Logic Police Thread - the really DIFFICULT questions ...

[DavidMc]

Mind you, YM, you don't think first home buyers would ever live out in Blacktown either. Aren't we lucky you don't represent the norm.

Blacktown? You mean where them city folk live? We used to live in Silverdale, right next to the Warragamba dam and drove a short 30 mins to Penrith to do the shopping and go to school.

Oh, sorry, I forgot 'reality' is not valid input for the Investatron 2000.

 

[DavidMc]

If people were really that logical, shouldn't all our retirees have moved to Thailand by now?
Alex

Unfortunately they hang around inner areas (which used to be 'outer areas') and complain that it's not peaceful and quiet anymore. Note how this also supports our argument.

 

[yieldmatters]

Uh, can anyone suggest a city, ANY city, that has seen the process YM suggests will happen? i.e. people deciding housing is too expensive, so they move into the countryside or overseas, TO THE POINT where housing prices in the 'main' city actually falls?

But the rise hasn't happened before either. So YES - I expect it to fall but only back to 2001 or 2002 prices + CPI - i.e. back to long term trend.

But now I am talking a "what would have been" scenario which 99% of accountants find impossible to get their head around so I'm not sure if you are with me.

And I agree with DavidMc about the merry-go-round ... we will never see it the same way - it will just go around and around. So I suggest this - lets meet back here in 2 years - I suspect a large chunk of your on paper wealth will have dissapeared. If I'm wrong, well I'm wrong. We will see.

 

[BoatBoy]

. So I suggest this - lets meet back here in 2 years - I suspect a large chunk of your on paper wealth will have dissapeared. If I'm wrong, well I'm wrong. We will see.

To which I will say, even with a 20 to 30% loss on paper even 50% loss I will still be so far in front compared to if I had NOT invested in property. (most here would probably be in similar positions)


I would have just been sitting around talking about doing something rather than actually doing.

Dave

 

[alexlee]

You know what I'll do if the market tanks and prices move back to 2001 levels? I'll move out of the place I rent now, downgrade my accomodation, take a second job, and up my savings rate to 80%. And I'll be buying everything I could get my hands on.
Alex

 

[JIT]

So I suggest this - lets meet back here in 2 years - I suspect a large chunk of your on paper wealth will have dissapeared. If I'm wrong, well I'm wrong. We will see.

Sure, will also keep an eye on your sold 2x1 apartment in the inner Brisbane suburb of Taringa.

This may have been worth say 170-175k in 2000/2001, and I recall you bought it at around 187k in 2002, then sold it for 275k in 2005, and this is now worth at least 349k....

So you're basically saying in 2 years time this sort of property will crash down in price to about 170-175k!!!

 

[yieldmatters]

To which I will say, even with a 20 to 30% loss on paper even 50% loss I will still be so far in front compared to if I had NOT invested in property. (most here would probably be in similar positions)


I would have just been sitting around talking about doing something rather than actually doing.

Dave

I never said you made a mistake investing at the time that you did.

 

[BayView]

But the rise hasn't happened before either. So YES - I expect it to fall but only back to 2001 or 2002 prices + CPI - i.e. back to long term trend.

But now I am talking a "what would have been" scenario which 99% of accountants find impossible to get their head around so I'm not sure if you are with me.

And I agree with DavidMc about the merry-go-round ... we will never see it the same way - it will just go around and around. So I suggest this - lets meet back here in 2 years - I suspect a large chunk of your on paper wealth will have dissapeared. If I'm wrong, well I'm wrong. We will see.

This won't even go close to happening Yield, because all the "paper wealth" that I've made is going to be used to buy more assets; in different areas, different property types - subdivs etc, as well as a couple of businesses.

The chance of all of them suffereing a remarkable loss is remote.

It won't please me to see that you are wrong because you will have wasted 2 years hoping that you will be right, and then your opportunity to time the market will have disappeared; again.

Do you want to be a "what would have been"?

