I read an article in the Sun about if you buy a $300,000 apartment now and because it will double every 7 years by 2045 it is worth $18,200,000. This to me is too good to be true. Why property does not double every 7 years is this. Say average earning is 60k so you can afford a $300k property on multiples of 5. So in 2045, according to the property gurus it would be worth $18.2 million and average earnings will have to be at least $3million. I seriously doubt average earnings will be 3million in 2045. SO HOW COULD PROPERTY DOUBLE EVERY 7 TO 10 YEARS FROM NOW ON WHEN AVERAGE EARNINGS CANNOT DOUBLE AT THE SAME RATE? Answer this property gurus.
Property doubles every 7 to 10 years?
- Thread starter round12tko
- Start date
What was the average wage 10 years ago?
Hi there.
Interesting question.
In Brissy - the average wage now is?
And ten years ago?. (1996).
I seriously don't know what they where
Using my own career as example (round figures)
I know that when I started work in 1997 as undergraduate
my wage was under 30K It's closer to $80k now (9 years later)
SO yes, I believe it has more than doubled in 10 years. (mind you I finished uni in that time).
But I haven't been working for multiple "7-10 year" cycles so it is probably statistically not reliable..
Cheerio.
A/c
Hi there.
Interesting question.
In Brissy - the average wage now is?
And ten years ago?. (1996).
I seriously don't know what they where
Using my own career as example (round figures)
I know that when I started work in 1997 as undergraduate
my wage was under 30K It's closer to $80k now (9 years later)
SO yes, I believe it has more than doubled in 10 years. (mind you I finished uni in that time).
But I haven't been working for multiple "7-10 year" cycles so it is probably statistically not reliable..
Cheerio.
A/c
round12tko said:
I have being saying the same thing for the last 25 - 30 years and continually been proved wrong
. Two examples: I bought my first property in 1979 (27 years ago), a 2 bedroom unit in East St Kilda (42 The Avenue) for $26,000. So doubling every 7 years, would mean that this property should be worth between $208,000 (3 doubles) and $416,000 (4 doubles) today, with it being closer to $400K (probably between $350K and $400K). I bet that would be about right.
I bought a house in Brisbane in 1988 (18 years ago) for $205,000. So doubling every 7 years, would mean that this property should be worth between $810,000 (2 doubles) and $1.6M (3 doubles) today. I would think it would be in that range today.
. I seriously doubt average earnings will be 3million in 2045.
lets go back a few years in Brisbane june 1974 avge price was $22,234
number of sales was 14554,june 1978 avge price was $32,378 number of sales 10,556.june 1982 avge price was $56,757 no sales13,256. june 1988
avge price was $83,679 no of sales was 19,306 ,11.3 % change.
june 1991 avge price avge price was $135,800 number of sales 15,557 ,june 93 the price starts to slow back to
on avge to 148,700. you can follow this right up to today but imho
in the last 6 years in BRISBANE if you look at relationships between
sales volumes and prices,particualy during all the real estate booms
then you may see that their has been three rapid booms in the last
six years..
my answer to your question is no..........
good luck
willair.
lets go back a few years in Brisbane june 1974 avge price was $22,234
number of sales was 14554,june 1978 avge price was $32,378 number of sales 10,556.june 1982 avge price was $56,757 no sales13,256. june 1988
avge price was $83,679 no of sales was 19,306 ,11.3 % change.
june 1991 avge price avge price was $135,800 number of sales 15,557 ,june 93 the price starts to slow back to
on avge to 148,700. you can follow this right up to today but imho
in the last 6 years in BRISBANE if you look at relationships between
sales volumes and prices,particualy during all the real estate booms
then you may see that their has been three rapid booms in the last
six years..
my answer to your question is no..........
good luck
willair.
Last edited:
Hi all,
I remember in 1962 my parents sold our home for just over 5000 pounds(ie $10k)
it was on the market last year and sold for round $265k, so while not doubling in cost every 7 years it has certainly doubled in that 7-10 yr range.
My father was a builder, in 1968 he was building 3brm houses for $5-6k, you do the maths.
Its always interesting to look at old newspapers, the prices seem so cheap now but at the time we wouldn't buy because they were too dear!
It's the same with real estate, it might seem dear today but you can guarantee it will be more in a few years. The house we currently live in cost $120k in 1992, it's current GV is $320.
