Safe as houses

They can take solace in the fact that house prices always go up..except for the times when they are going down. :eek:

When do they go down?

I've been the owner of over a dozen properties in my life so far, and not one has gone down in price since the first purchase.

And I don't even have much of a clue about this r/e caper. If I did I'd be "The Donald" by now.

If you want to pick a short term window of say, 2 or 3 years, and add in an isolated incident of a buyer with one property who loses money, then I'd agree with you.

But I'll guarantee that this was an operator error - not the vehicle of property as a whole.

I'll bet that same house which the buyer lost money on is still there and is still going up in value for someone else.
 
If you want to pick a short term window of say, 2 or 3 years, and add in an isolated incident of a buyer with one property who loses money, then I'd agree with you.

But I'll guarantee that this was an operator error - not the vehicle of property as a whole.

We've experienced and benefited from something very similar to this. I'm sure it's pretty rare.

Our first PPoR had a checkered history. It was inhabited by a lovely elderly couple who improved it immensely and had a wonderful "street-best" garden. They eventually got too old to maintain the property to their standard and sold it to a young couple back in 1994 for 108K.

The young couple proceeded to fight and argue and bicker, and totally neglected both the house and the garden, to the point where it had "good bones" and nothing else. Barren garden front and back, a veritable tip inside and a warzone everywhere else.

Mr and Mrs Muggins (us) came along 4 years later when they wanted it sold before they killed each other. We started offering 79K, even though it was advertised as 'offers between 105 and 115K'. Even though they were fighting enormously, they managed to come together to resist us enough to make us come up quite a bit.

We eventually bought it in 1998 for 96K. A drop of 12K, or 11% over 4 years. Ouch for them. Yippee for us.

We still own it and rent it out to a nice young couple. It's back to looking good and worth 550K now. I guess we managed to pick up all of their growth whilst they systematically destroyed the cosmetics of the property during their tenure.

If you graphed it's growth over the years, there was a definite dip under their stewardship, but it was temporary and artificial. As soon as you put a little bit of TLC into it, it was back to tracking normally again after a little spurt. Gotta love those spurts when you are driving the train. :D


108K in 1994 to 550K in 2009 = 11.5% p.a. compounded (What the property has done overall).

108K in 1994 to 96K in 1998 = minus 3.0% p.a. compounded (What the fighters received)

96K in 1998 to 550K in 2009 = 17.2% p.a. compounded (What the property has done with us).
 
Thanks Jonril. Damn useful tool. Good to see Economist readers on this ship of fools. Real prices do go sideways sometimes, even if we don't like them to.
The link you posted makes us more aware of that.
 
This is where I can't understand the Aussie house prices never go down attitude. All the charts show the same thing , they go down , stagnate for years and sideways , any of the real charts show it.

The question is where to from here ?

Cheers
 
Mate
Forget the charts. Buy quality, middle ring, inner bayside whatever property for as cheap as you can get it and you'll simply rake in the cash.

Im not saying studying macro economic conditions is a waste of time, but if you want to make some coin (and presumably you do as you are on this forum) do lots of leg work looking at houses, flats whatever and learn the market. Focus on a relatively small area and become an expert then when things appear that you as an expert know about, or are good add values then you buy it.

simple, really.

pieman
 
Mate
Forget the charts. Buy quality, middle ring, inner bayside whatever property for as cheap as you can get it and you'll simply rake in the cash.

Im not saying studying macro economic conditions is a waste of time, but if you want to make some coin (and presumably you do as you are on this forum) do lots of leg work looking at houses, flats whatever and learn the market. Focus on a relatively small area and become an expert then when things appear that you as an expert know about, or are good add values then you buy it.

simple, really.

pieman

+1 Studying macro economic conditions is a nice hobby to have, but it won't necessarily affect your own personal micro economic reality. Only your own actions have the power to change your circle of influence.
 
Blaster, surely you've answered your own question.

