Bubble due to burst…

Since when are  Sunshine & Gold Coasts cities ? I was under the impression they were holiday destinations.
What a surprise, canal homes on Gold Coast  and  apartments in Mooloolaba are unaffordable to the average worker on median incomes.  Isn't that why they have Ipswich and Gympie for ?

So its all smoke and mirrors and housing on Sunshine Coast is NOT more expensive then New York ?

Lets see, Brisbane median prices 7 years ago were around $200K  and now they are$400k+  ….Yes, looks like it is "garaunteed to double every 7 years" 
Even adjusted for inflation you would be well ahead of just keeping your money in a bank.  

harb wrote:

Lets see, Brisbane median prices 7 years ago were around $200K  and now they are$400k+  ….Yes, looks like it is "garaunteed to double every 7 years" 
Even adjusted for inflation you would be well ahead of just keeping your money in a bank.  

You are still the ultimate proptimist:) Brings a smile to my dial.

Obviously I haven't been away long enough. I'll check back in another few months and see how your confidence in this market is.

What i want to know is what happens to prices when they hit bottom. Do we all really believe they will stay there. If things have improved economy wise and sentiment has changed then it is a fair call to suggets that they will trend upwards in value from that low. At what speed i dont know but here we are comparing Aussie prices at the begining of a correction to those that have already had theres. Apparently we tend to follow these other countries so when we are nearing our bottom of the cycle theres a good chance that our housing affordability will look as good if not better than these other countries due to ther prices trending up again. And this does not have to be because of 50% drops. A small correction down for us and a correction up for these other countries will bring things back in line rather quickly.

The median house prices in Australian capital cities when compared to other cities is a furphy. Why? Our expectations for housing has changed dramatically over the past 50 years. We now expect to buy a 4-5 bedroom new house in the outer suburbs at or around the median price whereas 20 years ago we expected 3-4 bedrooms and prior to that 2-3 bedrooms was the norm. If you compare our expectations with those of the highly developed housing markets OS, their expectations haven't changed – they still have the same dilapidated housing and high densities that have existed for decades.

There are plenty of affordable sub-median priced housing options available, you just need to know where to look. (There are just as many sales below the median price as above it).

On this theme, the whingers will however continue to complain because they have allowed themselves to be conditioned by the purveyors of instant gratification…..vendors of consume now, pay later, interest free for 40 months, etc.

Solution is quite simple…..pay yourself first by living beneath your means, invest and re-invest the returns to compound. When a deposit is achieved, buy what you can comfortably afford and trade up as salary and equity position allows. Requires a re-evaluation of priorities and expectations. 

Note, that I said the solution was simple however I did not say the solution was easy…..easy implies lazy and no effort. People are always free to choose between instant versus delayed (or at least moderated) gratification and consumption.

Some folk like to look rich with fancy cars and high status artefacts…..big hat and no cattle   .  The minority just get on with the job and allow tincture of time to do its job………or maybe they're just LUCKY

These are less than bullish times, however people's expectations need to return from blue sky well above median house price aspirations that some first home buyers have.

harb wrote:

Say it ain't so and prices have not doubled in the past 7 years.

Houseprices, under normal circumstances, double every 10 years. Noone said they don't.
The explanation is simple : Inflation. Everything doubles / triples / quadruples every 10 years. My income in the last 10 years has quadrupled for instance. Did I do particularily well ? hm… well no , everything has become more expensive in the meantime, so I'm not that much better off. Ofcourse I have a better job and I earn more, but overall, I didn't become richer by a factor 4. Maybe a factor 2.
So, what does this all mean ? In the last 10 years houseprices have gone up MORE than double. And this is exactly the problem. In some places houseprices have doubled, but most have tripled, quadrupled or even worse.
This will mean there's a correction coming, because unlike housing, the wages didn't quadruple. They didn't move much actually, hence there's a correction coming. Housing doubled compared to wages, and need to come down 50% now to get back to normal. Probably more because credit is not available anymore and people have gotten themselves so much in debt that there are less buyers without creditcards / huge loans etc.
We'll go back to the 'traditional 3* median income' which means median houseprices in Sydney / Melbourne will come back to 200.000 abouts. And perhaps we will overshoot the crash and end up like Detroit, but any less than 50% ( in real terms , inflation corrected ) will not be happening. By real terms I mean simply this :
Median houseprices = 4* median income.

