Residex's Dec report - median price for Melbourne & Brisbane to reach $500,000 in 08

[Bazza]

Increasing house prices and declining home loan affordability are keeping more people in the rental market - so that is good for us property investors.

Residential rental vacancy rates have averaged an all-time low of 1.9% across Australia for the past two and a half years. And, improved yields make it more attractive for investors. So, I'm not complaining.

As many have already mentioned in this thread, we have all done the hard yards and there are always oportunities for those who put in the effort themselves rather than waiting for another handout.

Cheers,

Bazza

 

[james_w]

well I have to agree with the older folks we started out only a few

years back first block was 15k out in westwood qld and used that to buy our first house in stanwell for 93k sold that bought neighbours block and done house and land package then bought in aldershot bought a small 3bedder

brick for 155k and sold that not exactly desirable areas but worked for us

we are now bulding a house in toogoom payed cash for the land and will owe around 105k debt on the house as we are on a pension and is the only way we could get in to the house market there is still plenty of affordable

areas if you actually look hard enough by the way I am only 28 and our combined income is 30k instead of trying to buy in upmarket cool areas look

around places like gin gin,childers,bundaberg etc it isn't that bad

unless approx 20mins is to far from nice beaches is a problem lol

you will be suprised how many houses under 200k are in these areas and

what shops,infrastructure etc are there.

 

[keithj]

Using the median house price as a measure of affordability is silliness perpetuated by journalists

Exactly.

FHB's aren't supposed to be able to afford a median priced home.

All the 2nd (& 3rd) home buyers already have a big deposit 'cos they started with a small PPOR, it appreciated, they paid down principle instead of dead rent money, and magically a large deposit appeared when they sold it.

AND.... since they have this big deposit they don't have to borrow as much to buy a bigger (median?) priced PPOR, so their servicability is better.

It's those OOs with large deposits that can afford median priced props....NOT the FHB.

...and they blame investors for the price increases.

 

[Kennethkohsg]

The median price is a reflection of what people CAN afford and are CURRENTLY PAYING.

So, if the median is increasing, it is only because people CAN afford it. Hence, no affordability crisis.

It seems as though somebody else sets the median price, and people have to pay it, rather than it simply being a measure of what people are paying now.

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Dear Tubs,

1. I do not think that you can effectively make some valid generalisations nor logically derive your own conclusions, as per your a/m post.

2. We all know that presently, there are 2-tiers housing markets operating across the various Australian States.

3. That the upper end of the housing markets have continued to be active and report more house sales with higher house sale prices being achieved, thereby resulting in higher median housing prices being reported.

4. However, this does not neccesarily mean that all first homebuyers are buying these properties nor can they afford to pay for such highly priced properties. Nor does the higher median prices logically support that there are as many houses in the more affordable suburbs being sold as there are for the prestige properties or/and at the upper end of the housing market.

5. Thus, it is neither correct nor accurate to make such a generalisation superficially based on the existing house sale data;- after all, statistics do lie and that they often lie, in our real life cases.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

The median price is a reflection of what people CAN afford and are CURRENTLY PAYING.

So, if the median is increasing, it is only because people CAN afford it. Hence, no affordability crisis.

It seems as though somebody else sets the median price, and people have to pay it, rather than it simply being a measure of what people are paying now.

+++++++++++++++++++++++++++
Dear Tubs,

1. I do not think that you can effectively make some valid generalisations nor logically derive your own conclusions, as per your a/m post.

2. We all know that presently, there are 2-tiers housing markets operating across the various Australian States.

3. That the upper end of the housing markets have continued to be active and report more house sales with higher house sale prices being achieved, thereby resulting in higher median housing prices being reported.

4. However, this does not neccesarily mean that all first homebuyers are buying these properties nor can they afford to pay for such highly priced properties. Not does median higher prices logically support that there are as many houses for the affordable suburbs as there are for the presitage properties/upper end of the housing market

5. Thus, it is neither correct nor accurate to make such a generalisation superficially based on the existing house sale data;- after all, statistics do lie and that they often lie, in our real life cases.

Cheers,
Kenneth KOH

 

[Shadow]

Not does median higher prices logically support that there are as many houses for the affordable suburbs as there are for the presitage properties/upper end of the housing market

Hi Kenneth,

That is exactly what it means. By definition, the median price means that there are the same number of houses below this price as there are houses above this price. Therefore approx. 50% of all houses are available for less than the medium price. Meaning that there are plenty of houses priced in a suitable range for first home buyers.

Cheers,

Shadow.

 

[hobo-jo]

Some very valid points Kennethkohsg.

Shadow, what would you consider a suitable range for first home buyers? That's a very broad statement to be making that there is plenty of houses in the first home buyers range!

Just because 50% of housing is below the medians of $500-600k, a majority of the 50% could be in the 450-550k range and still out of fhb reach.

 

[BayView]

Exactly.

FHB's aren't supposed to be able to afford a median priced home.

