Sydney property prices set to double

[BV]

If prices go up because people's standard of living and desposible income is improving, that's great. Not the case here.

Really?

I thought our disposable income was improving due to the reduced price of clothing, consumer electronics, cars, travel, and at the same time we have our usual pay increases.....

On the other hand, rents are going up fast so this is a motivating factor for people to buy their own place.

 

[RocketMan]

No, your disposable income is not going up. Think about it - things might be cheaper because they are made in China etc. but that's only from the retailer end. You, the consumer, are getting ripped off left, right and centre. Look at David Jones - their margins have increased in the past few years! and who paid for that? You! the Australian market is a cartel of retailers with significantly high margins to cover the high rents that they pay their landlords.

 

[Ausprop]

where was the headline telling us that a GFC was coming?

 

[weg]

I thought our disposable income was improving due to the reduced price of clothing, consumer electronics, cars, travel, and at the same time we have our usual pay increases.....

BV, do you have a family to feed and clothe? Food has gone through the roof, and clothing and shoes for active growing children (especially boys) are not cheap.

Anyone want a husband and 2 boys? Will throw in an empty fridge .

 

[bene313]

property doubles every 10-12 years anyway, so really this isn't news.

Not necessarily:

House Prices in Australia since 1970!

 

[tigerGT]

I sense some somersoftians are quite bearish on property all of a sudden...

 

[RocketMan]

the most important aspect is being able to hold the property. If you cannot hold, then you are f@#$ed no matter how well you bought. It's the same old story

 

[Deltaberry]

Really?

I thought our disposable income was improving due to the reduced price of clothing, consumer electronics, cars, travel, and at the same time we have our usual pay increases.....

On the other hand, rents are going up fast so this is a motivating factor for people to buy their own place.

Well not sure if it's just that (ie your thoughts) or you've looked at it. In any case I don't think the rise in pay cheques (if any) are catching up to the jump in prices.

I was just reading one of GS's more recent economics update (suspect it was 11 March, if you have access). One of the things I picked up was in Feb, jobs rose by 400 - far short of the 15,000 from consensus. We're still sitting at 5.3% (just down slightly from 5.8% in 09) unemployment. People are working reduced hours too in order to keep the jobs, so again this translates to lower take-home pay.

In contrast, average house loan size is increasing exponentially, which will be further compounded by more rate hikes. A powerful chart in the report I'm reading points to that. Unfortunately I don't think I can post that sort of stuff here as it belongs to GS', but would highly recommend you subscribe to this sort of thing as they are very insightful (hence they make so much money even on the back of US' worst recession for a long time)

I haven't looked at electricity prices per se (I just pay them as they come), but with inflation forecasts of around 3% in CY10 and CY11, find it hard to imagine all your living costs are falling, keeping all other things constant (eg your usage).

 

[RocketMan]

electricity tariffs went up ~20% for me just recently. it's the biggest crock of BS

 

[weg]

BV, do you have a family to feed and clothe? Food has gone through the roof, and clothing and shoes for active growing children (especially boys) are not cheap.

Anyone want a husband and 2 boys? Will throw in an empty fridge .

Then there are the utilities... how can I forget that. Our power and water bills in SA keep going up .

I'm not overly bearish on property, but there must be people out there struggling just to pay for necessities.

 

[bene313]

I sense some somersoftians are quite bearish on property all of a sudden...

Bearish or realistic? Wouldn't be much good if we all sat around slapping each other on the back saying "property is gonna double, rah rah rah!".

A lot can happen in ten years. Hope for the best but be prepared for the worst.

 

[Ausprop]

wouldnt say it is all of a sudden either... this is running into the 3rd year now

 

[BV]

Then there are the utilities... how can I forget that. Our power and water bills in SA keep going up .
I'm not overly bearish on property, but there must be people out there struggling just to pay for necessities.

or to pay the rent...

 

[BV]

electricity tariffs went up ~20% for me just recently. it's the biggest crock of BS

You haven't seen nothing yet.
Wait for your electricity bill to come in

 

[Fudge]

the most important aspect is being able to hold the property. If you cannot hold, then you are f@#$ed no matter how well you bought. It's the same old story

How so?

If you have to sell an asset due to reduced cashflow reserves, or serviceabilty issues, thats not so bad.

Even when prices during the GFC have stabilised in some markets. You may even be able to take a profit

By releasing an asset is certainly not the end of the world.

It seems that realising or releasing assets is bad. If I have to release 2 or 3 to keep the rest of my Portfolio, apart from releasing to realise profits, then so be it!

Cheers,

F

 

[Shadow]

Do you agree with these predictions?

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UP TO half of Sydney homeowners are set to become property millionaires, with house prices predicted to double in the next decade.

I don't think it's out of the question, considering that Sydney prices fell 20% in real terms between 2003 and 2008. I believe the Sydney median house price will approach $1M by 2014-2015. These charts may be of some interest...

Although I would point out that none of these owners of million dollar properties would actually be 'millionaires', unless they had paid back their mortgage.

 

[jezza]

They ran the same article in the Heral sun as well so it must have been a national team working on it. Some places were going to go up 300%. Can it happen? We ll yes because history tells us in definitley can happen. I remember my parents telling me about 30 years ago when they bought there block for 65K that they wondered how there kids would buy a house. I look at it how first home buyers are really stuggling and wonder whether we as a society need to do something drastical to allow for future generations to own there own house or are we going to turn into a Italy where the next generation just adds another story on top of a existing dwelling.

One of the few things I think Australia can learn off America is to have more cities. What Sydney have done with Parramata is something that should be the benchmark. I think most states need to stop having everything centralised around 1 CBD and have 2 or 3 CBD's in planning. Vic for instance should grow Geelong and either a Bendigo or Ballarat aswell

Jezza

 

[asdf]

Anyone getting more than CPI or single digits for pay rises? I know our economy is getting back into full swing again but am not hearing massive pay cheques being dished out by employers across different industries.

 

[LisaP]

I don't think it's out of the question, considering that Sydney prices fell 20% in real terms between 2003 and 2008. I believe the Sydney median house price will approach $1M by 2014-2015. These charts may be of some interest...

Hi Shadow,

Thanks for the charts. Could you tell me if you got all three charts and the associated data from Residex? And if you did, did you have to pay for this data or do they provide free access?

Cheers,
Lisa

 

[Sunfish]

Some fuzzy figures there Shadow, the linear and log charts seem to have different start points. I am always sus about graphs purporting to "prove" something but which do not allow accurate interpretation because there are no graduations on one axis. I reckon you should only use log charts for long time charts anyway, so I'll discuss that one.

From '80 till now is three decades which means that if prop doubles every ten years the prop value should increase X8, which it has done (as near as I can tell), but the rule of 72 says that is just 7.2% cap gain per year. The average interest being paid on the OPM would be nearly 7% so that chart could never convince me, on it's own, to buy Sydney property.