Why I believe there will be a price ceiling..

I think in Shanghai it is like 100+X average income for inner city apartment.

Also bear in mind, negative interest rate is possible as it is starting to appear more often now. It makes sense, we can’t have the Rockefellers and Rothchilds of the world sipping their wines all day doing nothing for generation after generation.

 

People are also residing in properties for longer as transactional costs (stamp duty, REA commissions) eat into capital gains.

I'm not a Sydney expert but the rents for Sydney property seem fairly stagnant over the last 10 years, which is probably due to affordability. Wage growth has been weak since 2013. Rent is lower in 2020 compared to 2013 despite many properties almost doubling during that period. Record low interest rates have insulated investors and the poor yield has been accepted for capital growth/capital growth potential.

 

People buy Bitcoin and "hope and pray" someone in the future will pay more for it than they paid.

Surely at some point property bought to rent out is linked in value to the amount people can pay for rent.

 

Many here have disagreed with your prediction, so your answer is that the discussion has run it's course?

 

Please reread again carfully and slowly.

What really is happening is a case of "I sold therefore the market is going down cause I'm right".
Also happens here in reverse. People like to justify their action by seeking validation. It's just a human nature trait, until you see the same things happen over and over again.
And it's been going on for a lot more than 30yrs.
May not happen for ever, or even stop for 20yrs like Japan and some EU places.
I've posted on that elsewhere.

There are still some levers the gov can pull to spurn growth, one being eliminating stamp duty.
Another is PPOR interest being tax deductable as it is in other countries.
These are big levers. They may not even create a boom, but definetly keep prices stable.

 

Why do I notice an air of angst in your reply?

I posed a theory, some agreed with parts of what I said, others have disagreed and shared their points of view as well as their experiences.

Yet others challenged the expression 'once in a lifetime boom', which I have accepted, to the point I even posted "your story proves my theory wrong" on a previous page.

I have learnt lots from the insights offered by people whose knowledge of the property market economics vastly overshadows mine, with decades more experience in the housing market.

However I feel that the more recent posts discussing whether Sydney houses are still 'affordable' to young people is a digression, and I was indicating my desire to take a step back rather than be actively engaged in further discussions.

Hope that is okay. Again thank you for your insightful responses.

 

Years ago I asked some family members where they lived when they first came to Australia.
They asnwered 'Ashfield". My reply was "Oh so were near the city!".
They replied in those days they were told "why live so far from the city in the stix" . It was cheap.

If you go to Brisbane and talk to city locals you get "OMGZ!!! that's so far, like 20 mins from here!"

 

I always find it funny when you ask someone from Canberra what's considered far from the city.

 

Ha! Thats what they used to call Castle Hill, Baulkham Hills, Winston Hills, Bella Vista etc....was considered the boondocks for decades and farmland filled with cows and horses. Now ppl are paying $2M - $3M for a house and its now called "middle ring" suburbs when its already 35km+ out from the CBD.

I personally feel the distance from the CBD means less and less now. Even Penrith is packed to the rafters. Bumper to bumper traffic all the bloody time.

 

Where I bought Wsyd rents jumped up alot in the early 2010's and some Wsyd locations houses are going up again

 

Not angst, more confusion as to why you'd want to shut down the conversation.

To be honest, I don't know you from a bar of soap, so my assumptions may be wrong, but have seen it happen many times (not all, mind you) that some people just want to close off conversations when others disagree with their opinions.

 

@poby's argument is that the same level of growth is unsustainable. At the same growth rate, your property will be worth $4m in another 20 years. We can only wait and see.

 

So true, many financially wealthy derive many sources of income, hence if one dries up they can rely on other.
Also, what about current wealth, people will pass on yet financial wealth in not lost it is just transferred, the thread poster forgets that many will have estates to deal with too, where did all the trillion of government support go to, it is just transferred, so many other sources of financial wealth, not purely based on two household incomes alone...
As Warren Buffet t said:

We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
Price is what you pay. Value is what you get.
Someone's sitting in the shade today because someone planted a tree a long time ago.

 

There are two sides to the equation. You can lower expenses or you can increase incomes. And I don't mean just income from jobs. You can find alternative ways to create other streams of income including passive/royalty/recurring incomes.
You need to change your attitude and thinking that only earned income is used for investment in property or elsewhere. Many wealthy invest into assets first than liabilities and for alternative sources of income.
This alone should help to answer your doubts about having no ceiling, especially in 5-10 years you mentioned.

 

When this property was bought, it was inconceivable that it would ever reach the worth that it now has. Today it is inconceivable that it would reach $4m, but it could.

Over a period of time, block sizes change, demographics change, supply changes too. There will be QE from all the Covid stimulus, then there's the new airport, creating demand. Immigration may be ramped up, it may be ramped down. I've got no crystal ball, so can't foretell the future, all I, or anybody can do is look at what presents as good value at the time of purchase, based on their own set of circumstances.

It will be sold long before the next 20 years have passed, so clearly I won't make millions of dollars from profits, but that does not mean that someone else won't.

 

We bought our first home 695k, and did some basic calcs if property grows x% a year... only within a short couple of years it was worth $1mill. I thought that number sounded huge at the time, and there was no way...
But, we saw the house values creep up, 900k+, then topping the 1 mill mark. Now say, its 1.5m-ish. This was inconceivable just a couple of years ago, but here we are. So, Sydney homes may get to $4mill sooner than you think. You never know.

 

It's relative. And demand speaks.
For $1.8m, we could only get small apartments in cities of other first world countries.
Australia is very attractive to many wealthy foreigners who are aiming to migrate here.
Only $1.8m for a big landed property in Sydney ?? That's cheap ! They would say.
This is potentially the group who would push your house price through the ceiling.

 

Likewise, I did not for a second mean to make a 'woe is me, I am a millenial and I can't afford property in the most desirable part of Sydney' post. I'm comfortably in the top bracket for income/ assets.

Maybe if you read my first post on the thread that'll bring the discussion back to the original intended discussion - it was a prediction that there could be a 'price ceiling' as significant capital gains on entry level properties are getting increasingly difficult to make, which would affect the buying power of the next generation of buyers in 10 years (young people starting their careers now, who will be looking to purchase houses in 10 years).

But as many posters pointed out, there are many factors I have not accounted for in my prediction.

All theory aside, a prediction is either going to be right or wrong. And I will be fascinated if I can read my posts in 10 years time, with the benefit of hindsight.