What the RBA really thinks about house price values

Hi Prop,

Another great article out today from Shane Oliver at AMP summing up the state of the Aussie Resi property market. I think he makes some good points. Basically reckons we're likely to see prolonged stagnation for a while with growth flat for a few years to get rid of a 13% over-valuation before then tracking inflation so flat in real terms.

Not the end of the world, and good enough for me. Property investment for me is a cash flow game with capital growth only important in that it accelerates how quickly I can buy again. But servicability is first and foremost in my mind with LVR a secondary concern.

Oliver's Insights - Australian House Prices: Is the crash upon us?

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Cheers,
Michael
 

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I saw that chart yesterday (from Shane Oliver), it is one of the most confusing I have ever seen.

It claims to be priced in real terms (inflation adjusted), but looks far different to Steve Keens who charts the same over a slightly different time frame:

keenmay311.gif

http://www.propertyobserver.com.au/...-a-lot-further-than-people-expect-steve-keen/

Granted Oliver's is a log chart and Keen's is a not, but still the final numbers are way out.

Perhaps it was just mislabelled and is in nominal terms... anyway I agree with the implication that the chart shows, that we have a bear market ahead and has a fair way to go...
 
which Aussie house/s is he talking about because not a lot of that applies to anything around where I live?

"Average of six Australian capital cities" - makes it pretty useless...shows how high level statistics can become distracting
 
"Australian house prices won’t plunge, a senior Reserve Bank of Australia (RBA) has said."

gees, that's good to know. didn't know that was in question?!
 
Even if Oliver's graph is correct, it appears that whenever it comes back to the trend, it cuts straight through the line and goes well below trend, so it won't be a further 13% drop, try a 26%+ drop from here as it swings to the low side of the trend in a typical deleveraging over-correction.
 
this mythical house was above trend from about '66 to '86 so that would be a terrible conclusion.

"$159,500 in Houston, Texas." - that would barely pay for the fuel and govt levies to carve up a block in this country. Cars are half (or less) the price in the USA, I am awaiting for the great car crash so I can buy my new mercedes for $30,000... you just wait, that day is a comin'
 
Discounting mining areas min to no real growth in property values over five years now

Ausprop said:
"Australian house prices won’t plunge, a senior Reserve Bank of Australia (RBA) has said."

gees, that's good to know. didn't know that was in question?!
Click to expand...

Wondering how people are faring in the neg geared space with property values not doing much for five years now - need at least 10% growth to access equity - love to hear from others on staying focused and positive during such a long flat time period - we are holding with a long term investment perspective but how are others viewing the situation?? Rates keep going up; body corps gone up a lot so holding costs increasing whilst values remain relatively stagnant for five years now in a climate of very frugal lending practices
 
In a typical 10 yr cycle you could expect 6-7 of those years to be reasonably flat. So there is nothing new about that.

Yes, BC fees mainly driven by insurance premium increases, have risen. But interest rates have come down and rents have increased. I'm actually finding it easier to hold at present.
 
Agree with Propertunity about the cycle,

I am very much boring buy and hold...to the point where i try and forget ive even purchased after ive made the decision to :)

I remember pre GFC when mortgage rates were up round 9%...i was more stressed then, with less IP's than i am now...i am actually quite relaxed about the holding pattern we are personally in...and thats not due to any brilliant planning.

As for holding with little or no growth...once again...i have the boring old give it some time attitude....
 
Oliver's graph above doesnt seem to show the massive house price increases that we had in 1988 where everything in Brisbane doubled in value within six months. Blame Expo 88. Our prices then increased pretty radically again over the following two years.
 
Hi Prop

You know those interest rate decreases we got in the last few months? Well I just checked my NAB account and my package fee has increased expotentially to compensate the poor old bank. Anyone else notice that?

Rents may have been generally increasing in Sydney over the last five years, but they haven't in Brisbane.

Rchad, we are in the same situation as you - we bought a couple of years ago expecting it to be at the bottom of the downturn. O well, we can afford to keep going, but would much prefer to spend that same amount of cash each year on an overseas trip instead. We are currently purchasing something in a mining town to make hubby and I feel better.
 
HotRod said:
Um, maybe because it's not purely looking at Brisbane and maybe because it's logarithmic?
Click to expand...

Yes, I know it is not looking at any one location, that is why it is skewed. Sorry if I am preaching to the converted. BTW, Mate, but what's logarithmic?
 
natedog said:
Agree with Propertunity about the cycle,

I am very much boring buy and hold...to the point where i try and forget ive even purchased after ive made the decision to :)

I remember pre GFC when mortgage rates were up round 9%...i was more stressed then, with less IP's than i am now...i am actually quite relaxed about the holding pattern we are personally in...and thats not due to any brilliant planning.

As for holding with little or no growth...once again...i have the boring old give it some time attitude....
Click to expand...

Thanks to both yourself and Propertunity for validating reality - it is nice to hear from like minded people instead of all the pessimists I often note around me - given we are in it for the long haul will continue to resist the temptation to accept invitations to listen to the constant 'background' noise from media and commentators and people with negative mindsets
 
Angel said:
Yes, I know it is not looking at any one location, that is why it is skewed. Sorry if I am preaching to the converted. BTW, Mate, but what's logarithmic?
Click to expand...

It means the vertical axis of the graph goes up exponentially (1, 2, 4, 8, 16, 32) instead of going up in a straight line (1, 2, 3, 4, 5, 6).
 
hobo-jo said:
I saw that chart yesterday (from Shane Oliver), it is one of the most confusing I have ever seen.

It claims to be priced in real terms (inflation adjusted), but looks far different to Steve Keens who charts the same over a slightly different time frame:

keenmay311.gif

http://www.propertyobserver.com.au/...-a-lot-further-than-people-expect-steve-keen/

Granted Oliver's is a log chart and Keen's is a not, but still the final numbers are way out.

Perhaps it was just mislabelled and is in nominal terms... anyway I agree with the implication that the chart shows, that we have a bear market ahead and has a fair way to go...
Click to expand...

Assuming they use comparable, if not the same data, wouldn't Keen's chart be the one that is in nominal terms?
 
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