If you assume that property prices are cyclical, and that they are currently extremely high on virtually any metric (rental yield, absolute cost, price compared to income) that you can think of, then the logical conclusion is that they'll eventually become relatively less expensive.

Whether this occurs through inflation or price falls is an entirely different matter. As is the timing.

Of course, that's not a guaranteed outcome. The government could manipulate the market such that prices remain high. Only that would probably result in a stagnant market (like Sydney) with small annual movements and low rental yields.

That the standard scenario promulgated on this forum (that CPI inflation remains low, whilst house prices double every 7 - 10 years) strikes me as highly unlikely in the long term.

If inflation (and hence wage growth) runs at 3% and house prices rise by 10% per annum, then in 20 years the average Australian house will be around 25 times the average Australian salary, or five times the level which is considered seriously unaffordable.
 
Pieman, just curious, are there many good opportunities in the better suburbs in Melbourne?

It strikes me that there's been a prolonged housing boom, and that the easy pickings will have been mopped up years ago. Though I accept that there might be some interesting developments on tricky sites. (Still happens in London from time to time.)
 
Blaster, surely you've answered your own question.

If you assume that property prices are cyclical, and that they are currently extremely high on virtually any metric (rental yield, absolute cost, price compared to income) that you can think of, then the logical conclusion is that they'll eventually become relatively less expensive.

Whether this occurs through inflation or price falls is an entirely different matter. As is the timing.

Of course, that's not a guaranteed outcome. The government could manipulate the market such that prices remain high. Only that would probably result in a stagnant market (like Sydney) with small annual movements and low rental yields.

That the standard scenario promulgated on this forum (that CPI inflation remains low, whilst house prices double every 7 - 10 years) strikes me as highly unlikely in the long term.

If inflation (and hence wage growth) runs at 3% and house prices rise by 10% per annum, then in 20 years the average Australian house will be around 25 times the average Australian salary, or five times the level which is considered seriously unaffordable.



'Seriously unaffordable' undo able and unsustainable , I've been stating your exact paragraph plus some here and in others for 4 or 5 yrs now . The sums just can not add up.
It's not to be a D & G and God knows why I even bother trying to figure it out it doesn't effect my investing, I only buy stuff that I can build equity into not things relying on waiting for it but eh , the Oz markets been a head scratcher for 5 yrs now especially with the Global stuff.

Don't pay too much and cover thy butt.

Cheers
 
Unaffordable? Rubbish...

Look at that chart of the "Prices against average income" and chart all history. We're only at an index of 120 versus the 100 base point of 1975. So a marginal increase in prices relative to incomes. Over that 35 year period there's a whole host of reasons why prices would have outstripped incomes marginally which have been done to death in other threads. If you missed some of those arguments then here's a quick refresher:

Ross Gittins: We did it ourselves

We're certainly not in an affordability bubble here in Australia. Looking at the chart though its obvious why prices corrected back up through the 90's isn't it.

Cheers,
Michael
 
Mate
Forget the charts. Buy quality, middle ring, inner bayside whatever property for as cheap as you can get it and you'll simply rake in the cash.

Im not saying studying macro economic conditions is a waste of time, but if you want to make some coin (and presumably you do as you are on this forum) do lots of leg work looking at houses, flats whatever and learn the market. Focus on a relatively small area and become an expert then when things appear that you as an expert know about, or are good add values then you buy it.

simple, really.

pieman



Hi Pieman .

Most of my family live around those areas , I don't doubt it if you know your stuff , much potential. Too dear for me though and too far.

Youknow , what your saying about knowing your area though which is what I've decided to focus on , I'm feeling these days should be the single most headlining act in any book, seminar or guru teachings. Invaluable ! That and don't pay too much !
About 18 mths ago I decided to stick to mine which is The Great Ocean Road, it's been the smartest move I've ever made. No travel and so heaps cheaper and it becomes easier and easier to recognize ripples, micro ripples, slows or revs, good buys or potential, the latest rental movements the lot . A reduced price or hard to sell place , even who might own it and their situation, it goes on and on . Any new industry in the grapevine , schools, shops or tourist plans .
I love working like this now.

