I expect Sydney prices to keep rising pretty strongly until interest rates are raised significantly (by more than 1%).
In 2002 the RBA started raising interest rates, partly to cool the last Sydney property boom. After rates were up by 1% or so, Sydney peaked. However at that time there was also an over-supply in Sydney (rental vacancy rates at 4.5%), which contributed to the Sydney correction during 2004-2005.
At this stage my 2008 prediction that Sydney house prices would approach $1M by 2015 is looking increasingly safe.
It is quite telling how the bears used to mock my prediction every time I mentioned it, but now they are strangely silent on the matter.
Thanks for the reply.
$1M still seems a long way off but within 20 Klm of the CBD it's probably there already.
Certainly inside 10km's radius from the CBD in all directions it's there. Probably there up to 20km's out if you head north.
For Aussie property bears, "denial", is not just a long river in North Africa.....
$1M still seems a long way off but within 20 Klm of the CBD it's probably there already.
It was at $730K in August according to the Residex house price index on which the prediction is based.
Another 5-10% during the remainder of 2013, plus 15-20% in 2014 (that's the SQM prediction, which I agree with), and we're already at $950K by the end of 2014.
I reckon approaching $1M by the end of 2015 is in the bag.
$1M still seems a long way off but within 20 Klm of the CBD it's probably there already.
It was at $730K in August according to the Residex house price index on which the prediction is based.
Another 5-10% during the remainder of 2013, plus 15-20% in 2014 (that's the SQM prediction, which I agree with), and we're already at $950K by the end of 2014.
I reckon approaching $1M by the end of 2015 is in the bag.
I would be very surprised if we did not get a meaningful supply response in 2014. That may cap prices even without an interest rate rise.
Yes, I assume Scott Pape is a still renter. He made a disastrous financial decision more than a decade ago to rent instead of buy a house because he thought houses were overpriced and would crash. Now, more than a decade later, he is locked into this position. He has painted himself into a corner and is forced to carry on with his Bubble/Crash theory because he desperately needs house prices to crash in order to vindicate (to himself and his readers) his earlier bad decision.
Although he did recently buy a sheep farm, so maybe he lives there now. Probably not a great financial decision either.
Agree, I wouldn't pay much attention to Scott Pape on housing either.
Sydney is up almost 10% in the last few months alone and in many areas 20% in total. That's huge. Usually the RBA would nip it in the bud with a rate rise, but I don't believe they will this time.
Kudos to CJ who picked this and in particular the recent strong gains.
But as stated above I disagree and expect a slowing in 2014 - maybe a small correction but it won't fall back anywhere near the levels prior to the boom unless we see a rate increase of some magnitude. This boom is what the RBA wanted, it's not what they fear. The boom seems to be spreading nationwide now.
What is your expectation shadow?
You guys with your Australia is different hats sewn on
House-Price Busts
In 2005, the International Monetary Fund produced a paper on how house-price busts can hurt economies.
Analysing house prices in 14 countries during 1970-2001, it identified 20 examples of “busts”, when real prices fell by almost 30% on average (the fall in nominal prices was smaller). All but one of those housing busts led to a recession, with GDP after three years falling to an average of 8% below its previous growth trend. America was the only country to avoid a boom and bust during that period.
What about Shadow's shtick about house prices merely tracking incomes since 2002 as his prime argument countering the bears?
Clearly, these increases are not tracking incomes. What do you have to say about that Shadow? Still all good?
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
What about Shadow's shtick about house prices merely tracking incomes since 2002 as his prime argument countering the bears?
Clearly, these increases are not tracking incomes. What do you have to say about that Shadow? Still all good?
Yes, all good. You may not be aware, but although prices nationally have tracked incomes since around 2002-2003, there has been some variation between cities.
Sydney is experiencing strong growth now partly because it underperformed incomes since 2003, as shown below.
If Sydney house prices approach $1M by the end of 2015, then that means the price to income ratio in 2015 will be back up to where it was in 2003.
So by 2015, Sydney will have tracked incomes, on average, over a 12 year period.
Remember - tracking incomes is over the medium-long term, however, there will always be short term cycles between strong price growth and correction.
Nationally, we had a correction between 2010 and 2012. Now we're in the growth part of the cycle again.
But over the medium-long term, house prices have simply been tracking income growth since 2002-2003.
What about Shadow's shtick about house prices merely tracking incomes since 2002 as his prime argument countering the bears?
Clearly, these increases are not tracking incomes. What do you have to say about that Shadow? Still all good?
Yes, all good. You may not be aware, but although prices nationally have tracked incomes since around 2002-2003, there has been some variation between cities.
Sydney is experiencing strong growth now partly because it underperformed incomes since 2003, as shown below.
If Sydney house prices approach $1M by the end of 2015, then that means the price income ratio in 2015 will be back up to where it was in 2003.
So by 2015, Sydney will have tracked incomes, on average, over a 12 year period.
Remember - tracking incomes is over the medium-long term, however, there will always be short term cycles between strong price growth and correction.
Nationally, we had a correction between 2010 and 2012. Now we're in the growth part of the cycle again.
But over the medium-long term, prices have simply been following incomes, since 2002-2003.
Here we go again!
The world started in 2002-03 according to Shadow.
So a 30% annualised growth rate in Sydney is normal?
50% investor activity is normal?
The interest rate settings fuelling the madness and foreign buyer laws is normal?
the fact that FTBs are nowhere to be seen is normal?
All part of the cycle eh?
Sure, historical comparative examples please.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
You are such a hoot; basically you are arguing that property only goes up, a few bumps along the way, but short term only.
So all Ihave to do is buy a house practically anywhere and watch the capital gains roll in right shadow? that's the model hey? The past being the predictor of the future.
That's how it works does it? Explain this then:
Quote:
The ABS has no way to determine how many FTBs are buying in Sydney right now... the numbers are likely much higher...
And yet it seems to be able to tell exactly how much FTBs are borrowing to buy houses in any given month.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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