All the 2nd (& 3rd) home buyers already have a big deposit 'cos they started with a small PPOR, it appreciated, they paid down principle instead of dead rent money, and magically a large deposit appeared when they sold it.

AND.... since they have this big deposit they don't have to borrow as much to buy a bigger (median?) priced PPOR, so their servicability is better.

It's those OOs with large deposits that can afford median priced props....NOT the FHB.

...and they blame investors for the price increases.

And ironically, if all the 2nd, 3rd home buyers didn't keep trading up, but instead just stayed in the more modest house and bought IP's instead, they would have a lot more wealth, retire early, and buy the really good PPoR for cash and still have a good lifestyle.

 

[BayView]

The median price is a reflection of what people CAN afford and are CURRENTLY PAYING.

So, if the median is increasing, it is only because people CAN afford it. Hence, no affordability crisis.

It seems as though somebody else sets the median price, and people have to pay it, rather than it simply being a measure of what people are paying now.

No it doesn't.

It can simply be a few more properties in the very high end of the market that bump up the dollars turned over for that area.

meanwhile the bulk of the sales are still below the median. It's an inaccurate reflection.

 

[willfong]

No it doesn't.

It can simply be a few more properties in the very high end of the market that bump up the dollars turned over for that area.

meanwhile the bulk of the sales are still below the median. It's an inaccurate reflection.

It's the median, not the mean. Exactly half the sales are below it and half above it, doesn't mean that the bulk is below it. Fully agree with the point that it's unrealistic for most young FHB to aim for a median home, or even above it if the characteristics (near the sea, near train, near city, large backyard, good school etc etc) that they often ask for is any indication.

 

[Shadow]

Shadow, what would you consider a suitable range for first home buyers? That's a very broad statement to be making that there is plenty of houses in the first home buyers range!

Hi hobo-jo,

I just did a quick search on RealEstate.com for properties in Parramatta and surrounding suburbs, between $100,000 and $200,000. It came up with 50 hits. I just choose Paramatta as a random example since it is neither a very high-end or a very low-end suburb... somewhere in the middle I would say.

So that is 50 properties that a FHB could easily afford, in one area, of one city, of one state in Australia. Just think how many similar properties there would be right across Australia - many many thousands.

Just because 50% of housing is below the medians of $500-600k, a majority of the 50% could be in the 450-550k range and still out of fhb reach.

Theoretically possible, but very unlikely.

 

[hobo-jo]

I just did a quick search on RealEstate.com for properties in Parramatta and surrounding suburbs, between $100,000 and $200,000. It came up with 50 hits. I just choose Paramatta as a random example since it is neither a very high-end or a very low-end suburb... somewhere in the middle I would say.

So that is 50 properties that a FHB could easily afford, in one area, of one city, of one state in Australia. Just think how many similar properties there would be right across Australia - many many thousands.

Coming from someone who has been looking for an investment property in the FHB range I can tell you 50 houses is absolutely nothing in an area/suburb. I have weekends where I will hit 15-20 open houses, every open house is packed with people itching to get their offers on paper there on the day with the RA agent and most are sold that weekend or in the few week days following.

Wizard's 'Tomorrow's First Home Buyers series'*' revealed 672,000 Australians plan to purchase a property before mid 2008. This represents a 70 per cent increase on the previous year, and is the fourth consecutive quarterly increase in first home buyer intentions.

http://www.wizard.com.au/about/newsitem.aspx?id=361

 

[Kennethkohsg]

Dear Shadow and Tubs,

1. When the median house price is openly reported in the local newspapers or/and by Residex or/and APM etc, is this "median house price ( for each Capital Cities)" actually referring to the median house price for the first-time homebuyers or/and the median house price for the more affordable suburbs?... Apparently not, isn't it?

2. Thus, we will need to first clearly differentiate and distinguish the references used such as "median house price for the various Capital cities" as against the " median house price each of the specific and more affordable suburbs", or/and the actual median house price where the average first-time home buyer can truly afford to buy and pay for their properties, based on the average household income level in Australia.

3. We will need to bear in mind further that the median house price for each Capital Cities can vary over time or/and time-period reported or/and referred to.

4. Morever, there is also no neccesity for all the new first-time homebuyers to try to buy these median priced (for each Capital Cities) properties for themselves, in the first place. Nor is it realistic nor pragmatic nor advisable for them to try to do so, honestly speaking.

5. After all, these median house priced ( for each Capital Cities) properties, more often than not, is actually far more expensive than what the first-time homebuyers can realistically afford to buy with their present household income levels.

6. For your further comments/discussion, please.

7. Thank you.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Coming from someone who has been looking for an investment property in the FHB range I can tell you 50 houses is absolutely nothing in an area/suburb. I have weekends where I will hit 15-20 open houses, every open house is packed with people itching to get their offers on paper there on the day with the RA agent and most are sold that weekend or in the few week days following.


