What's going to happen to the property market?

Replies to This Discussion

Permalink Reply by Lisa on August 2, 2008 at 16:28

I agree - it will become "impossible for the majority of Australians to purchase".

I hate to say it, but the economy does not work in such a way that everyone is able own their own home. Like jacquesk says, many Europeans rent for life. Why should Australia be any different to other places in the world.

They don't call it the "Great Australian Dream" for nothing. Think about it, in an era where the bulk of the western world are living in more 'compact' quarters (ie, more people per sq foot :-), ie. London, Singapore, Paris, New York etc., Australia has still been chasing the Great Australian Dream - originally it was a 1/4 acre block with a hills hoist and enough room for the kids to play.

We, the settlers of a new land (both convicts & pioneers! :-))have had some time to shine, now it's time to come in line with the rest of the world.

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Permalink Reply by Tony Aloisi on June 4, 2008 at 9:43

While it matters more for your heirs than it does for you, it can matter if you're looking at using the equity in your home to do other things - renovate, invest, go on a holiday, etc.

The group it matters for most is first home buyers, who are having to take out larger and larger loans (that they can't afford).
TA

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Permalink Reply by Matthew Reader on June 6, 2008 at 17:47

There is a danger inherent in having "equity" in your home. Borrowing can be a dangerous game, and used incorrectly equity can be little more than a credit card on steroids!
Matt

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Permalink Reply by purplewombat on June 12, 2008 at 23:26

I totally agree with you Matthew. Kinda defeats the purpose of buying a home if you're never going to own it! Great for the banks, they'll have you on a string forever more. They are in the business of lending money to make money. They really don't want you to pay off your home. It's just too big a temptation for a lot of people. If you're going to keep redrawing on your mortgage, might as well just rent and spend all your money.

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Permalink Reply by T Tokyo on June 12, 2008 at 23:59

So true purplewombat!!! Banks don't want you to pay off debt, be it home loan or credit card debt. They not going to go far if everyone pays off their loans...

TNT

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Permalink Reply by Ivan Tanner on June 13, 2008 at 2:52

I agree with Matt as well. Here's a very simple economic rule of thumb. If a house costs $400,000 and rents for $400 a week that's a 5% yield. This is what yield property's gravitate to over the long term. At the moment for a $500,000 property
might get you $375 a week so that means rents must go up or property prices go down to get it back into synch. I suspect property prices will remain flat for the next 5-7 years with rents grinding there way up as wages increase. Landlords can only demand rent increases that the market will stand i.e there's an affordability index for rent as well. One of the property's I bought in 1996 for $135,000 rented for $150 a week. That same property I'm selling now for $450,000 rent's for only $250 a week....that's my point.

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Permalink Reply by Bandwidth on August 2, 2008 at 16:29

My observation is that property returns 12 to 14% pa combined rent and capital growth so when capital growth goes down rent goes up. Also most of the numbers being quoted are Sydney peices and rent Sydney has had lowsy rental yeild for years. Most other capital cites have had > 5% yeild for a number of years.

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Permalink Reply by Matthew Reader on February 4, 2009 at 21:47

Looks like you were onto something here Ivan way back in June las year - rents have gone up AND property prices have fallen.

And I think there's a lot more pain to come with property, based on the Demographia study mentioned in this article:

The bursting of the Aussie housing bubble

[you can download the Demographia study here]

What does everyone else think about this - three of the top five most unaffordable places in the world (based on the places in the study, all "Western" countries)??!!

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Permalink Reply by Karen on June 4, 2008 at 16:42

Great to see so many fantastic responses to this thread!!!

Karen

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Permalink Reply by Michael9 on June 17, 2008 at 10:29

Hi
I'm interested to know about the underlying demographic dynamic of the baby boomers who must shuffle off this mortal coil in the next twenty to thirty years as opposed to new population growth. If the baby boom population bulge is much bigger than the new growth (and particularly if they move out of their houses in the next fifteen years into communities and supported care) then the equation of inexorable growth in prices must be questioned. In 2028 it's possible the place will be littered with empty houses. What do others think?
Michael

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Permalink Reply by JG on June 18, 2008 at 11:39

The data I'm seeing is showing falls in real estate right now.

The "weight of money" from the boomers moving out of their accumulation investment phase is a worry in all markets, not just real estate (aged care is licking its lips though).

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Permalink Reply by Bandwidth on August 2, 2008 at 16:37

The only way you are going to get the majority of boomers into aged care is kicking and screaming :-). Also there is a long tail in the baby boomer generation. A better demographic is the "children of the revolution" which takes it into born up to the mid 60s. so there are some of them that are in their mid to late 30s. We will be a long time waiting for them to "move on"

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