Are house prices set to tumble in Oz?

[carpetbelly]

point d is a winner for you... that's a handy skill to have. I can barely get dressed in the morning let alone do a house up so I have to be even more careful than you for chosing. Yes, you might gain in house price inflation but with your skills you're also able to add value that way which is a good thing.

[NZStidz]

I've found over the years that it isn't necessarily just the mortgage that is prohibitively expensive, but the rates/council tax/water rates etc. There seems to always be SOMETHING just tipping home ownership into the unaffordable category. I'm not sure about Australia, but here in NZ I have just paid $22,000 to sell our $525k house - don't forget to factor that cost in when you sell. Real estate fees cost a fortune however with the market as it is at the moment (i.e. s-l-o-w), we wouldn't stand a hope of selling privately.

[GavCar]

Again then though, this is a personal opinion. I just do not agree with interest only mortgages unless you're putting away enough money to cover off the capital for when the mortgage expires. Otherwise I class interest only mortgages as just almos like expensive renting. Yes, you've agreed to buy the property but at the end of the day the bank still owns that property. You're not making any arrangements to pay off the capital. Again, I thought the same when I was back in the uk and having got stung a little in that crash and thinking what could I have done that was just sensible.

 

 

No wanting to be dismissive but house prices go up and down. You say you've amde 10-15k,I'll say congrats really. Personally the only way a uk flat is an investment is if your yield is big enough. Saying that, aso that 10-15k, not knowing your circumstances at all but could you have made similar by say renting a property and putting the difference into investments from the start? I'm not trying to be negative... more than anything I'm just trying to dismiss the idea that renting is dead money and home owning isn't. Owning a home is only not dead money when the mortgage is paid off. Otherwise you're basically paying interest on a mortgage with is very much so dead money.

 

 

That's the thing. It's a gamble that it will be worth more in time. Nothing more. It cannot be guaranteed. That's the problem I have with it.

 

 

Have to say, totally agree with your statement of planning for the future is really important. After all, that's what this whole thing is about isn't it . That's also a nice example to read. Have to say well done to your parents.

 

 

I dont think it was a rant, very much the start of a good debate

Also, I dont think there's a lot of negative about owning your own home at all. I personally think it's a great thing if you take that leap. I know how it feels to 'own' your own home and I;d say generally that's a fantastic feeling. Just dont over stretch yourself to do so... That's basically my point.

 

Again, apologies if none of that makes sense. Last night posting drunk on cideer, this morning/afternoon, ergh my hangover lol!

 

 

OK, if your property is worth more when you sell it than when you buy it then it doesnt matter if you've paid off the capital as the difference is profit. If you buy a flat for £150,000 on interest only and then sell it for £180,000 (obviously not getting into the nitty gritty losing fees etc just the principle) then you have made £180,000 (ish) so how was paying the mortgage each month 'dead money' - you wouldnt have made that money if you were renting!

 

You say could I have made that £10,000/£15,000 by renting a property and putting the extra money away - as I said my mortgage is CHEAPER than renting a smilar flat would be so therefore I have paid LESS each month AND made money!! Therefore if we werent saving to go to Oz the extra would be being put away to pay off the capital. And we we probably have a similar plan in Oz, knowing that we still have our flat in England aswell.

 

Over time property will always grow in value which is why I said you have to be prepared to be in it for the long haul. Yes after 5 or 10 years it maybe go down in value but you need to be able to wait it out until it goes up again and it will.

 

Also with renting, you could be given notive to leave at any stage so could be hard to set down roots and also like I said you can do anything you like if you buy it wheras if its rented there will be restrictions and you will have ot ask 'permission' to do stuff.

 

We know quite a few people that buy interest only properties & rent them out & are keeping them for investment for the future. At the end of the day it doesnt matter what they are worth until they are sold. Property will eventually go up in time as inflation is inevitable. For example we know people that have lived in the same house for like 30 years and they bought it for £30,000 ish thousand and now it worth £200,000!! So still would make £170,000 on an interest only mortgage after paying the bank back.

 

The way I see it is that the crash happened not long after we bought our flat and we're still not in negative equity because we bought sensibly ie good location, appeal to quite a wide market, negotiated a good price etc so if we can hang on to it for another 10/20 years, even if we haven't managed to go to repayment we are likely to make mooney on it we would never have been able to get otherwise.

 

There are situations where renting is the best thing ie when we first move to Oz we will rent until we can find the place where we want to settle and get a bit more savings behind us. But I really believe that once you settle into a home long term then it is better to buy.

