Residex's Dec report - median price for Melbourne & Brisbane to reach $500,000 in 08
- Thread starter Nth Brisbanite
- Start date
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Dear Willfong,
1. I agree with you.
2. That is why I only sort of use the Demographia survey studies outcome as a sort of mental guide for myself, to try to understand the local Australian housing markets and to project for myself, how far its various median house price will REALISTICALLY grow further and at what pace and the kind of time frame required.
3. I have no doubt it is very important for us as investors to properly understand the local psyche and public sentiments regarding the median house price in the prevailing housing markets.
4. In as far as the housing affordability issues, beside understanding the so-called aspirational needs for the first time homebuyers and their internal psyche/ internal reference points/general market response as well as the local Govt's planning considerations, there are other factors such as Govt tax/development charges and land zoning/usage policies/practices to consider too, if we are to successfully identify the next emerging "ugly duckling" suburbs to invest.
5. Consequently, to safely and profitably invest in the local real estate require multiple skills and competencies, beside a matrix of specialist knowledges required and a positive self psychology. It is not as simple and easy as some property investing books seem to suggest for beginning investors.
Cheers,
Kenneth KOH
Hi Kenneth,
Housing is included in the Mercer cost of living calculation. It includes housing, transport, food, clothing, household goods and entertainment. These all contribute to affordability and in fact I think this is a better measurement than the Demographia method, because these factors all impact disposable income and therefore the amount people have available to spend on property.
The Demographia survey is quite limited by looking only at the median property price, but not the quality of those properties, or the impact on each persons spending ability as affected by the general cost of living.
The CNN article is simply that - an article, referring to the Mercer survey. You need to look at the actual Mercer survey to see the components used. The Mercer survey can be found here:
http://www.mercer.com/costofliving
Cheers,
Shadow.
sarcasm right? Or are you talking nominal terms with the central banks pumpin trillions of dollars into the system?
Other way around - Perth median will be higher than Sydney in a couple of years. It's inevitable, there is just too much money in WA, not enough housing, fastest growing city (population), highest wages, etc etc.
Most analysts are forecasting Perth to fall and Sydney to rise over the next few years.
See this thread for details: http://www.somersoft.com/forums/showthread.php?t=38039
Cheers,
Shadow.
Spot on, just had this discussion with my mate, with the same conclusion...has anyone told you you're smart Alex???
Sorry, you are referring to median, not average...
I really should read the entire thread first...
There are 2 big problems which make the mercer info fairly useless in my view.
1) I believe housing costs are imputed by looking at rent (somebody can correct me if I'm wrong here). Because rent is cheap in Australia - way cheaper than buying so it gives the wrong view on affordability.
2) It is done at market exchange rates. This is very flawed. Hence the movement of cities so dramatically from year to year.
OK all - ready for my affordability spiel ....
I agree that the median home price is not a valid indicator for first home buyers. They shouldn't be buying the median home.
But this doesn't mean an entry level home is affordable. An entry level home within 1 hour from work is only affordable on 2 wages. If you pause for children or you have any other hickups you are screwed.
Take the average weekly earnings (which is generous as the average is skewed by high income earners) and you get $1105.12 / wk (Average Weekly Earnings, Australia, cat. no. 6302.0). If I take $400 from this (which is also generous as the $1105 is gross wages) and plug this into a loan calculator I can borrow get $220K. If I buy something for $220K within an hour from the CBD I will get a complete almost unliveable dump. Compare this to my parents that bought in the 70s - new 3 bedroom house, 35 mins from the CBD, 20 mins from work, all on a single average income.
Society has gone backwards with housing and we call it "progress". If the price of anything else rises we think that is bad. If it is housing we think its great. We are a very confused country.
Yeah, life sucks. Boo frigging hoo. Wring your hands all you want. It isn't going to change anything. I'd just rather aim to be at the wealthy end of the spectrum, hmm?
Actually, in Sydney, $200k will get you a decent 2 bed unit in Parramatta. Don't want to live in a unit? Tough. In time, people will realise that they have no choice but to downgrade their expectations. Either that, or someone 'solves' the affordability problem. A market crash won't help because market crashes usually happen together with recessions, and your lower income people don't fare so well in those, either.
Alex
YM, what do you think is going to happen when cities increase in size?! The outskirts 100yrs ago were 5mins from CBD, then perhaps 15mins 30yrs ago, now 40 mins, and in another 20yrs what - perhaps 90 mins???
I would really love to know what you would expect to happen in growing cities - if a population was 500k 50yrs ago and everyone (even the outskirts) lived within 20mins of CBD, and now the same city has a population of 6 million - how do you believe the boundaries cannot be pushed out further so the newer homes have no choice but to be 1 hour out?
