Month by month or even quarter to quarter comparisons do not take into account seasonal factors. A quarter-last-year-on-quarter-this-year or year-on-year comparison will eliminate seasonal variations.
Now all of you who said prices would never come down...
- Thread starter greedy saffa
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Month by month or even quarter to quarter comparisons do not take into account seasonal factors. A quarter-last-year-on-quarter-this-year or year-on-year comparison will eliminate seasonal variations.
True but I'm not talking about seasonal variations. I am talking about compositional variations. Every time they look sales data there will be a different group of houses that have sold.
I've got a big head but I might have to start wearing small hats just to hedge against risk ....
Posted this into another thread on the same topic, but appears most action is happening here...
This is just part of the seasonal cycle and prices drop from the december quarter to the march quarter. As a FHB I wish it were true the prices were dramatically dropping but sadly the data doesn't back it up. From the metro melbourne median price, we have the same signs for 2008 as 2007.
Dec 03 - Mar 04 Prices dropped approximately 4%
Dec 04 - Mar 05 Prices dropped approximately 3%
Dec 05 - Mar 06 Prices dropped approximately 2%
Dec 06 - Mar 07 Prices dropped approximately 2%
Dec 07 - Mac 08 Prices dropped approximately 2%
From the REIV website, see attached graph.
This is just part of the seasonal cycle and prices drop from the december quarter to the march quarter. As a FHB I wish it were true the prices were dramatically dropping but sadly the data doesn't back it up. From the metro melbourne median price, we have the same signs for 2008 as 2007.
Dec 03 - Mar 04 Prices dropped approximately 4%
Dec 04 - Mar 05 Prices dropped approximately 3%
Dec 05 - Mar 06 Prices dropped approximately 2%
Dec 06 - Mar 07 Prices dropped approximately 2%
Dec 07 - Mac 08 Prices dropped approximately 2%
From the REIV website, see attached graph.
Attachments
Pete_d,
I believe there is more to it than the REIV march quarter dip.
If you look at the stats you'll find that although the REIV median price has dipped in the March quarter, the Residex value for the March quarter has not dipped for any of those years. (It's the Residex values that are quoted in the opening post.)
I think 2008 will see a value dip for the March quarter for the first time in years, and I suspect Residex are right.
I believe there is more to it than the REIV march quarter dip.
If you look at the stats you'll find that although the REIV median price has dipped in the March quarter, the Residex value for the March quarter has not dipped for any of those years. (It's the Residex values that are quoted in the opening post.)
I think 2008 will see a value dip for the March quarter for the first time in years, and I suspect Residex are right.
Hi guys,
For the Doom and Gloomers, here's an interesting article in the SMH today about just how close we got to a nasty Depression, and parallels being drawn with the Japanese situation...
http://www.smh.com.au/news/opinion/how-we-just-avoided-the-big-d/2008/03/30/1206850700844.html
For balance, here's the other side of the argument:
http://www.domain.com.au/Public/Art...louds have a silver lining&s_rid=smh:Homepage
But that's all just crystal balling...
Cheers,
Michael.
For the Doom and Gloomers, here's an interesting article in the SMH today about just how close we got to a nasty Depression, and parallels being drawn with the Japanese situation...
http://www.smh.com.au/news/opinion/how-we-just-avoided-the-big-d/2008/03/30/1206850700844.html
Paul Sheehan said:
For balance, here's the other side of the argument:
http://www.domain.com.au/Public/Art...louds have a silver lining&s_rid=smh:Homepage
If its at the "bad" end of the proposed spectrum then everyone holding property is in trouble. If its at the "good" end then we'll see a rapid recovery and all be sitting pretty. Time will tell just what happens in property in the coming years. Two competing drivers. On one side there's the demand/supply equation which suggests price appreciation. On the other side there is the disastrous credit market situation which may not recover quickly which suggests price erosion. Which side wins will determine the outcome. My hunch is a couple of years of pain followed by a return to a functioning credit market and some tentative price appreciation followed by growing exuberance and marked price improvement.John Edwards said:
But that's all just crystal balling...
Cheers,
Michael.
