Australian property market; sustainable?

Nothing in this country has inlfated as quickly as houseprices over the last decade. Over that time period, at a quick gestimate based on a head full of stats, percentage increases are:

Wages – 30-50%
Cars – 20-30%
Food – 70-90%
City houses – 150-200%
Regional houses – 80-150%
City Rent – 100% ish

Possibly but I tend to think not. Talk to really old people (older than boomers who are themselves caught up in the debt machine as a path to retirement) and most of them can see plainly that housing and related costs are way out of wack to the long term. Talk to the kind of people that don't approve of their inner city family home being valued at 600k, can make no sense of why it is and have seen their rates quadruple in the last 10 years whilst their gardens have had no upkeep.

I honestly think the argument of wether or not Australian house prices are in a bubble is a totally mute point. The question isn't wether housing costs much more relative to everything else than it did a decade ago but rather is it sustainable.

The other points you raised are kind of opinions and emotive, so difficult to debate. Though I must say that I wouldn't term investing a passion. Wanting more wealth is a passion, so investing is something you can be passionate about but should always keep a pragmatic POV when researching and acting.

The house market in Australia, however, is something that many are passionate about:) Do you think that, if house prices continue to grow at the rate they have been in recent Australian history, that any worker other than the most highly paid will be able to afford them in another decade?

Again you are referring to sensationalist media journalism and again the fundamentals of the markets are completely different. I can't stress this enough. Just read this article http://www.hotspotting.com.au/index.php?act=viewArticle&productId=1919 and thought it was very appropriate to this thread. This is by a respected property commentator Terry Ryder who knows first hand the inadequacies of journalists reporting on the real estate market.

Only read it very quickly but some points spring to mind immediately:

1) Ryder is invested in being an Australian RE commentator, so his POV is biased from the onset. It's like a spokesman for the a tobacco company talking down cancer claims:)

2) He wants to compare us to non english speaking or non major economies, rather than just the other developed economies that have crashed. Zimbabwe, for instance, I guess, if we compare ourselves to them we have no asset inflation issues:)

3) He name calls which doesn't suggest a very proffessional approach to his article and effects his credibility.

Here's the thing, I am willing to conceed that government intervention, easy credit and the overall dellusion of the Australian populace could keep property prices from collapsing in any meaningful way in the short term but I get the feeling not a single one of you who are getting all antsy about my posts is willing to accept that prices could downturn and the future may yet prove your investment descisions bad. Seems a little closed minded to me and I don't think I can help with it.

Of course people will still be buying houses – of that I have no doubt. How much they will have to pay for them is the only question.

Read what i have written above aabout closed mindedness. Does it ever cross your mind that property prices might decline? Are you hedged against it? If you can't answer yes to either, I fear your faith in house prices is a little blind and you could get stung.

OK so I did post something here last night (tongue in cheek) that I think did carry some truth………however,  I am wondering if anyone here knows about the REWARDS program? They say that in 2010 they acquired 16 PCFP in a matter of 4 days. I guess it still is possible, afterall.

If you are bored, why respond? I wasn't talking about hedging against property with other property, I was talking about hedging against all property with other investments.

You agree that the property market has cycles?

Do you also agree that October 2008 saw the start of a downturn but our government brought us out of it?

Is it possible that the downside of the current greater property cycle still hasn't played out in full?

BTW – my argument is not diluted, it is still thus. Australian property started over a cliff in October 2008. FHOB, Low IRs and easy credit fueled Australian property growth in 2009. Now, there is an oversupply of apartments in most major cities, FHOB has been taken away, bank lending is tightening and IRs are on the up. From this I deduce falling property values noticable from March 2010.

The rest is me trying to get you and your ilk to consider another POV.

Where am I being inconsitent? I currently believe the oversupply of apartments and a decline in sales price will be apparent by March, I guess wether it is blatently apparent or not depends on your perspective (and mine when I typed it:)).

Wether I hold to this belief until March depends on what happens with IRs, government intervention and credit flow between now and then. If things continue on there current path, I am reasonably confident my speculation will come to pass. There is already a known OS of apartments in Brisbane and a 0.3% decline in recorded December sales prices – it's not being a prophet or anything, just predicting patterns that may lead to an inevitable conclusion.

Reason I have chosen March is because it is 3 months from the end of the FHOB and consitently rising IRs – no real science or stats here it just generally takes a quater for things to become apparent.

How do you know I'm not?

dreamtoblelieve,

One of your pin up boys, Joye, came up with the 03% decline in December.

http://www.businessspectator.com.au/bs.nsf/Article/Will-the-housing-market-cool-pd20100129-25VS7?OpenDocument&src=blb

December 1/4 is up 2.9% but month of December is down 0.3%. Admittedly Joys cliames that is becuase December is traditionally slow but slow sholdn't lead to declining prices, should it? Just less sales, I would have thought?

Here is someone from SQM wonderring how there can be a housing shortage if rental vacancys are rising. And suggesting that house price growth may be due to easy credit and not supply/demmand.

http://www.smartcompany.com.au/property/20100122-rise-in-rental-vacancies-raises-questions-about-housing-shortage-and-soaring-prices.html

The declines in 2008 I talked about were recorded by ABS and all over the news at the time, so surely I don't need to cite them again. Articles about Brisbanes apartment OS came out earlier this year, if I see one agian I will link it.

First time investors should be aware of these POVs to keep the debate balanced – if it is all spruik they base their descisions on, then that would be less nice for them.

Isn't this part of the problem when interest rate rises are used to exert some control over the economy?  If the objective is to spend less, then maybe an increase of the GST would be better and more effective. The political party who does that would be committing suicide.

If the property market appears to be flattening out, interest rates can steady or come back down again. The RBA would have to be complete bonkers to keep increasing in a flat property market surely. 

Last post because this is farcical now. Do you even read the links you post? Because they literally have no relevance to support  your argument in relation to this topic what so ever, it actually supports the argument of the vast majority of property investors who do see property as a viable investment (hence this forum). To claim that a 0.3% month on month decline (particularly as month by month is statistically unreliable, let alone in December) despite a quarterly increase overall means we're heading for decline is insanely short sighted.

Then you post a link demonstrating that vacancy rates have just returned to their long term trends, which could have been forecast by a monkey given the obvious additional incentives for first home buyers to buy and not rent last year, how you have interpreted that this suggests an oversupply leading to a decline in prices is beyond me.

The topic of this thread, was if Australian property was sustainable and a viable investment still. You predicted "imminent declines blatantly apparent by March and there will be definite negative growth (1-5%) reported in the market by that time" and that the "Austrlai property market is in a bubble bigger than any other property bubble in the developed world" yet throughout these countless posts you have never given credible evidence to support these notions, instead you have failed to mediate your point accross, provided a diluted and inconsistent argument (note the "by march", "from march" then "by march" again time frame illustrated in your earlier posts) and even posted links directly opposing your view point.

I personally believe that is highly unlikely that there will be a national decline in prices this year let alone a crash, nor do I think the nation is in for a boom, but I do believe that property is a viable investment for the long term and that with the right combination of activity, research and due diligence it provides an opportunity for anyone to achieve their long term financial goals.