Australian Houses overvalued by 30%

Peter said:
More like 70%.
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Yes, as a percentage of yearly income, totally over the limit.

I think the average wage is $60,000 p.a. The average house is $600,000. With interest, that is about 1.8 million over 30 years. If the standard mortgage should not be over a third of salary, that's 90 years to replay the loan. Two wage earners takes 45 years. No wonder they're extending the retirement age.
 
This week's nomination by the Economist Intelligence Unit of Melbourne as "the world's most liveable city" for the fourth year running should add fuel to the market. But sales conditions are likely to be tempered by well-researched buyers being selective and unemotional.

The prestige market has clearly picked up, but some agents have expressed disappointment with the prices being achieved by houses in the $1 million to $2 million bracket.

RP Data auction market specialist Robert Larocca said: "I'd hate to think where the market would be without interest rates being at the levels they are at the moment. Even at this low level, interest rates have not allowed the market to boom."

On Saturday, the Domain Group reported a clearance rate of 75 per cent from 509 auctions, which was down on previous weeks and indicated a moderation in demand.

There are 744 auctions scheduled next weekend.


http://theage.domain.com.au/real-es...rgain-in-variable-market-20140823-107ofn.html
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sammysilver said:
Peter said:
More like 70%.
Click to expand...

Yes, as a percentage of yearly income, totally over the limit.

I think the average wage is $60,000 p.a. The average house is $600,000. With interest, that is about 1.8 million over 30 years. If the standard mortgage should not be over a third of salary, that's 90 years to replay the loan. Two wage earners takes 45 years. No wonder they're extending the retirement age.
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I really think all these statements using averages are BS.

I earn more than double the wage figure and my first house cost less than half the average, 3 years ago.

I have no problem at all servicing several mortgages.

If you earn 60k a year you shouldn't be living the high life and buying 600k houses...
 
willrocks said:
Are you sure $60K is the average Australian wage? It sounds way too low.
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The Average Weekly Ordinary Time Earnings (AWOTE) was $75,600 p.a. as at May 2014.

That figure (the mean) is skewed upwards by a handful of people earning very high salaries and it also only includes people with full time jobs.

If you use the median - where half of all full time workers earn more and half earn less - the figure is about $58,000 p.a. (and drops to $47,000 if you include part-timers as well).

To break into the top 10% of income earners, you'd be getting about $105,000 p.a.

To be a member of the (in)famous 1%, you'd be earning just over $280,000 p.a.



So what all that works out to is that any given person on an average income can't afford to buy an average house.
 
The average wage around Bundaberg would be lucky to get to $35k...

However house prices are much lower, great houses for sale $250k/400.

Food is cheap also eg. sweet potatoes $1 kg, strawberries $1 a pumet.

Rent a good house $300 wk.

Everything in proportion>?

Regards Errol 43
 
A progressive income tax often means a person on $200K doesn't take home a lot more than a person on $100K. If it keeps going this way we'll all be earning the average wage regardless of the stated salary.
 
errol43 said:
Everything in proportion>?
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Depends if you use the long term trend or the "new normal" ratios.

Long term trend was (very roughly) house price = (average male income * 1.2) * 3. Weekly rent (again, roughly) = house price / 1000.

The "new normal" uses household income as the basis for the multiple, but that doesn't account for the increase in women's employment and earnings over the last thirty odd-years. The .2 from the "average male income * 1.2" equation represented a couple with a full time male breadwinner and a poorly paid, part time female earning a little extra after doing the housework to help things along.

Obviously since then women's participation in the workforce has increased substantially and that .2 has blown out to about .6 (or perhaps a little higher). Somewhere along the line, the typical household added an additional 50% of a typical income.

In addition, the "median multiple" of 3-4 has also blown out to 6-8.


Basically, all the financial benefits that women gained from greater employment prospects in meaningful, fulfilling jobs was almost immediately lost again by dumping all the additional money into houses which subsequently pushed the prices up.
 
Big A.D. said:
Basically, all the financial benefits that women gained from greater employment prospects in meaningful, fulfilling jobs was almost immediately lost again by dumping all the additional money into houses which subsequently pushed the prices up.
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But on the plus side, it doubled the number of taxpayers.
 
willrocks said:
A progressive income tax often means a person on $200K doesn't take home a lot more than a person on $100K. If it keeps going this way we'll all be earning the average wage regardless of the stated salary.
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Someone on $200,000 p.a. (gross) will pay $63,550 in tax and take home $136,450.

Someone on $100,000 p.a. (gross) will pay $24,950 in tax and take home $75,050.

The difference is $61,400

The difference alone is more than the median full time wage, so no, the person on $200k does take home significantly more than the one on $100k - an entire extra salary's worth, plus change.
 
Thing is - what value do these high costs produce for the country?

Of course it is of "value" to an existing owner who sells - although only if you dont want to buy another and that really only happens when you die. (investors who sell gain for sure)

For all new home buyers or even people moving to a bigger house - it is just a negative.

So high prices are good for a generation or so and then it cant be sustained unless wages rise at a commensurate rate - which they have not been over the last 15 years.
 
pi said:
sammysilver said:
Peter said:
More like 70%.
Click to expand...

Yes, as a percentage of yearly income, totally over the limit.

I think the average wage is $60,000 p.a. The average house is $600,000. With interest, that is about 1.8 million over 30 years. If the standard mortgage should not be over a third of salary, that's 90 years to replay the loan. Two wage earners takes 45 years. No wonder they're extending the retirement age.
Click to expand...

I really think all these statements using averages are BS.

I earn more than double the wage figure and my first house cost less than half the average, 3 years ago.

I have no problem at all servicing several mortgages.

If you earn 60k a year you shouldn't be living the high life and buying 600k houses...
Click to expand...

Pull your head out of your arse. I was making the point that houses are overpriced and tossed some figures around to show why.

Like a rat up a drainpipe, you couldn't wait to declare your income and your asset base. Use some of your money to go back to school and get an education. Perhaps then you'll learn the art of discourse.
 
sammysilver said:
pi said:
sammysilver said:
Yes, as a percentage of yearly income, totally over the limit.

I think the average wage is $60,000 p.a. The average house is $600,000. With interest, that is about 1.8 million over 30 years. If the standard mortgage should not be over a third of salary, that's 90 years to replay the loan. Two wage earners takes 45 years. No wonder they're extending the retirement age.
Click to expand...

I really think all these statements using averages are BS.

I earn more than double the wage figure and my first house cost less than half the average, 3 years ago.

I have no problem at all servicing several mortgages.

If you earn 60k a year you shouldn't be living the high life and buying 600k houses...
Click to expand...

Pull your head out of your arse. I was making the point that houses are overpriced and tossed some figures around to show why.

Like a rat up a drainpipe, you couldn't wait to declare your income and your asset base. Use some of your money to go back to school and get an education. Perhaps then you'll learn the art of discourse.
Click to expand...

Wow, you come across as pretty bloody "average" Sammy.

My intention was not to big note, nor trigger such an aggressive response.
But you know what, I'm stoked with what I've achieved at 27 while people like you told me it can't be done, it's overpriced, it's to risky, you're stupid etc. etc.
 
pi said:
sammysilver said:
pi said:
I really think all these statements using averages are BS.

I earn more than double the wage figure and my first house cost less than half the average, 3 years ago.

I have no problem at all servicing several mortgages.

If you earn 60k a year you shouldn't be living the high life and buying 600k houses...
Click to expand...

Pull your head out of your arse. I was making the point that houses are overpriced and tossed some figures around to show why.

Like a rat up a drainpipe, you couldn't wait to declare your income and your asset base. Use some of your money to go back to school and get an education. Perhaps then you'll learn the art of discourse.
Click to expand...

it's to risky, you're stupid etc. etc.
Click to expand...



I doubt anyone would have said that.
 
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