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What's the difference in the data sources. As I understand it the REIV data is just the median of the reported sales (voluntary by agents). How is the Residex data derived.
I'm not saying the prices won't drop further just that there may be seasonality element to the drops.
http://www.residex.com.au/index.php?content=faq&from=lhsmenu
"Where does your information come from?
We buy most of our sales data from government bodies in the various states and territories of Australia.
The rest of the information that we provide in the form of statistical data, literature and advice is put together from our own analysis of the sales data we collect."
Residex is median value.
Problem is you can't explain away a dip from Dec to Feb as seasonality and point to the REIV stats. Yes the price dips, but not the value. In this case the value has dipped (which is unusual for Dec->Mar), and so too will the price (which is normal for Dec->Mar as you point out).
However we need to keep this in perspecitive, we're talking a tiny dip over a short period (at this stage). I expect Melbourne to dip ~5% for the year (although I hope I'm wrong), but on the back of 20+% increase last year who cares?
Hi All,
i guess as a society that has information at thier fingertips we can get sucked in to the constant monitoring of our portfolios based on the "current" stats available....i know i sometimes do and im pretty much the buy and never sell kind of guy....it suits my passive (wife says "lazy" ) style of investing.
i guess it depends on your timeframe and your goals, but lets take 1 single property owned by my wifes grandparents.
built a 2 bedroom, 1 bath new home on a 700sqm block of dirt in glen waverly 50 years ago....**** end of the world back then.
cost them 500 pounds house and land they claim...lets say it cost double that at 1000pounds or $2000 dollars.
That house has had no work done on it, and land alone is probably pushing $550-600k today.
my crude maths says thats doubled in value about 8 times in that 50 year period.
i am sure there were a few economic hicups along the way in that 50 year period...but that one house has done alright i reckon.
it will probably continue to do so over the next 10, 20, 23, 30, 40, 50 100 years.
heres a crazy thought, if it doubles 8 times over the next 50 years it will be worth about $128,000,000 dollars....sounds impossible...... probably about as impossible as telling someone in the 1950's that there home will be worth 500 times what they paid for it in 50 years time
Late night sleepy ramble over
Cheers,
i guess as a society that has information at thier fingertips we can get sucked in to the constant monitoring of our portfolios based on the "current" stats available....i know i sometimes do
and im pretty much the buy and never sell kind of guy....it suits my passive (wife says "lazy" ) style of investing.i guess it depends on your timeframe and your goals, but lets take 1 single property owned by my wifes grandparents.
built a 2 bedroom, 1 bath new home on a 700sqm block of dirt in glen waverly 50 years ago....**** end of the world back then.
cost them 500 pounds house and land they claim...lets say it cost double that at 1000pounds or $2000 dollars.
That house has had no work done on it, and land alone is probably pushing $550-600k today.
my crude maths says thats doubled in value about 8 times in that 50 year period.
i am sure there were a few economic hicups along the way in that 50 year period...but that one house has done alright i reckon.
it will probably continue to do so over the next 10, 20, 23, 30, 40, 50 100 years.
heres a crazy thought, if it doubles 8 times over the next 50 years it will be worth about $128,000,000 dollars....sounds impossible...... probably about as impossible as telling someone in the 1950's that there home will be worth 500 times what they paid for it in 50 years time
Late night sleepy ramble over
Cheers,
heres a crazy thought, if it doubles 8 times over the next 50 years it will be worth about $128,000,000 dollars....sounds impossible...... probably about as impossible as telling someone in the 1950's that there home will be worth 500 times what they paid for it in 50 years time
It sounds impossible because it is impossible. Take income to rise 50% every 6 years but then assume property doubling every 6 years. You end up with 2 lines that are in a very different place.
Common disclaimer though - I talk at the aggregate, the macro level which is what a rule of thumb like that is supposed to represent. I'm not saying it can't happen for a particular house. Paddington was a hole if you go back far enough ...
