Evidence WHY property prices won't perform as they have in the past

Soo many people just waiting for capital gains. If you add value you might get some. If you sit there doing nothing I doubt it!
This is why house prices have gone up in the past. Please identify which of the below components will cause higher property prices in the future…if you believe so.

All I can see is if we go from dual income households to triple or more...slums here we come!

Below are the components for buying a property- Lets look at a comparison of 1980 to now. All references for fact check are below.

Average Sydney House price

1980- $180,000

2019- $955,000

Collateral for deposit. Deposit requirements reduce from 30% to 10%

1980- $54,000 initial deposit @ 30% LVR= purchase price $180,000

2019- Same $54,000 deposit at 10% LVR=purchase price $540,000

**Same deposit= Property Prices TRIPLE!**

Debt for loan- interest rate cuts

1980- Interest rate 10% to borrow $126,000= Payment per month (25yrs) = $1,145

2019- Interest Rate 4% $1,145 per month (25yrs) = Repayment capacity of $215,000

**Same repayment = 70% increase in repayment capacity!**

Ability to repay- Income: Increase in dual income households from 1980.

Average weekly wage- Note these are Australian- Sydney wages are higher than average

1980- $200 per person- (single income earner)

2019- $1250 per person- Dual Income earner…lets assume second income is half as much to be conservative $1250+ $625= $1875

**Average household income has gone up 9 times!- conservatively**
Note also that wage increases outstripped inflation improving cost of living. Now they meet inflation, if that!

Population: Sydney has added an additional 2 million people since 1980, also increasing the number of dual income households available. Note that this only increases the numbers available to purchase…NOT how much they can pay.

Outcome: That same household that in 1980 could only buy a $180,000 house, now have 2 incomes to put down a bigger deposit (150%)- That 54,000 deposit is now 81,000, which at 10% LVR means they can purchase $810,000 property, and with a 9 times increase in household income coupled with a 70% repayment capacity due to interest rate cuts can afford the higher priced house. Also note that at times you could purchase with a 5% deposit allowing that same $81,000 deposit to leverage up to purchase $1,620,000

Do you expect deposit requirements to drop dramatically?
Do you expect interest rates to drop enough to support a large increase in repayment capacity?
Do you expect wages to go up ahead of inflation?
Do you expect a massive increase in population all competing for wages to drive wages up?

What will be the CAUSE of prices to beat inflation in the future?
HOPING for house prices to rise is a stupid investment philosophy...

References

https://www.business.unsw.edu.au/re...ledon - Australian House Prices 1880-2005.pdf

Australian House Prices

https://www.abs.gov.au/AUSSTATS/[email protected]/2f762f95845417aeca25706c00834efa/b224e0d9ffc9dee1ca2570ec001b2a0a!OpenDocument

https://www.loansense.com.au/historical-rates.html

Australia Average Weekly Wages | 2019 | Data | Chart | Calendar | Forecast

https://aifs.gov.au/sites/default/files/publication-documents/fs2010conf.pdf

Work and family

 

Ah yes. The smart telling the rich there stupid. And lucky.

(shrug)

Still confident about existing sydney houses. when sydney hits 8m people the starter home will be a 60sqm 2 bed unit.

 

The subject of this post is what my grandfather told me in 1973 (when I was 17).

I had no idea back then. I have no idea today.

 

florian heise is that you again?

 

If you have no idea WHY your assets went up in price, then it would be reckless to be advising your children to follow your path...

 

3 things I know.
There are always someone richer than you.
There are always someone smarter than you.
There are always someone better looking than you.

I still can't predict the house price.

 

you haven't addressed any of the points below...just that you are 'confident'
What makes you confident? past performance? Population doesn't equate to high house prices you know....

 

Some of those dates go back just after the introduction of colour transmission in march 1975 so one can track the price rise ever year as financial issues are only part of the problem ..

 

looking forward to 8 million? They'll be thirsty? 1 desal plant provides 15% of drinking water, an extra 3 mil people will be fine...we can build more plants for free

Sydney's desalination plant is turned on — so what does that mean?

https://www.smh.com.au/environment/...s-dam-levels-extend-dive-20191022-p5333y.html

 

Prices will keep on going up, by 2040-2050 expect to see an average home for around $3-4M in Melbourne/Sydney.