I suppose it's one of the advantages of having seen a number of RE cycles there is plenty of anecdotal evidence to support the premise that the cost of real estate will double every 7-10 yrs.
Tom
I remember in 1962 my parents sold our home for just over 5000 pounds(ie $10k)
it was on the market last year and sold for round $265k, so while not doubling in cost every 7 years it has certainly doubled in that 7-10 yr range.
My father was a builder, in 1968 he was building 3brm houses for $5-6k, you do the maths.
Its always interesting to look at old newspapers, the prices seem so cheap now but at the time we wouldn't buy because they were too dear!
It's the same with real estate, it might seem dear today but you can guarantee it will be more in a few years. The house we currently live in cost $120k in 1992, it's current GV is $320.
I suppose it's one of the advantages of having seen a number of RE cycles there is plenty of anecdotal evidence to support the premise that the cost of real estate will double every 7-10 yrs.
Tom
It will not necessarily double. It will depend on the property, and the state of the market for that area, amongst other things.
I was looking at a Brisbane property in 2000, in the outer suburbs. The asking price for that property was less than the sale price 8 years before, when it was almost new. Demand for land in that area was small, as there was so much of it available.
Of course, if I had bought it , it would have ridden the boom.
I was looking at a Brisbane property in 2000, in the outer suburbs. The asking price for that property was less than the sale price 8 years before, when it was almost new. Demand for land in that area was small, as there was so much of it available.
Of course, if I had bought it , it would have ridden the boom.
I started fulltime work in 1977. That is, over 29 years ago. Over that time, my salary has increased an average of 9% per year. That is, on average, it doubled every 8 years.
On this basis, if I was on a salary of $60K today, it would be over $1.7M in 2045, not $3M but still not bad.
Just as property increases in price due to inflation, supply/demand and adding value - so does one's salary (adding value in this case would mean obtaining education, knowledge and experience).
Talking about supply/demand - earlier this month, I was in Mackay and I overheard two 20-something year olds talking about their pay - they work in the mines and were getting $1,000 per 12-hour shift
On this basis, if I was on a salary of $60K today, it would be over $1.7M in 2045, not $3M but still not bad.
Just as property increases in price due to inflation, supply/demand and adding value - so does one's salary (adding value in this case would mean obtaining education, knowledge and experience).
Talking about supply/demand - earlier this month, I was in Mackay and I overheard two 20-something year olds talking about their pay - they work in the mines and were getting $1,000 per 12-hour shift
kierank said:
Your salary rising by that high amount just means that you have improved your relative position in the labour market.
For those who follow the 'traditional career' model such above average rises are normal with age or seniority. This can also happen for those who follow a less traditional career model (eg from employee to outsourced contractor who trades job security for high hourly rates).
You rode the up escalator while others were on the down escalator and others were standing still.
Hence if calculating affordability changes (and the ability to sustain rising property prices), using median incomes of society as a whole is better than reference to one's own circumstances only, since all property values are socially determined.
Peter
Average weekly earnings changes in Australia: http://www.abs.gov.au/ausstats/[email protected]/94713ad445ff1425ca25682000192af2/277de45665c11900ca256cbf0017219d!OpenDocument
Do the math
Unfortunately their 1941-1990 series doesn't appear to be online.
There's a real wages from 1980-2004 chart in: http://www.bca.com.au/upload/Access_Report.pdf
Which is also very interesting. See page 14, chart 2.5. Be aware of the biases.
Of course individual experiences vary.
Cheers,
Aceyducey
Do the math
Unfortunately their 1941-1990 series doesn't appear to be online.
There's a real wages from 1980-2004 chart in: http://www.bca.com.au/upload/Access_Report.pdf
Which is also very interesting. See page 14, chart 2.5. Be aware of the biases.
Of course individual experiences vary.
Cheers,
Aceyducey
Isn't it just the case that a given property moves up the ranks? The house your bought in an outer suburb 20 years ago was filled with young families just starting out. 20 years later, it's become an old house in a middle ring or even inner-ish suburb, and are sought after by executives.
While starting salaries don't increase by 7-10% a year, you have to take into account that the city expands and property use changes (old houses redeveloped into units, outer farmland subdivided, etc) and the people who live in an area change (starter families to execs to young professionals, etc). As the economy expands the pool of higher-earning people increases. You see an extreme case of this in New York and London, where big chunks of the property market moves depending on how bank bonuses are in a given year, and prices are insane for the normal worker. Sydney sees a smaller version of that.
