Society/Culture Australian Property Prices to Crash?

[Number37]

I didn’t say it was the be all and end all reason
Look at the context of all my posts
I’ve always maintained it’s a variety of factors

Immigration is one they can do something about because it’s not a basket case of complexity unlike the other myriad of reasons why we are in this mess

We must have a large immigration intake every year to prop up the whole economy.
The idea that there is shortage of supply is nonsense. The Property Council spruiks this myth so that developers & realtors can make money.

Australian houses are valued at $9000 per square metre. The highest in world except for Hong Kong which is off the charts ($50k per square metre).
For context, the USA is about $3000 per square metre.

In the 1980's 4 years salary = house.
Today it's 16 years.
That's got zilch to do with population.

If you read through this thread there is a common theme of people spruiking home ownership as an investment.
Home ownership is NOT an investment. It isn't a way to make money, I should say, it shouldn't be a way to make money.

The property market is F'd up because developers/realtors/mortage brokers/financial advisors have for the past 30 years been spruiking it as a way to make money. Developers/realtors/mortage brokers/financial advisors/already rich are the only ones getting rich/er out of the property market.

Houses are for living in, not a means to make money.
Anybody that tells you houses are a means to make money is a wannabe Bernie Madoff.

 

[Seeds]

Bring ‘em on

I’ll employ 3 of them right now
But guess what

There is nowhere for them to live

two long run supply side issues to deal with in regards to housing.

land supply releases.

costs of construction.

immigration doesnt impact land supply releases. If you have more immigrants you can release land at the same rate as immigration (or higher if you want).

immigration helps lower construction costs by increasing the pool of contruction workers relative to overall population size.

immigration does cause housing problems in the short run as housing supply is fixed in the short run. But that is a cyclical problem and should be ignored when looking at housing policy (And immigration policy beyond 18 months).

 

[Seeds]

And why did it increase do rapidly?

My guess , probably migration .

Ftr I didn’t say it was the be all and end all reason
Look at the context of all my posts
I’ve always maintained it’s a variety of factors

Immigration is one they can do something about because it’s not a basket case of complexity unlike the other myriad of reasons why we are in this mess

Also, House prices boomed during the pandemic years when immigration was zero.

 

[greyhound punter]

Some more points.

1) People often forget that high prices ultimately induces supply - one poster alluded to it before: Australia has never built more houses in it's history than the previous decade. For example, if cotton prices are high, then enterprising individuals will take up cotton farming to cash in on the high prices - this in turn increases the supply of cotton and the price drops and reaches an equilibrium. It is the genius of market economies and why capitalism will always leave communism/socialism in its wake.

2) It is well known in futures trading circles that the commitment of traders report, that is released weekly, can allow savvy traders pick market tops and bottoms based on over extended buying or selling interest. For example, if there is historically a large amount of buying in corn futures, then eventually, all participants who would like to buy corn contracts have bought into the market, and inevitably, the market falls as there are no more buyers.

I see the same sort of analogy in the housing market - eventually all buyers will be priced out. We aren't at the point yet, but we are getting there.

3) The inability to short sell housing - Robert Shiller made a valid point many years ago, the inability to "short sell" housing allows bubbles to accumulate because 'the bears' can not make a short bet - as one can quite easily make in the stock market or the commodities market. Short sellers ultimately sniff out "bullshit" and look to make profit doing so - this allows markets, in theory, to be efficient.

Personally, my favourite indicator is the absolute dirt that is thrown at anyone who dares to say that housing might fall. The natives are getting restless.

 

[greyhound punter]

Also, House prices boomed during the pandemic years when immigration was zero.

Yep. Rising prices in conjunction with rising volume (of transactions): in retrospect, it was probably a common market phenomenon known as a "blow off" or an "exhaustion move" - a rapid increase in the price of a security matched by rising volume - often at the end of a trend.

Lots of cheap money around, nothing else to do, why not trade houses between each other - some people would have made a fortune during that time - 99% will lose it all and then some.

 

[greyhound punter]

We must have a large immigration intake every year to prop up the whole economy.
The idea that there is shortage of supply is nonsense. The Property Council spruiks this myth so that developers & realtors can make money.

Australian houses are valued at $9000 per square metre. The highest in world except for Hong Kong which is off the charts ($50k per square metre).
For context, the USA is about $3000 per square metre.

In the 1980's 4 years salary = house.
Today it's 16 years.
That's got zilch to do with population.

If you read through this thread there is a common theme of people spruiking home ownership as an investment.
Home ownership is NOT an investment. It isn't a way to make money, I should say, it shouldn't be a way to make money.

The property market is F'd up because developers/realtors/mortage brokers/financial advisors have for the past 30 years been spruiking it as a way to make money. Developers/realtors/mortage brokers/financial advisors/already rich are the only ones getting rich/er out of the property market.

Houses are for living in, not a means to make money.
Anybody that tells you houses are a means to make money is a wannabe Bernie Madoff.

