Random Question.
Why must property prices return to 3-4 times the average wage??
Is this a fundamental or an assumption.Adrian Cahill | AdrianCahill.com Personal Development Expert
http://adriancahill.com/from-investor-to-coach/
Email Me | Phone MeHere since 2002, however things have evolved over the years.
adriannqld wrote:Random Question.Why must property prices return to 3-4 times the average wage??
Is this a fundamental or an assumption.many seem to think thats what the number used to be , so thats what it should be now and in the future
if you beleive that everyone should be able to buy a home then its a nice social objective, and more affordability would add to general activity you would think.
personally I think that this tends to be bit of a BS number and maybe should only be used as a guide to overall trends. Yes its more expensive now than in the old days …. what makes us think we have a right or expectation to levels that existed in the days? how many off us want to back track there as a way of life? not many i'm tipping….even though things like peak oil/global warming/sustainability may put us there kicking and screaming.
The balance between wage multiple to house prices is significantly affected by your expectations (where do I want to live and what do I just have to have) and earnings (am I prepared to pull my finger out/take risks to be more than an average wage earning drone)
Speaking of prices things still seem to be going strong in Vic. Just came back from attending 2 auctions and both houses got sold. Not that many people attending but the buying power and demand is still strong. I don't think people in Australia are climbing much of a wall of worry at all..
Until commodity prices pop and companies go under and jobs are affected, times are prob going to be good still. Lets hope commoditiy prices stay just where they r right now.
Enjoy:
AUSTRALIA'S economy is looking even more fragile amid reports that some mortgage lenders are repossessing homes for defaults of as little as $1000.
http://www.news.com.au/couriermail/story/0,23739,24078036-952,00.html
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ItalianDragon wrote:Enjoy:
AUSTRALIA'S economy is looking even more fragile amid reports that some mortgage lenders are repossessing homes for defaults of as little as $1000.
http://www.news.com.au/couriermail/story/0,23739,24078036-952,00.html
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I really dont know why you post on here. Your point is taken. We know how you feel about the market here in australia.You are not here to help in any way. Let go.
Devo76 may I ask how "Italian Dragon" is not here to help? Just because he is not here trying to talk up the market or tell people to buy dosnt mean he's not here to help, if anything he's is making people more aware of what is going on in the market such in this case as all the bank repossessions going on at the moment due to morgage stress which does affect the market. It annoys me when property investers and real estate agents come on here and just try 'talk up' the market and how prices are going to keep booming etc. then when someone comes on here and looks at things from a different angle they get told to go away. I think anyone that is going to buy property at the moment do your OWN research and dont listen to bias opinons from people who have an invested interest in the market continuing to boom.
bias is shown here in both directions, +ve and -ve, there are some here that preach gloom and doom and seem to rejoice in that and the pain of others…….like the "enjoy" comment when posting a -ve article. Its easy to do a search on posts by individuals, when you do that its fairly easy to see who is trying to help others and who is trolling or just pumping up their own tyres. The desparate need to feel superior displayed sometimes gets to some people and they bite, others just let it go.
Paul22M wrote:Devo76 may I ask how "Italian Dragon" is not here to help? Just because he is not here trying to talk up the market or tell people to buy dosnt mean he's not here to help, if anything he's is making people more aware of what is going on in the market such in this case as all the bank repossessions going on at the moment due to morgage stress which does affect the market. It annoys me when property investers and real estate agents come on here and just try 'talk up' the market and how prices are going to keep booming etc. then when someone comes on here and looks at things from a different angle they get told to go away. I think anyone that is going to buy property at the moment do your OWN research and dont listen to bias opinons from people who have an invested interest in the market continuing to boom.Fair enough. i just question the motive behind such short 1 liner post or links. Im all for information from both sides. I am now a lot more aware of the down sides to investing thanks to this. But in the end this is a INVESTORS forum with the majority deciding to use it to increase their wealth or knowlage. Sometimes i feel the comments are just purely a attempt to put a downer on investing. Not to give a friendly warning. If you are a genuine person looking to share his knowlage and research then' italian dragon" i am grateful.
