We will defy history if the bubble doesn't burst

Australia's housing bubble would defy worldwide trends and all historical evidence if it did not burst, a US investment fund has said.

HERE IS THE LINK

http://www.theage.com.au/business/p...story-says-yes-20100430-txcc.html?autostart=1

This was in todays news,

now ive heard of lots of reasons why the bubble will or will not burst,

but if all the facts are true, its probably the most convincing article ive personally read.

(I had my last post deleted for copyright for some reason when I included the original link but yet another poster did the same thing in another but wasn't deleted)
 
Last edited:
Property Meister,

This has been debunked several times before. Here's a recent example that I contributed in another thread:

http://www.somersoft.com/forums/showthread.php?p=663515#post663515

Their argument is that we should maintain a constant price to income ratio which ignores the fact that incomes are beating inflation by 1.35% pa. So, of course, all that extra spare income is put into housing thereby increasing the ratio steadily over time. Its an exponential, not a linear relationship.

Your link talks about the loan to income ratio which I presume to mean average single income, so that also doesn't allow for the increase of dual income families. It also doesn't allow for the easing in credit rules. An increase in acceptable LVRs means more leverage can be employed at the same amount of cash flow outgoing and also push up prices.

Looking at a simple income to price ratio in isolation completely ignores the other critical drivers of affordability. Affordability is a factor of disposable income, number of incomes and amount of leverage. Put all of them together and prices can and will rise faster than a mean single income.

It really is a simple concept but we are dealing with the media here...

Cheers,
Michael
 
All Australian capital cities are at or close to historical highs on a house price as multiple of income function. What markets are you referring to that have 'bust'?

mandurah off 25%
perth western burbs off 20% (recovered from 40%)

then onto the regions, eagle bay off at at least 30% for example.

not sure what the fluffy hedoniucs or reia numbers say but that is the reality. I guess I had similar issues when the Perth market was rising -cannington villas jumped from $220k to $370k in the space of about 6 months but the stats never showed that

am sure there are other markets suffering similarly
 
for the sake of the argument, let's assume when he talks of aust property he is talkign about Melb. I was going to include Syd but they have behaved too differently.
 
what do you mean? that regions have busted or they haven't?


I'd reckon Elfie means they haven't busted.

Property growth has slowed down in my area. It's done pretty well in 7 years or so and I think the smart money is going back to Melbourne and Sydney for the next cycle. Prices definately haven't dropped and economically things are great.

Just looking at growth figures for 10 years for most towns in my area we'd have flogged Sydney. And that's really in 7 years not 10, as nothing much happened till 2003. [same as Perth :)]

Tamworth, 10.2%
Scone, .....11.1%
Armidale,....9.6%
Gunnedah,..10%

RP data from the latest YIP mag. Not many Sydney suburbs have done that for 10 years. The figures for South Oz regions look amazing.

And of course looking at Sydneys figures doesn't give the real figure either as Sydney was booming before 10 years ago, probably starting 97 or so, so that makes Sydneys figures look less than they really are too. Sydneys figures over 13 years would look great, as it includes 97,98, and 99 as well.


See ya's.
 
Last edited:
in sunny canberra its like buying a can of coke in africa, by the time you put your hand in your pocket to pay for it. its already gone up! what the numbers are who realy knows as the data is already three months behind when its read out :eek:
 
Property Meister,

This has been debunked several times before. Here's a recent example that I contributed in another thread:

http://www.somersoft.com/forums/showthread.php?p=663515#post663515

Their argument is that we should maintain a constant price to income ratio which ignores the fact that incomes are beating inflation by 1.35% pa. So, of course, all that extra spare income is put into housing thereby increasing the ratio steadily over time. Its an exponential, not a linear relationship.

Your link talks about the loan to income ratio which I presume to mean average single income, so that also doesn't allow for the increase of dual income families. It also doesn't allow for the easing in credit rules. An increase in acceptable LVRs means more leverage can be employed at the same amount of cash flow outgoing and also push up prices.

Looking at a simple income to price ratio in isolation completely ignores the other critical drivers of affordability. Affordability is a factor of disposable income, number of incomes and amount of leverage. Put all of them together and prices can and will rise faster than a mean single income.

It really is a simple concept but we are dealing with the media here...

Cheers,
Michael

Grantham was referring to multiples of family income.

If you look at valuations in terms of average income, prices have risen significantly over the past decades:
http://www.ibhb.com.au/resources/valuations.htm


Sure the number of dual income families has increased from the 60s, but if prices and wages keep rising at historical rates, it will eventually require multiple generational incomes to purchase the same property.
 
Sure the number of dual income families has increased from the 60s, but if prices and wages keep rising at historical rates, it will eventually require multiple generational incomes to purchase the same property.

I *think* most people just pay IO anyway, so the loan is as multigenerational as you can get
 
in sunny canberra its like buying a can of coke in africa, by the time you put your hand in your pocket to pay for it. its already gone up! what the numbers are who realy knows as the data is already three months behind when its read out :eek:

Very true, and that's assuming you can actually find a can of coke to buy.

Glad I got into those Braddon properties when I did!
 
HERE IS THE LINK

http://www.theage.com.au/business/p...story-says-yes-20100430-txcc.html?autostart=1

This was in todays news,

now ive heard of lots of reasons why the bubble will or will not burst,

but if all the facts are true, its probably the most convincing article ive personally read.

(I had my last post deleted for copyright for some reason when I included the original link but yet another poster did the same thing in another but wasn't deleted)

Hey,

Did you end up buying a property yet?
 
Again its another interesting topic.
Why are the posters from WA showing more 'caution' compared to other regions. Could it be due to near term asset price growth.

Another interesting fact, track the number of posters from this whole forum to recent asset price growth. I think you will find quite a close correlation between the number of posters and recent price growth.

Its the same in the coffe lounge when it comes to the share market.
Whenever an obvious spurt happens in the share market, we get several coffee lounge posts about shares.
When the share market becomes 'boring', the posts drop off.

mmmm near term data bias.
 
In the long run, it's pretty hard to defy history. Those who've been in it for less than a decade will pounce on any "evidence" to suggest that property prices, like trees, will grow into the sky. Anyone who disagrees is a heretic.

Another interesting fact, track the number of posters from this whole forum to recent asset price growth. I think you will find quite a close correlation between the number of posters and recent price growth. .

So true. It's a rare to see people who've been in property for 20+ successful years acting bullish as prices go crazy. It's the yong 'uns who are blind to all reason. I have over a dozen IPs in Australia and I'm not buying anymore - I'm reducing my exposure in all but a few select localities. Not saying prices will crash but I do think those who are geared are going to get hurt as prices go sideways.
 
In the long run, it's pretty hard to defy history. Those who've been in it for less than a decade will pounce on any "evidence" to suggest that property prices, like trees, will grow into the sky. Anyone who disagrees is a heretic.



So true. It's a rare to see people who've been in property for 20+ successful years acting bullish as prices go crazy. It's the yong 'uns who are blind to all reason. I have over a dozen IPs in Australia and I'm not buying anymore - I'm reducing my exposure in all but a few select localities. Not saying prices will crash but I do think those who are geared are going to get hurt as prices go sideways.

Definitely seems to be a lot of young ones who are blind to reason. A lot of this can actually be blamed on their parents who have instilled in them that property only goes up, and if its expensive now it can only get more expensive. I have spoken to a few GenY'ers and told them that it doesn't necessarily have to be the case. They have been quite relieved to hear this because there is a lot of pressure on them to buy and surprisingly there are a few smarter ones who would rather opt for safety, save a bigger deposit, and not buy into the "must buy now" crowd.
 
Top