 

Cara :wubclub:

[Guest The Ropey HOFF]

All i hope for is that somehow, certain things go wrong in Australia, not long term like here in the uk, say for a year, an housing crash, a debt scenario, similar to the uk and Ireland and an overall situation where.................. the dollar creeps up above $2 to £1 so that we can afford to emigrate and buy our house out right, instead of the current situation, where the $200,000 we have lost due to the chronic exchange rate, where we would have to get a loan, or mortgage for this loss to get the house we want and at 50 i don't want to go into such debt and i won't do that, its lunacy.

 

Please god.................. make Australia struggle for a bit, so that thousands can afford to get there, especially us. Only for a short while, i know its totally selfish what i want, but its human nature.

[pablo]

point d is a winner for you... that's a handy skill to have. I can barely get dressed in the morning let alone do a house up so I have to be even more careful than you for chosing. Yes, you might gain in house price inflation but with your skills you're also able to add value that way which is a good thing.

 

 

I suppose it is handy carpet,but believe me its a chore mate,standing downstairs in here and then looking up to the trusses of the hse and realising what i had ahead was enuf to reach for the valium,but all the joinery,tiling,new ceilings,concrete+timber floors ,landscaping,kitchen units etc etc i done myself,the only things i paid for was the wiring that a mate done £800,plumbing with combi boiler etc £1,000,and plastering approx£1,000,because i'l only take on patch plastering,not a full hse,anyway it worked out,the value is more than dbl now,and that includes taking out a good few quid for holidays+car etc,im FAR from rich btw!!!! but like i say we have taken a fair few bob out of the hse and its still worth at least dbl,so i suppose being a builder is handy,chore tho!

BTW that was the only other thing i was "debating" with myself...buying a plot and building my own hse in oz,but do i want the hassle.........MMMMmmmm:radar:probs not.

[fish.01]

The average wage to new mortgage ratio in Australia is about 4.3. Don't think it is that different to the UK if not a little lower?

 

(Source: BE)

Average Mortgage is $286,392

Average Wage is $65,668

 

4.36 times

 

With low unemployment and relatively strong economy not sure why prices would fall off a cliff as opposed to fall a bit and then stagnate for a decade like they have in the past after a boom? Unless unemployment or interest rates rise dramatically.

[Addy]

I think things have started to slide already. the percentage of properties sold at auction last week in Tasmania was 4%! Yes 4%! The other states have dropped from the usual 60-70% sales too.

 

Auction Results and Recent Property Sales - realestate.com.au

 

Things aren't great in QLD either:

 

Southeast Queensland homebuyer confidence low, prices stagnant | Courier Mail

 

Perth has already started to fall:

 

Perth property price plummet continues

 

We were looking to buy a few weeks ago and have stopped looking as we think the market will fall. It might not crash as spectacularly as the UK and Eire but it is definitely slowing.

[skippy]

I can't see house prices coming down in the next few years, as there is a shortage of rental's in most areas of Oz, and that's what's keeping the prices high in the buying and rental market.

A lot of properties are now being auctioned to get the maximum price for the sellers, and people are willing to pay the stupid prices just to own their own homes, those are the people who may lose money in the future in my book.

I've heard that people are also putting in bids as to how much they are willing to pay for rental properties nowadays, so the highest bidder gets the rental, very nice for the owner, but very hard for people just wanting a roof over their heads until they get established.

The problem arose some years ago when the government stopped building homes for low income families, so they had to rent privately and get rent assistance from the government to help to pay the rent, which made private rentals very hard to find for the average worker who just wanted a rented home until he could afford to buy his own.

[paddygunner]

Ireland was a different scenario, having an open door policy to Europe most of the lower paid workers were eastern Europeans who rented (especially Dublin). During the boom the population was booming and they needed to be housed. Young Irish people were buying 3 or 4 houses and renting them out to immigrants thinking it was a good investment (although they were a bit Greedy) until the GFC hit and most of the big Blue Chip corporations used the excuse to move out to cheaper dingy country's like India. Most Irish people who were left unemployed then got lower paid jobs working in factories, cleaning, shops & hospitality. The eastern europeans moved back to their own countries and a lot of houses were left empty, no rental income and the people were trying to off load houses cheaply to avoid foreclosure.... thats how the property crash happened. Over supply of housing with no demand....Because of GREED.

 

Of course then developers stopped building mid-project because of negative demand, hence all the 'Ghost Estates' just lying 1/2 built and unfinished and because the Banks? Government had guaranteed Developer loans that is what sunk the banks which in turn sank the Government.