But in the end i dont go on the tour de france web sites and tell them to buy a car do i ?
Ahhhh that article reminds me of the good old days.
back in 1991, had one client arrested and two promised cheques fall over on a shipping delay. 30K I was counting on gone. I owed Citibank $4400 and was 35 days late. Got a letter saying that if all arears and current was not paid, the house would be repossessed at that time. Wife not happy……., made it ,but these guys were serious.
Had a client who was a Citbank roving manager. She told me one of the more aggressive managers from the late 80's was spending more time kicking people out of their homes than making loans. Their theory was "if you leant it you collect it".
Simple really, wait for them to leave, get in locksmith, removalist, sherriff, put the worldy goods on the street, wait for them to return, (guess he sat on the lounge) and give the legal notice saying if they try to reenter they will be criminally charged – "have a nice day" and that was Sydney lower Nth shore.
Ohhhhhh the good old days are coming back….
Ok guys, sorry for the "enjoy", I`m not a natiev English speaker and OFTEN I still do many language mistakes, I did not really mean to enjoy such a painful news.
Anyway, I`m here to help and sharing news and share opinions.
Like this other one:
http://www.news.com.au/business/money/story/0,25479,24043852-5013951,00.html
Debunking housing myths
By Ed Shann July 19, 2008 10:45am
- Economist says house prices can and will fall
- The number of unsold houses on the market is rising
- International markets have already seen sharp price drops
THERE are two housing myths worth debunking. The first is that house prices never fall. The second is that because underlying demand currently exceeds new supply, house prices will keep rising.
Neither is true, Australian house prices can and will fall.
US house price falls of 15.3 per cent over the past year get most publicity, but Irish and British house prices are also falling sharply.
Ireland is down 9.5 per cent and Britain 8.7 per cent. Forecasters predict falls of 30 per cent in US and British house prices and 15 per cent in Ireland.
New housing starts have halved in Ireland and dropped about 30 per cent in the US and Britain.
ANZ economists claimed recently that Australian house prices have never fallen and there is no reason why they will. They are not historians. The house price series they use only starts in the mid-1960s.
You may think house prices never fall because you have never experienced them. However, Australian house prices have fallen previously and house prices are falling overseas.
Of course that does not necessarily mean Australian house prices will fall now, but there is no law of nature that says they cannot fall.
The optimists argue that underlying annual demand for Australian housing is 180,000 units and new starts are only 150,000. They conclude that house prices are likely to rise.
However, underlying demand is a theoretical concept using long-run trends in population growth and household formation. In practice, high house prices mean kids stay home longer, rather than buy new housing and students rent houses together rather than separately.
Actual demand for new houses is currently below underlying demand.
The house price surge was largely due to people bidding up prices of existing housing as interest rates fell and they could access funds more easily.
The rise in interest rates and tightening credit standards reverses the incentive to trade up to better housing. Home loan approvals have dropped 23 per cent in four months, so demand is falling and rates are still rising.
The number of new houses built does not determine supply. About 10 per cent of houses, or over 800,000 houses, are vacant at any time, for example holiday houses.
Financial pressures push empty houses onto the market. Lower clearance rates mean the number of unsold houses is rising. Supply will rise further as share prices fall and unemployment rises, forcing sales of existing houses.
Australia has rapid population growth and mining is boosting income growth. We did not have the large influx of new low-income house buyers that more lax US credit standards allowed. So while house prices may not fall as sharply here as overseas, they will still fall.
Investors renting out houses will be squeezed by rising rates and realise capital losses are possible.
Rents will rise and house prices fall until housing returns are comparable with other assets.
That will improve housing affordability for first-home buyers and eventually stimulate the next upturn.
