Australia, you’ve officially jumped the shark

Haven't you been saying this since you last sold a property?

How long ago did you sell your last property, and what has happened to the values since then?

Wasn't it sold back in 2006?

More importantly; haven't you been waiting for the prices/values to drop since then?

Has that happened?

 

Some people might expect too much for a country without “real industry” if ignore mining etc. Construction industry is a vital part; and "housing market" is a big business (economy) here.
By the way, the price for a lot of properties in Brisbane, Adelaide, Canberra etc. is still at year 2009/2010 level. The recent ARPA change may curb the growth in Sydney/Melbourne to some extent, but these guys definitely do not want to pour too much water to inundate other places.
Given the historically low interest rate, it is the best time for working class (e.g. cleaners, restaurant waiters etc.) to own a home because of the low repayment. They are scared to buy a home when rate is 6%. Whether these home buyers can cope with future rate increase is another matter.....

 

Does my personal situation make the quote (or anything else I post) any less true? Can you hold a discussion about the housing market and our economic position as a country without the need to personally belittle me? If not let me know and you'll be the second person I can add to my ignore list. But for the record I bought in 2006, sold in 2010 and prices in Adelaide aren't much, if any, higher today than they were when I sold.

Do you think debt to household disposable income can more than double again?

https://propertychat.com.au/communi...ially-jumped-the-shark.2364/page-4#post-39797

If not, how will prices rise at the same rate they have over the last several decades?

Do you think past performance is a guarantee of future result?

 

Household debt as a % of household disposable income.
Note how the rapid growth phase kicked off when banks were deregulated, and lending criteria 'loosened'.

who thinks we are going to 250% in the next 30 years, and at what standard variable interest rate?!

 

Not trying to belittle you BB; just pointing out your past as how it pertains to this topic and your recent statement.

They were legitimate questions.

It is pertinent BB, because if you were of that mindset 9 or 10 years ago when you sold your PPoR, and then the values continued to go up, then it refutes your statement that "past performance is no guarantee of future results".

Past performance before your last sale proved that houses continue to go up, and the next 10 years after your last sale has also shown that. That is why it is important to know about the timeframe of your last sale.

It may not continue, and values may go backwards as you say, but I think your mindset is too myopic and very bearish. No offence intended. Just giving you my view about property based on what I've observed so far.

I have been hearing folks making those statements for at least 30 years, and I know of other results from when I was a child that what you state is not the case.

For eg; my Grandparents owned a house on Dandenong rd, about 5km's from the CBD. It was used as a boarding house for several years, then they sold it for $18k from memory.

This is circa 1950 (or possibly earlier- just after WW2).

The land value alone for that site now would probably be close to $1mill.

I have no doubt that back in 1950, folks were saying that prices couldn't keep going up

 

We all know that this is not true, and cannot be guaranteed. It depends on the context that it is used too, though.

My context is that house prices will continue to go up in the future, unless wages stop going up, and/or the population declines.

Your context might be that they can't go up as a percentage of disposable income. I agree on that.

And that has always been the case, and is self-regulating (and partly by the Banks who won't over-expose themselves via very high LVR's on their loan books) Yes; I know Banks have done that, and in the past many have come unstuck as a result. Try getting a loan in this current environment; despite the record low rates.

Why do you put folks on ignore? I have ding-dongs with folks here all the time, and over at SS, and folks attack me personally, and run crying to the mods because of whatever; to report me and so forth; I never put them on ignore, because everyone has an opinion, everyone has some factual and anecdotal material (still factual despite not being on a graph/chart) which is useful.

You can't run a successful forum if everyone is in a mutual admiration society.

You need to lighten up and harden up BB.

BB, you started the thread, and you put up your personal details on a public forum. You cannot expect to not be scrutinized.

If you can't handle that, then I suggest you not participate on these forums, and/or not divulge any personal info that may be used against you at a later date.

At least you do post stuff about yourself (and I admire you for that) so we know where you stand with more depth; unlike others who jibe at folks and go running off into the ether, without anyone knowing anything about them. That's gutless.

As I said; your mindset as it pertains to your history (and graphs).

House prices do not rise at the "same rate" all the time. It is not linear. Never has been.

The average over a long time is approx 7-10 years to double in value. I'll guarantee you that 40 years ago folks were saying it is impossible to buy....

Our 2nd IP (bought in 2001) did not increase in value for almost 3 years. Then it went up a little bit, and unfortunately we had to sell it. And; the rents didn't go up for 2 of those years.

At that time, I could easily have said what you have been saying. But I'd have been wrong.

 

It was 5 years ago as I've already pointed out. & there's not since been a spike in price growth like the years during or prior to ownership (see Adelaide on below chart).

They didn't have the household debt load we have today. Some folks in 1950 may have said we'll never have a TV like device that you can hold in your hand and use it wireless, but here we are. What someone said in 1950 is of little relevance to the environment and facts at hand today.

I have a thick skin Bayview, I just don't want to spend my time responding to nonsense.

What do you notice about the size of the each growth spurt / cycle over the last couple of decades?

