Number of weeks earnings required

[L Bernham]

Here is an interesting statistic.

It compares two countries of 6 in the world that The Economist magazine says are in dangerous bubbles.

Number of weeks earnings required to buy a house

1988 - USA 265 weeks Australia 263 weeks
1996 - USA 270 weeks Australia 268 weeks
2003 - USA 310 weeks, Australia 450 weeks

source REIA, Datastream, AMP Henderson Global Investors

What do people make of it? What has changed in Australia in the last few years that could justify this. I dont think its low interest rates as they are lower in the US than here. It shouldnt be immigration as both countries have similar levels of growth.
I would like to know what it is as this is three times the level it has ever been.

Is it sustainable? Does anyone have any ideas?
Cheers
L Bernham

 

[MarkB]

LB

One possible explanation springs immediately to mind, though I must admit I haven't really given the issue much thought.

Australia's population is much more concentrated than the US's. (Greater) Sydney and (Greater) Melbourne alone account for approximately 40% of our population.

Syd and Melb are also where the bulk of the employment opportunities are - people are moving into these areas looking for work, or following the opportunities > driving prices up.

For comparison, the 2 biggest cities in the US (New York and LA ??) probably have 40 million or so people between them, but with an overall population of 290 million, this less than 15% of all Americans.

FYI: http://www.cia.gov/cia/publications/factbook/geos/us.html

MB

 

[brains]

Isnt Chicago bigger than LA? I was over there a few years ago and it was then but LA was catching up. Has it overtaken already?

 

[L Bernham]

I just posted the details up against the USA because we are similar size. They have more than 10 times more people so I would have thought their figure would be higher.

Incidentally, on that list we are the highest country with those a long way below us being Germany, Sweden, Canada, UK, US, Japan and NZ.

 

[L Bernham]

Also Mb364 it doesnt really explain why we were on a similar levels to the US for all the years just preceding the last few.

Is it that we have only just realised that we have on a few cities where the population is concentrated compared to the US?

 

[D.T.]

Hi LB

Perhaps this is because Australia's economy is doing fairly well at the moment and USA's isnt?

-Regards

Dave

 

[paul_s]

Out of interest does anyone know what kinds of yields IP's in the US generally return, would be interesting to compare it to their very low interest rates.

 

[MarkB]

True LB, the population concentration approach doesn't fully explain the differential that has opened up just in the past few years.

D2k could be onto something.

I'd actually be curious to see what those figures are like on a yearly basis - the gap in the data from 1996 to 2003 is 7 years.

It might be a combination of:

- what D2k has suggested, and

- a domestic housing boom.

If so, then the figures would show the "gap" really opening up just in the last 3-4 years.

MB

 

[bundy1964]

Originally posted by paul_s
Out of interest does anyone know what kinds of yields IP's in the US generally return, would be interesting to compare it to their very low interest rates.

I asked an agent in Portland.

Yield 10%

CG 8%

She is not sure on the rest of the USA.

Did a Google -

Came up with just over a year old commercial returns of 8 to 10% she tells me vacancy rates would be higher now than they were then so yields would be lower.

Its hard to find anything current and relevent on yields there.

bundy

 

[paul_s]

thx for that bundy

perhaps one thing that might be influencing things is tax issues, in terms of Australia implmenting a new capital gains structure which is more favourable for investors and also possible differences in negative gearing?

 

[Jerry Maguire]

Too many seminar presenters out there teaching other people how to buy property
That's the fuel for the price increase as well as all the TV shows

Regards
Jerry

 

[D.T.]

Hi Jerry,

I agree with those things. Also internet as well. Think about how easier this makes investing

-Regards

Dave

 

[ocean view]

hundreds of reasons..

Maybe 20 big ones..

But you would need to put them all down to get your answer your looking for,

Maybe after finding them all you may change your view on sustainable Growth in Australias top 20% of purchases for the next 5 yrs.!

OV

 

[Les]

I wonder just how much credit is given based on the apparent stability of the Southern hemisphere vs Northern.

Such stability has to come with a premium, doesn't it?? How's immigration lately?

Just a thought......

Regards,

 

[L Bernham]

Immigration in the USA was an average 3 million per year from 1990 - 2000.

http://www.numbersusa.com/overpopulation/census.html

This is

 

[FrankGrimes]

Originally posted by brains
Isnt Chicago bigger than LA? I was over there a few years ago and it was then but LA was catching up. Has it overtaken already?

FYI

New York has a population of around 17 Million
LA around 15 Million
Chicago 8 Million

Next is San Fran and Houston at around 4-5 Million

Had it in a book at home somewhere..

 

[Aceyducey]

Originally posted by L Bernham
Here is an interesting statistic.

It compares two countries of 6 in the world that The Economist magazine says are in dangerous bubbles.

Number of weeks earnings required to buy a house

1988 - USA 265 weeks Australia 263 weeks
1996 - USA 270 weeks Australia 268 weeks
2003 - USA 310 weeks, Australia 450 weeks

The first question to come to my mind is:

Can the US and Australian housing markets be fairly compared in this way?

Or is it a case of Apples & Oranges (or perhaps more appropriately, Sheep & Widgets)?

The US has a different legal framework around mortgages, much larger potential for strategies such as trading mortgages, sub-letting & vendor finance.

The country is economically very different to Australia when you look at the details & current state of play.

Sure we both speak American, are obese & have Heads of State that received barely 50% of the vote (the Queen received 55% in the referendum so she did better)...

But the countries' housing markets are not exactly comparable - read a property book by any US writer!

Some key Qs:

What is the home ownership figure for the US?
What is the median home price (USD) by state?
What proportion of homes in the US are free-standing vs townhouses, units, etc?

Cheers,

Aceyducey

 

[brains]

Thanks Frank, i stand corrected

Originally posted by FrankGrimes
FYI

New York has a population of around 17 Million
LA around 15 Million
Chicago 8 Million

Next is San Fran and Houston at around 4-5 Million

Had it in a book at home somewhere..