And I can't speak for other cities but you don't have to live in a 'dump' in Adelaide.
I would really love to know what you would expect to happen in growing cities - if a population was 500k 50yrs ago and everyone (even the outskirts) lived within 20mins of CBD, and now the same city has a population of 6 million - how do you believe the boundaries cannot be pushed out further so the newer homes have no choice but to be 1 hour out?
And I can't speak for other cities but you don't have to live in a 'dump' in Adelaide.
Hey YM,
Do you have any stats. that could tell me the average weekly earnings for an individual (rather than household) in Melbourne?
If you give me this figure, I'll see if I can find a decent and affordable starter property within an hour of the CBD......
Thanks.
I recently read in an article that 'some economics dude' calculated that our 'debt ceiling' we have been talking about over the past few months supports a median price of around the $500-520k mark on current incomes (taking into account future income growth) in the capital cities.
This is somewhat consistent with both Perth and Sydney stalling at around this amount and also why Melbourne and Brisbane are still going (with Residex thinks they'll hit $500k in the next short while).
Perhaps it will reach this level and then just hover around it for a few years? Or perhaps it will hit this level then slowly deflate? Or perhaps it will 'crash'?
Unfortunately I do not remember the author or the publication - it was at the end of a 13 hour flight and my brain wasn't working well. Does it ring a bell with anyone? (Maybe this has already been raised and discussed).
As we know it's the dollar cost of the 'emotion factor' that screws up all the calculations. Surely we could have a rough stab at working this out based what it is for similar countries? (i.e. at what stage will people choose to rent over buying). What was this point in Ireland? What was this point in Canada? England?
Perhaps the Australian love affair with home ownership will lessen with our increasing immigration. Surely most of our new Australians come from countries where renting for life is more 'acceptable'.
This is somewhat consistent with both Perth and Sydney stalling at around this amount and also why Melbourne and Brisbane are still going (with Residex thinks they'll hit $500k in the next short while).
Perhaps it will reach this level and then just hover around it for a few years? Or perhaps it will hit this level then slowly deflate? Or perhaps it will 'crash'?
Unfortunately I do not remember the author or the publication - it was at the end of a 13 hour flight and my brain wasn't working well. Does it ring a bell with anyone? (Maybe this has already been raised and discussed).
As we know it's the dollar cost of the 'emotion factor' that screws up all the calculations. Surely we could have a rough stab at working this out based what it is for similar countries? (i.e. at what stage will people choose to rent over buying). What was this point in Ireland? What was this point in Canada? England?
Perhaps the Australian love affair with home ownership will lessen with our increasing immigration. Surely most of our new Australians come from countries where renting for life is more 'acceptable'.
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I think that was APM (Australian Property Monitors).
I think if you had decent planning and infrustructure policies you end up with multiple CBDs. Larger city does not necessarilly mean higher prices.
I don't know Adelaide. My world revolves around Brisbane, Sydney, Melbourne. So I'm sorry to include the fine city of Adelaide in my anti-family evil city list!
I guess the question for everybody out there is this - in principle, is a rising median house price a good thing or a bad thing for the economic well being of society? I'd argue strongly it isn't but I should transfer this discussion to the economics thread. Deep philosophical / economic arguments are loads of fun but not for everybody - I am conscious of that.
Hey guys,
Just scaned this growing post - I am 28 and have done the overseas travel thing etc, only really settled down in the last couple of years. I live in Perth and was struggling to see how I could get into the market over here post boom. I decided that rather than feel sorry for myself I would purchase an IP interstate that I could comfortably afford - looking to move onto number 2 sometime soon - hopefully.
It sucks that I still have to rent in my home state but at least I am in the market. Might be an option for other first home buyers - who cares about whether you like the area - you don't have to live there.
Will it pay off - who knows but at least I have had a crack.
Just scaned this growing post - I am 28 and have done the overseas travel thing etc, only really settled down in the last couple of years. I live in Perth and was struggling to see how I could get into the market over here post boom. I decided that rather than feel sorry for myself I would purchase an IP interstate that I could comfortably afford - looking to move onto number 2 sometime soon - hopefully.
It sucks that I still have to rent in my home state but at least I am in the market. Might be an option for other first home buyers - who cares about whether you like the area - you don't have to live there.
Will it pay off - who knows but at least I have had a crack.
funny stuff.I have no problems personally - at the top end of the income spectrum. But I also have a socialist / compassionate strain I can't seem to get rid of. I think I might even join the greens!
Eg. Melbourne 2030: Activity Centres, Transit Cities etc...