Here's some more references for you

- "it is almost impossible to purchase a house for less than twice, or even more, than the official valuation, or rent 'a couple' of small furnished rooms for less than £2/10/ to £3/10/ per week."
House Prices in 1949 - HOUSE PRICES AND RENT - The West Australian (Perth, WA : 1879 - 1954) - 27 Jan 1949

- "it is nearly impossible for the average working man to buy a home and move into it"
Sydney 1950 - House Prices Soaring - The Herald (Melbourne, Vic. : 1861 - 1954) - 24 Oct 1950

- Housing affordability down 1988 - Housing affordability down - The Canberra Times (ACT : 1926 - 1995) - 24 Oct 1988

 

Continuing to be expensive doesn't mean it's a good investment...ever heard of inflation?
It was nearly impossible for the average working man to buy a Ferrari in 1960...it is still nearly impossible for the average working man to buy one.
What will CAUSE house prices to beat inflation and be a good investment?

 

Population pressure and limited supply in desirable locations is exactly why prices have increased and will continue to increase.

Last month I was speaking with a friend, she's a property manager. She was complaining that she wants to move closer to her kids school because the commute was difficult (she wants her teenage daughter to walk to school instead of being driven 10 minutes). She complained that the properties nearby were to expensive to buy. The rentals were all run down but very expensive, she wanted to know why.

The reason is simple. She wants to move there, so does every other parent in the school. Therefore the prices go up because there's always another person willing to pay a little more.

I understand the affordability profile based on peoples wages and the relationship with interest rates better than just about anyone. Despite this I see people buying increasing expensive properties every day. I can even tell you how people on average incomes manage to buy expensive houses (hint, they don't borrow the full purchase price).

Property prices don't increase universally, but there are plenty of reasons why price behaviour can easily be predicted (both up and down) in certain locations.

 

Last week something occurred that creates a great opportunity to make some quick, ease and predictable money over the next few years. Similar events have occurred at least twice in the past decade with significant price increases in certain markets as a result. There's no reason to believe that this even won't yield the same results if investors are positioned to take advantage of it.

 

@Ummm
What's your point here?
Don't invest in property?

 

Willing to pay more, and able to pay more?...so you expect that this increase in population will cause wages to increase (above inflation...otherwise it is a status quo) to allow people to pay more?

Or if wages stay the same (relative to inflation), then more of that persons wage goes towards housing because they are willing to pay more. This means they must be willing to pay less elsewhere. Less discretionary income into the Australian economy will reduce retail spending and jobs, reducing the owners/shareholders/employees of those businesses income, giving them less money to spend on housing. 10% of Australias workforce is in retail...no small number. People stop building/renovating impacting construction jobs another 10% of the workforce, going out Arts Recreation, accommodation food services...another 10% of the workforce. That's 30% of the workforce...and so on an so on...

6291.0.55.003 - Labour Force, Australia, Detailed, Quarterly, Aug 2019

So because you see people buying more expensive properties everyday, and you are a mortgage broker you must be able to explain why they are able to pay more. Which of the components of- Deposit, Loan or Ability to pay is allowing them to do this, and which of these will continue to be more favourable and allow buyers to continue to push house prices higher in the future?

Or is it just magic?

 

Buy and Hold is unlikely to outpace inflation. Adding value may give you some benefits provided you don't overcapitalize, and buy in area that causes people with the ability to pay more to move there. The question is what will give them the ability to pay more? lower deposit requirements, Lower interest rates or higher wages? That is up to you to decide....maybe there is a new industry coming to an area about to pay wages higher than the incumbents?

 

So average household income gone up 9 times, interest rates dropped significantly (looking at staying low for foreseeable future) and property prices only increased 5 times.

From that there appears to be plenty of scope for further price increases.

Then look at Perth with a much lower average house price, heaps of capacity to increase.

 

I think you've made a good point, it depends where you invest

 

City of 5 lawyers and 5 baristas increases to 10 lawyers and 10 baristas.

what happens to prices when the lawyers move to mt druit?