Can you address the question you skipped?

Do you think debt to household disposable income can more than double again (from current levels)?

If not, how will prices rise at the same rate they have over the last several decades?

Using anecdotal evidence from yours or the situation of others from the past is not what I'm looking for. I want to know if and how you think credit will rise at the pace it has in the past in order to repeat the price growth of the last 30-50 years... if you think it's been something other than credit driving prices, then please enlighten me and the forum on your theories.

 

"BB" very hard to say ,but from what one reads in other investment sites and not only property related sites fast buck equities traders swimming naked option sellers ect,there seems to a liquid tendency to discriminate on the future whether it's history or it has any bearing on the future prices and the fundamental outlook on property prices,all I can do is going by all the rate-insurance-urban water bills and the ucv's and the 2'nd page valuations that I'm paying this morning then one would have to say "YES" all the land values have gone up in the past yea add another 30% on the bcc councils ucv's then it can be a worry,but we all could be sitting on a plie of dynamite and as we both know everything tradeable has a potential to fall,just look at the number of people who walked away from the safe less then 3% in bank term deposits ,and reinvested in high end Banks over the past 10 weeks that would have gone from champagne to s### real quick,or as big warren tells everyone over the past 50 years plus,"ONLY WHEN THE TIDE GOES OUT YOU DISCOVER WHO'S BEEN SWIMMING NAKED"then the sharks are let run free.

 

While the nay sayers keep on having a whinge, I would much prefer spending the time and energy to research areas, improve my knowledge base on fixing things, about investing in general and talking to the right people. At the end of the day, data is good to have, but does not always correlate. Reminds me of my former work colleague and her husband who is meant to be a guru in the financial field and they sold a house in the hills for $600k range. The same property is worth close to a million and they tried to justify that they reduced their overall debt level.

 

I agree. Back then, there were almost next to no credit options other than a personal loan and or a house mortgage.

Now we have all sorts of options. As a Nation; our level of debt is scary - something like 105% of income is debt per person.

But, when folks apply for loans with Banks right now; the Banks look a the applicant's financial position and assess their ability to handle the DSR, and they send in their valuers to do what they do and value the houses low to protect the Bank. Not only that; the Bank's qualification goal posts shift on a regular basis to suit themselves.

So, your mindset of continuing escalation of debt as a percentage of income is flawed; it's a model and not necessarily ever going to occur... It's very hard to get a Bank loan for 200% of your income if the Bank says; "sorry; application declined"

This is a growth rate. The rates of growth will be affected by numerous factors; low interest rates, under-supply, easy credit etc. Not always all together either.

So, what you see is some years of spiked growth (like we are seeing right now in a number of areas).

Then we see a period of slowing to no growth - as per every other cycle I've witnessed so far.

A couple of years of neg growth, then a slow and steady climb for a bit, then a leveling off again. All-in-all; most of the period has had some growth of some sort. I can't be bothered to calculate the average over that period for those two areas, but it will be positive growth I'd wager.

So, what's your point with this? Are you saying this is new info, or abnormal behaviour?

Nothing new here; go about your lives people.

My prediction - based on my experience and your graph above which supports my observation - is we will move out of this current boom, and into a period of very little growth (in Sydney - which is the hot topic right now) for probably about 5 years...distressed sales will put a negative slant on some parts of the market for sure.

This period of no/very little growth will allow wages to catch up, prices to level off and the affordability rate to improve.

This is not factoring any interest rate movement, or economic outlooks or consumer sentiment.

You bought in 2006 and sold in 2010, and have not bought since. That is your choice, and you view the market as a terrible P/I ratio, terrible ROI and so on.

But that is a whole industry point of view for you.

Meanwhile, folks will still buy and sell houses while you keep waiting for the values to line up and the lights to turn green.

 

The content of "nonsense" is subjective.

We all see stuff here we regard as nonsense from our perspective.

It's never a good enough reason to put an ignore on folks.

I reckon the ignore button should be removed. It's akin to ostriches with their heads in the sand; hear no evil, see no evil.

If you don't like folks' posts - move on to other stuff and simply ignore them in your own way I reckon.

 

How did was the land obtained and developed, how were funds obtained to build the house ? That's a great attitude" I am all right Jack" bugger helping any-one else get a roof over there head.

 

There will always be growth spurts and cycles, I just think the more leveraged we become, the more difficult it will be to repeat the growth of the past.

That's my point. The larger our debt burden becomes relative to our incomes the harder it will be for credit to expand and enable house price growth at rates we've seen in the past.

It is more complicated than 1 factor, which is why I've asked what you think will contribute to price growth continuing at past rates.

My point is that house price growth in the past has been driven by trends that can't continue forever:

Total debt increasing at a faster rate than GDP.

Price growth growing faster than wage growth.

Block sizes decreasing.

Interest rates falling.