 

[DavidMc]

Uh, can anyone suggest a city, ANY city, that has seen the process YM suggests will happen? i.e. people deciding housing is too expensive, so they move into the countryside or overseas, TO THE POINT where housing prices in the 'main' city actually falls?

But the rise hasn't happened before either.

How does the rate of price increase relate to the 'downsizing expectation' trend? Every other major city has been doing this for years and by world standards we have large dwelling sizes at bargain basement prices. I fail to see why we would be a special case and somewhat immune to this trend as you suggest. Or do you think there is something in it?

 

[alexlee]

Two years from now, if property DOESN'T fall, YM will buy in and REALLY get caught in the bust. And he won't have the cushion from the 2004-09 period of appreciation.

Two years from now, if property falls (and I do expect it to), YM will say I told you so and lowball sellers. But without experience and a negative bias, he'll make offers so low he won't end up buying anything, and so miss out on the inevitable upturn (just as there will be an inevitable downturn).
Alex

 

[alexlee]

I do enjoy reading your posts Alex.

To me, those last 2 made perfect sense, and not just theory, but real life examples.

I also wish I could type that fast. That post would have taken me half the day to do (seriously)

Dave

My mother's idea. I was actually taught how to type as a child.

On a good day I can clock 75, 80 wpm. Missed my calling as a steno.
Alex

 

[JIT]

Why then do people say Sydney is not affordable? Because they still consider a house on a block of land within an hour of the city as 'something that should be affordable to ordinary people' (I really need a catchy term for this), and a 2 bed unit to be, well, beneath them. When people resign themselves to the idea that they can't afford a house, ever, then they'll consider units to be normal. In which cases incomes will again be connected to house prices, because the definition of 'house' has changed.

I thought someone called this the 'aspirational crisis'?

 

[wylie]

On a good day I can clock 75, 80 wpm. Missed my calling as a steno.
Alex

I was a secretary in a previous life and last typing test I ever took I think I got 123 words per minute on one of the big old manual clunkers made in 1945 or so. I was pretty fast.

I still type fast, but nowhere that speed anymore, but my kids still look at me with saucer eyes and hubby still types with two fingers, which really is hard to watch

Wylie

 

[alexlee]

Most of my friends want to live in certain areas (usually close to the city) for the lifestyle, to be close to family, because that's where they grew up, etc. This is a human trait that's not likely to go away. A friend asked me why I want a house in the Hills when, for the same price, I could get a nice townhouse 15 minutes from the city. Less space, but a much shorter commute, more nightlife, etc.

Given that, does anyone see a mass migration out to country areas so that you can, for example, get a house instead of living closer to the city but in a unit? People aren't even willing to move to Western sydney to live in a house. Hence why those areas are falling in price while the North Shore, for example, is going up.

For the price of a 2 bed unit on the Lower North Shore I can get a pretty nice house on a big block of land out west. Yet Western Sydney prices are falling. Why? Because people aren't willing (for now) go live out there. And we expect them to move into a regional town instead?

What's more likely is that bit by bit they resign themselves to smaller accomodation. So every year young people who move out get smaller and smaller places, further and further out, until the whole of central sydney is filled with units. New units aimed at the starter market will become smaller and smaller. Conversely older (bigger) units will become more valuable because new units are smaller, and the old suburban block is even more valuable because you can build a block on it.

Think that's far fetched? Look at old photos of Hong Kong, or Tokyo, or Manhattan. I'm sure none of the people back then could have imagined just how much you can build on a scrap of land. I went to the Museum of New York earlier this year, and they had a video of how Manhattan spread from the Southern tip up to Harlem. Incredibly interesting and instructive.
Alex

 

[trendsta]

Most of my friends want to live in certain areas (usually close to the city) for the lifestyle, to be close to family, because that's where they grew up, etc. This is a human trait that's not likely to go away. A friend asked me why I want a house in the Hills when, for the same price, I could get a nice townhouse 15 minutes from the city. Less space, but a much shorter commute, more nightlife, etc.

Given that, does anyone see a mass migration out to country areas so that you can, for example, get a house instead of living closer to the city but in a unit? People aren't even willing to move to Western sydney to live in a house. Hence why those areas are falling in price while the North Shore, for example, is going up.

