What is overvalued

Watching ABC morning news this morning and they had the usual panel of "property experts" saying how overpriced the Syd and Melb property markets are.

That got me thinking, of all the commentary from the so called experts stating the markets are overvalued I have never heard one of these so called experts discuss the actual data/fundamentals that lead them to the conclusion that housing is overpriced. In contrast, if you look at shares there are several well documented metrics (eg P/E ratio) that are used as the basis for judging whether a company and its shares are over priced.

Perhaps I'm wrong, but it appears many of the so called experts simply conclude housing is overpriced based on a bunch of fuzzy subjective characteristics such as their own gut feeling or that housing is becoming unaffordable to certain segments of the community. Sometimes I think the issue of overpriced is incorrectly mixed with affordability, but that's another issue.

So I'm wondering, what actual hard data/fundamentals are used to conclude housing is over priced and for those who dabble in shares is there a P/E ratio equivalent for houses.

 

No idea whatsoever.......I read something about Sydney being 40% over priced....cough cough....

I take little notice of this term "overpriced", though when I start reading/hearing this I think we are perhaps closer to peak? Just buy well, and early

MTR

 

We were discussing this "data" and the media and misinformation and data stats showing means and medians etc a few weeks ago. But there is no way I can recall what part of the forum it was.

I agree Hedgy, I find the commentary disturbing on so many levels.

 

"Overvalued" - getting a valuation or appraisal every 3 months.

 

Over value as compared to median income. Another measure would be rent / price. Is it stainable?

 

I think it was my thread..... "Why Brisbane did not Boom" - I am laying low, they are out for blood

 

Honestly I find there are better experts on here.

You know people who actually own properties? Lots of them.

Do research both with stats but also on the ground......

How many properties do these experts own? Who pays their wages? What bias do they have?

There is BS on here too, but you have a fair idea what it is when they post.

 

I did discuss it on Brisbane thread on medians stats etc that it only represents a technical view. for day trading it may be more applicable (you can see the demand and supply of the trades) but with property they are so many variables on the ground, graphs, zoning, auction rates or how many underbidders were they, location, school zones, shopping centres, universities, location to tram or train, demographics (Chinese, Asian, Greek, Italian, Sudanese, Abo etc), income levels, distance to CBD etc.

 

Just look at it in a very simple way..Value and what people preceive it too be are very different..
At least in the raw equities markets you know what happening minute by minute and you know when you are wrong and what is the maximum loss your prepared to sustain and analysing the results on a monthly basis it's all there in black and white..
Property the way the value range from area to area all the media tarts investment fastbucks that are out there as long as the interest rates stay low they will all still have a job..

 

Interesting comment. I was more thinking about a technical view of house prices hence my reference to equities P/E. Couldn't agree more re the "on the ground" variables. The way I see it equities also have many on the ground variables and folks that value a stock taking on the ground factors into account are the fundamental valuation crowd. I'm not suggesting that my comparison of housing and stocks is appropriate, but it just seems that when the majority of housing experts throw the term overpriced around it doesn't seem to be based on any hard data analysis or accepted valuation metrics--just a fuzzy gut feel. So how someone can say with confidence that Syd could experience a 40% pullback or that the median will grow x% I wonder how they get there without numbers. Coming from an equities background I understand the rationale and logic used to arrive at such growth claims in equities. While equity experts are far from perfect, at least when the term overpriced stocks is thrown around they usually base it on one of many several accepted metrics, such as P/E ratio. Some of the valuation metric might be questionable, but it is a metric nonetheless.

 

When an investment is heavily negatively geared and purely praying for capital gains

 

For a very very rough guide compare present gross yield in a suburb with the yield in 2012 and 2007. Any further back is more difficult and from a different interest rate environment.
I remember a 5% gross yield in a capital city being considered an acceptable return.

 

What does @bob shovel have to say about that?

 

1 in relation to income
2 in relation to yield

is it really all that puzzling ? seems quite clear to me housing is overpriced in many areas of Mel and almost all of Syd, maybe because I am low income & how obvious an accelerant low/falling rates have been. Add in the poor economy during this boom and that screams overblown to me.

 

I think you have kind of proved my point--it seems to be more of a subjective evaluation instead of a data metric evaluation.

 

You can find all the answers you need on my website and for a small fee I will take you through my 12 step program and mop session. I can provide data and statistics to even prove nostradamus wrong! don't delay call now

 

1 & 2 is not subjective IMO, it could be seen as subjective if I look at many people who have very similar income in a decade but very dis similar housing prices.

You could say my reply is not scientific, but the data is there.

 

I am interested in your mop session, do you get a set of steak knives as well ?

 

That's what we need a prophet with special visions,do you have a link to bob.com..

 

Now that sounds like BS!!!!