No House Price Growth for 350 Years

Nigel Stapledon's also has real house price data for Australia.

ausrealhomeprices.gif


Just a quick glance, and you can appreciate the size of the bubble we are in.
 
BoatBoy said:
I hope all these houses can last that long.

Who's going to build anything new if there isnt an earn in it?

Dave
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That's what rental yield is for. The only problem is house prices has risen so much, that rents have not kept up with them. So it's not a problem of rents being too cheap, just a problem of house prices are too much.
 
I wonder what a median priced dwelling looked like 100 years prior to settlement of this country? 3x1 or 2x1 would have been a palace
 
Tim said:
Robert Schiller, author of "Traders, Guns and Money" has undertaken research on property dating back to 1629 and asserts that real house price growth is less than 1% at best.
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I had 33% CG last 18 months. Guess Im not getting any more CG until 2041. Just as well interest rates are going to be negative in real terms.
 
That was a 1% increase in real term.
Inflation also is a bit difficoult to calculate and lately it is always being played down and it is somewhat more then the official data.
Also I want to point out that probably wage increase is also around 1% in real term in the long time. I know that a lot of you had real wage increase higher then that but these days everything was bubbled up (including share market, commodities, AU$, budget surplus,...
 
Sustainability said:
That's what rental yield is for. The only problem is house prices has risen so much, that rents have not kept up with them. So it's not a problem of rents being too cheap, just a problem of house prices are too much.
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OK, so if a block of land 10klm out(adjusted to D&G levels) @ say what $150k, and a cheap house new build 220m2 for $180k , thats still $330k.

Lands not going to get much cheaper unless Govt stops charging for connections, roads, drainage, parks, infrastructure in general, houses wont get much cheaper unless bricks timber labour get drastically reduced, so I suppose if no CG is involved then that place would need to get what?, say a 12% yield to make it start to look attractive? (remember no cap growth and add in rates, maintenance etc)

I could live with that, rents out to $800/week on a $330k 10k ring property

Hate to see what that inner city stuff goes for.

Someone please check my numbers, red wine is yummy ;-]

Dave
 
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No growth in 350 years is not a D&G post, because I don't like to be emotional on investing, so interpreting it as D&G would be reacting emotionally.

However it does show that there are decades upon decades of house price growth as well as house price slumps - I think we are now conditioned to thinking that property basically just goes up over the long term, when in fact it may not.

What it does mean however, is that with inflation comes debt reduction, and with time comes increasing yield, this means that house price growth becomes irrelevant anyway (unless you are too highly geared, then it matters a lot!).

I think that houses are obviously a better standard than in previous years, so growth will come with that anyway.

US housing has dropped up to 40% in some areas, and the Aus housing bubble is higher than US, so it will be interesting to see how we ride it out over time.

Tim
 
it's purely academic tim.

house prices increase because to replace said house at current labour, material and land values increase with inflation.

inflation is your friend as far as CG goes. while the two aren't directly related, they sit at opposite ends of road required to be travelled. so starting on said road from inflation will lead you to higher house values.

can anyone on here pick up a 200sqm lot in Sydney's inner West for $50k anymore? no?

Why?
 
Blue Card! said:
it's purely academic tim.

house prices increase because to replace said house at current labour, material and land values increase with inflation.

inflation is your friend as far as CG goes. while the two aren't directly related, they sit at opposite ends of road required to be travelled. so starting on said road from inflation will lead you to higher house values.

can anyone on here pick up a 200sqm lot in Sydney's inner West for $50k anymore? no?

Why?
Click to expand...

BC

I hearing you mate, we have to realise inflation in this aspect... our property values may not rise in value, its that our dollar is loosing value which means it takes more dollars to buy aproperty. its some what a bias view saying property doesnt grow much without inflation which would somewhat be on the money, but we have inflation and will not stop inflation so inevitabley prices will rise.

Just my 2c, i know some smart **** will try and grill me on this, and why house prices will fall etc... so i have assumed my position here to get rammed.
 
Ausprop said:
I wonder what a median priced dwelling looked like 100 years prior to settlement of this country? 3x1 or 2x1 would have been a palace
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even 120 years ago the humpy with a toilet pit behind the bushes would have been considered pretty classy.

okay - so property is growing at "only" 1% above inflation each. what is that compounding over 350 years?

but, for a simpleton like me, i'll try and understand by breaking it down. i could be completely wrong in my on-the-spot understanding so please correct me.

property prices rise by 1% above inflation, so, say inflation is 3% - prices rise on average by 4%. but the loan i have underneath the property is not rising at all - so, in real terms my debt level is decreasing by 3% a year without me putting any principal payments in.

so, not only is my debt level falling, i am making more capital growth than inflation - so, at a rise of 1% per year, in 10 years my property would have gone up 10%. and my debt level has dropped 30%. a 40% differential.

am i grossly wrong?
 
it's often forgotten, but it's a real saviour sometimes. inflation is COMPOUNDED! thansk so much lizzie!

if inflation is running at 5% this year, falling house prices can't keep "falling". eventually they will fall in line with inflation - and inflation will carry the prices with it.

this whole doom'n'gloom scenario of house prices being worth 50% less etc may come true. but if we end up with stagflation or inflation or hyperinflation then that makes them undervalued and oversold.
 
lizzie said:
but, for a simpleton like me, i'll try and understand by breaking it down. i could be completely wrong in my on-the-spot understanding so please correct me.

property prices rise by 1% above inflation, so, say inflation is 3% - prices rise on average by 4%. but the loan i have underneath the property is not rising at all - so, in real terms my debt level is decreasing by 3% a year without me putting any principal payments in.
Click to expand...

The only issue with your example is that over the last decade or so, prices have increased much faster than the long-run average (which is between 0.7%pa and 1.2%pa depending where you get your figures from) when adjusted for inflation. By this measure, prices are currently 30% or so above where they should be (if they'd risen a bit faster than inflation). So instead of taking today's price and adding 1% above inflation to work out whether you're ahead or behind, try taking 1998's price and adding 1% above inflation. That would imply falling prices in the future to return to trend, then slow growth after that. ;)

How does the projection look then?
 
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