For the price of a 2 bed unit on the Lower North Shore I can get a pretty nice house on a big block of land out west. Yet Western Sydney prices are falling. Why? Because people aren't willing (for now) go live out there. And we expect them to move into a regional town instead?

What's more likely is that bit by bit they resign themselves to smaller accomodation. So every year young people who move out get smaller and smaller places, further and further out, until the whole of central sydney is filled with units. New units aimed at the starter market will become smaller and smaller. Conversely older (bigger) units will become more valuable because new units are smaller, and the old suburban block is even more valuable because you can build a block on it.

Think that's far fetched? Look at old photos of Hong Kong, or Tokyo, or Manhattan. I'm sure none of the people back then could have imagined just how much you can build on a scrap of land. I went to the Museum of New York earlier this year, and they had a video of how Manhattan spread from the Southern tip up to Harlem. Incredibly interesting and instructive.
Alex

I think for Sydney de-centralisation will be key.
Once workplace, infra, amenities and lifestyle are de-centralised the city will become effectively city of cities ...

Just like no one from the east has been to parramatta or liverpool, once these areas get critical mass people from parramatta or liverpool etc wont have the need to visit cbd/inner areas.. im not saying no one will transit , but it will definitely reduce..

 

[JIT]

Just for interest, the veteran posters here might recall L_Bernham, who's been lurking here recently - my PM discussions with this person suggest that they have still not changed their initial position! - despite all the evidence to the contrary.

I suspect in 2 years time YM might still be sticking to his original stance too!

 

[acer]

People aren't even willing to move to Western sydney to live in a house. Hence why those areas are falling in price while the North Shore, for example, is going up.

....Yet Western Sydney prices are falling. Why? Because people aren't willing (for now) go live out there.

I think you are being a bit too general on this topic. Have you seen prices at Norwest (bella vista waters)? this suburb is (appx30-35km) nth west of sydney
and prices range 1m-2m for houses.....further in oatlands (20km west sydney), again prices around 1m mark and selling. These are only 2 but could mention many others.....

There are many nth sydney suburbs that are affordable to west sydney residents but locals dont move due to your earlier remark, they are familar with area/family/work etc....

Yes eastern sydney is definitely unique and not everyone can move there, but to suppose western sydney has a shortage of willing occupants is far festched.......remember it holds the greatest quantity of housing stock so you would expect demand to drop as the market changes.

Dont want to sopund harsh so apologies if taken that way, but the general perception that western sydney is avoided by home buyers is off the mark.

 

[BoatBoy]

I think when talking Western Sydney we are talking $200k to $300k Western Sydney, not $1 million to $2 million (North)Western Sydney.

Judging by the amount of stock on RE.com and the supposed falling house prices, I would hazard a guess that they are'nt being snapped up by low affordability candidates, hence the belief that they seem "unsuitable" , for whatever reason to the aforementioned low affordability candidates.

Dave

 

[alexlee]

I'm specifically referring to the areas where it seems prices are falling and mortgagee sales are increasing. That suggests to me that there is insufficient demand in these areas at current prices. Obviously within Sydney there are dozens if not hundreds of sub-markets.

The only point I'm trying to make is that the affordability crisis is bs. It's an aspirational crisis: it's not people can't afford to live, but people can't afford to live where they want. Expectations haven't caught up to reality yet.
Alex

 

[lizzie]

Most of my friends want to live in certain areas (usually close to the city) for the lifestyle, to be close to family, because that's where they grew up, etc.

and it's not only people wanting to be close to work. i am always amazed at the number of sole parent or disability pensioners that continue to live in slim conditions in the cities - when they could easily move to somewhere more affordable in the country and have a (in my view) a better lifestyle - decent house, bit of yard, friendly locals etc ... and on the same income as they don't need to be near a job.

a goodly portion of the housing choice has nothing to do with jobs. but you are also right in that people will go to the jobs, the jobs won't go to the people - so there needs to be forced (or encouraged) decentralisation.