Interesting piece by Joye in the AFR

Some may think Joye is trying to sensationalise ?

Someone suggested to me that his change in tune happened when he left Business Spectator and Property Observer to join the Fairfax stable. Around that time he stopped publishing his own independent blog with its pro-property stance.

I don't know what to think, really.
 
Someone suggested to me that his change in tune happened when he left Business Spectator and Property Observer to join the Fairfax stable. Around that time he stopped publishing his own independent blog with its pro-property stance.

I don't know what to think, really.
There are others who seem to think his assertions are a little Keenesque.

.... I am clearly worried about the current run up in house prices and can see a period where house prices will falter as the RBA moves to a monetary policy tightening cycle, Chris' view of such large falls seems to be askew.

As a result, I am offering Chris a simple two-tiered offer based on his forecast.
.....

For Chris, those seem juicy odds at 10 to 1 on something he thinks could happen.
....
 
Price-Income ratio is one of those useless metrics imo. It gives a false impression of whether housing market is bubble and often used by doom/gloomers

1. It doesn't take into account savings. Eg. someone with 1mil in savings and $0 income buys a 1 mil house will look outrageous in this ratio. Incidentally Aus saving rate has gone up heaps since GFC

2. Interest rate is the real driver. Look at the ratio post RBA independence. Same income, 5% interest means you have twice buying power of when it was the 10%+ days

3. Housing is elastic demand in comparison to other basic needs food/clothing/transport. There is only so much you can eat/wear/drive no matter how cheap they are, whereas all the money saved up can always go to a bigger house (general public, non-SS members of course)
 
Long term chart (prices to household income) in a new article this morning:

http://www.afr.com/p/business/property/house_prices_flash_red_record_debt_MPI3fve6eztNMyT62R4P1J

dc9fce44-bb75-11e3-a9d3-f477f7972aaf_house2646x369.png


& another (household debt as % of income):

bbee0332-bb75-11e3-a9d3-f477f7972aaf_house1-646x366.png


Anyone who thinks we can see similar house price appreciation over the next 30 years as we've had over the last 30 is kidding themselves.
 
Anyone who thinks we can see similar house price appreciation over the next 30 years as we've had over the last 30 is kidding themselves.

Ever since the Bretton Woods system came to an end in 1971, which made all currencies a pure numbers game, anything is possible. It is all dependent on inflation / interest rate. Since RBA is targetting 2-3% inflation, that is the goal I will be aiming at long term

Real house prices in relation to hard currencies (gold, oil) is mostly likely remain constant. But to a fiat dollar$ figure, anything is possible
 
Hobo - you seem to love posting charts of house price to income and gearing from the early 1990s until now.

Care to post a chart of retail interest rates from 1990 to now instead? That might help explain a few things... perhaps it will help divert discussion away from less these relevant metrics?
 
Since RBA is targetting 2-3% inflation, that is the goal I will be aiming at long term
Which is far lower than the growth in prices we've seen over the last several decades.

Housing has more or less reached the peak price it can in real terms or relative to incomes. We now have dual incomes paying for many houses, interest rates at record lows & prices at or near the highest they've ever been to incomes, GDP, rent. What significant demographic or market related changes could we see that drive prices any higher than inflation/income growth? There is far more risk to the downside should we see an economic downturn or rising interest rates.

After 3 years of incorrectly predicting the real estate market, here we go again.
Got Melbourne wrong & still surprised at the growth. Got Perth right.

Otherwise not sure what prediction from 3 years ago that you mean?
 
Care to post a chart of retail interest rates from 1990 to now instead? That might help explain a few things... perhaps it will help divert discussion away from less these relevant metrics?

Some may find this chart from CBA & RBA to be a little more relevant to reality. It shows how much we are paying in interest relative to our disposable income.

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Looks like it's the best it's been for 10 yrs! so we have plenty of spare disposable income to keep buying more expensive houses.

However, remember that the RBA may feel the same way & pull the rate rise lever.
 

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Thanks for posting that Keith - a very interesting graph.

However, remember that the RBA may feel the same way & pull the rate rise lever.

While this is true, the RBA has much more to worry about than house prices. They consistently try to talk them down but what is always notable in those statements is their lack of action in actually using the IR lever.

My guess is they will keep jawboning on house prices but only use the IR lever when other issues demand it - things like employment, business investment, economic growth and inflation. Unless those things demand higher IRs, then they will let house prices run - it's the lesser of all the evils they are trying to control with the one rate lever.
 
Look forward to your apology:D
What apology?

Are you going to apologise for continuing to regularly misrepresent what I say? http://somersoft.com/forums/showpost.php?p=1141970&postcount=128

I've said in the past I got that call wrong. It's not an open prediction that lasts until my death lol. Your wording implies I have consistently predicted that for 6 years which is not the case.

Also it was mid to late 2009, not 12 months prior as my post implies (AFAIK I misspoke in that post), but if you can find my prediction from 6 years ago (April 2008 or even anytime in 2008) then I'd welcome you to share it.

