What the bulls fail to realise is that WA is stilll hugely benefiting the multi-billion $$ borrow and infrastructure spend from the state government.
You guys have net even really got a taste of austerity yet. But it is coming in the second half of 2015.
Along with the winding down of the mega projects and the completion of Roy Hill mid year 2015.
Dr evil has spoken.
herbie
21 Aug 2014, 05:00 PM
It would seem to me that Perth could well be in for a bit of a setback?
Are there any Perth based dudes on this site actually buying (except for future development potential maybe) at this time? - I'd be interested to hear if you are - Ta.
Hmmm - Absolute minimum, I reckon I'd hold off until mid 2015 at least re Perth, to at least let a bit of the dust settle; See what the fallout might be. But definitely NO rush to buy at all is my punt on the Perth market at this time.
And yes, depending how things go, it's just possible nominal Perth prices might not increase for a decade. Such things do happen in the big bad world of property investing ...
There is nothing wrong with maintaining & observing what's already in place.
If one is able to with no stress.
I am more concered about zoning changes that may not go in my favour if I hear any whispers that may be to my detriment I will get my act together to develop, & just rent it all out until is good to turf.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
we are only at the start of that downturn at the moment... wages werent rising that much from 2007-now, the gains happened from 2002-2007 as i have shown to you time and time again.. what we have been seeing is a slowing down and no news of what will replace the high paying jobs that are now being closed out....
answer those questions and i will be more optimistic on the state of the Perth property market over the next 5-10 years.. [/quote]Wages rose by more than 50% according to the ABS from 2007 to now. I would not say that is not much. It was the highest wage growth since the 90s.
We are not seeing this slow down of yours despite big projects completing this year are we? Wages are still growing. Wages are like house prices they are sticky, WA has been through a few of these mining cycles of yours since 1994, but it seems that there are not many periods, if any of falling wages, except a dip for the GFC.
To get a slow down in wages growth from your argument you need to make several assumptions:
1. That operational workers will earn significantly less than construction workers and:
2. That there will be significantly less workers in operation than in construction (I have shown that this is not the case for a project like Roy Hill which will have 2000 full-time operational jobs for 15 years, and a peak of 4000 construction workers but much less averaged over the construction period).
. 3. That a lot of short term FIFO contractors from all over the country and overseas have added more home buyers to the market over the past few years than a few less long term FIFO operational staff based in Perth will in the next few years.
4. That no other high wages will emerge in other market segments.
I am thinking that maybe WA wages might not drop that much after all.
Quote:
If wage growth slows, or pauses due to re-positioning of labor, how can house prices rise?
If wages are growing property prices can rise, they can also rise due to all those wage rises since 2007 that have not shown up in property prices
Quote:
If the State government is forced to introduce more levies and reduce costs due to shortfalls in budget due to falling commodity prices, how will that assist with disposable income/purchasing power for housing?
This cannot really happen as the way the GST is divided up any losses to our facilities will mean that GST income has to come back to the State. It is also very unlikely as I cannot see BHP, Fortescue and Woodside making that kind of money without healthy royalties. The State government may have hoped for more royalties but that is a very different scenario than saying they will experience decreasing State income. That is not gonna happen.
Quote:
if the aussie dollar falls in value, how will perth people get their new cars, tv's , white goods and basic houshold items for the same prices and still have money left over to pay multiples of their income on houses?
WA is an export based economy and a drop in the dollar is like a big pay rise. Manufacturing, agriculture and tourism markets will all benefit. This leads to jobs growth, more money in our super from our Australian investments, more money for the finance people in Sydney and on and on and on. WA needs the dollar to fall. If the price is a bit more for imported goods so be it. House prices in Perth depend on sentiment at this stage of the cycle, a bit extra for imported white goods is a drop in the ocean compared to the wages growth that has stayed out of property since 2007.
Jimbo
21 Aug 2014, 05:48 PM
You are forgetting to incorporate into your stats that the average home of 1974 was on a 1/4 acre block. Places like Wembley, Cottesloe, Mt Pleasant,Como and Rossmoyne all had big blocks many which have been subdivided and re-developed.
This is hidden inflation that you can't account for in your chart.
Also, I would say with a great deal of confidence that in 1974, 90% of Perth property would have been within 15km of the city. I remember when Kardinya was being developed and was considered to be "out in the sticks".
If you took the price chart and just increased just the value of those properties that existed in 1974, you would have a very different picture.
The other thing about your wages to prices chart is that you are assuming that Perth wages are higher than WA regional wages but that is not the case.
SHHHHH the bears don't realise this - they think that home owners only saw the same growth as the medium house price.
I could have used stratified data and this tries to take that into account but that would add to the validity of my position not take away from it.
When you use price to income trends that has the effect of normalising the data yet you can still see the stagnation and fall in real prices that has occurred since 2007. This will end sometime, housing markets never stay down forever.
Veritas
21 Aug 2014, 06:58 PM
So tell us then Skamy.
Seeing as most of those fundamentals were in place for much of the last ten years, how come South of the River got smashed in 08/09?
I think there was a Global Financial Crisis at the time and a lot of folk thought that they would put off buying a house, that reduced demand for housing therefore prices fell.
But the GFC is in fact over now.
Veritas
21 Aug 2014, 07:38 PM
Mike
Your investment strategy ( as you tell it ) seems to defy all logic.
Can you please tell us under what circumstances you would go bust.
What level of debt are you holding?
Seeing as you have no problem telling us early and often about the scale of your property empire, you might tell us how leveraged it is.
I think Mike's secret is not to get too greedy. He does not wait for the peak or the bottom, he buys when prices are falling and sells when they are rising.
He also sticks to a market price level that is most stable ie the lower end of the market.
Some people get greedy and look to make one big dramatic killing in the market eg Steve Keen selling up his home hoping to ride a downturning market or a buy to flip investor trying to ride an upturning market. Sometimes these people make money but sometimes they fall flat on their face.
doubleview
21 Aug 2014, 08:16 PM
keep posting those charts Skamy funny pictures
Ya got nothin have you preacher boy?
Not one single word in the face of all my lovely charts you are dumbstruck for once. I am not even getting the usual fire and brimstone sermon from you on the evils of buying a home or an investment property
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
The Australian dollar will fall more slowly than any other inflated global currency (though it will still fall). When it does eventually crack it will crash.
The Government is beaten at the margins on its austerity agenda. Given the terms of trade are already far below forecast, the forthcoming misses in deficit reduction are going to be tricky but the Government is clearly going to plump for confidence now as well.
Essentially they are opting for house price inflation and the ensuing wealth effect to drive everything else domestically, for the external sector to continue shedding – and one assumes for unemployment to continue mounting – while the AAA mandated budget cuts and fiscal reforms over the cycle are stashed behind the bushes somewhere down the track, as we adopt the mining capex pike position.
Judging by the rhetoric of the major banks, the APRA macroprudential guide to lending is having some impact in preventing banks competing via lower lending standards. We can therefore expect out-of-cycle mortgage rate reductions (so far they haven’t actually amounted to anything) to keep the party going.
Housing is set for one final great inflation straight into the capex cliff and the next external shock.
It’s a ship of fools cheering wildly into a storm but the spinnaker is set and bulging, the will for change is absent and the rudder is broken!
Sit back and relax, this could all be more entertaining than Evil Kneivel doing the 28 London buses or the Grand Canyon – in a tragic kind of way.
SHHHHH the bears don't realise this - they think that home owners only saw the same growth as the medium house price.
I could have used stratified data and this tries to take that into account but that would add to the validity of my position not take away from it.
When you use price to income trends that has the effect of normalising the data yet you can still see the stagnation and fall in real prices that has occurred since 2007. This will end sometime, housing markets never stay down forever.
OK, a quick case study. My parents sold a house in Melville in 1975 for $18,500. It was on a 1000m2 block.
It now has a property at the rear and both combined would be in the region of around 1.2 million (A standalone property in the same area would cost at least a million anyway). Deduct a generous 200k for the rear build (was built over 10 years ago) and you have a growth rate of 54 times the 1975 price.
Yet the Perth median price has increased by only 27 times in that same time frame. (very neat how the the numbers work out to be half, but that is just coincidence).
The median price growth for Perth may not look that severe when you look at the REIWA chart, but it has been watered down by building further out, on smaller blocks, and by subdivision. On a like for like basis, since 1974 Perth property has outperformed even bubbly London (at 42 times for a like for like).