When I started work 9 years ago I made $28k. Salary has gone up 10%+ a year since then, and now I can probably afford a $500k house. Even with prices back in 1997, I couldn't have afforded such a house (would have been maybe 250, 300k?).
So a given property keeps going up ahead of general increases in salary because:
1) Use changes (density, ordinary home to McMansion)
2) Buyers change (young families to execs as the suburb gets better
3) Pool of buyers increases with population increases, economic growth, city growth, etc
Alex
While starting salaries don't increase by 7-10% a year, you have to take into account that the city expands and property use changes (old houses redeveloped into units, outer farmland subdivided, etc) and the people who live in an area change (starter families to execs to young professionals, etc). As the economy expands the pool of higher-earning people increases. You see an extreme case of this in New York and London, where big chunks of the property market moves depending on how bank bonuses are in a given year, and prices are insane for the normal worker. Sydney sees a smaller version of that.
When I started work 9 years ago I made $28k. Salary has gone up 10%+ a year since then, and now I can probably afford a $500k house. Even with prices back in 1997, I couldn't have afforded such a house (would have been maybe 250, 300k?).
So a given property keeps going up ahead of general increases in salary because:
1) Use changes (density, ordinary home to McMansion)
2) Buyers change (young families to execs as the suburb gets better
3) Pool of buyers increases with population increases, economic growth, city growth, etc
Alex
I can't contribute on why this should be so in the future. Like you, I suspect it may not be.round12tko said:
I think I know why it has happened recently though...... As a young man I spent a short time selling white goods for Chandlers. That was when I realised that I wasn't alone in being poor. Virtually every washer or fridge sold was done on a HP contract with AGC or some other rip-off merchant at 10% FLAT! Never heard the term? It is nearly 20% REDUCING. This at a time when housing rates (if your bank deemed you worthy) were about 3%.
Calculated as a percentage of a tradsman's pay, the price of manufactured goods were many, many times more expensive then than they are now (they vary but the cost of a TV is now <5% of what they were in '63) The effect of this release from the debt spiral should never be underestimated. It's odd but I have never heard anyone quote this as significant! but I still believe the ability to pay off your house instead of your posessions has driven RE since the '80s inflationary boom.
Trust me! I've been there.
Most people's wages will grow AT LEAST at CPI (approx), ignoring the fact that they may get promoted to more senior jobs.
Over the course of the economic cycle that would be 1 or 2% to maybe 6,7, or 8% (like 1970s from what I have heard).
Plus - many years - even if you didnt get CPI raise - tax cuts would give you a 1, 2, 3% 'pay rise' (ie you bring home more dollars each week).
Combine the two and you can see why property would logically increase 7% at least a year over the long term, without considering any other factors.
Over the course of the economic cycle that would be 1 or 2% to maybe 6,7, or 8% (like 1970s from what I have heard).
Plus - many years - even if you didnt get CPI raise - tax cuts would give you a 1, 2, 3% 'pay rise' (ie you bring home more dollars each week).
Combine the two and you can see why property would logically increase 7% at least a year over the long term, without considering any other factors.
G'day round12tko,
I'm sure we've all heard that property appreciates at 7 - 10% pa. But your example chooses 10% (which is a bit rich for the average apartment).
Try recalculating your figures using 7% (i.e. doubles every 10 years) and it won't seem quite so frightening.
Will some apartments appreciate at 10% pa? Yeah, probably - if they have views across Sydney Harbour or similar, I'd say "No doubt!"
But if we're talking "average apartment", I'll join the ranks of "No way, Jose". And then, as we all know, it is land value that gives the growth - so maybe even 7% is a bit rich for apartments .....
Regards,
Sure this wasn't an ad ???12tko said:
I'm sure we've all heard that property appreciates at 7 - 10% pa. But your example chooses 10% (which is a bit rich for the average apartment).
Try recalculating your figures using 7% (i.e. doubles every 10 years) and it won't seem quite so frightening.
Will some apartments appreciate at 10% pa? Yeah, probably - if they have views across Sydney Harbour or similar, I'd say "No doubt!"
But if we're talking "average apartment", I'll join the ranks of "No way, Jose". And then, as we all know, it is land value that gives the growth - so maybe even 7% is a bit rich for apartments .....