So turk presumably given your tone, you think that history will be repeated, prices will continue to outpace incomes as they have over the last 15-30 years and in 2030-2045 we will be saddled up with circa 300% household debt to income?
 
What everyone is forgetting is that the government WANT increase house prices.

Increase price, increase wealth , increased confidence , increased building , increased spending , leads to

INCREASED TAX , hence less need for nasty spending decreases and everyone will think the government is doing a great job .

My hope is at the end of this Liberal Government , they don't start trying to out spend the Labor opposition in terms promising lower taxes and more spending and stick to their guns of relative Financial Frugality.

Any spending of spare money should be put into infrastructure ( esp the Hexaham Bypass ....) and smart spending to future proof our economy to build on Australia's areas of advantage and not just more buckets of middle class welfare .

Cliff
 
What apology?

Are you going to apologise for continuing to regularly misrepresent what I say? http://somersoft.com/forums/showpost.php?p=1141970&postcount=128

I've said in the past I got that call wrong. It's not an open prediction that lasts until my death lol. Your wording implies I have consistently predicted that for 6 years which is not the case.

Also it was mid to late 2009, not 12 months prior as my post implies (AFAIK I misspoke in that post), but if you can find my prediction from 6 years ago (April 2008 or even anytime in 2008) then I'd welcome you to share it.

?



Your quick with the accusations of lying, but these are posts by you that I am putting up.

Another post by you now in August 2010 reiterating your 2008 bearish position on property.

Perhaps you just misspoke once again a year later:rolleyes:

As the 2008 house price crisis was averted with a slashing of rates, relaxing of foreign ownership laws and introduction of the FHOB we have no way of knowing how bad this fall was going to be, but my personal opinion at the time (prior to FHOB announcement and rate cuts) was that we would see 15% off prices over a couple of years, however the stimulus trimmed this to 5.5% (national fall from the ABS index) before prices started rising again.


also in the same post


You make it sound like I have changed my argument over time, however if you go back 6 months you will find this has not been the case, e.g. here is a post from early January this year:

January 7th, 2010

Quote:
Originally Posted by hobo-jo View Post
Over 2008 at the "crash" site I was normally grouped with the property bulls. I was regularly posting and usually in defense of property prices (as there were still reasonable prices in some Adelaide suburbs). Over 2008 I was of the opinion there were still opportunities for those wanting a PPOR, but thought as an investment it didn't make much sense to buy. To me, in the Adelaide market, property as an investment hasn't made sense (e.g. to purchase now) since early 2007 which is when I stopped looking for my first IP. Over 2008 I was of the opinion we would probably see 15% off nominal prices by around 2011-2012. I was not part of the group claiming qtr 1 2008 was the tipping point and I am no Steven Keen follower when it comes to his house price predictions.

Over 2009 I observed. Watching FHBs continue to flock to property, continue to borrow excessively to purchase, continue to mainly stick with variable rates...watched as prices in many states even started to climb again. It didn't make sense to me that following the greatest financial catastrophe they had ever seen the younger generations were still diving head first into overpriced assets under 1 year later. Not only that but the government was encouraging it with increases in the FHOG. 2009 absolutely reeked of the final stages of a mania/bubble. Hence towards the end of 2009 I became quite bearish and sold the only property I owned (there were other contributing factors), which was purchased as a first home with the intention to subdivide down the track. I now believe we will see at least 15-20% of nominal prices over all capital cities over the next few years and probably another 5+ years stagnation/low growth. It could end up being worse.

My prediction is the tipping point is Qtr 1 2010 (that may just mean relatively flat growth to begin with). Though my expectations are no where near as bearish as some that have been here before. We have already seen a drop off in borrowing from FHBs after the reduction in the FHG and that will only continue as I believe it was reduced again December 31st (?). Investors are picking up the slack for now, but don't believe that will continue.

Increasing interest rates (including non RBA moves from increases in lending costs), credit availability, reduced FHOG, will all be contributing factors which tip property into negative growth starting next year.

I think 5% off most capitals at least is likely in 2010. If we don't see drops and property prices stay flat then I think blaster's scenario with stagflation while property prices don't rise seems likely dropping the real price of them anyway.

Not really fussed if I'm wrong. Overpriced assets with a 5% return (- high costs) are not really of interest to me, so even if house prices don't come down it's likely that I will just continue to find other under priced assets to invest in.

My view hasn?t changed much from the above, although the start of the price correction took a little longer than I expected following the removal of the FHOB, I guess I should have accounted for the money flow from this boost to take a couple of months to ease out of the system as well as a couple of months for listing to increase putting pressure on sellers to start dropping their prices.


http://somersoft.com/forums/showthread.php?p=702596
 
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Anyone who thinks we can see similar house price appreciation over the next 30 years as we've had over the last 30 is kidding themselves.

I am not expecting to see similar house price appreciation over the next 30 years as we have seen over the last 30 years. I think the price increases we have had were due to unique circumstances which I can't see being replicated over the next 30 years. Accordingly my investment strategy relies on steady growth slightly above inflation, not the dramatic doubling of house prices every 7 to 10 years.
 
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