Cheers
 
Buy quality, middle ring, inner bayside whatever property for as cheap as you can get it

Good point Pieman. Too many people get suckered in by the hype and pay way too much. The consequences can be terrible for their pockets, marriages etc.
Buy cheap stuff in good locations - its the best way to get ahead. Problem is there isn't much cheap stuff in good locations these days, is there? Getting a metro property in a good location to pay for itself (without negative gearing or depreciation and taking into account market rents) is pretty damn hard.
 
Unaffordable? Rubbish...

Look at that chart of the "Prices against average income" and chart all history. We're only at an index of 120 versus the 100 base point of 1975. So a marginal increase in prices relative to incomes. Over that 35 year period there's a whole host of reasons why prices would have outstripped incomes marginally which have been done to death in other threads. If you missed some of those arguments then here's a quick refresher:

Ross Gittins: We did it ourselves

We're certainly not in an affordability bubble here in Australia. Looking at the chart though its obvious why prices corrected back up through the 90's isn't it.

Cheers,
Michael


Give me some of what your on.
It's been fact for years what are you talking about, Aussie house prices are among if not the dearest in the world , talking ordinary burb housing .
I've seen 3 or 4 stories in the last few mths alone . 7 to 9 x the av wage. Ultra dear over most of the world is considered above 4. 5-6 is considered extremely unsustainable
Up your way is worse, your av wage is less and your boom more extreme .
Yep many threads in many forums and many arguments all over but , that's mo and it's also fact so you won't get me forking out 4 or 500 k for some plain Jane burb sh't/h that was only 80 or 100 grand 8 or 10 yrs ago , so sue me.
And don't say prove it , that's also been done many tims over here and everywhere else.
 
PS , not that I'm saying we're gonna crash or whatever . I actually would have thought we might and we could yet who knows but Australia's a very sheltered place and it's systems can function in weird and independent ways.
I would say that sooner or later though , we are in for some correction min' atleast and a very long drought if nothing else but again - jmo.

If I really knew I'd be the only one that does in this country.
 
If I really knew I'd be the only one that does in this country.

How true. I've been reading the doom and gloiomers, gold bugs, savvy investor columns and blogs, this forum and it's archives, youtube conspiracy documentaries and banks and RBA bulletins for months now and what is truly evident is the fact that no-one knows what is going to happen, many don't understand what just happened, and they all ready to stampede in the next direction if enough get spooked. They refer to markets as exhibiting herd behaviour for good reason as anyone who has dealt with livestock will know.

As a Bruce Petty cartoon once said:
Ask him where we're going.
No. He might not let us follow him any more.

The single straw for the drowning among us is that history has a habit of repeating, and the truism is: Predictions on the end of the world must be respected. They've been happening for centuries.

I predict AUD at 60cents, Petrol at $2 a litre, housing bubble bursts, markets crash, govt takes super, gold 5k an ounce, and price of eggs through the roof. Just don't ask for dates.
 
Last edited:
How true. I've been reading the doom and gloiomers, gold bugs, savvy investor columns and blogs, this forum and it's archives, youtube conspiracy documentaries and banks and RBA bulletins for months now and what is truly evident is the fact that no-one knows what is going to happen, many don't understand what just happened, and they all ready to stampede in the next direction if enough get spooked. They refer to markets as exhibiting herd behaviour for good reason as anyone who has dealt with livestock will know.

As a Bruce Petty cartoon once said:
Ask him where we're going.
No. He might not let us follow him any more.

The single straw for the drowning among us is that history has a habit of repeating, and the truism is: Predictions on the end of the world must be respected. They've been happening for centuries.

I predict AUD at 60cents, Petrol at $2 a litre, housing bubble bursts, markets crash, govt takes super, gold 5k an ounce, and price of eggs through the roof. Just don't ask for dates.

Hey Julie
Sounds like we better buy some chooks and a solar panel for the car , I'm all over it.

Cheers
 
Top