Regards,
BIS Shrapnel affordability indicator - calculates mortgage repayments at the prevailing standard variable rate for a loan of 75% of the median house price, as a percentage of full time earnings - the higher the percentage, the less affordable prices are.
I let you all draw your own conclusions.
Sydney - 44.6 (1987), 46.6 (1988), 80.6 (etc), 73.9, 54.6, 45.7, 41.8, 40.4, 45.4, 42.7, 37.1, 38.6, 39.4, 47.0, 41.0, 47.6, 53.6, 61.3, 55.1 (2005)
Of interest -
1987 Melb 46.7, Brisbane 31.4, Adelaide 39.2, Perth 27.5, Hobart 32.8, Darwin 34.5 & Canberra 38.8
2005 Melb 43.1, 2003 Brisbane 30.4 (2005 - 39.3), 2005 Adelaide 34.9, 2003 Perth 25.4 (2005 - 34.3), 2003 Hobart 24.6 (2005 - 34.8), 2005 Darwin 31.9 & 2005 Canberra 36.4.
Regards
Keen
I let you all draw your own conclusions.
Sydney - 44.6 (1987), 46.6 (1988), 80.6 (etc), 73.9, 54.6, 45.7, 41.8, 40.4, 45.4, 42.7, 37.1, 38.6, 39.4, 47.0, 41.0, 47.6, 53.6, 61.3, 55.1 (2005)
Of interest -
1987 Melb 46.7, Brisbane 31.4, Adelaide 39.2, Perth 27.5, Hobart 32.8, Darwin 34.5 & Canberra 38.8
2005 Melb 43.1, 2003 Brisbane 30.4 (2005 - 39.3), 2005 Adelaide 34.9, 2003 Perth 25.4 (2005 - 34.3), 2003 Hobart 24.6 (2005 - 34.8), 2005 Darwin 31.9 & 2005 Canberra 36.4.
Regards
Keen
But then you read this
Quote
The Great Australian Nightmare?
Added by: National
Source: Property Council of Australia
Date Published: 28 April 2006
Added To Web: 01 May 2006
Housing affordability is declining, according to an international survey, which also reveals that Sydneysiders are finding it harder to get into the market than New Yorkers. Stephanie McDonald reports.
The second annual Demographia International Housing Affordability Survey: 2006, charts ratings for major markets from September 2005 in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States.
Demographia is an international public policy firm specialising in demographics, development impacts, market research and urban policy.
The survey reveals Australia has four of the most unaffordable markets in the top 20 – Sydney (7th), Hobart (15th), Adelaide (18th) and Melbourne (19th) – and none in the most affordable housing markets. Perth ranks 23rd, Brisbane 26th, Canberra 45th and Darwin 51st. Australia also rates highest as having the most unaffordable markets, followed by Canada, Ireland and New Zealand.
“The most pervasive housing affordability crisis is in Australia…” the survey says, rating six markets in Australia as severely unaffordable and two as seriously unaffordable.
The method used in the survey is a calculation of the median house price to median household income ratio, with a median multiple of 5.1 and over rated as severely unaffordable, 4.1 to 5.0 seriously unaffordable, 3.1 to 4.0 moderately unaffordable, and 3.0 or less affordable.
Demographia says Australia’s capital cities recorded median multiples in the 1980s of 3.0 or under. Since 1996, that national rating has jumped two full points, and over three points in Sydney.
Using data from AMP Banking, the Australian Bureau of Statistics, the Housing Industry Association, the Real Estate Institute of Australia and the Reserve Bank of Australia, the survey sets the average household income in Sydney at $61,000 and the average house price at $520,000. This results in a median multiple of 8.5, the most expensive market in the country and a severely unaffordable rating.
In Hobart and Adelaide, surprising some with their high rating on the survey, the median household income is $40,100 and $41,700 and the average house price is $266,500 and $272,000, respectively. With all other average house prices over $300,000, these two markets still don’t appear to be overly unaffordable.
Tim Willing, managing director of Multiplex Living at Multiplex, says growth in Hobart and Adelaide can be one reason for the cities’ high rankings.
“Particularly in the case of Hobart, (they) have had very little growth for a long time and then they had a major spurt of growth for a couple of years,” he says.
