asprilla

I believe that you have forgotten about that little thing called the time value of money, old sport. You might as well challenge me to find a loaf of bread in the shops for 5p.

Your earlier post says that in 1980, a nice 3 bedroom house in Perth, in a good area, would cost $128,000. Where did you get that number from ?

The average wage in Perth in March 1980, was $12,775 gross.

pomtastic

If you overlayed that chart with average income growth, then you'll see how dislocated house prices have become to wages. It's unsustainable, something has to give.

More and more of people's incomes are now being spent on mortgages, this is BAD, not good. Less cash to spend on goods and services which means businesses will eventually go under. This is starting to happen.

Unfortunately, the Govt has a vested interest in keeping house prices high, people think they are 'richer' when their house goes up in value, they get bank loans against their ever increasing house prices to buy cars, new kitchens, holidays, etc which keeps the economy going - it's a classic ponzi scheme. Also, high house prices will enable the Baby Boomers to afford retirement - and we all know about the ageing population trouble ahead.

swigski

As you have obviously read all the details and thought it through maybe you can easily prove that property is not overpriced as you said you would earlier?

hereandthere

No, the cost of the house in Perth in 1980 is $128,000 in today's money. At the time it was $40,000, or three times the average wage as supplied by you. So you make my point very well for me - houses, as we all know, used to cost about three times the average wage, but now cost seven, eight or even ten times that, old sport.

hereandthere

Quite, but as long as you people like asprilla I think this madness could just go on and on. He actually thought a house in Perth in 1980 cost $128,000 1980 dollars.

asprilla

Please re-read my post of 11:40am. Take a couple of minutes to think it through.


How can we have a decent, logical debate on these kind of issues, when it is obvious that most of the people on the "global house price crash" bandwagon don't even bother to read other people's posts, let alone full newspaper articles on the subject matter.... or even God forbid, ask some questions for themselves instead of lapping up what the media tells them and what they want to believe.

I am off to bang my head against a hard object.

DeadVim

<Gravelly Voice>GFC 2 - This Time It's Personal.</Gravelly Voice>

Carry on with the analysis chaps ...

coolshadows

The actual number of houses being constructed has declined over the years...

Housing construction chart by state:

hereandthere

Asprilla

To be fair, I have joined this debate late and not read all your posts. But my point to you is just that houses are now about three or four times more expensive, in terms of average house price/average wage ratio as they were a generation ago. Indeed as their long-term average over decades.

We are talking about crippling amounts of money being borrowed so young people can own a home. They are stopping buying, and I don't blame them. I will not buy a house until the average raio is back to 3.5. If everyone stuck to that rule prices would be 50% in a few weeks.

Put another way, if UK house prices continue to rise at the rate they did in January 2010, the average house in Britain in 100 years' time will cost about £250 billion. I think we can all see, a crash is necessary and imminent.

ABCDiamond

$128,000 1980 Perth House prices for an average 3 bed I bathroom house ?

Average weekly wages: Earnings ; Western Australia ; Persons ; Full Time ; Adult ; Total earnings ;
$ 376 1983
$1,428 2009

So in 2009, using the same increase rate as wages we should see a 3 bed 1 bath house costing about $486,400

What are 3 bed house prices like in Perth now ?

ABCDiamond

When you say a ratio of 3.5, what exactly is that ratio ? A House price 3.5 times the household income ?

hereandthere

The house cost $40,000 in 1980 dollars. So the $376 is $20,000 per annum, making the wage 50% of the house price. Today, the wage annualised is $75,000 (who the hell earns that by the way??) which is about 20% of a three bedroom house in Perth.

ABCDiamond

With a decline in housing construction, you would also expect a rise in prices due to supply and demand. More housing construction would reduce that demand, and aid in bringing prices down.

coolshadows

Comparison of similar Cities...

coolshadows

Of course, just because houses are statistically unaffordable doesn't guarantee that the housing bubble will burst.

The government could act and increase housing construction, whilst still supporting current home owners with fair interest rates.

A more moderate annual increase in house prices, even inline with inflation, can still be seen as a worthy investment.