"Perth property in freefall"

[MrCrumbpacker]

Dramatic headline,

http://www.smh.com.au/business/prop...p-shows-no-sign-of-ending-20110427-1dwi3.html

How much truth in it?, another case of "please don't raise rates"?, perhaps some of those from Perth can let us know.

 

[Ausprop]

A bit sensational and the headline is about 2 years too late. They were in freefall in 2008 when prices slumped about 30%, then they picked up about 10%, then they have been grinding around the bottom a little bit and stock levels looking horribly high. Of course those stats are my estimates from the coal face, not the fuzzy published ones.

 

[Dazz]

.....and how is the coal face ??

 

[Ausprop]

still hard work! if only property would keep doubling every 7 years dam it!

 

[Aaron Sice]

"freefall" and "four percent" must go together because they both start with the letter "F" and make for nice alliteration in a sensationalist story.

offer someone 4% under their asking price and see where it gets you.

considering all major companies here are putting on new sales and marketing and general managers which in downtimes is usually a sign of both business and economic confidence.

a lot of design jobs asking for 10+ years experience doing the rounds as well.

rents have never been higher - i found out the other day that my neighbours house just rented for what my mortgage is worth.....

good story. totally ignores the coalface, but good story.

 

[MrCrumbpacker]

rents have never been higher - i found out the other day that my neighbours house just rented for what my mortgage is worth.....

.

Is that good?

I guess that would depend on how big your mortgage is, and whether you house is the same as your neighbours.

In my view rental returns should be worth a bit more than the borrowing costs, or you would end up relying on capital growth, not always a good idea.

 

[Aaron Sice]

Is that good?

I guess that would depend on how big your mortgage is, and whether you house is the same as your neighbors.

In my view rental returns should be worth a bit more than the borrowing costs, or you would end up relying on capital growth, not always a good idea.

considering the house is only 2 years old....yes!!!!

 

[MrCrumbpacker]

considering the house is only 2 years old....yes!!!!

Sorry if I'm being daft here, but 'ploise exploin'

 

[Ausprop]

fairly safe to assume that he means he bought a house only 2 years ago on a max LVR loan in a flat or falling market and the rent already services the mortgage... that would be a great outcome if that's what you mean BC? lucky you didn't follow that impulse to sell!

 

[sammyla]

still hard work! if only property would keep doubling every 7 years dam it!

Im really puzzled by this 7 year doubling.Since when did houses double every 7 years? who sets this time limit? Spruikers? is there a system in place to make sure this is achieved why cant it be 4? So historically prices always doubled every 7 years? i don't believe it.

So dos this mean household income doubles every 7 years too? now that does not happen right?

 

[Ocean Architect]

Im really puzzled by this 7 year doubling.Since when did houses double every 7 years? who sets this time limit? Spruikers? is there a system in place to make sure this is achieved why cant it be 4? So historically prices always doubled every 7 years? i don't believe it.

So dos this mean household income doubles every 7 years too? now that does not happen right?

That figure was arrived at by analysing house prices for the past few years and then spruikers jumping on it, and repeating it until it because "known by everybody" (which actually means "parrotted by everybody")

If you would like to work out the doubling period for anything, what you do is divide 70 by the percentage change in taht thing. So, lets say inflation is running at 3.5%, then 70/3.5=20 which means that everything in the world will cost twice as much in 20 years.

In order to arrive at a 7 year doubling period, then whatever analyst out there must have used an average 10% capital appreciation per year for property. ie 70/10=7.

Personally I think that you would have to be on drugs to believe any of that rubbish - there are rises and falls in any given years, spread out all over the country.

Case in point are areas around mining areas - all it takes is an announcement of expanded operations or a mine shutdown and the price of property goes all over the place, 7 year rule or no.

As for your household income question, use the same formula - 70 divided by your % increase in wages. I reckon you'd be lucky to have a 20 year doubling period for most professions. I know with certainty that pharmacy wages in the NT have been quite flat for the past 10 years - the guy who convinced me to go into pharmacy was making $40/hr in 1994. I know pharmacists working today for $35/hr.

This is why I refuse to work in pharmacy. That and the old ladies asking me to tell them how to use their itchy fanny cream in detail. And the single mothers who look at me like a potential baby daddy. I'll reconsider if they issue me with a taser though.

