Just been looking into the trends within house prices.
People are saying there has been some reduction in the increases. Is true to an extent, but mainly localised in the pricey end of the market. i.e. the 4 bedroom house and 3 bedroom apartment.
3 bedrooms house prices have continued to increase by around 2% over the month, 2 bedroom places pretty static. Big drop in the 4 bedroom property market of around 7%
But still not great for affordability.
Monday, June 29, 2015
Sydney House Prices 26/6/15 - Average 3 bedroom house sold for $1,253.551 (up 1.58%)
| Average | 2 Bedroom House | 1,146,464.91 | 1,089,060.94 | 1,203,868.89 | 57403.97632 | -0.37% | ||
| 3 Bedroom House | 1,253,551.56 | 1,214,519.96 | 1,292,583.15 | 39031.59401 | 1.58% | |||
| 4 Bedroom House | 1,480,815.66 | 1,423,802.34 | 1,537,828.97 | 57013.31364 | -1.85% | |||
Sunday, June 21, 2015
Sydney house prices 20/6/15. Average 3 bedroom house sells for $1,234,11. (1.73%increase)
2 bedroom house...$1,150,670 (-0.7%)
3 bedroom house....$1,234,112 (1.73%)
4 bedroom house.....$1,508,732 (-0.93%)
Pretty standard craziness!
3 bedroom house....$1,234,112 (1.73%)
4 bedroom house.....$1,508,732 (-0.93%)
Pretty standard craziness!
Monday, June 15, 2015
My Theory on House Prices
At the end of the day, real estate investment is very similar to a 3 year bond.
You invest a large amount upfront, get coupons (rent) back as regular income and then (after sale) receive the full amount back (if you hold to maturity).
Obviously the risks are, capital loss and loss of coupons if the place is not rented. But in a place like Sydney not much of a risk. 3 year bonds in Australia have been yielding an average of 2.6% over the last 3 years, but 2.3% over the last year and under 2% over the last 6 months. Even with 80% occupancy, a $1.4 million dollar house earning rents of $750 a week will still give you a yield of 2.2% (or around 2.86% with negative gearing thrown in). And that's if house prices stay steady over the three year period.
Based on these figures, and because blind freddy could see bonds have been predicted to go through a bit of a correction, money has been flowing into Real Estate instead of bonds, causing (house) prices to go up and yields to go down.
However, once the US Fed starts increasing rates, I predict that the money will leave Real Estate and go back into Bonds (better liquidity generally). Hopefully this will take some of the investor activity out of Real Estate (they have lower costs of capital than Owner Occupiers due to the tax effect of negative gearing) and hopefully drop the prices a bit.
But we will see.
You invest a large amount upfront, get coupons (rent) back as regular income and then (after sale) receive the full amount back (if you hold to maturity).
Obviously the risks are, capital loss and loss of coupons if the place is not rented. But in a place like Sydney not much of a risk. 3 year bonds in Australia have been yielding an average of 2.6% over the last 3 years, but 2.3% over the last year and under 2% over the last 6 months. Even with 80% occupancy, a $1.4 million dollar house earning rents of $750 a week will still give you a yield of 2.2% (or around 2.86% with negative gearing thrown in). And that's if house prices stay steady over the three year period.
Based on these figures, and because blind freddy could see bonds have been predicted to go through a bit of a correction, money has been flowing into Real Estate instead of bonds, causing (house) prices to go up and yields to go down.
However, once the US Fed starts increasing rates, I predict that the money will leave Real Estate and go back into Bonds (better liquidity generally). Hopefully this will take some of the investor activity out of Real Estate (they have lower costs of capital than Owner Occupiers due to the tax effect of negative gearing) and hopefully drop the prices a bit.
But we will see.
Sydney house Prices 13/06/15 : Average 3 bedroom house now sells for $1.213 Million (down 0.34%)
Change in House Prices after latest auction results
| House | Type | Average | Min (based on SD) | Max (based on SD) | Confidence | ||
| Average | 2 Bedroom House | 1,158,831.86 | 1,087,521.06 | 1,230,142.66 | 71310.79972 | ||
| 3 Bedroom House | 1,213,174.53 | 1,165,623.36 | 1,260,725.71 | 47551.17784 | |||
| 4 Bedroom House | 1,522,907.62 | 1,446,526.40 | 1,599,288.83 | 76381.21522 | |||
Wednesday, June 10, 2015
Joe Hockey - Out of touch
Ahh Joe, you just can't help yourself can you.
"Get a good job and then the bank will lend you money" (paraphrase). This is exactly the problem. People Mortgaging to the hilt.
But what gets me a bit is this idea that it is that simple. Lets see what you need (minimum to buy the average house these days)
As mentioned, average 3 bedroom house in Sydney is around $1.2million.
Ok, on to that add 5% for buying costs (stamp duty/inspections etc.)
So that takes us to $1.26 million total cost.
For the bank to give you a loan these days, you need between 10-20% equity (we will say 20% so we don't have to pay for mortgage insurance) So we need savings of $252,000 (not easy to obtain really....)
Then, you need a loan of the rest ($948,000).