I am not so sure either about WA having sticky down wages. If you are a tradie working on contracts, you take whatever you can get. The wages blip during the GFC was caused by some projects being iced for six months or so but the crazy hikes upwards were caused by all the big players trying to get their sites up and running at the same time. That was a perfect storm that we probably won't see again.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
OK, a quick case study. My parents sold a house in Melville in 1975 for $18,500. It was on a 1000m2 block.
It now has a property at the rear and both combined would be in the region of around 1.2 million (A standalone property in the same area would cost at least a million anyway). Deduct a generous 200k for the rear build (was built over 10 years ago) and you have a growth rate of 54 times the 1975 price.
Yet the Perth median price has increased by only 27 times in that same time frame. (very neat how the the numbers work out to be half, but that is just coincidence).
The median price growth for Perth may not look that severe when you look at the REIWA chart, but it has been watered down by building further out, on smaller blocks, and by subdivision. On a like for like basis, since 1974 Perth property has outperformed even bubbly London (at 42 times for a like for like).
I am not so sure either about WA having sticky down wages. If you are a tradie working on contracts, you take whatever you can get. The wages blip during the GFC was caused by some projects being iced for six months or so but the crazy hikes upwards were caused by all the big players trying to get their sites up and running at the same time. That was a perfect storm that we probably won't see again.
Keep dreaming in fantasy land bears, Perth property prices are only going one way… UP. Your dreams of sweeping in on budget basement properties where the effects of a mining downturn means many IP owners will be panic selling are false. Your dreams are getting smashed each and everyday forward. Bought in '13 and and ya can't lose I'm only paying a fraction more than rent, in a much nicer house and no more rent inspections etc. As an added bonus it'll be mine outright within ~15 years. Any inevitable price gains will be a bonus.
I think most of this bearish thinking stems from recent arrivals to WA which are bitter that they missed the rising tide and that many blue-collar workers own a nice PPOR or multiple investment properties. This snobbism from overseas where only some with a stamp on a piece of paper or bidding entrepeuner could amass such wealth is absolutely thrown out the window when they come to Perth. Then you also have bearish point of view from the left which expect everything to be given on a plate and couldn't take advantage of the exceptional economic conditions in WA for the last few years. They vent their frustration from being bottom feeders against others which own more than them while doing NOTHING to improve their personal situation other than whining about the government. Not saying I like the current government but these people act like 2 year old with their thinking and actions.
Next minute they're claiming DSP from tax payers and still bitter.
It is construction workers who are losing jobs as the mines complete, miners are being hired.
There are a lot of new long term mining jobs. For instance, Roy Hill is going to employ 2000 for 15 years.
Construction workers only work for a few years on the projects and you are telling us they are on lower money. So we could see wages rise.
Does the ABS count a Leighton employee constructing a mine camp a mine wage or a construction wage?
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
It is construction workers who are losing jobs as the mines complete, miners are being hired.
There are a lot of new long term mining jobs. For instance, Roy Hill is going to employ 2000 for 15 years.
Construction workers only work for a few years on the projects and you are telling us they are on lower money. So we could see wages rise.
Does the ABS count a Leighton employee constructing a mine camp a mine wage or a construction wage?
Nobody would work on a minesite for $1449.20 a week. My last stint was $11,050.00 per three week cycle (2 weeks up and 1 week back). That's 10 hour days, 13 day fortnights.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
It is construction workers who are losing jobs as the mines complete, miners are being hired.
There are a lot of new long term mining jobs. For instance, Roy Hill is going to employ 2000 for 15 years.
Construction workers only work for a few years on the projects and you are telling us they are on lower money. So we could see wages rise.
Does the ABS count a Leighton employee constructing a mine camp a mine wage or a construction wage?
You are either truly an idiot or just adamant in posting complete fabrications ...
Those mining construction jobs are on mining wages .. Its the mining sector old lass... When they transfer to construction sector build houses in Perth they will be back in construction sector pay bracket ...
Its highly likely those in long term mining jobs will also be on lower salaries as there will be so many queing up for the work that the mining companies can pick and choose - not the same as the " employ at whatever price we can get labor " conditions of investment boom years
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