Fat centrelink chick with 3 kids under 18 months: "so, are you single? wink wink"

OA wild west taser style: *ZAP!*

Fat centrelink chick: "What happened?"

OA: "beats me, you just fell over, are you okay? Here, buy this tablet to stop it happening again, I'll even give you 50% off"

Fat centrelink chick: "Oh thankyou, OA So, are you single?"

OA: You idiots just don't learn, do you? *ZAP!*

 

[HiEquity]

As for your household income question, use the same formula - 70 divided by your % increase in wages. I reckon you'd be lucky to have a 20 year doubling period for most professions. I know with certainty that pharmacy wages in the NT have been quite flat for the past 10 years - the guy who convinced me to go into pharmacy was making $40/hr in 1994. I know pharmacists working today for $35/hr.

Given that the thread is about Perth, then this is probably relevant. A projection of 4.5% per annum for wage price increases over the next three years at least. Of course it's just a projection but there's a fair bit of analysis behind it.

70/4.5 = 15 years to double wages.

If we use Average Weekly Earnings projections (as some prefer) of circa 5.7% over the period, we get 70/5.7 = 12 years to double average weekly earnings.

On top of WA inflation projections of 3.25% for that period and heady growth in Gross State Product. Interesting stuff - hardly prime ingredients for a "freefall" in Perth at any rate...

Hmmm, might need to ramp up the investing a bit - could be a boom around the corner!

 

[Aaron Sice]

Given that the thread is about Perth, then this is probably relevant. A projection of 4.5% per annum for wage price increases over the next three years at least. Of course it's just a projection but there's a fair bit of analysis behind it.

70/4.5 = 15 years to double wages.

If we use Average Weekly Earnings projections (as some prefer) of circa 5.7% over the period, we get 70/5.7 = 12 years to double average weekly earnings.

On top of WA inflation projections of 3.25% for that period and heady growth in Gross State Product. Interesting stuff - hardly prime ingredients for a "freefall" in Perth at any rate...

Hmmm, might need to ramp up the investing a bit - could be a boom around the corner!

well measured response as usual.

there's definitely somehting bubbling under the surface - no end of development site buying and it appears we're in a bit of a bear trap...

 

[MrCrumbpacker]

Personally I think that you would have to be on drugs to believe any of that rubbish - there are rises and falls in any given years, spread out all over the country.

Too true, property, generally a good hedge against inflation!, anyone looking for riches sitting on their **** maybe gets lucky for a few years.

Mars bars double every 15 years after all.

Inflation,.....always count on it, and count it in.

 

[Ocean Architect]

Given that the thread is about Perth, then this is probably relevant. A projection of 4.5% per annum for wage price increases over the next three years at least. Of course it's just a projection but there's a fair bit of analysis behind it.

70/4.5 = 15 years to double wages.

If we use Average Weekly Earnings projections (as some prefer) of circa 5.7% over the period, we get 70/5.7 = 12 years to double average weekly earnings.

On top of WA inflation projections of 3.25% for that period and heady growth in Gross State Product. Interesting stuff - hardly prime ingredients for a "freefall" in Perth at any rate...

Hmmm, might need to ramp up the investing a bit - could be a boom around the corner!

Interesting link, although I would be curious to see an industry breakdown of those wage forecasts, as I suspect a skewing of those statistics due to mining.

 

[Melbournian]

pretty scary article

 

[Sunfish]

Mars bars double every 15 years after all.

But Cadburys are market makers, not market takers. What are you?

And doubling every 15 years hardly matches inflation. Damned if I'm going through the trials and tribulations of owning property, just to match inflation.

 

[Marty McDonald]

But inflation eats the loan value and increaes the rent over time. With a buy and hold stratergy regardless of cg you end up with an income linked to inflation and an unecumbered asset to sell or not..That's the end game right?

 

[Sunfish]

But inflation eats the loan value and increaes the rent over time. With a buy and hold stratergy regardless of cg you end up with an income linked to inflation and an unecumbered asset to sell or not..That's the end game right?

Maybe yours. No way it's mine.

Inflation will always be less than your interest so in a pure sense inflation will not "eat away" your loan. You pay your lender upfront every month. If he wasn't being recompensed for inflation why would he lend to you?

 

[Ausprop]

it's ok if someone else is paying your interest