Will property values double by 2017?

[Dazz]

lots of people drive cars they can't afford, and live lifestyles they can't afford. Great. This means that they have areas to cut back expenditure to pay the rent when it goes up. People make their own choices, and live with the consequences. If 25 year olds want to drive a BMW and go out every night, and go overseas every year, great, but don't bleat about property being too expensive. Oh, and while you're whinging, nip down and pay the rent, yeah?

Fantastic in theory VY, but my real life experience is that the people you are describing don't go down the budgeting and prioritising route.

If the rent falls behind, or isn't paid at all.....the threat of being evicted or kicked out of their accom. is nowhere near enough to force them to change their financial habits that backed them into the corner in the first place.

The massive advertising pressures of retailers in all forms of media and their peer group who indulge to the same extent, simply overwhelm the bleatings of some perceived boring wealthy old fart Landlord, or crusty old PM with grandma glasses, writing some belated letter threatening to kick them out unless they give him their beer and party money. Big deal. LET'S PARTY !!!!!!!!

 

[VYBerlinaV8]

Agreed Daz, and this is why we have bonds and landlords insurance. But I think as times get tight, Aussies tend to be better with paying the rent than some others (anecdotal evidence only) .

 

[daviddanae]

I voted probably (only because the option "hope so" wasnt there)!

 

[kaf]

MBL,

I have a firm belief property cannot continue to double every 7-10 years longer term as posted in http://www.somersoft.com/forums/showthread.php?t=32463

Hi J Martin

Just wanted to say that I just read the thread you started (had missed it in May) and really enjoyed it! Now there is a nice example of SSers discussing using facts not exclamation marks and actually having a productive and interesting brainstorm. Well done!

kaf

 

[Nullagine]

House prices could continue to "grow" at ~8% per year in nominal terms - through inflation of the money supply. The money supply will inflate to the extent that people are willing to swap equity for debt. There is likely to be a limit to the debt to equity or debt to income ratio - as suggested in thses graphs:

 

[MichaelW]

Nullagine,

Thanks for sharing. Do you have any links where I can read more about this sort of stuff?

I'm very interested in the macro-economic environment given I'm basically a long term buy and holder. Anything around demographics or money supply I'm very interested in.

Many thanks,
Michael.

 

[caz]

There are some really interesting Points of views here. I too hope prices double as they have historically. Although I am not sure.
In recent history prices have increased as lending has increased. Banks have increased lending from the husbands income alone to husband and wifes incomes and now less deposits and longer morgages.
With interest rates at a historically low rate I do wonder where the money will come from especially as rates rise.
Will shared equity increase ?
Will wages continue to rise and both partners work full time until retirement to pay off a morgage ?
At the moment wages are increasing due to such a great few years in the stockmarket and economy.
I feel that we may have harder times before we have easy times again. I'm not really sure when and I'm hoping it isn't too bad.
I know my parents know of lots of people who have been burnt when good times turn bad and they were over committed especially in the early 90's.

The way we are playing the market is that if we follow too much doom and gloom advice we will definately have nothing but cash in the bank deflating with inflation or we try and build a portfolio well within in our safety margins.
Sure if interest rates double, rents halves and we lose our jobs we will be stuffed but I think alot of people will be, including friends with no investments and just a PPOR morgage.
We like to fix rates but what happens if in 5 years the fixed rate period is over and the rates and twice as high, property is unsaleable at a decent price. Well it is something we would have to decide about closer to the time.

This is a fairly negative post, but they are things I think about.
Hopefully thou everything doubles and this is why we feel the risk is worth it.

 

[lizzie]

http://www.somersoft.com/forums/showthread.php?t=32463[/url]

now that was a good thread. some interesting viewpoints. a few things may have been overlooked - and it might be a good time to bump that thread to the top.

one factor is that when the situations change (higher prices, less affordability etc), the banks will change their rules. from memory, in japan and some of the european countries they have mortgages that are cross-generational. something like 99 year mortgages that transfer from parents to children. how many products are the banks offering now, to allow affordability, that weren't available 20 years ago. women had difficulty even borrowing in their own names 20 years ago!

you'll also find that even tho the average price will climb higher, there will still be affordable housing as the outskirts push further out - block sizes may decrease, the mcmansion may be a passion of the past and apartment living may become the big thing within 20km of the city - think of new york, apartments overlooking central park are now selling in the 100's of millions. makes sydney (the most expensive australian city) appear peanuts when the most expensive property is still in the 10's of millions. what happens is that people move to where it is affordable and commute, or work closer to home.

this working close to home will be even more interesting in the next 20 years, with the increase of telecommuting - working from home via computers and webcam etc. even at this stage hubby could easily work from home, but he goes into work to be "seen". once businesses overcome their shyness of telecommuting, it could be a major driver in the future - so therefore city living is purely lifestyle driven, and not work driven.

a great book to read, to put everything into perspective, is donald trump's "strategies for real estate". now they be some scary figures - but current and relevant for the usa, and perhaps not to distant for australia.