I agree with everything but the timeline. I maintain housing really started to lose the plot circa 2014, before that i think it could be justified somewhat on the fundamentals of the economy - outside of that, 95% of the growth has been speculative in nature.

 

[greyhound punter]

Why cant interest rates keep going up? UnEmployment is low. Interest rates are higher in other countries. the australian ones have gone up too slowly and its causing issues for our exchange rate.

People have become accustomed to interest rates being used to stimulate the economy in bad times - which is not the primary reason for interest rates - it is more a secondary reason.

So the idea goes that if the economy hits a rough trough, then the gov will cut. As you correctly point out, if inflation is above target, then it doesn't matter what the state the economy is in, those IRs are going to the moon. Interest rates are there for price stability - to keep inflation low. The RBA doesnt care about your investment property or your mortage - at least, they shouldn't.

For those that naively think that interest rates won't hit double figures - i remind you that interest rates trended up for 20 years from 1963 to the late 1980s. Rising from 4.5% to 17% - of course, not in a straight line, but an uptrend never the less.

Wowee. Boy oh boy.

 

[peetoo]

Outgoing RBA gov still dismayed inflation is not yet beaten. Citing rents as a major driver.

You couldn’t make this shit up

 

[DangerousD]

I see the same sort of analogy in the housing market - eventually all buyers will be priced out. We aren't at the point yet, but we are getting there

How do you think the above fits when compared to other markets around the world? Lots of people say the above and it makes sense but if you look at London as an example or if we are following a similar path, then house price growth in the major capital cities has a long way to grow.

When i lived in London, it was normal for professionals to share well in to their 30s and most people were forced in to buying small apartments, not saying this is a good thing but its what i see happening here. Land size will decrease, house sizes will decrease, density will increase, so people wont necessarily be priced out of the market, the market will just change.

Just going off where i live, everyone is knocking down existing houses and building duplexes or a dwelling at the rear, the new houses sell for the same price as the existing but are half the size.

 

[greyhound punter]

How do you think the above fits when compared to other markets around the world? Lots of people say the above and it makes sense but if you look at London as an example or if we are following a similar path, then house price growth in the major capital cities has a long way to grow.

When i lived in London, it was normal for professionals to share well in to their 30s and most people were forced in to buying small apartments, not saying this is a good thing but its what i see happening here. Land size will decrease, house sizes will decrease, density will increase, so people wont necessarily be priced out of the market, the market will just change.

Just going off where i live, everyone is knocking down existing houses and building duplexes or a dwelling at the rear, the new houses sell for the same price as the existing but are half the size.

London is a financial powerhouse of the world - trading, market making, investment banks, foreign exchange.

I wouldn't compare Sydney or Melboure to London in that regard.

My central point remains: property is still priced with the assumption that IRs are going back to zero.

I see rising interest rates over the next decade or 20 years. That 3 bedroom, 2 bathroom $600 000 house in Logan is going to crater in value.

High end real estate in London, a financial powerhouse of the world, that is a different story. Who knows.

 

[peetoo]

London is a financial powerhouse of the world - trading, market making, investment banks, foreign exchange.

I wouldn't compare Sydney or Melboure to London in that regard.

My central point remains: property is still priced with the assumption that IRs are going back to zero.

I see rising interest rates over the next decade or 20 years. That 3 bedroom, 2 bathroom $600 000 house in Logan is going to crater in value.

High end real estate in London, a financial powerhouse of the world, that is a different story. Who knows.

The markets are more similar than different. Foreign investment

 

[DangerousD]

London is a financial powerhouse of the world - trading, market making, investment banks, foreign exchange.

I wouldn't compare Sydney or Melboure to London in that regard.

My central point remains: property is still priced with the assumption that IRs are going back to zero.

I see rising interest rates over the next decade or 20 years. That 3 bedroom, 2 bathroom $600 000 house in Logan is going to crater in value.

High end real estate in London, a financial powerhouse of the world, that is a different story. Who knows.

Interest rates aside as I dont see them continuing to climb, as long as we continue to have a capital city focus, I don’t see prices in any capital dropping.

Referencing my last post, prices might drop or stagnate but the land/house size will shrink.

We currently have 66% population in our capitals and 80% in coastal areas, unless this changes, the demand for land will stay strong.

Unless things plummet in a big way, Logan will continue to climb, demand for housing there is at an all time high and compared to other suburbs close by, is undervalued.

 

[peetoo]

Was just looking at online value our hous seems to have increased 10x in the 30 years we’ve been here

So the bumps are smoothed out.

Now before we were here, actual sales in 77 and 88 showed a 6.6 fold increase11 years

1977 to now, 4.5 decades, 72 fold increase

 

[CatToTheFuture]

We must have a large immigration intake every year to prop up the whole economy.
The idea that there is shortage of supply is nonsense. The Property Council spruiks this myth so that developers & realtors can make money.

Australian houses are valued at $9000 per square metre. The highest in world except for Hong Kong which is off the charts ($50k per square metre).
For context, the USA is about $3000 per square metre.

