will house prices continue to double every ten years?

don't get me wrong ... have nearly seen it all over the last 30 years. first ppor was owned during 17%+ interest rates (associates were on 24% second mortgages) with almost instant capital gains of 100% when interest rates came off ... then no capital gains for the following 10 years.

divorce and done over by a "skase".

then was starting from scratch and buying around 1999 and again, nearly instant 100% gain over the next 3 years, then got caught at the top of the boom and nearly lost the investment lot due to high equity but poor cashflow (managed to hang on by the skin of our teeth but ppor was safe). a priceless lesson ... came back again cashflow wise in recent years, so combined with equity we are comfortable ...

see - been at the coalface :D
 
A good read is a book called "A fortunate Life" written by Albert? Facey about his experiences in WA in the early 1900. He bought a 4 acre farm in Tuart Hill (about 4 km from the city in 1913 for 450 pounds. Convert that to dollars, double in 13 times, split the 4 acres into 500 sqm blocks and the 7-10 year equation still is spot on.
 
So Yarrahboy (or are you Mick691 at the moment),
What do you think the sceptics were saying in 1965 or 1975 or 1985 or 1995?
I guess they would have been saying "wow, what an increase in property price we have just witnessed. How on earth can this continue?"
I hate to think anyone would have paid them any attention.......
stacks_image_1374_1.png
Chart is meaningless without context. Plot a line showing income growth on the same graph and you will see where the problem started.
 
Real_Melbourne_House_Prices_1965_-_2010b.JPG


notice the wage to property ratio is at 7.8


So Yarrahboy (or are you Mick691 at the moment),

What do you think the sceptics were saying in 1965 or 1975 or 1985 or 1995?
I guess they would have been saying "wow, what an increase in property price we have just witnessed. How on earth can this continue?"

I hate to think anyone would have paid them any attention.......

stacks_image_1374_1.png
 
No-one on a $67,116 wage is going to be buying a $524,500 property.
No lender is going to let you make repayments on a loan that consumes 85% of your wages.
But this argument has been done to death......where's Keith with his charts?
 
No-one on a $67,116 wage is going to be buying a $524,500 property.
No lender is going to let you make repayments on a loan that consumes 85% of your wages.
But this argument has been done to death......where's Keith with his charts?


How sure are you on that ? Helluva lot of "low doc" loans out there.
 
How sure are you on that ?
Yep, pretty sure :)

Helluva lot of "low doc" loans out there.

To use Token Funder's phrase: not so much.
And the ones that are out there, require a 20% deposit for a start.

Hadn't you better log off now and come back with a supportive post from Mick691? :D

I will probably get bored with this soon....but a bit like Kramer: He's a loathsome offensive brute, yet I can't look away ...
 
ha ha - true. $12k, $4k - hardly seems even relevant now huh?
Agree, seems like a pittance, but I'm sure in 1970 it was very relevant. I suppose in 40 years from now, people will look back at 2010 and say that $524K seems like a pittance to what prices are then.

Regards
Marty
 
Is that not the point of the chart?

e.g. that in 1970 someone on an average wage could have purchased a median property, but today that wouldn't be possible?

What was the population of Australia in 1970? What it is now? If there are only so many inner city suburban houses while the number of buyers far exceed who is going to end up getting the house? The one with the most money willing to pay the highest.

There are houses affordable with average wage. It's in outer suburbs. You want to make houses in inner suburbs affordable? Reduce the population of Australia to what it was in 1970 and I guarantee you the house price in inner city suburbs will drop back due to lack of demand.

Cheers,
Oracle.
 
What was the population of Australia in 1970?
12.66M

What it is now?
21M give or take

If there are only so many inner city suburban houses while the number of buyers far exceed who is going to end up getting the house? The one with the most money willing to pay the highest.
Good point Oracle. We now have 10M more people today. Not all live in Sydney of course and not all who do want to live in the CBD surrounds.

But all of that taken into account, there are not proportionately more inner city homes and so supply is restricted with increased and increasing demand = only one way for prices to head.
 
Yarramick, if your wage doubled over night how much money would you have to pay a mortgage? If my wage doubled over night I would have about 3 times the amount of cash to pay off my mortgage. If this is the case, what does comparing property price v wage achieve?

Gools
 
What was the population of Australia in 1970? What it is now? If there are only so many inner city suburban houses while the number of buyers far exceed who is going to end up getting the house? The one with the most money willing to pay the highest.
Look at the chart posted in the thread. You're telling me that population growth is the reason for the price movement for the last 10 years? There was higher growth in each decade from 1960 to 1990, yet somehow with lower population growth we manage a higher increase in housing against wages :rolleyes:

Same old property arguments that simply do not hold up when scrutinised.

No doubt the extra population adds some factor to the equation, but the real reason for house price growth has been the same as any other country with a housing bubble, easier access to more credit. If easy credit is removed (via rising interest rates, tighter lending criteria) the bubble will burst or at worst partially deflate.
 
You're telling me that population growth is the reason for the price movement for the last 10 years?

....

If easy credit is removed (via rising interest rates, tighter lending criteria) the bubble will burst or at worst partially deflate.
Have we had strong growth over short periods of time (bubbles?) before we had 'easy credit' ?

Easy credit was a small factor in the recent growth period. Population growth continues to be a long term contributory factor to rising prices, as does disposable income rising roughly in line with house prices, as does low inflation, as does limited/expensive land releases, as does a large proportion of people wanting to live in one of 5 or 6 v. small geographical areas.

I don't think anyone is saying that population growth is the sole reason for house price appreciation. The market is far more complex than that.
 
Have we had strong growth over short periods of time (bubbles?) before we had 'easy credit' ?
Easy credit was a small factor in the recent growth period.
Strong growth over a short period of time does not necessarily equate to a bubble (en example being Gold's rise over the last 10 years, it is strong growth over a short period, but comparable to other assets & wages I would say it is relatively fairly priced where it is today on a historical basis).

The last Australian house price bubble of signficance (e.g. comparable to today) was during the period 1880-1890 and was driven predominatly by the same factor as today (availability of easy credit).

Easy credit is not a small factor, it is the main factor (or multiplier if you will, which has jacked prices up to obscene levels). Take all your examples:

- Limited land availability
- Population growth
- Demand for specific areas

None of these would have been able to drive prices to where they are today without the easy credit, however you could drop any 1 of these factors and add easy credit and likely we still would have had a bubble.
 
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