Hi all again,
That "specific" house doesnt care if incomes have risen or not...if "someone" can afford it and they want it they will buy it
not sure what the median income was 50 years ago, but im guessing a 2 bed 1 bath at the end of the universe was probably below median price and more easily afforded on a median wage....fast forward 50 years, its now an above median priced home, more desirable area, blah blahblah..... so it isnt affordable to a median wage anymore, doesnt matter, so it "isn't" impossible that it can keep going at the same rate
After all nothings impossible
Cheers,
That "specific" house doesnt care if incomes have risen or not...if "someone" can afford it and they want it they will buy it
not sure what the median income was 50 years ago, but im guessing a 2 bed 1 bath at the end of the universe was probably below median price and more easily afforded on a median wage....fast forward 50 years, its now an above median priced home, more desirable area, blah blahblah..... so it isnt affordable to a median wage anymore, doesnt matter, so it "isn't" impossible that it can keep going at the same rate
After all nothings impossible
Cheers,
It sounds impossible because it is impossible. Take income to rise 50% every 6 years but then assume property doubling every 6 years. You end up with 2 lines that are in a very different place.
Common disclaimer though - I talk at the aggregate, the macro level which is what a rule of thumb like that is supposed to represent. I'm not saying it can't happen for a particular house. Paddington was a hole if you go back far enough ...
An example of wage increases:
In 1982 I was earning approx $90 p/w as a 3rd year Trainee Golf Pro.
Now the 3rd years earn around $500 p/w.
That's about 7% a year - part of it is probably due to changes in demand for that specific role but another (probably larger) part is the high inflation of the 80s.
But it doesn't change my point. Wages and property growth can't grow at different rates forever. Keep wage growth at 7% per year (compounding). Use any figure above this for property (lets say 10%) and you will get to a place that is impossible in reality.
Unless everyone is taking out 100% mortgages, then wages aren't the only factor in determining affordability (and hence "capacity to pay").
As you reduce the LVR on a property purchase, the deposit becomes more and more important in contributing towards capacity to pay.
Deposits (effectively a stock of wealth) aren't bound by your (eg of) 7%, hence property prices aren't either.
M
As you reduce the LVR on a property purchase, the deposit becomes more and more important in contributing towards capacity to pay.
Deposits (effectively a stock of wealth) aren't bound by your (eg of) 7%, hence property prices aren't either.
M
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Playing devils advocate here for the purposes of discussion...
Maybe ownership of the average properties (seperate homes) will get out of reach from the majority if wages cannot keep up with property prices. Looking forward to 2030-2050 higher density living will probably be the norm. Urban sprawl is not sustainable. More apartments at cheaper entry will become more common, etc. We might reach the situation in Melbourne, Sydney, Brisbane similar to New York of London for example, where home ownership is not the norm.
Maybe ownership of the average properties (seperate homes) will get out of reach from the majority if wages cannot keep up with property prices. Looking forward to 2030-2050 higher density living will probably be the norm. Urban sprawl is not sustainable. More apartments at cheaper entry will become more common, etc. We might reach the situation in Melbourne, Sydney, Brisbane similar to New York of London for example, where home ownership is not the norm.
Feb 2009 = $390,000 ?
Quite feasible I think. Property prices in Australia are about to drop a lot more than people care to believe is possible.
Time to reduce exposure, I've just sold one flat & may sell another.
What makes you think so?
I strongly suspect this is what will happen. There are many places where home ownership is not the norm - why should Australia be any different in the longer term. One of the main reasons I invest in property now is because I think prices will be prohibitive within about a generation (another 25 years or so), and anyone who managed to own property and hold it for that time will be in a significantly advantaged position financially.
This is the only answer to my riddle that makes sense. It is impossible for house prices to outstrip wages over the long term - somebody must always pay for the house (even if it is a renter). But what can happen is the density will become higher which effectively means more wages per m2. Eventaully though the higher density argument has a limit too - there are only so many wage earning people you can fit in per m2.
Hence for investing I think it is all about the land - buying a place that is already developed (apartments) and expecting it to appreciate is a mistake as it is already high density. I'd also note that taking a speculative position on higher density in the future is successful only if governments maintain their current useless performance on infrustructure. If they suddenly wake up and fix infrustructure people will be able to spread out again which will take the demand off high density. There is no shortage of land in Australia - just infrustructure to make it livable.
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