In the 1980's 4 years salary = house.
Today it's 16 years.
That's got zilch to do with population.

If you read through this thread there is a common theme of people spruiking home ownership as an investment.
Home ownership is NOT an investment. It isn't a way to make money, I should say, it shouldn't be a way to make money.

The property market is F'd up because developers/realtors/mortage brokers/financial advisors have for the past 30 years been spruiking it as a way to make money. Developers/realtors/mortage brokers/financial advisors/already rich are the only ones getting rich/er out of the property market.

Houses are for living in, not a means to make money.
Anybody that tells you houses are a means to make money is a wannabe Bernie Madoff.

One of my favourite things to do is look up jacksonville Florida houses for sale.

I live in Adelaide and the population, density, gdp per capita etc is roughly similar.

The quality of house I could have there is insane compared to what is here

 

[peetoo]

After a period=d of all forecasters agreeing prices are ‘correcting’, forecasts are diverging again

Aussie house prices ‘set to soar 15 per cent’: KPMG - realestate.com.au

Home prices are set to explode over the next year and a half, with housing affordability to be hit hard, according to a new report.

www.realestate.com.au

 

[Number37]

After a period=d of all forecasters agreeing prices are ‘correcting’, forecasts are diverging again

Aussie house prices ‘set to soar 15 per cent’: KPMG - realestate.com.au

Home prices are set to explode over the next year and a half, with housing affordability to be hit hard, according to a new report.

www.realestate.com.au

real estate dot com is owned by Newscorp.
I wouldn't believe a word they write.

 

[greyhound punter]

Oil is rising...inflation is returning....I expect interest rate rises to continue....

 

[Sqotty from office works]

Oil is rising...inflation is returning....I expect interest rate rises to continue....

Listing's at highest in 6 years.
That's something newscorp and realestate.com don't tell you.

 

[peetoo]

real estate dot com is owned by Newscorp.
I wouldn't believe a word they write.

Discount 95% of all predictions, especially this thread.

Funds tied up in principle residence is better than anything including super it seems. Still there to reverse mortgage if you live longer than your super lasts

 

[peetoo]

Listing's at highest in 6 years.
That's something newscorp and realestate.com don't tell you.

Clearance rate too

 

[FIGJAM]

One of my favourite things to do is look up jacksonville Florida houses for sale.

I live in Adelaide and the population, density, gdp per capita etc is roughly similar.

The quality of house I could have there is insane compared to what is here

Jacksonville is a toilet!

I'd have thought Adelaide's sister city of Austin TX would be more comparable (both have similar average / median house prices after conversion).

 

[CatToTheFuture]

Jacksonville is a toilet!

I'd have thought Adelaide's sister city of Austin TX would be more comparable (both have similar average / median house prices after conversion).

Greater metro Austin is near double the population of Adelaide at 2.3 to rads 1.3. They have a gdp per capita in Austin that is more than double Adelaide's at 84k USD per citizen there to ours 60-odd AUD per citizen

May as well compare adelaide to New York city

 

[DangerousD]

One of my favourite things to do is look up jacksonville Florida houses for sale.

I live in Adelaide and the population, density, gdp per capita etc is roughly similar.

The quality of house I could have there is insane compared to what is here

Without looking at any data, would be as simple as building costs in the US are lower because wages for trades are lower? Separately I’ve always assumed the demand in the US is a lot lower, Adelaide for example, what is the nearest city/town of similar size you could move too? Melbourne? It’s a fair move.

In the States, there’s a lot more cities and towns to spread the demand across the country.

Do you have any thoughts?

 

[CatToTheFuture]

Without looking at any data, would be as simple as building costs in the US are lower because wages for trades are lower? Separately I’ve always assumed the demand in the US is a lot lower, Adelaide for example, what is the nearest city/town of similar size you could move too? Melbourne? It’s a fair move.

In the States, there’s a lot more cities and towns to spread the demand across the country.

Do you have any thoughts?

Building costs definitely lower and wages lower, but how much do they get away with lower wages because of a low cost of living driven by low housing cost? Can be a bit circular.

I think you probably wouldn't have to go that far back in time to find Adelaide real estate substantially cheaper than jacksonville. Without looking at the data.

 

[DangerousD]

Building costs definitely lower and wages lower, but how much do they get away with lower wages because of a low cost of living driven by low housing cost? Can be a bit circular.

I think you probably wouldn't have to go that far back in time to find Adelaide real estate substantially cheaper than jacksonville. Without looking at the data.

I just did a quick google and it said electrician salaries in Jacksonville at $24 per hour, just comparing that to here and that would be about 60-70% cheaper than Melbourne, assuming that applies across other trades and that is huge.

Then there’s demand, i think its roughly 65% live in 6 capital cities in Australia and about 80% live on the coast, with that in mind, the lack options outside the main capitals keeps demand in these places very high.

Without massive investment in towns outside of capitals to spread the population or government intervention on property investors, property prices will continue to climb.