 

[Bantam Roosta]

think of new york, apartments overlooking central park are now selling in the 100's of thousands. makes sydney (the most expensive australian city) appear peanuts when the most expensive property is still in the 10's of thousands.

Not quite sure what you mean here lizzie. Do you mean millions? Haven't heard of anything in Sydney for under a 100k for a while, not that I pay any attention to that market.

I do agree that lifestyles change though and people will expect very different things in years to come.

BR

 

[mbl]

now that was a good thread. some interesting viewpoints. a few things may have been overlooked - and it might be a good time to bump that thread to the top.

one factor is that when the situations change (higher prices, less affordability etc), the banks will change their rules. from memory, in japan and some of the european countries they have mortgages that are cross-generational. something like 99 year mortgages that transfer from parents to children. how many products are the banks offering now, to allow affordability, that weren't available 20 years ago. women had difficulty even borrowing in their own names 20 years ago!

you'll also find that even tho the average price will climb higher, there will still be affordable housing as the outskirts push further out - block sizes may decrease, the mcmansion may be a passion of the past and apartment living may become the big thing within 20km of the city - think of new york, apartments overlooking central park are now selling in the 100's of thousands. makes sydney (the most expensive australian city) appear peanuts when the most expensive property is still in the 10's of thousands. what happens is that people move to where it is affordable and commute, or work closer to home.

this working close to home will be even more interesting in the next 20 years, with the increase of telecommuting - working from home via computers and webcam etc. even at this stage hubby could easily work from home, but he goes into work to be "seen". once businesses overcome their shyness of telecommuting, it could be a major driver in the future - so therefore city living is purely lifestyle driven, and not work driven.

a great book to read, to put everything into perspective, is donald trump's "strategies for real estate". now they be some scary figures - but current and relevant for the usa, and perhaps not to distant for australia.

I wouldn't be taking Donald Trump all that serious Lizzie....he is more of a personality rather than an investor......he is not as rich as he play's up to be.....he is a brand name more than anything.

You want good advice......follow someone like Warren Buffet (heard of him ?), and read a book by his mentor Ben Graham which is called 'The Intelligent Investor'.....it is over 50 years old, however still a very worthwhile book today.....a 'bible' of investing.

 

[Nullagine]

Do you have any links where I can read more about this sort of stuff?

http://www.debtdeflation.com/blogs/

Otherwise, these graphs can be constructed from publicly available data - mostly on the RBA's site.

Aus has been through a credit bubble before:

 

[geoffw]

mbl

Is the condescension necessary?

 

[mbl]

mbl

Is the condescension necessary?

Where was I condescending ? Please point it out ....

cheers, mbl.

 

[lizzie]

You want good advice......follow someone like Warren Buffet (heard of him ?)

more childish condemnation - from someone who knows nothing about me. can we close this thread and bump up the other more constructive debate instead?

 

[geoffw]

Where was I condescending ? Please point it out ....

cheers, mbl.

follow someone like Warren Buffet (heard of him ?),

mbl, your attitude in this forum is very childish. Contrary views are welcome, but a continual shouting that the sky is falling, with very little to back it, will not help.

You are very close to being shut down.

 

[mbl]

Ok....I will refrain from making any comments that are not 'pats on backs', and 'feel good' comments. I mean come on !!!! How on earth is what I said condascending. I was asking Lizzie if she had heard of him, so that she can extend the conversation and tell me why she would prefer advice from the likes of Donald Trump and not soemone like Warren Buffet.

I feel people's complexes are coming through.......

Lizzie.......Okay, I will be more clearer......why would you prefer the investment 'strategies' of a Donald Trump, and not from the likes of Warren Buffet (value investing) ?

I'm just trying to open a few minds.

 

[Nullagine]

I'm just trying to open a few minds.

You first.

 

[geoffw]

I feel people's complexes are coming through.......

What the?

That comment added nothing to any intelligent debate, and is quite rude.

mbl, if you wish to continue, please confine comments to facts and argued opinions, not just personal slanging.

 

[BoatBoy]

mbl, your attitude in this forum is very childish. Contrary views are welcome, but a continual shouting that the sky is falling, with very little to back it, will not help.

You are very close to being shut down.

Thank you very much

 

[lizzie]

Lizzie.......Okay, I will be more clearer......why would you prefer the investment 'strategies' of a Donald Trump, and not from the likes of Warren Buffet (value investing) ?

weel folks, down at the yokel we's don't have much of a library. only two books, but they sure have purdy pictures in them ...

i have extensively read of both mr trump and mr buffet and admire various parts of their strategies (investing or otherwise). however, for the particular point i wanted to make (value of property in a major western city), mr trump was relevant, whilst mr buffet wasn't.

so much for trying to get this thread back on track ...

p.s. yes, i did mean "millions" but must've had some psych barrier their for a brief moment .

p.p.s. no i haven't read mr graham and so must add him to my extensive library of well-read investment books, books from all eras and all sources and all points of view.