not only that you don't understand logarithms but you also seem no to understand why and when it is used
So I have few questions for you:
Is ASX index CPI adjusted? Does ASX index measures value of a fixed asset? Does house price index measures fixed share of a total asset value?
Look, I'll spell this out for you one last time:
* Some argue that house prices should historically, over a period of 100 years+, maintain some constant CPI-adjusted price, or else they are in a bubble. These are the people that trot out the linear scaled "real" house price index chart to back up their argument. If you follow this argument to it's logical conclusion, it means that a median house in Sydney today should cost only $50k! Ie 2/3 a single average wage, and an amount of money that a large proportion of people could save up in 12 months or faster if they wanted to! This is despite the fact that even ignoring land prices, you would struggle to just build and fit out a median Sydney house for 3-4 times that figure!
* Others (myself included) argue that in fact this position is silly, and that the prices of houses have in fact been increasing steadily in real terms for the past 60 years, that this trend is due to wages growing faster than CPI, the concentration / scarcity factor (more people in the same number of cities), and also due to ongoing real economic and average wealth growth. So - if you want to see this trend, you should plot your "CPI adjusted" house price index using a log scale. Doing this shows there is in fact no bubble.
* Some argue that house prices should historically, over a period of 100 years+, maintain some constant CPI-adjusted price, or else they are in a bubble. These are the people that trot out the linear scaled "real" house price index chart to back up their argument. If you follow this argument to it's logical conclusion, it means that a median house in Sydney today should cost only $50k! Ie 2/3 a single average wage, and an amount of money that a large proportion of people could save up in 12 months or faster if they wanted to! This is despite the fact that even ignoring land prices, you would struggle to just build and fit out a median Sydney house for 3-4 times that figure!
I don't argue that house prices should follow CPI (i.e. stay the same in “real” terms)
* Others (myself included) argue that in fact this position is silly, and that the prices of houses have in fact been increasing steadily in real terms for the past 60 years, that this trend is due to wages growing faster than CPI, the concentration / scarcity factor (more people in the same number of cities), and also due to ongoing real economic and average wealth growth. So - if you want to see this trend, you should plot your "CPI adjusted" house price index using a log scale. Doing this shows there is in fact no bubble.
I agree that house prices should follow trend due to general improvements in quality of life, income, wealth growth and GDP growth.
BTW houses are not scarce today. There are more of them per household than ever in our history.
Quote:
Please do try and keep up!
As you may see from the chart it is not required to have log scale to see that house prices in Australia are overvalued by up to 40% in “real” terms from the trend "due to wages growing faster than CPI and also due to ongoing real economic and average wealth growth"
The fact that ASX index increases faster or slower has nothing to do with this. That index is measure of something completely different.
MANY PEOPLE selling their homes are still looking for prices higher than buyers are likely to pay – and the difference between asking and selling prices can be as much as 20 per cent.
For while property website surveys published this week show residential property price falls since the peak of the property boom of between 43 and 52 per cent nationally, estate agents say that actual selling prices are now down by around 60 per cent and more.
The lack of specific information about property sales prices means that buyers and sellers are still largely in the dark about what is actually happening in the property market.
This should change in June, when a property price register detailing recent sales, with addresses and prices, is published by the Property Services Regulatory Authority (PSRA).
The figures published by property websites MyHome and Daft are all based on asking prices.
Meanwhile, the CSO’s most recent residential property price index, published in late December, showed prices paid for property down by 52 per cent from the peak – but its figures are based on mortgage drawdowns and exclude cash transactions, which many agents now say account for one-third and more of their sales.
Sherry FitzGerald puts the fall in selling prices from the peak in 2006 at 62.4 per cent in Dublin, and at 59.8 per cent nationally. Douglas Newman Good’s CEO Keith Lowe puts the fall in greater Dublin at 65 per cent, while Edward Hanafin, a director with Lisney in Cork, says that prices there are off the peak by about 50-60 per cent “and more for apartments”.
Given the continued uncertainty of the market, and the probability that prices will continue to fall in 2012, what should people who still want to buy – or sell– this year do? At what level should buyers pitch an offer, and how can vendors put a realistic price on their home, given the uncertainty?
Sherry FitzGerald director Simon Ensor says that a further fall in prices of 5 to 10 per cent is a definite possibility, so if you’re making an offer on a property, you could pitch it by at least that much below the asking price. As always, of course, it depends on the kind and location of the property.
Ronan O’Driscoll, director of residential at Savills, says: “If you’re looking at an apartment in a rural location you could make a ridiculously lowball offer, and perhaps get a bargain, because there’s such a minute market for them.
“However, there’s little point bidding €150,000 for a three/four-bed semi in an established suburb of Dublin, Cork or Galway which has dropped in price from €700,000 to €350,000 since the peak.”
This is because the kind of property most in demand at the moment, according to most agents, is the solid three/four-bed suburban semi in areas not too far from city centres.
“Further depreciation of good family homes is less likely,” says Ensor, “because the buyer who might have bought a two-bed apartment will now go straight for the three-bed semi.”
Ensor says that there is more happening in the market than people think. “Some people who can buy are doing so. They just want to settle down, knowing they’ll be there for 25 years.”