David Rees, director of research at Mirvac, has witnessed this change. He says the various data he has seen on affordability “show over the past four or five years, affordability in most Australian cities has fallen…”
Rees says Sydney’s high ranking is due to several factors such as higher incomes and a lower supply of land.
“You can go back 150 years and Sydney has always been the least affordable of Australian cities. It’s a function of relatively higher wages in Sydney, combined with … limited access to land,” he says.
UnQuote
The rest can be found at http://www.propertyoz.com.au under the "Property Australia" magazine style link on the top right hand side of the web page.
Keen
Quote
The Great Australian Nightmare?
Added by: National
Source: Property Council of Australia
Date Published: 28 April 2006
Added To Web: 01 May 2006
Housing affordability is declining, according to an international survey, which also reveals that Sydneysiders are finding it harder to get into the market than New Yorkers. Stephanie McDonald reports.
The second annual Demographia International Housing Affordability Survey: 2006, charts ratings for major markets from September 2005 in Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States.
Demographia is an international public policy firm specialising in demographics, development impacts, market research and urban policy.
The survey reveals Australia has four of the most unaffordable markets in the top 20 – Sydney (7th), Hobart (15th), Adelaide (18th) and Melbourne (19th) – and none in the most affordable housing markets. Perth ranks 23rd, Brisbane 26th, Canberra 45th and Darwin 51st. Australia also rates highest as having the most unaffordable markets, followed by Canada, Ireland and New Zealand.
“The most pervasive housing affordability crisis is in Australia…” the survey says, rating six markets in Australia as severely unaffordable and two as seriously unaffordable.
The method used in the survey is a calculation of the median house price to median household income ratio, with a median multiple of 5.1 and over rated as severely unaffordable, 4.1 to 5.0 seriously unaffordable, 3.1 to 4.0 moderately unaffordable, and 3.0 or less affordable.
Demographia says Australia’s capital cities recorded median multiples in the 1980s of 3.0 or under. Since 1996, that national rating has jumped two full points, and over three points in Sydney.
Using data from AMP Banking, the Australian Bureau of Statistics, the Housing Industry Association, the Real Estate Institute of Australia and the Reserve Bank of Australia, the survey sets the average household income in Sydney at $61,000 and the average house price at $520,000. This results in a median multiple of 8.5, the most expensive market in the country and a severely unaffordable rating.
In Hobart and Adelaide, surprising some with their high rating on the survey, the median household income is $40,100 and $41,700 and the average house price is $266,500 and $272,000, respectively. With all other average house prices over $300,000, these two markets still don’t appear to be overly unaffordable.
Tim Willing, managing director of Multiplex Living at Multiplex, says growth in Hobart and Adelaide can be one reason for the cities’ high rankings.
“Particularly in the case of Hobart, (they) have had very little growth for a long time and then they had a major spurt of growth for a couple of years,” he says.
David Rees, director of research at Mirvac, has witnessed this change. He says the various data he has seen on affordability “show over the past four or five years, affordability in most Australian cities has fallen…”
Rees says Sydney’s high ranking is due to several factors such as higher incomes and a lower supply of land.
“You can go back 150 years and Sydney has always been the least affordable of Australian cities. It’s a function of relatively higher wages in Sydney, combined with … limited access to land,” he says.
UnQuote
The rest can be found at http://www.propertyoz.com.au under the "Property Australia" magazine style link on the top right hand side of the web page.
Keen
The more unaffordable a property eg 10times average earnings the more the notion that property doubles every 7 to 10 years becomes a fallacy.
A question for mortgage brokers
If inflation runs at around 3%, wages are probably increasing at that rate also.
But just because wages go up 3%, it doesnt mean that property can only grow at 3%, and we've seen that historically.
If your wage goes up 3%, what does this mean for your maximum borrowing capability. Does it go up 3%, or does it go up more? I believe that it will have a compounding effect over the life of a loan and that is why property prices can increase at a rate > 3%.
Just a theory.
If inflation runs at around 3%, wages are probably increasing at that rate also.
But just because wages go up 3%, it doesnt mean that property can only grow at 3%, and we've seen that historically.
If your wage goes up 3%, what does this mean for your maximum borrowing capability. Does it go up 3%, or does it go up more? I believe that it will have a compounding effect over the life of a loan and that is why property prices can increase at a rate > 3%.
Just a theory.