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... and not forgetting you have still not yet, knocked on all the doors for the many more potential "selling" properties whose owners may want to sell presently but have still not officially listed them for sale yet publicly through the various RE agencies or/and RE properties sale websites etc.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Wizard's 'Tomorrow's First Home Buyers series'*' revealed 672,000 Australians plan to purchase a property before mid 2008. This represents a 70 per cent increase on the previous year, and is the fourth consecutive quarterly increase in first home buyer intentions.

http://www.wizard.com.au/about/newsitem.aspx?id=361
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Dear Hobo-jo,

1. How accurate and reliable is this "672,000 potential buyers" figure or/and reported increasing buyers trends, as quoted by Wizard, in the first place?

2. Please do your own independant research and due diligence first before allowing yourself to be "unduely pressured" by these figures, into rushing to quickly buy a property for yourself and over-paying for its house price.

Cheers,
Kenneth KOH

 

[Shadow]

Coming from someone who has been looking for an investment property in the FHB range I can tell you 50 houses is absolutely nothing in an area/suburb. I have weekends where I will hit 15-20 open houses, every open house is packed with people itching to get their offers on paper there on the day with the RA agent and most are sold that weekend or in the few week days following.

So... I think what that shows, is that despite the cost, many FHBs are still able to buy these properties. Therefore the real problem problem appears to be lack of supply (or too much demand), rather than affordability...

Cheers,

Shadow.

 

[sue78]

I predicted this mths ago...and I'm sure I noted it in Somersoft too.

However, I feel a bit uncertain now although prices will keep going up, you are going to see a lot more houses not moving above the $500k mark. Why? well because finance is hard to get. With interes rate rise and banks wanting more deposit...it's just a given.

I was hoping to take another year off in 2008 but looks like I'll have to go back to work.

It's going to be a stressful year.

 

[Kennethkohsg]

So... I think what that shows, is that despite the cost, many FHBs are still able to buy these properties. Therefore the real problem problem appears to be lack of supply (or too much demand), rather than affordability...

Cheers,

Shadow.

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Dear Shadow,

1. I believe that at best, the total number of house sales specifically attributable to the first-time home buyers account for less than 30% of the total house sales achieved as reported over each specific reporting period.

2. Thus, I do not fully agree with your a/m conclusions. I think that they are too simplistic and inaccurate to a certain extent, without doing your own due diligence and research on the proper house sale data referred to.

3. Many FHBs still desire to purchase the median house priced properties;- whether they realistically can afford to do so or/and whether they have actually done so or not, is a separate story altogether.

Cheers,
Kenneth KOH

 

[mja]

I'm a Generation-Y (just turned 28 a couple of months ago) and I think I bucked the trend of what all my friends were doing in Sydney, back in 2003.

I bought my own car first. Then I upgraded to a WRX. I pretty much lived from pay packet to pay packet until I was 23, when I went out of my way to just buy something. I didn't do much research, but did want to live in Brisbane, so I bought an apartment off the plan which settled 18 months later.

My wife and I moved out of our comfort zones (living with our parents) in Sydney, away from all of our families, friends and colleagues to Brisbane, where I knew a few people, but really we didn't know anyone.

Since then we've been here 3 years, and now own 3 properties in Brisbane.

Most of my friends in Sydney still rent. Oh, in a shared house situation, so they're *splitting* the rent.

-- MJ.

 

[Shadow]

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Dear Shadow,

1. I believe that at best, the total number of house sales specifically attributable to the first-time home buyers account for less than 30% of the total house sales achieved as reported over each specific reporting period.

2. Thus, I do not fully agree with your a/m conclusions. I think that they are too simplistic and inaccurate to a certain extent, without doing your own due diligence and research on the proper house sale data referred to.

3. Many FHBs still desire to purchase the median house priced properties;- whether they realistically can afford to do so or/and whether they have actually done so or not, is a separate story altogether.

Cheers,
Kenneth KOH

Hi Kenneth,

I think my main point is that there are plenty of cheap properties that FHBs can buy. If they are willing to do without the McMansion and Plasma and expensive car, and instead buy a modest unit, or small home in the outer suburbs, then there are certainly plenty of affordable properties.

It won't kill them to live in a one bedroom apartment for a few years until they build enough equity to trade up. Or else rent a small apartment until they save a good sized deposit. I have done this myself, and I'm sure many others on this forum have done the same. I even rented a single room in a shared house for several years. It didn't kill me, even though I was nowhere near the suburb where my family was based, and it allowed me to save some dollars.

So to any FHBs who say they can't afford any suitable property, I would respond that their expectations for their first property are simply too high.

If we look at the twenty most expensive cities in the world (see link below), there is no Australian city in the top twenty. This means that people all around the world live in much more unaffordable cities than us. So, how do FHBs manage in these cities? I would say they buy smaller properties, including units, further from the city centre, or rent smaller units while saving for a decent deposit.

Australian FHBs will simply have to do the same.

http://money.cnn.com/2007/06/15/pf/most_expensive_cities/

Cheers,

Shadow.