IF…. we are investors and not traders then we are in it for the long haul i.e. at least 1 if not multiple cycles. So assuming you can afford to hold your existing portfolio through the tough times, as investors we should be happy with a correction in the market as it provides good buying opportunities. I have two keen interests as a result:
1 – finding some great value deals between now and say the next 12 – 24 months. I believe there is a correction starting right now, but I don't know how deep it will be so I will buy when I believe I have found good value deals. And I will spread my purchases over those 12-24 months so if the correction goes deeper (or not) I will have averaged my buying cost. Once everybody has declared that Aussie property is doomed, will self destruct and never receover again it will be time to get greedy!
2- the robustness of the australian housing market in the long term i.e. 5-10-15 yrs from now and that is where long term trends like migration, demographics, economy, growth in China do play a meaningful role. I believe longer term the Australian housing market will be robust and will show healthy upward trend.
yarpos wrote:bias is shown here in both directions, +ve and -ve, there are some here that preach gloom and doom and seem to rejoice in that and the pain of others…….like the "enjoy" comment when posting a -ve article. Its easy to do a search on posts by individuals, when you do that its fairly easy to see who is trying to help others and who is trolling or just pumping up their own tyres. The desparate need to feel superior displayed sometimes gets to some people and they bite, others just let it go.Hey Yorpos.
There are angle myself , I've been saying she's gonna dump for 2yrs but my reasons are greed in Australia now. It's ruining the country for us , our children.
Do you want your kids to be able to buy a house , their kids and theirs – afford food , schooling , cars , live fairly , well actually I want to have one waiting for mine but that's not the point .
Australia is very unhealthy and unsustainable right now for the longer term , for the good of the country and our families . It's become ridiculously expensive on every angle and sector . It's no good for anyone and the costs and greed in everything is really starting to make me sick to be honest .
There's no scruples anywhere here anymore it's just about money and how much some A/H can bleed out of you .
Not a good look or a healthy one long term .
Even this bank stuff , what a joke , poor thing only making 3 billion instead of 4 this year – I'm sad for them. What the hell difference does it make they'll only put up fees, charges and rates and bleed it out of us anyway and the country will let them.
We have the dearest banking sector in the world to I believe !
If and when things dump I'll cop it myself – it has to be done.
CheersHi Mister
You paint a fairly bleak picture. Where do you think its substantially better than here? we live in a western commercially oriented democracy, so greed or the profit motive is a big part of that.
Re your question yes I want my kids to have a life and my 20 somethings are buying homes and getting on with life in their own way (one with my help and one without). Really I dont think things are that bad but I have always expected to be self sufficient and I am not affected by the wrongs of the capitalist system…….as long as they dont make it compulsory for me.
Erik,
You realize that the real-estate in Japan has been crashing for decades already ?
Are you ready to invest your money into something that will keep going down every year , costs you a LOT of money per month ( negative gearing ) and on top of that have 10% inflation ?Everything looked similar in Japan 20 years ago to Australia now. And their housing market has been crashing lower, and lower… and lower every year, without exception. I think a house there is worth 10% of what it was worth in the height of their bubble.
Scamp
Thank god someone knows something about investing.
I agree with you entirely, being a professional investor myself.
Unfortunately, as people have short term memories, people buy investments based on emotion on what has been doing well. This means they are buying high.
All investors should know the basic principal of investing : buy low / sell high. or, do not buy high / do not sell low.
Prices are only low either after they have fallen in price a lot or after many years of not going up in price. Prices are high after they have gone up rapidly over a relatively short period of time due to economic bliss.
Buying property in 1998 to 2000 was a great idea as the price did nothing for 10 years. You could buy a house for less than you could rent one. Interest rates were very, very low.
Now the opposite has happenned.
Interest rates have gone up, speculators have driven up the price of houses, individuals have taken on way too much debt in the belief property prices cannot fall. The economy is slowing, the unemployment rate will start to go up, people will start to lose some jobs.
Bang
The house of cards will fall big time. When property prices crash, people with debt lose everything.
