What is Australian property fair value?

Nice video from Martin North:

Comments

  1. Place I sold in box hill melb 2015 is now listed for less than I sold it for. Yet the data on prices still suggests it’s at late 2016 level.

      • Yeah I’m cheering. Feels good to see my decision validated. Went short housing on the back of macroprudential and IMF statements in 2014-15. Long shares during 2015 dip.

        I reckon the people who bought it off me will lose $50-80k after costs. Not a sure thing, property.

      • boomengineeringMEMBER

        North Manly, there was a two week frenzied peak over a year and a half ago where comparable houses were getting sold for 2M and 2.3M. Mine was more comparable to the 2M one. Several months after that a similar to mine sold for 1.2M. There could have been extenuating circumstances for the cheaper sales as the prices have since climbed a little. Those inflated prices may not have shown up in statistics as they are done over a month period not two weeks. I did think of selling at the top but when I did the homework wasn’t worth the trouble. At that time the wife walked to work and the rent would have been $1,500 wk, rent for my tools (factory) $600-$800 wk, would landlords take dogs and cats?, agent fees, moving costs, taxes etc etc.

  2. Median price has historically tracked 2.5 to 3.5 times median wage in an area. At least on average across the nation.

    Sure we have had a massive population growth over the last 15 or so years but even so the figures on construction of new dwellings has been as many new homes per immigrant as the UK has done yet our prices have gone up much more than theirs….. I dont see how we can claim there is a property shortage, especially with the last census saying there was an 11% vacancy rate.

    Obviously we have been building too many of the wrong properties…. Maybe instead of crush loading each of the state capitals we should have focused construction of infrastructure in the smaller regionals to enourage the growth there were people could buy properties worth living in and have a lifestyle…..

  3. It would be a wonderful outcome if prices fell that additional 40% to reach fundamental value. I have my doubts, but just keep watching the data.

  4. While everyone is obsessing over putting a number or percentage to how far land prices will fall, I remind all this is a multi-variant equation with many moving parts. Martin may prove to be excessively optimistic if, for example, commodity prices and therefore export earnings fall significantly. We can forecast, but no-one actually knows. The Rudd stimulus in the GFC was spot on. Yet a Shorten government, using the same analysis, advisors and updated techniques, may get it badly wrong, simply on good or bad luck.

    And make no mistake, there is an army of global financial types with staggering access to liquids, educated by busts elsewhere, ready and willing to exploit and exaggerate Australia’s land price bust to make a dollar.

    Don’t Buy Now!

    • On the last point you made, I think, overseas buyers will be very reluctant to buy Aussie property if the value falls and so does the AUD. Is there some precedence for this in Ireland or Canada?

      • Antic-data-ly… We’re looking to buy back into the Aussie market with our American spoils. We moved to the US in 2016 (somewhat late to fully capitalize on the housing bust, but I digress) but would love to have a home in Oz should healthcare get worse again in the US / have investments offshore (for both countries, frankly). But our hope is to pull a Rockefeller (buy when there’s blood in the streets) and time it much more betterer this go-around.

        As for more antic-data, we bought in Northern California (Sacramento, not the bay) for 1/3 of what a comparable home in Canberra would have cost us. Had our stupid, loving friends and loved ones been better people and lived somewhere with a lower cost of living, we could have bought in for 1/6th or less, comparatively. With a tiny bit of luck, those savings and spoils will translate into modest, though upmarket homes in both countries for the price of what we’d have bought in Canberra.

      • prime Dublin property was bought en masse by vulture funds and major speculators when it crashed to the bottom…They have since sold and made many billions of Euros. in fact the Irish government sold many of these Properties to the vulture funds through Their taking over of the failed banks and they then sold the distressed properties for a pittance or sold the distressed mortgages on these properties to the funds for a hundredth of their value in some cases. Same surely would happen here in theory…

  5. I recently tried to get a loan for a private business largely to fund cash flow problems arising from a big uptick in demand and a consequent up tick in the capital invested for Work In Progress.
    From previous experience in the US I would have expected this loan to have been a complete no-brainer. The company had been doing business for over 15 years with consistent 30% net profit and 30% CAGR there were no major personnel changes nor were there any major changes in the customer base.or with manufacturing partnerships nor for that matter was the market place substantially altered by new arrivals (matter of fact the upside that I was seeing was largely due to larger competitors exiting the market).
    In the US (15 years ago) banks would have been very willing to lend up to a limit of about 2 times annual revenue at their base rate.
    OK so I take all this information to several Australian banks.
    Does anyone know the first question out of the bankers mouths? (hint it involves my home)
    Does anyone know how far the discussions proceeded when I indicated that I was not willing to personally guarantee these loans? (hint I was careful to not let the door hit me)

    OK so what does this all mean. Well basically the only asset that has any leverage value in Australia is Real Estate. There wasn’t a single banker that was in the least bit interested in seeing the cashflow statement, they had zero interest in the unfolding market dynamics and zero understanding of why this particular loan was way safer than hmm Houses.
    Bottom line is that if an Australian has any business aspirations they’d better own their home and be prepared to mortgage it….there are no other loans available, with this in mind, Can Australian RE ever be rationally valued?
    Bare in mind that that RE asset is not simply a house because it enables far more than just shelter, it’s a sort of gateway asset without which you can’t progress. Kinda like a game of Monopoly you need to have so and so many houses before you can even dream to build a Hotel.
    Good job I didn’t really need the the money because I did the old Dell trick and indirectly forced the customers to fund my WIP for small discounts AND the promise that I would deliver sooner.

    • Pecunia Nervus Belli

      Its because thats how its been for so long – not for any other reason.

      Prospa and a plethora of other online vendors are filling the void you are looking at. They are lending close to a million $ – same day, no collateral, etc.

      The big 4 are worse than 1990’s bureaucracies – slow moving elephants which are completely behind the times. Housing crash will force their hand.

      .

      • I suspect you missed the point.
        I didn’t actually really need the money because there were a dozen ways that I could get the required cash.
        What I really wanted was to distance myself (and my finances) from the business. I wanted it to be obvious to anyone interested in acquiring the business, that this business did not rely on my private financial backing. I wanted these arms-length bank loan structures in place so that it was very clear to everyone that the business valuation did not depend on my ongoing involvement.
        I could have easily created a private loan from a related company (ultimately loaned the business the money myself, but that would be no different to my privately guaranteeing these loans with my house mortgage….I wanted it to be completely clear that this was not necessary.

  6. I don’t recall where I read the below
    Spain levelled out at 10% down – before it dropped to 35% down. It would have hurt if you had bought in at 10% down thinking things were going to turn around.
    Ireland looked like it was going to level out at 25% down – and then dropped to 55% down. That would have hurt even more.