9 May 2007

House prices rising... slowly

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The ABS has released the next thrilling installment of The House Price Index.

In Canberra there was a 1.2% shift to the positive. Such a slight move is good news for all, those who are ney sayers, have a gander at the Mining Industry fed rise over in ‘burbs of perth.

Aplogies for the basic report, but all of those who know me would agree that it far better I steer clear of counting and numbers, as my efforts on marking-up nine holes of golf can attest.

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Hence the need for the ‘sinking fund’ that most body corporates operate.

VYBerlinaV8 now_with_added grunt9:33 am 14 May 07

The location of the apartment appreciates. Although the value of the building itself fluctuates a bit, the general trend is value downward.

An apartment that is worth more now than when you bought it is an appreciating asset isn’t it???

i like good old canberra houses i have lived in my house for 16 years and it’s not fulling down

Some old Canberra houses are fine.They were built with hardwood and have hardly any cracks. I have lived in several.

People are knocking them over to build units cos that is where the money is, not cos the houses are falling apart.

VYBerlinaV8 now_with_added grunt1:42 pm 10 May 07

The concept that land appreciates and buildings depreciate is interesting. While I agree that in theory this works, the practical side is that houses (especially those under 10 years) sometimes appreciate in value when building costs are rising. For example, I built a house 5 years ago in a nice new suburb (let’s call it Jerrabomberra), which cost about $200k to build. To rebuild the exact same house today would cost somewhere between $250k-$300k. This doesn’t mean that the value of my house (excluding land) has necessarily risen, but it does mean that the replacement cost (the cost worn by someone entering the market, that is) has changed.

As to housing quality, I am informed by my bro-in-law who is a builder (and used to live in Melbourne) that Canberra has the poorest building quality he has ever seen – partly because silly structures are approved, and certificates of occupancy given too easily, and partly because Canberrans seem willing to accept lower standards. Interesting observation (and that’s all it is, really).

The houses that they slap together en masse these days, eg. at Bruce, will be lucky to last 25 years.

A relative of mine in the UK lives in a house that was built in the 17th century. Mind you the roof was re-thatched in the 18th century, the floors replaced in the 19th century and electricity and water connected in the 20th century.

They just don’t make houses like they used to!

Houses are depreciating assets. It is the land that appreciates. (Remember this when you next think of purchasing an apartment unit.)

As a general rule of thumb, house/land prices generally double every 10 years (though it tends to bust and boom instead of being a steady rise). Doubling of value in 10 years equates to a investment return of 7.2%pa. This is the minimum benchmark return for an investment to be worthwhile.

Now here is the crunch. If wages are kept low (ala Workchoices) then the demand for housing is reduced and house prices are restrained due to lower demand (we just can’t afford to move house). If house prices are restrained below the 7.2% benchmark, then they are not a worthwhile investment and investors will put their money elsewhere. Lack of investment in housing results in less rental accommodation available and higher rents.

The demand and supply is an interesting area:
* land may be a limited resource but are a long way from running out
* the baby boomer population bubble is entering its twilight years and Western countries are starting to see a general decline in their ‘native’ population
* govt initiatives like baby bonuses and immigration will have some impact.

James-T-Kirk1:23 pm 10 May 07

“Many Inner North houses that were built 45 to 50 years ago are riddled with cracks and have rusted through plumbing, especially the ones that have been rented out for years with minimal maintenance. That’s why so many have been flattened recently prior to being replaced by multiple units.”

They get flattened because somebody who owns the land brought it for a paultry sum, and has discovered that the slack planning laws allow a group of units, where there was once a house.

Cool, Why sell your house for a couple of hundred thousand, when you can build units, and sell them for bucket loads more…

If my back yard was big enough, I would build a dual occupancy house… Money for nothing – (and depending on who you get in to rent it, chicks for free) and I dont have to move any TV’s…..

House prices are always rising.
big woop.
If people want to buy a house then maybe they should just work more to get more money, come into the market by buying a smaller house, not a mansion, or buy with someone.
Unless of course you are a single parent – in that case you’re just screwed.
Well, actually if you hadn’t been screwed in the first place you’d be right.

“Also, houses have a lifespan considerably longer than 25 years.”

Not much longer. Many Inner North houses that were built 45 to 50 years ago are riddled with cracks and have rusted through plumbing, especially the ones that have been rented out for years with minimal maintenance. That’s why so many have been flattened recently prior to being replaced by multiple units.
The houses that they slap together en masse these days, eg. at Bruce, will be lucky to last 25 years.
As recently noted in the SMH – “Canberra, a city of high house prices with the poorest quality housing stock in Australia”.

VYBerlinaV8 now_with_added grunt4:13 pm 09 May 07

Can’t agree, on the grounds that the Australian population is growing faster than houses are being built, and we are currently in a (minor) baby boom. Also, houses have a lifespan considerably longer than 25 years.

VY, that is a bit of a reach there. In 25 years time, half of Australia’s population will be in situ in a nursing home. Running on the logic, in 25 years time there will more than likely be glut of houses in disrepair, at cheapish prices compared to the current market, as the owners probably will have trouble finding a acceptable price for labour to come and fix the joint to get the price that they see as acceptable.

VYBerlinaV8 now_with_added grunt1:30 pm 09 May 07

Exchanging on number 4 this week…

which is why I plan to buy 5 as quickly as i can…

VYBerlinaV8 now_with_added grunt1:18 pm 09 May 07

Housing prices always rise in the long term. In 25 years time less than half of Australians will be able to buy their own homes.

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