 

Causes for the property crash in Ireland

 

1. Uncontrolled Immigration.

2. Bad developer planning

3. Minimum Wages way above what they should have been.

4. Greed

 

If you want my opinion WA & Perth is very similar to Ireland in that there is a boom in one particular sector that is responsible for the population boom there, if that sector went down the tubes a good portion of the population would be forced to sell up and move away...and property prices would tumble.

 

ok so there are differences but I have to say that there are also similarities.

 

From what I've heard there are plenty of young australians in their 30's buying second properties on the basis of the equity they haave built up in their first house because prices have mushroomed in the last decade.

 

I believe the impact of negative gearing is a hugh pillar of housing price rises.

Don't forget we never had negative gearing in Ireland ( you could not offset rental loss against other incomce here)

 

Also getting back to the OP question about renting or buying I still maintain that if median house prices are over 7 times your average annual salary then they are not affordable in the long term.

It is only 15 years ago that you could only borrow 2.5 times your annual salary.

 

Well the debate will go on - unfortunately for us there is litterally no movement in the housing market here even at 2001 prices.

[pablo]

So many different figures put on mortgage to wage ratio onhere,yer dont know which one to believe:goofy:

[fish.01]

....

 

Also getting back to the OP question about renting or buying I still maintain that if median house prices are over 7 times your average annual salary then they are not affordable in the long term.

It is only 15 years ago that you could only borrow 2.5 times your annual salary.

....

 

You may not have meant to imply it....but people are not borrowing 7 times their annual salary now either? That of course is impossible.

[paddygunner]

You may not have meant to imply it....but people are not borrowing 7 times their annual salary now either? That of course is impossible.

 

 

OF course it is impossible but I think this is the reason why so many people on average wages cannot afford to purchase a property. Prices are too high relative to wages.

[pablo]

So thats it then..............everyone agrees with me:biggrin:,interest only it is!:biglaugh:

[fish.01]

OF course it is impossible but I think this is the reason why so many people on average wages cannot afford to purchase a property. Prices are too high relative to wages.

 

Yeah I agree. The average house is certainly way out of reach of a home buyer on average wages with little deposit. But I guess it should be.

 

The current market prices are being supported by new mortgages averaging $286,000. I suspect the average household income taking out these mortgages is well above the average wage level.

[pablo]

Yeah I agree. The average house is certainly way out of reach of a home buyer on average wages with little deposit. But I guess it should be.

 

The current market prices are being supported by new mortgages averaging $286,000. I suspect the average household income taking out these mortgages is well above the average wage level.

 

 

Whys that fish? because they have little deposit?because surely people on average wages deserve the chance to own their own home?

[Guest chris955]

That of course only applies to average wage earners, lots of people of course need to borrow much more and some of course less but given that the average house in most major cities is considerably more than 286k and probably closer to 400k then those ratios go pout the window. The fact is that prices cant keep rising the way they have been.

You really need to look at the median wage which is more representative, the median wage is around $48,000.

 

The average wage to new mortgage ratio in Australia is about 4.3. Don't think it is that different to the UK if not a little lower?

 

(Source: BE)

Average Mortgage is $286,392

Average Wage is $65,668

 

4.36 times

 

With low unemployment and relatively strong economy not sure why prices would fall off a cliff as opposed to fall a bit and then stagnate for a decade like they have in the past after a boom? Unless unemployment or interest rates rise dramatically.

[fish.01]

Whys that fish? because they have little deposit?because surely people on average wages deserve the chance to own their own home?

 

The comment was about whether they should afford the "average" house rather than any house. Given supply and demand would think the average house would be afforded by the statistically average home buyer. Would assume the average home buyer has a decent chunk of equity.

[fish.01]

That of course only applies to average wage earners, lots of people of course need to borrow much more and some of course less but given that the average house in most major cities is considerably more than 286k and probably closer to 400k then those ratios go pout the window. The fact is that prices cant keep rising the way they have been.

You really need to look at the median wage which is more representative, the median wage is around $48,000.

 

Not sure what you mean? What ratios go out the window?

[pablo]

Yeah I agree. The average house is certainly way out of reach of a home buyer on average wages with little deposit. But I guess it should be.

 

The current market prices are being supported by new mortgages averaging $286,000. I suspect the average household income taking out these mortgages is well above the average wage level.

 

Not sure i understand fish tbh,it looked like you were saying the average hse should be out of reach of people on average wages?

[Guest chris955]

The wage to mortgage ratio. This is why people are in fact borrowing way more than 4 or 5 times earnings.

 

Not sure what you mean? What ratios go out the window?

[fish.01]

Not sure i understand fish tbh,it looked like you were saying the average hse should be out of reach of people on average wages?