MyHome managing director Angela Keegan agrees that prices for traditional three-bed semis are likely to stabilise first. But for sellers wondering how to price their property for sale “local information is absolutely critical” she says.
“You need to talk to people who have bought or sold in your area recently, and talk to local agents.”
Ronan O’Driscoll says that buyers who have a house to sell shouldn’t bother making an offer on another property, even if their home is in a good location: “Sell the house first and have a pile of money ready to pounce.”
Frank Conway of Moneycoach points out that sellers – many caught in negative equity – are seeking economic prices that will pay off their mortgage and advises sellers to ask for more than they might get, with a view to bartering.
He, like all pundits, agrees that lack of confidence and lack of credit are the main factors keeping the market subdued, and believes it will stay that way in 2012 until this changes.
Measures in last month’s budget – changes to mortgage interest relief, the capital gains tax incentive, continued low rate of stamp duty – are seen as possible positives for the property market for 2012. The effect of the planned property tax is as yet unknown.
But continued price falls are not necessarily bad, says Daft economist Ronan Lyons in the Daft price survey report. “ . . if the size of the correction in house prices is determined by fundamental factors, then it is better for the prices to race to the finishing line than crawl there”.
I'm a relative newbie here, so please correct me if I'm barking up the wrong tree. Be gentle!
Why are people so focussed on house prices versus income? The level of disposable income after tax and basic living costs has been increasing for several decades now, so surely the relative proportion of income spent on housing is also increasing. Real incomes have also been increasing for the past 15 years in Australia. Further, average dwelling sizes (relevant from the perspective of replacement cost) have risen significantly. Combine this with easier credit terms over the past 10 years, and a social shift towards two parents working, and is it surprising property costs have risen.
I am fairly confident that we will see most of the market take a breather now for a few years while other factors catch up.
A new 420-apartment development in Dublin is for sale with a price tag of €70 million, the largest sale of a distressed residential complex in the city. Clancy Quay, which overlooks the River Liffey, is an ambitious 13.5-acre development led by builder David Kennedy. It reached a high stage of construction before the property market collapsed in 2008.
As of last week, 228 apartments were rented in the project, with 42 in rental process and another 138 units ready to rent as soon as a new owner arrives to provide furnishings, according to the Irish Times. Twelve penthouses still remain in shell condition. Current rent income equals €3.17million a year, the paper reports. Fergus O'Farrell of Savills estimates the overall rent to grow to €6.8 million once the remaining units are rented out, with an expected gross yield around 9 per cent. That yield doesn't include valuation for the remaining 8.45 acres which have planning permission for a 15-story hotel and more apartments than are currently in the first phase.
The developer paid €25.4 million for the development and reached a carrying value of €190 million by the end of 2008, before the market fell apart. The project was financed by Bank of Scotland and National Irish Bank, according to the Irish Times. The current level of debt to the banks is not known, but it is estimated to be about €230 million. Industry experts believe American property firm Kennedy Wilson will participate in the bidding, the Times reports. The firm previously purchased two similar properties in the city. Other bidders for the property include funds from the U.K., U.S. and Germany.
Residential property prices in Ireland increased by 2.3% in the year to July and are up 1.2% month on month, signalling a recovery in the market.
These figures come on top of a 1.2% rise in June and a decrease of 13.6% recorded in the 12 months to July 2012 showing that the recovery has started in the last few months.
The data from the Central Statistics Office suggests that Dublin is leading the recovery with prices up by 3.3% in July and they are now 8% higher than a year ago.
Dublin house prices grew 3.6% in the month and are 7.5% higher compared to a year earlier while apartment prices are now 11.6% higher than the same month of 2012.
However, the CSO said that it should be noted that the sub-indices for apartments are based on low volumes of observed transactions and consequently suffer from greater volatility than other series.
It could take some time for the recovery being seen in Dublin to spread across the rest of the country. The price of residential properties in the rest of Ireland fell by 0.1% in July compared with an increase of 0.3% in July last year. Prices were 1.5% lower than in July 2012.
And prices still have a long way to go to recover lost ground. House prices in Dublin are 52% lower than at their highest level in early 2007 just before the economic crash. Apartment prices in Dublin are 59% lower than they were in February 2007.
Overall residential property prices in Dublin are 54% lower than at their highest level in February 2007. The fall in the price of residential properties in the rest of Ireland is somewhat lower at 48%. Overall, the national index is 49% lower than its highest level in 2007.
According to property experts the rise in prices in Dublin is caused by a lack of supply. There is a shortage of family homes in Dublin, particularly in the south of the city, and it means that people are being priced out of the market. Some real estate agents say that prices have actually climbed by around 20% in the most sought after area.
Property experts report that up to 100 people are showing up for each viewing, such is the demand for even modest three bed properties. Also owners are reluctant to put their properties on the market because prices are low and also because lending conditions are difficult.
According to broker Karl Deeter thousands of people with mortgage approval were finding that Dublin prices are moving beyond the amount the banks were prepared to lend them. There are concerns that the shortage of supply could create a new housing bubble in the Dublin area.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy
