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So house prices can never, ever, go down eh?

By johnboy - 1 November 2012 73

The ABC has bad news for the real estate bulls who spent years telling us that up was the only way real estate prices could go:

New figures show house prices in Canberra dropped 1.3 per cent in October.

The latest RP Data-Rismark report has found the median house price in Canberra is now $490,000, the second highest in the country behind Sydney.

What’s Your opinion?


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73 Responses to
So house prices can never, ever, go down eh?
mmillercfp 1:34 pm 01 Nov 12

maxblues said :

Zultan said :

It cost me $26,000 to rent a house for my family to live last year in Canberra. So I figure now that I’ve bought a house I can lose $26,000 (give or take) each year before I’ve actually lost out on anything.

That’s not a bad way to look at it. I haven’t lost out yet…but there is still time…

It’s not a great way to look at it.

If the property cost $26,000 to rent for a year, it’s a reasonable assumption to say that the capital value was probably around $577,777 (this is using a 4.5% income yield after costs).

If the purchaser has saved a 20% deposit AND the stamp duty, they borrowed the remaining $462,222. At 6.0% pa interest that’s $27,733 per year. As the owner rather than tenant, you’ll then need to add on rates and potentially body corporate fees.

If the property price remains flat, it’s a small loss each year ($1,733). If it goes down it’s a bit more.

Housing can build some great saving behaviours, and many value the feeling of ownership rather than being a tenant in which case it’s a worthwhile purchase in spite of the maths.

Like most things though, there’s a bit more to it once you scratch the surface a little. Make your own decision that suits your circumstances, not what you heard around the water cooler.

maxblues 1:18 pm 01 Nov 12

Zultan said :

It cost me $26,000 to rent a house for my family to live last year in Canberra. So I figure now that I’ve bought a house I can lose $26,000 (give or take) each year before I’ve actually lost out on anything.

That’s not a bad way to look at it. I haven’t lost out yet…but there is still time…

Madam Cholet 1:17 pm 01 Nov 12

johnboy said :

Holden Caulfield said :

JB’s apparent prejudice against owners of real estate, any real estate, is so cute.

Real estate owners are some of my best friends.

Idiots making housing unaffordable on the basis of foolish cargo cult thinking (and boring me senseless at dinner parties for a decade) on the other hand I’m less fond of.

In that case, my advice would be to not go to dinner parties.

Rawhide Kid Part3 1:11 pm 01 Nov 12

angrymotorist1 said :

This is funny. I’ve made hundreds of thousands of dollars buying and selling houses whilst people have been “waiting for the market to crash” over the last 6 years…

Keep on truckin’!

It’s a coming. I can smell it in the wind.

chewy14 1:05 pm 01 Nov 12

angrymotorist1 said :

This is funny. I’ve made hundreds of thousands of dollars buying and selling houses whilst people have been “waiting for the market to crash” over the last 6 years…

Keep on truckin’!

I agree, I’ve made hundreds of millions over the last few years in property. I mean its so easy when real estate prices double every 5 years without fail. Only suckers rent.

Clown Killer 1:05 pm 01 Nov 12

Real estate prices go up, they stagnate and they go down. if you look at the long term trend, its onwards and upwards. As with any major investment – it’s time in the market … not timing the market … that will lead to the best result.

Grrrr 1:05 pm 01 Nov 12

I like how a 1.3% drop in a month or 1.6% over a year is “bursting the bubble” according to your tags. Perhaps “mild correction” would be more apt?

So who are these real estate bulls you mention, then? Pretty sure that I’ve never, ever heard anyone say that house prices can never, ever go down. Only that the long-term trend for housing is upwards and that over the long-term market-wide it compares favourably to other traditional investments.

Would anyone consider the drop in prices in 1996 a burst bubble? That was a serious drop. I see current price fluctuations now as equally motivated by local and national economic situation rather than investor sentiment.

Deref 1:05 pm 01 Nov 12

Now if we can keep that up each month for a couple of years, sanity will prevail!

angrymotorist1 12:46 pm 01 Nov 12

This is funny. I’ve made hundreds of thousands of dollars buying and selling houses whilst people have been “waiting for the market to crash” over the last 6 years…

Keep on truckin’!

Zultan 12:44 pm 01 Nov 12

It cost me $26,000 to rent a house for my family to live last year in Canberra. So I figure now that I’ve bought a house I can lose $26,000 (give or take) each year before I’ve actually lost out on anything.

Holden Caulfield 12:32 pm 01 Nov 12

johnboy said :

Idiots making housing unaffordable on the basis of foolish cargo cult thinking (and boring me senseless at dinner parties for a decade) on the other hand I’m less fond of.

Fair enough.

Thumper 12:31 pm 01 Nov 12

The latest RP Data-Rismark report has found the median house price in Canberra is now $490,000, the second highest in the country behind Sydney.

One could point to a certain party, about to be reinstated, who has been in power over the last ten years and presided over this sad state of affairs.

Not saying that the other mob would have been any better though.

NoImRight 12:29 pm 01 Nov 12

So they made a mistake buying a house 10 years ago? Cherry picking is fun.

johnboy 12:27 pm 01 Nov 12

Holden Caulfield said :

JB’s apparent prejudice against owners of real estate, any real estate, is so cute.

Real estate owners are some of my best friends.

Idiots making housing unaffordable on the basis of foolish cargo cult thinking (and boring me senseless at dinner parties for a decade) on the other hand I’m less fond of.

Holden Caulfield 12:23 pm 01 Nov 12

JB’s apparent prejudice against owners of real estate, any real estate, is so cute.

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