And that's already on the top price. Usually I'd use 3*, I'll be on the safe side here, and only predict meager drops of 50% overall.

Scamp wrote:

harb wrote:

Say it ain't so and prices have not doubled in the past 7 years.

Houseprices, under normal circumstances, double every 10 years. Noone said they don't.
The explanation is simple : Inflation. Everything doubles / triples / quadruples every 10 years. My income in the last 10 years has quadrupled for instance. Did I do particularily well ? hm… well no , everything has become more expensive in the meantime, so I'm not that much better off.

Ah, but in that case we can't be in a real bubble since most of price increases have been caused by inflation.  Any small real increases can be justified by the increase in the population numbers and  an increase in size and quality of our homes.   

To get back to what you call normal you'd have to reduce the population number down to what it was back when things were "normal" The average size house also doubled and now includes mandatory solar  HWS, insulation and rainwater tanks as well as other goodies that used to cost extra.

 
No we won't, not unless we also go back to the "traditional" 2br  fibro cottage on the outskirts of town and the long drop dunny at the back of the property.   Do a materials costing on a standard 4×2 and see how much of your 200.000 would be needed just for materials alone. 

I'm guessing you have arived in Oz and have had a good look at Sydney so I ask you, does Sydney look anything remotely like Detroit ?  The main reason Detroit crashed was not high priced but the dissapearance of jobs in the auto industry which supported the whole town.  Without jobs people there packed up and moved to other towns in search of jobs.
Compare that with Sydney /Melbourne were there is no ONE industry that supports the town but let pretend that somehow all the jobs there were to dissapear overnight. Now what ?   Even if 5% of the population could find jobs in Brisbane and Perth and decided to move there doing so would cause masive housing shortages and the obligatory prices rises and rents through the roof over there.  That's why its different over here.

harb wrote:

So you are predicting a prolonged recession and unemployment at 9%  ? I've seen better in early 80's.
Property prices about to get smashed ? I don't think so. For that to happen we'd have to be in a property bubble which we aren't, despite what the potential buyers on ghpc would want us to believe.  Btw, have you actually been in a recession yourself  or are you just reciting from the ghpc manual ?

I've lived through 2. Worked through 1 and was a student during my first. Luckilly, then as now, I have been in the government's employ. I have only been a private employee in the early naughties.

During both recessions, house prices did decline.

In the 80s, I remember my parent's peers putting of moving, upgrading, holidays, new cars and all sorts of things just to concentrate on the mortgages.

I had one peer with a house when we went into the 90's recession and he was very concerned about his equity. He worked hard and did a lot of cashies (was in a niche trade) to make sure that he stayed in front. I had friends that worked in the building industry and their incomes suffered quite a bit – went from drinking Turkey to goon:)

That aside, the build up to this has been far more dangerous then either the 80's or 90's downturns. Our debt levels are more extreme and the correction has been put off (is still being put off) by goverment and bank policy for far longer. Bubbles are bigger, the population spread is more unstable and indulgence is ridiculously high. This is a perfect recession storm, sycronised and global, like the 20s – which only leads to one thing.

I hope you aren't too highly leveraged harb, because I'd hate to see you loose your sense of humour…

harb wrote:

Maybe in your part of the woods, here in Perth prices went from mid 30s to high 90s during the 80s. Must have been different in Perth. 

I was in Perth!

From memory it was late primary, early high school for me so early 80's. One of the families in our street (older than mine) had a son that killed himself over financial stress.

Just checked some historical data – from a page you probably trust
http://reiwa.com/res/res-salesgraph-display.cfm

The price boom was mid to late 80s. Major recession and high interest rates at the start of the 80s. NG was abolished, remember? that's how bad it was back then – everyone was getting pretty desperate. You might have brought in mid 80's, so around about the perfect time – as 2010/2011 will be this time around.

Well at least you sound like a smart investor. Not trying to bite off too much at any one time.