Great read and changed my mind a bit. One significant factor I would however include in the current/future ‘fuel tank’ for housing prices is shadow banking or the bank of mum and dad.
Saving for the deposit, generally more difficult than covering the interest, is made easy for some, especially those in well off areas/capital cities as the folks can put up for the deposit or act as a guarantor. So the benefits and euphoria of the past 50year bull run are still available to those who’ve had parents generate wealth over that period.
Still I’m less bullish after reading your article. Well done
Good points. However, I'm thinking, the bank of mum and dad has always been around. More weight to the thinking.
As a financial adviser I well remember a presentation by the manager of international investments for BT extolling the ongoing wonders of the dot com boom ....just before it tanked. Cisco was on a price to earnings ratio of 50 !!!
To add to our difficulties you need to be on average earnings to afford what is being provided on a 240 square meter block that is in fact a quarter of the size that your mum and Dad purchased back in the sixties. And we live in single purpose zoned urban sprawl that stretches to the horizon and beyond. Both mum dad and the kids need cars. So the traffic density has increased by a factor of about six. The area of roadwork per hectare is now more than half. Big heat sink. Air conditioning. Most people don't know the name of the next door neighbour. No local community. Little intergenerational contact. Screen focussed activity. Kids don't play marbles any more marking their playground with a stick dragged through real dirt. They get little opportunity to play with other kids on an informal basis and get properly socialized, i.e. bullied.
One thing I noticed at the time of the 2008 GFC was that the Chinese diaspora cities (Sydney, Melbourne, Vancouver, Toronto, Auckland, San Francisco) suffered very limited falls in real estate prices and rallied to new highs within months if not weeks.
This suggests to me that when Australians can no longer afford to buy our houses there will be a vast pool of international buyers ready to step in and keep prices unaffordable.
Every time I read about a new ten million dollar house sale it seems the buyer is from overseas.
I think if there is even the suggestion of a bear market in Australian housing, the fools in charge here, aware of the big banks vulnerability, will be revving up immigration from China and India to keep the ponzi going for a few more years.
Great read and well rationalized. Another critical growth driver we have seen in the US leading to skyrocketing home prices relative to earning potential is the increasing cost to build in major American cities. With upcoming heavily restricted, increasing environmental and cultural impact assessments required, we have seen building lead times and costs grow substantially.
Great read and lots of potential for consideration for expansion on the topic!
This was a great read, thank you. I’m based in Auckland which as I’m sure you are well aware has similar ‘propadee’ market characteristics!
I read a very similar take 15 years ago 😅
Great read and changed my mind a bit. One significant factor I would however include in the current/future ‘fuel tank’ for housing prices is shadow banking or the bank of mum and dad.
Saving for the deposit, generally more difficult than covering the interest, is made easy for some, especially those in well off areas/capital cities as the folks can put up for the deposit or act as a guarantor. So the benefits and euphoria of the past 50year bull run are still available to those who’ve had parents generate wealth over that period.
Still I’m less bullish after reading your article. Well done
Good points. However, I'm thinking, the bank of mum and dad has always been around. More weight to the thinking.
As a financial adviser I well remember a presentation by the manager of international investments for BT extolling the ongoing wonders of the dot com boom ....just before it tanked. Cisco was on a price to earnings ratio of 50 !!!
Cheers all
Absolutely brilliant. And very funny.
To add to our difficulties you need to be on average earnings to afford what is being provided on a 240 square meter block that is in fact a quarter of the size that your mum and Dad purchased back in the sixties. And we live in single purpose zoned urban sprawl that stretches to the horizon and beyond. Both mum dad and the kids need cars. So the traffic density has increased by a factor of about six. The area of roadwork per hectare is now more than half. Big heat sink. Air conditioning. Most people don't know the name of the next door neighbour. No local community. Little intergenerational contact. Screen focussed activity. Kids don't play marbles any more marking their playground with a stick dragged through real dirt. They get little opportunity to play with other kids on an informal basis and get properly socialized, i.e. bullied.
Comprehensively stuffed I would say.
What to do?
One thing I noticed at the time of the 2008 GFC was that the Chinese diaspora cities (Sydney, Melbourne, Vancouver, Toronto, Auckland, San Francisco) suffered very limited falls in real estate prices and rallied to new highs within months if not weeks.
This suggests to me that when Australians can no longer afford to buy our houses there will be a vast pool of international buyers ready to step in and keep prices unaffordable.
Every time I read about a new ten million dollar house sale it seems the buyer is from overseas.
I think if there is even the suggestion of a bear market in Australian housing, the fools in charge here, aware of the big banks vulnerability, will be revving up immigration from China and India to keep the ponzi going for a few more years.
Great read and really makes the data easy to understand!
How does population growth factor into being another factor to support this growth ?
Great read and well rationalized. Another critical growth driver we have seen in the US leading to skyrocketing home prices relative to earning potential is the increasing cost to build in major American cities. With upcoming heavily restricted, increasing environmental and cultural impact assessments required, we have seen building lead times and costs grow substantially.
Great read and lots of potential for consideration for expansion on the topic!