No one has been listening to the warning to Australia from the IMF (International Monetary Fund) that Australian Property prices are 40% overvalued. They did not listen to the warning in the US either.Investors – do your research – but do not get advice from property developers, banks or real estate agents – get it from economists and asset allocators.
yarpos wrote:Hi Mister
You paint a fairly bleak picture. Where do you think its substantially better than here? we live in a western commercially oriented democracy, so greed or the profit motive is a big part of that.
Re your question yes I want my kids to have a life and my 20 somethings are buying homes and getting on with life in their own way (one with my help and one without). Really I dont think things are that bad but I have always expected to be self sufficient and I am not affected by the wrongs of the capitalist system…….as long as they dont make it compulsory for me.
Sorry about that I don't like bleak either but I just feel it's crucial the whole place gets a wake up call because if you check things out compared , you see we are constantly ripped off , way over taxed , way over everything but house prices I mean 8-9 and 10x the aver' wage it's just no good .
My kids are 3 and 4 so looking 20yrs time and their kids and theirs's , so I'm thinking ahead as now is bad enough so could you imagine ?Owell
longterminvestor wrote:ScampThank god someone knows something about investing.
I agree with you entirely, being a professional investor myself.
Unfortunately, as people have short term memories, people buy investments based on emotion on what has been doing well. This means they are buying high.
All investors should know the basic principal of investing : buy low / sell high. or, do not buy high / do not sell low.
Prices are only low either after they have fallen in price a lot or after many years of not going up in price. Prices are high after they have gone up rapidly over a relatively short period of time due to economic bliss.
Buying property in 1998 to 2000 was a great idea as the price did nothing for 10 years. You could buy a house for less than you could rent one. Interest rates were very, very low.
Now the opposite has happenned.
Interest rates have gone up, speculators have driven up the price of houses, individuals have taken on way too much debt in the belief property prices cannot fall. The economy is slowing, the unemployment rate will start to go up, people will start to lose some jobs.
Bang
The house of cards will fall big time. When property prices crash, people with debt lose everything.
No one has been listening to the warning to Australia from the IMF (International Monetary Fund) that Australian Property prices are 40% overvalued. They did not listen to the warning in the US either.Investors – do your research – but do not get advice from property developers, banks or real estate agents – get it from economists and asset allocators.
It is a no brainer . We are 40% over at least – even the aver wage verses repayments prove that. But at the end of the day, my brother pays 82 for a house in Brissy 5 yrs ago and now it's supposedly worth 520 .
Um I'm no maths wiz but couldn't we safely assume 100% p/yr for 4 or 5 yrs running is slightly over doing it .I know that can happen anytime in a lucky strike but not when the whole countries been on the biggest rampage since sliced bread as well.
Call me slow but them apples just don't add up.
Then there's the whole world scenario going on directly following so .Scamp wrote:Erik,You realize that the real-estate in Japan has been crashing for decades already ?
Are you ready to invest your money into something that will keep going down every year , costs you a LOT of money per month ( negative gearing ) and on top of that have 10% inflation ?Everything looked similar in Japan 20 years ago to Australia now. And their housing market has been crashing lower, and lower… and lower every year, without exception. I think a house there is worth 10% of what it was worth in the height of their bubble.
Scamp, I certainly do, but Japan was and is a structurally different economy than Australia in many ways. Japan experienced years of deflation, which is most certainly not the case in Australia and with the pressure on energy and food is unlikely. You yourself highlight inflation of 10% – well, that will perculate into house prices at some point. Furthermore, I believe the 21st century will belong to emerging markets and Australia is fundamentally well placed to take advantage of the emerging markets due to its commodities and has great potential in providing (financial) services to these countries (especially in Asia). Of most wetsren economies Australia is one of the best placed to weather the oncoming downturn.
You make a few assumptions here that actually don't apply to my situation: I have access to much lower interest rates, my properties do not cost me much money to hold, in fact my portfolio is almost neutral before tax. With rents set to continue to rise for another 3-5 years at least that will make the portfolio positively geared, even with rising costs.
