As I said, when prices go up too much, they'll come back down. I never advocated buying despite the market potentially being at a peak, and waiting 30 years of inflation to carry you through.
All this talk about house prices and household incomes is very unimaginative.
Let us just imagine that over the next year or two mining capital investment collapses in Australia and unemployment rises. Together with a hollowed out manufacturing sector courtesy of a decade long run of a high dollar, as well as a govt that is not inclined to borrow any more money itself, what then becomes the only method to stimulate the economy to maintain employment?
You guessed it - cut interest rates. We have seen what happens to house prices when interest rates dropped from 18% to 5% over the last 20 years. I wonder what will happen to real estate prices when interest rates drop further to 2.5%?
The only reason our interest rates aren't already there is because of the mining investment boom. Take that away and we start to look just like the rest of the developed world... there is no reason our rates can't be just as low or lower than theirs. Then, all of a sudden, housing looks affordable again! Especially for investors paying interest only loans...
This is why I love investing in property!
Let us just imagine that over the next year or two mining capital investment collapses in Australia and unemployment rises. Together with a hollowed out manufacturing sector courtesy of a decade long run of a high dollar, as well as a govt that is not inclined to borrow any more money itself, what then becomes the only method to stimulate the economy to maintain employment?
You guessed it - cut interest rates. We have seen what happens to house prices when interest rates dropped from 18% to 5% over the last 20 years. I wonder what will happen to real estate prices when interest rates drop further to 2.5%?
The only reason our interest rates aren't already there is because of the mining investment boom. Take that away and we start to look just like the rest of the developed world... there is no reason our rates can't be just as low or lower than theirs. Then, all of a sudden, housing looks affordable again! Especially for investors paying interest only loans...
This is why I love investing in property!
Regardless of the stats and figures, each generation has people that scrape by, people that do alright and people that do well. They all do it in different ways, whether shares, property, business, criminal enterprises, and this generation is no different.
There were people 10, 50 and 1,000 years ago that were D&G and felt that they would never be able to get a foot on the ladder and there were those that just did it.
There were people 10, 50 and 1,000 years ago that were D&G and felt that they would never be able to get a foot on the ladder and there were those that just did it.
I think a big factor in FHBs having a much higher buy-in price is due to the type of stock bring built now. My first home was a 3 bed single garage, single bathroom townhouse near st Mary's, about 10 yrs old. The average 10 yr old property and newer stock have double garages, an extra bedroom/living/bathroom. Without factoring natural price increases there's no wonder the bottom end is higher in price. Perhaps it's time for estates to be built with smaller houses in them. I saw that eagle homes had a promo the other week for a 4 bed house for 99k. Included all except site costs. But shock horror it only had one living area, one garage and one bathroom. The average new build costs around the 250-300k mark now. Reduce that price by 100k or more and affordability would increase significantly.
Sure the houses are bigger now with new builds, land size however is much smaller
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