Read interesting article today
Read more: here
Although, I am cautiously optimistic that real house growth will be higher than 2.5% but I do agree with the article that it won't be as high as it has been over past several decades. Discretionary income has to rise a lot and at the same time people would have to be satisfied to use that extra income towards higher mortgage payments for house prices to grow at 6-7% or higher.
Thoughts?
Cheers,
Oracle.
The RBA?s conclusion is that house prices would have to continue to rise at the same rate as they had for the past six decades for owners to be as well off as renters.
It calculated that the annual rate at which the real (inflation-adjusted) price of a house must rise for an owner to keep pace with a renter financially was just below 2.5 per cent.
Assuming real house prices increased at the historical 2.4 per cent, buying beat renting if the owner held for more than eight years.
However if the 1.7 per cent rate experienced over the past 10 years was used, owning only beat renting over a period longer than 30 years.
From the mid-90s the big story has been falling rates but that?s not going to be a factor in the next 20 years,
Read more: here
Although, I am cautiously optimistic that real house growth will be higher than 2.5% but I do agree with the article that it won't be as high as it has been over past several decades. Discretionary income has to rise a lot and at the same time people would have to be satisfied to use that extra income towards higher mortgage payments for house prices to grow at 6-7% or higher.
Thoughts?
Cheers,
Oracle.