I have never actively experienced a housing crash – too young for that
– but that does not mean I can't learn from what has happened in the past and I have, my portfolio is neutrally geared, well placed, less susceptible to interest rate rises and has a lowish LVR so I can easily weather a flatlined market or a crash. At the same time history shows that in every major western economy property has been a good investment if your time horizon has been long enough – even if you pick a "bad time" to start to invest!And I think the next 12-24 months could actually be a good time to invest if the market does really correct heavily…
I would not blame too much the normal public when NOT EVEN the ANZ TOP MANAGERS could see the downturn coming as explained in this article by the ANZ Chief Mike Smith:
http://www.news.com.au/business/story/0,27753,24100323-14334,00.html
ANZ tips defaults to rise
ANZ chief Mike Smith says loan defaults among home borrowers will rise as the job market faces pressure from a downturn in economic conditions.In a wide-ranging interview with BusinessDaily, the ANZ (anz.ASX:Quote,News) boss said he was worried about the direction of the Australian economy and its implications for banks and other lenders.
"I worry about the general economy and I can't believe that arrears in mortgages and credit cards are not going to pick up," he said.
"I don't think it will be as bad as what has happened in the US and the UK but this is a negative turn.
"These are not happy, happy times."
Mr Smith, who was speaking after Monday's shock disclosure of a $1.2 billion blowout for the bank in the September half, warned that mortgage stress was likely to rise in line with increasing unemployment.
"The reason we haven't seen bad debts rise yet is because the unemployment rate remains pretty good," he said.
"But the downturn is not going to create as many new jobs as more people come on to the market."
Mr Smith said he could not rule out the prospect of more corporate failures this year as marginal businesses struggled to cope with rising costs.
ANZ has felt the impact of sliding credit quality in the corporate sector more than other Australian banks as a result of its big exposures to troubled borrowers such as Centro, Opes Prime and Bill Express.
"I can't say there is not going to be another large corporate failure in the market," he said. "Certainly, the watchlist is increasing across all sectors.
"Commercial property is obviously vulnerable because when you have a slowdown in retail activity the effect will be felt in the commercial property space.
"There has been highly speculative building in Queensland and Western Australia and they are most at risk."
Mr Smith said he was concerned that some members of his management team had been slow to identify the shift in the economic cycle.
"We have so many relationship managers and executives who have never seen a downturn," he said.
"That is an issue because I've been a bit critical of some of the guys for not recognising the signs early enough."
Mr Smith said regulators around the world were likely to impose pressure on banks to put aside more capital as global economic conditions deteriorated.
"Hopefully, the regulators will wait until the global banking system is out of its hole because in the global market today capital is becoming a scarce resource."
The announcement on Monday of another $1.2 billion in bad debt provisions has put the ANZ's acquisition plans in Asia on hold, but Mr Smith said the board was examining the long term possibility of raising equity through scrip issued on the Hong Kong or Singapore exchanges.
On the prospect of ANZ pursuing a partial listing on an Asian exchange, Mr Smith said: "I don't rule it out, it is something we will continue to look at, but we have a lot on our plate and it would be distraction right now."
I love the way he (Smith) talks about being critical of them for "not recognising the signs"…what the hell has he been doing? he and his direct team are hardly a bunch of clueless 20 somethings who made money because they were in a boom rather than having any special knowledge or skills. They are supposed to guide the operational and strategic course of the company and it seems they have been asleep at the wheel and not reall aware of what their people were doing. Says a lot about governance at ANZ. Now he is pontificating and expects people to take him seriously ….. good on the analysts at the last announcements on further losses for questioning his credibility. And no I dont hold ANZ shares …. I just get pissed off with people not taking responsibility for their own actions….or maybe inactions in this case.
– but that does not mean I can't learn from what has happened in the past and I have, my portfolio is neutrally geared, well placed, less susceptible to interest rate rises and has a lowish LVR so I can easily weather a flatlined market or a crash. At the same time history shows that in every major western economy property has been a good investment if your time horizon has been long enough – even if you pick a "bad time" to start to invest!You must be logged in to reply to this topic. If you don't have an account, you can register here.