None of these trends can continue ad infinitum. Perhaps you think the trends will continue for the next several decades... i.e. debt to household disposable incomes reaches 340% (from circa 170% now), mortgage interest rates fall to 2% from 4%, block sizes decrease from average 400 sqm to 200sqm, banks will continue allowing smaller and smaller deposits. If you can see this happening then I can understand your expectation that the growth of the past will continue to repeat for some time more, but once we reach those levels do you think we will double/halve all these numbers again for the trend to continue?

At some point either we have the mother of all crashes (a reset if you will) or growth simply slows to a rate lower than in the past (or somewhere in between).

I struggle to control myself from responding to the posts I see so the ignore button is a handy automation of doing so if needed.

 

My favourite goto video about house prices:

 

No, I don't expect growth to continue...the rate of growth will fluctuate a lot over each 10 or 20 year period.

As I said; you are looking at a model, but all us oldies here will say the same thing; the wages will eventually catch up, the prices will slow to zero growth etc.

The Banks will allow smaller deposits - and are doing so; they just handball the risk to the LMI crowds, so the smaller deposit gets swallowed up in LMI costs.

Personally; I think that is crazy. If the bank are hand-balling the risk, then you know you are walking a tight rope and gambling on CG to save you.

 

What about population growth and the basic supply and demand? Has population and migration growth slowed to such an extent of oversupply? And if property prices slow, plus the banks tightening their lending, developers will find it hard and supply will slow, which then pretty much balances out the supply and demand ratio over time imo. The biggest issue is jobs and unemployment. The government needs to think about jobs creation quick smart, and invest in industries that will create jobs going into the future. Currently it seems all they are doing is slashing jobs, and sending them overseas.

 

Once labor gets into power, they may double refugee intake and migration number ...
Perhaps reinstall carbon tax, and do some other nice things public dislike eventually...
The cycle goes on......

 

From my observation, these folks are not necessarily "scared" to buy.

What I very often see are these folks making terrible life/financial decisions and bad money management, so they are trapped in the rental cycle a lot longer.

For eg; almost every kitchen hand/waiter etc you see is out the back having a puff on a ciggy in their breaks. Many are younger folks, and spend a lot of their earnings on stuff, and travel, etc.

 

It is not directly the Government's fault that jobs are being lost.

One of the realities of our Nation is that for a very long time (and particularly since WW2) the Unions have fought to improve worker's conditions in Aus. Now; this is a good thing, but I believe we have now reached and surpassed the tipping point.

But, this was back in the days before the Global markets and internet etc, and Aus had virtually a protected market for all their manufacturing and exporting of produce such as resources, wool, meat, rice and so forth....everyone bought all their goods from Aus, and everything was made here....clothing, plastics, cars, furniture, shoes, sporting goods, car tyres - all made here until about the start of the '90's.

But, slowly over the years, the world has changed and more industries from O/S have snuck into our lives in various ways, cheaper and decent quality products, and many of the bigger companies have had to move with the flow - labour costs overseas (and tax incentives) are the main factor; much cheaper than ours (thanks to Union wins for conditions and wages, etc), the internet arrived, Ebay, Gumtree and a million other ways to buy goods without visiting a store.

Things like Payroll Tax on Companies with more than 25 employees...WHY? That is an insane money grab, and costs jobs. Yes; that is a Gubb cost.

The result has been a shifting of jobs (that can be shifted) - overseas, shifting manufacturing shifted overseas, or closing down industries altogether which can't compete with cheaper imported products. Call centres to energy companies etc - all O/S.

Even things like the Health Industry (my wife is a Theater Nurse and I worked in an ICU for 3 years) - we are now flooded with Doctors, Nurses, Technicians etc from O/S....WHY? Why can't we produce the necessary personnel from here on our own shores?

If you want to blame anyone - blame ourselves. We are constantly pushing for better wages, better conditions (higher wages cost to the Employer) and cheaper products.

We want more for less, and we want a terrific lifestyle and amenities which costs money (taxes), so the cost of doing business is increasing while the pressure to provide a lower cost product is increasing (lower profits).

Add to that our Tall-Poppy syndrome of hating everything/anyone getting rich, and big companies who make too much money, etc

Noone is loyal to the local market produce/services. Folks won't pay $2 per kg more for a bag of Aus oranges when they can buy them $2 cheaper from some other Country import, etc.

Folks won't buy a locally made Commodore for $40k when they can buy a Hyundai for $26k, and so on.

Creating new long-term permanent jobs now is next to impossible, unless a massive reform and haircut of worker's "wins" are addressed and removed. But that will never happen....unfair dismissal laws, Fair Work commission and so on; another thorn in the side of big business, so they opt for lots of part-time and casual employees so they can get back some control over quality of staff.

Sickies, holiday loading, Super Guarantees, long service leave, penalty rates - hangovers from the Halcyon days, and noone wants to let go of them.

So, we are left with only the jobs which cannot be shipped O/S in areas such as tourism, services, small business (which is being squeezed out by larger multi-Nationals) and a few small manufacturing industries, local construction and so on.

I've been watching this scenario unfold for a few decades now.

 

Smoking is far less prevalent today than it was 30 years ago (in youth and adults).