Aussie houses are world's most overpriced
The 'Economist' journal says Australian housing is overpriced by 56 per centAustralian homes remain the most overvalued in the world, giving fresh life to the debate over whether the nation's housing market is a bubble.
The economic journal of the record, The Economist, says Australian housing is overpriced by 56 per cent.
Morgan Stanley global strategist Gerard Minack has been arguing the case for some time and thinks a bubble started to inflate in the late 1990s.
"We've had 20 years where the Australian consumers have been willing to borrow more to buy an asset that they believe always goes up in value – the classic sign of an asset bubble," he said.
"You buy it because it's going up and you don't take account of the underlying fundamentals such as the rental return or the price relative to average income."
The Economist certainly thinks the Australian property market is the worst in the world, with Australia followed closely by Hong Kong and France.
The Economist says Australian house prices have risen 215 per cent since 1997, which compares to 95 per cent in the US
Heard it all before.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Aussie houses are world's most overpriced
For another take on the matter, pick up today's (6 March 2011) Sunday Age, go to the Business section and read the article on page 20, titled, "Don't believe the reports on Australian house values".
To partially quote,
"…what exactly did The Economist measure? The ratio of home prices to rents in 20 economies. Its a single measure – and a leaky one at that.
You could simply say Australia tops The Economist list because our average rents are too low – rental yields have remained unchanged at about 4 per cent for many years, though they are beginning to rise.
More likely out home values are justified by one of the best economies in the developed world – even if it is a two-speed model in which mining industries thrive and other sectors struggle.
…It is much more probable that [house prices] will drift for at least a year after slipping by an estimated 1 per cent in the 12 months to January. And this is not a bad outcome for most homeowners whatever this report or the next report might care to say."
Yeah, heard this same <moderator: delete language> in the 70's, the 80's the 90' ….. There will always be doom and gloomers and if I had chosen not to buy because of other people's indecision based on their inbuilt fears, apathy and procrastination I would not have achieved financial independence as a result. Anyway, what are the alternatives? Shares? Managed Funds? Do nothing? Mmmmmmm…..
CHEERS!
TCI remember them being rated as overpriced when they were 30% cheaper.
I remember a certain nameless newspaper suggesting house prices would tumble in June 2006 .. right before they went up another 30%.
I remember the idea that this just couldnt continue … stated .. across the front of the property section …… in 2002.
It must be hard being so wrong.
Why is when doomers and gloomers talk something down they 'should be listened too' whereas when people talk up something they have 'vested interests'?
I like how you think Derek.
CHEERS!
TCThe only message I can take away from the Economist argument is that there is an awful lot of upward pressure on rents.
bardon wrote:The only message I can take away from the Economist argument is that there is an awful lot of upward pressure on rents.Yes, landlords should raise rents. They are not getting enough return on their investment.
That was tongue in cheek, BTW.
Is it not better to say that they could be getting a better ROI by raising rents.
bardon wrote:Is it not better to say that they could be getting a better ROI by raising rents.Yes I wasn't 100% serious when I said landlords should raise rents but I agree with it to a certain extent. Perhaps they should, but it will be at the tenant's expense of course.
Most of my properties have recently came up for rent review and I have got increases of 5%, two of them I left unchanged. One because the tenants are very good and its our PPR the other because I am the tenant.
double
I don’t know why the Economist bothers with this chart of price to rent as unlike commercial the value of a property is set by human emotions and a very strong desire to own their chosen place of shelter. This is a very subjective valuation and in all reality it has no limits other than say credit.
Maybe the survey is showing that Australia is a very desirable place to live and people place a high value on its land and houses.
I dont really see how you can see most commodities nearly double in price in the last year .. electricity up .. water up .. rates .. up .. and not expect that to be passed along to the renter / consumer in inflationary terms. That suggests an upward movement rather than a downward trend. However .. on the same note .. if the money supply dries up due to inflation .. house prices .. luxury items .. and services would all be coming back as the market reassesses itself due to less currency floating around.
Overseas they are factoring in for this year … for the US markets .. 3 interest rises at least. So .. you dont think that will be passed on here? I doubt we are immune to serious fluctuations in the US markets despite our attachment to Asia.
Property is only worth what someone is willing to pay for it…
reggie5005 wrote:Property is only worth what someone is willing to pay for it…Equally it is only worth what a willing seller is prepared to take for it.
In the long run the value of property will increase. With the exception of natural disasters, etc. Which appears to be a common trend.
However it may not be a good time to buy, renovate then sell. As it is always possible for a short term drop in prices or for the market to stagnant. Not that I want the market to slump, I believe it is due for one.bardon wrote:reggie5005 wrote:Property is only worth what someone is willing to pay for it…Equally it is only worth what a willing seller is prepared to take for it.
To true Bardon
All these comments make me laugh: Its so dramatic, however I have taken the plunge n my IP is settling next month; Happy to ride witht the wave…
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