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So maybe 6% all told.devo76 wrote:In the last 100 years i know Australia has gone through many booms.many busts,recessions,depression,war,oil scares,stock market crash,s. interest rate rises and falls, government changes,inflation changes etc etc. While all this has been going on house prices have rolled along in a general upward direction.My question is does a graph exist showing mediam house prices over say the last 100 yearsHowdy Devo. I've just got my hands on a chart of a chart of Australian average house prices over the last (nearly) 150 years. Thought you'd be interested. You might have to vary your original view that "house prices have rolled along in a general upward direction". As I've pointed out repeatedly before – that's a relatively new phenomenon that has coincided (duh!) with a period of unusually high inflation followed by unusually high (unsustainably so) credit growth.
It's a bit hard to see at this scale, but the declines in house prices in the period following 1890, 1910 and 1930 (all coinciding with credit growth falling below GDP growth) all exceeded 30%. They look like little bumps in an eternal upward trend at the broad scale, but they were in fact very significant. Also worth noting that prices in 1950 (inflation adjusted) were at a level first reached in the mid 1880s. No real growth for 65 years.
Of course things are a little different today, what with a Reserve Bank that believes it has the power to keep inflation constantly growing at its target rate. We'll see.
Cheers, F. [cowboy2]
crashy wrote:money is pulled out of equities and is reinvested in property. thoughts?What money? It's the same credit expansion that's been the main force pushing shares higher, property higher and national productivity higher for the last decade. Credit = loans. People borrowing to buy. If they pull money out of shares they'll pay back loans first. This also adds volatility to the market… higher leverage = more flighty investors with more to lose = wild and unpredictable swings.
Geez, I know people that have 'pulled equity' out of their home to buy shares! Crikey, talk about doubling down! Excessive borrowing led to excessive house price growth which led to further excessive borrowing (against house price growth) to fund further excessive growth in house and equity prices…
Forget about the 'subprime crisis', what we should all be focusing on is the liquidity crisis. If lending slows significantly, we'll have simultaneous falls in everything that has been bid-up by the credit bubble. Equities, house prices, art, muscle cars, numismatics, domestic productivity… you know, all that stuff. I posted a two-part rant about this here and here if anybody cares to read it.
I'm not keen to try to make a comprehensive argument here either way, but I will make one point. In some ways share investing is lower risk than property investing. I could buy today shares in one of the world's largest telecommunications companies and be sure to get an annual return of around 6.5% fully franked. This is a high-quality investment. Capital gains however, are not guaranteed, nor is the value of the invested capital. But this also is true of investments in rental properties. The difference is, a net yield of 6.5% is not available on high quality residential real estate.
An investment that relies on uncertain future capital growth to achieve a decent gain is inherently more risky than one that relies only upon its relatively certain future profit flows.
Cheers, F. [cowboy2]
Disclaimer: I am not a financial advisor. Don't read the above as advice and please don't try to sue me if your investment strategy doesn't work out.
Disclosure: I currently own no shares outside of my superannuation fund. I sold up last year in expectation of a serious and broad-reaching downturn in sharemarkets. Despite the recent turmoil and ~7% market shakedown, the All Ords index is still 11% above my sell-level.Erm.
Was I making fun of you or just being a knob generally?
Maybe when I post there about a thread here, I should add this to the thread under discussion:
???
Age: Early 30s.
Outlook: The end of this recent period of easy money and hyper-debt expansion is going to have a profound influence over my life. This is not a normal state of affairs:But credit card debt is trifling compared to mortgage debt:
Courtesy of Steve Keen: http://debtdeflation.com/blogs/Cheers, F. [cowboy2]
"does a graph exist showing mediam house prices over say the last 100 years and also on this graph indicate the major influences on prices like the ones mentioned above and when they happened"
I've got another one for you – one of my own. As far as I'm concerned, this shows clearly the primary driver of house prices, and the primary driver of the boom/bust cycle. Try working out where the booms and busts would sit on this chart. Then where history's great house price booms occurred.
Moosehead<font wrote:Households are spending about the same on housing as they have before, but a lot more on the air-con, 2nd fridge, dishwasher etc…Not quite, Moose. Households are putting the same proportion of total expenditure toward housing, but over those 20 years, the amount of household income being spent has risen from around 90% to around 104%. And this is only going to rise over time, given that future buyers will be taking on loans and repayments that are much larger relative to their income.
On a related note, did you realise just how much of our expenditure relies on debt these days? It's frankly worrying (and absolutely unsustainable).
Chart courtesy of Steve Keen: http://debtdeflation.com/blogs/Despite all this talk of a strong economy / export driven economy or what-have-you, the primary source of income in this country is debt! Our own debt! We're effectively borrowing to pay ourselves.
The growth in mortgage debt alone added the same amount of money to our economy in the first quarter as our exports!
We're now addicted to debt, and absolutely, hopelessly trapped. At some point in the future, the rate of debt growth must slow to our rate of income growth or below. That implies a reduction of 50%+. In other words, more than 50% of our current annual debt growth is the unsustainable bit. And if debt growth were to lose that 50+% tomorrow (ie become sustainable), we'd be plunged almost instantly into recession. In fact, the only thing that has kept our economy growing for several years now has been this debt growth… ugh! This can't end well!
What was the question again?
F. [cowboy2]
Actually, I do have something that might help satisfy your curiosity. CommSec produced the following chart a few years back (it's a little outdated):
You can derive the rest of your data from this. I actually have this one pinned above my desk with comments all-over it (WW1, roaring 20s, great depression, WW2, diggers return, BBs born, golder era, BBs buying, high inflation, sharemarket crashes, interest rate peak, disinflation, tech boom/bust, the great housing bubble etcetera). And I've scrawled the ratio of debt to income over the top as it is closely correlated to the house price to income ratio.
You can get a high-res version from the source here:
http://www.abe.org.au/papers/David~Rees~Presentation.pptCheers, F. [cowboy2]
Hmm. Interesting. This is apparently the first time such a move has been made during an election year, though yesterday I read that Hawke was re-elected just 9 months after interest rates hit 17%, so the claim must refer to calendar years.
"VOTERS normally don't mind rising interest rates. Just ask former Labor prime minister Bob Hawke, who won his fourth election in March 1990 despite home loan rates peaking at a record 17 per cent only nine months before polling day."
We've heard plenty of wailing in the media about how this hike will effect "average Australians", but how will it effect the "average propertyinvesting.com forumite'? The savers can count their pennies, and consider their reduction in borrowing capacity. The debtors can tell us whether the hike will put pressure on their finances and what they might have to go without.
I'll start. Providing the banks pass on the increased rates to savers, I expect to be $2.30 better off per week. In other words, not enough to buy a cup of coffee, therefore not worth even thinking about.
Next?
crashy wrote:wthankyou for proving once again how much smarter you are than us.You're most welcome!
Now, how's the problem progressing? Mortgage broker back in the office today?Cheers, F. [cowboy2]
Some more details on the above via APRA.
The main sellers of securitised loans in May were:- Westpac: total securitised loans outstanding up 1200% in one month (from $550 million to $7.2 billion)
- Commonwealth: total securitised loans outstanding up 30% in one month (from $17.7 billion to $23.1 billion)
- Citigroup: total securitised loans outstanding up 43% in one month (from $2.1 billion to $3.1 billion)
- ANZ: total securitised loans outstanding up 60% in one month (from $597 million to $955 million)
I can only think of two explanations. Either the larger sellers were dumping some of their dodgier loans in a hurry, or they were trying to shore up their balance sheets in preparation for tighter credit conditions ahead.