Even at the average rate of 4.8% over 30 years...that's around $4965 a month mortgage repayment, or close to $60,000 a year. And that's assuming interest rates stay low. If they get to the long term average of 7% again, its $6307 a month, or $75,600 a year. And that's provided the bank will give you a loan of that size
How is that sustainable when the average yearly household income in NSW = $99112 (2012 figures from ABS)?. It basically means that even at these low rates, Mortgage repayments will make up over 50% of your income.
Even if you are in the 4th quintile (average yearly household income of $118716, mortgage repayments are still over 50%). It's only when you get to the top 20% of households, where incomes are at $235912 a year, where it starts looking manageable.
You can rent a 3 bedroom house in Sydney in a nice area for around ($700-$800) a week, or up to $3500 a month. So buying is way more expensive than renting at the moment.
But this is the dirty little secret of house prices. No one wants them to drop. So much of Australian wealth is tied up in them that any drop will cause economic damage. And so people like Hockey and Abbott will occaisionally stuff up and blurt out the true feelings.
"Get a good job and then the bank will lend you money" (paraphrase). This is exactly the problem. People Mortgaging to the hilt.
But what gets me a bit is this idea that it is that simple. Lets see what you need (minimum to buy the average house these days)
As mentioned, average 3 bedroom house in Sydney is around $1.2million.
Ok, on to that add 5% for buying costs (stamp duty/inspections etc.)
So that takes us to $1.26 million total cost.
For the bank to give you a loan these days, you need between 10-20% equity (we will say 20% so we don't have to pay for mortgage insurance) So we need savings of $252,000 (not easy to obtain really....)
Then, you need a loan of the rest ($948,000).
Even at the average rate of 4.8% over 30 years...that's around $4965 a month mortgage repayment, or close to $60,000 a year. And that's assuming interest rates stay low. If they get to the long term average of 7% again, its $6307 a month, or $75,600 a year. And that's provided the bank will give you a loan of that size
How is that sustainable when the average yearly household income in NSW = $99112 (2012 figures from ABS)?. It basically means that even at these low rates, Mortgage repayments will make up over 50% of your income.
Even if you are in the 4th quintile (average yearly household income of $118716, mortgage repayments are still over 50%). It's only when you get to the top 20% of households, where incomes are at $235912 a year, where it starts looking manageable.
You can rent a 3 bedroom house in Sydney in a nice area for around ($700-$800) a week, or up to $3500 a month. So buying is way more expensive than renting at the moment.
But this is the dirty little secret of house prices. No one wants them to drop. So much of Australian wealth is tied up in them that any drop will cause economic damage. And so people like Hockey and Abbott will occaisionally stuff up and blurt out the true feelings.
Tuesday, June 9, 2015
Sydney House Prices 6/6/15 - Average 3 Bedroom house now sells for $1.217 Million (down 1.62%)
Analysis of this weeks auction results. Prices down for 3 and 4 bedroom houses. Up for 2 bedrooms
| House | Type | Average | Min | Max | Confidence | % Change from last week | ||||
| Average | 2 Bedroom House | 1,158,175.68 | 1,090,834.60 | 1,225,516.75 | 67341.07928 | 1.30% | ||||
| 3 Bedroom House | 1,217,369.03 | 1,160,168.29 | 1,274,569.78 | 57200.74631 | -1.62% | |||||
| 4 Bedroom House | 1,541,090.07 | 1,445,838.23 | 1,636,341.90 | 95251.83767 | -2.97% | |||||
Tuesday, June 2, 2015
Why Same Sex marriage is unlikely to be supported by the Coalition Government
This little extract from Essential Report tells you all you need to know...it's a vote killer for the Government (a net vote of -7%). Greens and Labor voters would not change their vote to the Coalition because of Same Sex Marriage...it's not a point of difference for them. Hence its only the "Vote Other" up for grabs, and again, more votes in the "No" case for them. No wonder Abbott just wants to kick this particular can down the road.
Sydney House Prices - Average 3 Bedroom House now sells for $1,237,406!!
Been having a look at some Auction results from last week, being in the unenviable position of looking to buy a house.
Auction results are a pretty accurate guide to real house prices as it is a pure supply and demand proposition. When their is bidding involved, the price is most likely to be what the market thinks it is.
So I downloaded the action results data from Realestate.com.au and then analysed it...removing any data that didn't feature a price and separated it into two bedroom, three bedroom and four bedroom houses.(Not too worried about units at the moment)
I then calculated the average price across Sydney and also the 95% confidence interval to try and calculate the minimum and maximum prices for around 95% of the housing stock in Sydney. And these are the results below.
So basically, for the average family to buy the average 3 bedroom house in Sydney, they are paying at least
$1.1 million, most likely over $1.2 million, and could be possibly paying $1.3 million! Bubble time!
Auction results are a pretty accurate guide to real house prices as it is a pure supply and demand proposition. When their is bidding involved, the price is most likely to be what the market thinks it is.
So I downloaded the action results data from Realestate.com.au and then analysed it...removing any data that didn't feature a price and separated it into two bedroom, three bedroom and four bedroom houses.(Not too worried about units at the moment)
I then calculated the average price across Sydney and also the 95% confidence interval to try and calculate the minimum and maximum prices for around 95% of the housing stock in Sydney. And these are the results below.
So basically, for the average family to buy the average 3 bedroom house in Sydney, they are paying at least
$1.1 million, most likely over $1.2 million, and could be possibly paying $1.3 million! Bubble time!
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