 

Yes, but I'm not stating what morally should be the case, but stating what statistically should be the case given how the housing market works.

 

I'm explaining what I mean badly. I'll try again. :biggrin:

 

A lot of the commentator blogs with an axe to grind state how expensive it is for someone starting out in the housing market by showing how they can't afford the average house. To me this is disingenuous. They should be comparing against the starter house, not the average. The starter house has become expensive enough....they have no need to overplay their position.

 

Our parents didn't work themselves into a position where they could finally afford a house and then expect the average house...they expected a starter house, and then worked their way up to the average and beyond when they had built up equity.

 

The average house should be the one you get when you are half way up the market ladder, not starting out.

 

It would be nice if someone on a less than average income and little savings could afford a starter house but this doesn't seem to happen and they tend to rent or buy an apartment.

[fish.01]

The wage to mortgage ratio. This is why people are in fact borrowing way more than 4 or 5 times earnings.

 

I'm don't agree that that figure can be supposed. People would not be able to service that loan.

 

You can equally make arguments for the average wage of home buyers being more than the median wage. A lot of people on lower incomes are not in the housing market. A lot of families who buy a house have more than one income. A lot of people buying the more expensive houses live in the higher paying areas with higher average incomes.

 

For example, if someone borrowing the average mortgage of 289,000 is borrowing way more than 4 or 5 times their income then try it with 7 times as that seems way more.

 

Mortgage $289,000

Income $41,000

 

Net Income per month $2,787

Mortgage per month $2,083

 

So not only would the bank not give you that loan but you wouldn't be able to make the first repayment if they did. I don't believe loans like this are the the norm at all.

[Joebloggs]

Some people can afford to buy and some people can't, that's why there will always be rentals. We all want something that we can't have...

[Que Sera Sera]

Right now as always I am going to go with my personal experience because I am lousy at maths and cant do the sums but:

 

We could not afford the house we are renting at the moment if we were to try and buy it. We wouldnt be able to borrow the amount of money that it would take to buy it and even if we did we couldnt afford to pay it back.

 

Now we can afford the rent quite comfortably and we dont HAVE to pay anything other than electric and gas on top. Which means we can live in a lovely house in a lovely area which if we were to buy would mean we would have to move from the area just to rent from the bank for the next 25 years. The decorations are to my taste so no issue there.

 

I understand the need to buy as I had it in the UK but really it doesnt feel so necessary here. Just my experiences as I said I am not a maths person. We have no debt at all for anything whatsover and it means we sleep very comfortably :wubclub:

[Maisie]

Ireland was a different scenario, having an open door policy to Europe most of the lower paid workers were eastern Europeans who rented (especially Dublin). During the boom the population was booming and they needed to be housed. Young Irish people were buying 3 or 4 houses and renting them out to immigrants thinking it was a good investment (although they were a bit Greedy) until the GFC hit and most of the big Blue Chip corporations used the excuse to move out to cheaper dingy country's like India. Most Irish people who were left unemployed then got lower paid jobs working in factories, cleaning, shops & hospitality. The eastern europeans moved back to their own countries and a lot of houses were left empty, no rental income and the people were trying to off load houses cheaply to avoid foreclosure.... thats how the property crash happened. Over supply of housing with no demand....Because of GREED.

 

Of course then developers stopped building mid-project because of negative demand, hence all the 'Ghost Estates' just lying 1/2 built and unfinished and because the Banks? Government had guaranteed Developer loans that is what sunk the banks which in turn sank the Government.

 

Causes for the property crash in Ireland

 

1. Uncontrolled Immigration.

2. Bad developer planning

3. Minimum Wages way above what they should have been.

4. Greed

 

If you want my opinion WA & Perth is very similar to Ireland in that there is a boom in one particular sector that is responsible for the population boom there, if that sector went down the tubes a good portion of the population would be forced to sell up and move away...and property prices would tumble.

 

Totally agree with what you say, Im Irish myself and I def think here there is more houses than demand and the builders are still building but there is so many houses sitting on the market for ages, house we are in is a rental but its up for sale but

what happens when we move out now in Jan, no one is going to move in cos its up for sale and who wants to rent a house with home opens! its either landlord pull house off the market and rent it out which they dont want to do or else let it sit until it does sell which it hasnt this last 10 months. Same for a lot of houses that are up for sale now with tenants in they will find it impossible to get tenants in whilst house is on the market.

 

I dunno I wouldnt feel personally comfortable buying here at the min but thats a personal opinion (diff if you have kids to consider and schools to consider). I think the market here will def drop more but I dont think it would end up ever as bad as Ireland but then I never thought Ireland would go as bad unfortunately as it is now.