Do House Prices Always Go Up?

[Troll]

Since I was a kid I have had it always drummed into me to "invest in property". "Buying a house is the safest investment" but after reading about a lot of burst housing bubbles around the world it gets me wondering if this is necessarily true.

You just have to look at the Unites States where millions have mortgages worth more than their houses or Japan which has been in recession since the early 90's when it's property bubble burst. The fundamentals of it seemed flawed. I mean when my parents bought their place in the early 90's it was worth about the average yearly wage now it is worth 10 times the average wage. There must be a ceiling to this ratio in property to average wage. Is the property boom even good for the economy? We are channeling so much of our wages into bricks and mortar. Imagine if we had a larger disposable income going into starting businesses or even buying that $70,000 FPV.

Long story short in the post GFC age is property still a safe investment?

[Resurrection]

That is the million dollar question.

[Windsor220]

I think its safe in the long run but it wont boom like it did a few years ago.

[Benny D]

people keep expanding.
property closer to CBD will become more sought after.
price goes up.

[poppa smurf]

short term possibly not always.....long term nearly always.......there are "boom an bust" cycles of course

ours has gone down probably 20% over the last 2 years (since I put our place on the market)

the expansion of Roxby downs was going to be a saviour but.....well we all know what happened there

[Mercury 8]

Close to the city,close to the water, will always be sought after but as said above the big boom times are gone forever.Maybe some of the majors close to the big mines will have short term gain but what happens when the mining boom dies.

[Yellow_Festiva]

Property value is cyclic. There are numerous external factors that dictate the value of a property. Some of those factors are natural, some caused by people. Neither can be controlled or predicted.

Some observations if I may:

1) No matter what, people want / need a roof over their heads. It's one of our basic needs.
2) Our economy is very different to others. The US made legislation to lend money to people who had a snow balls chance in hell to EVER repay the loan. Do that across the country and all of a sudden you have a boom of cashed up buyers all fighting to buy. When that happens, the sought after product also booms to profit form the demand.
3) Japan??? Their population has been going down over the past several years and is predicted to continue to do so. When you have excess housing prices fall.

We cannot compare our situation to most other countries. If we are not the most stable economy in the world we are probably in the top 5. We have a growing population, resources that people want and plenty of land to go around. Our banking and finance systems are pretty robust and we still have a good way of life.

I doubt prices will shoot up as they did between 2000 and 2003 as we are a lot more cautious with our spending, having said that, in my opinion prices will remain stagnant for a while. If all things remain equal, we will still get our pay rises, tax incentives and reduce our debt further. After a while something big will happen causing the whole cycle to start again.

But of course, I could be TOTALLY incorrect. I'm on holidays and generally don't travel with my crystal ball ;)

[XBROO]

Yeah I think it's like a ten year cycle, if you hold on to property for that long you should make money on it. But there's alot of research you have to do before you buy the property but that's another story. The idea is that houses go up and down but in a ten year period it should be worth alot more then what you bought it for. I've had my house about 8 years now in that time it went to 150K over what I payed for it. But in recent years it has gone down and probably about 80K over now, so still good.

[usernametaken]

Land goes up.

Houses are just a bonus

[MercurySilver]

Originally Posted by usernametaken

Land goes up.

Houses are just a bonus

agree
land is the go imo
our land has gone up in value 180 grand in 5 years (but thats council rate estimates)

cant go wrong with a decent big block i reckon

houses drop and fluctuate up and down
then location size and what the house has comes into it
they say it goes in cycles of 7 to 10 years?
if thats the case we should be nearing the increase in value in the next year or two (?) over here at least

[Dash_XR]

Originally Posted by usernametaken

Land goes up.

Houses are just a bonus

This is the golden rule, location.

Most houses loose value as they age, the land holds all the value.

What amazes me in my area is people spending 200+k on 400m or smaller blocks in massive estates in the middle of nowhere blinded by the thought that all property is a great investment.

I honestly can't see them doing overly well in the long run as more and more newer estates pop up all around them.

Time will tell I guess.

[xisled]

At the moment especially in the outer suburbs of Melbourne, a lot of people have a mortgage that is higher than the property itself. These people will eventually get in front but it will be in around 5 to 10 years.

Also buying a house depends on what you want to do with it. If you want to live in it then I would not be really thinking about how much money you can make out of it. It would still be part of buying the house but not a huge part. Things you would look for would be, close to public transport, parks, travel time to work etc.

When buying to invest and rent the property out, this is where you would be looking to maximise the amount of money you can make from this assets.

I am looking into both investment and living at the moment and 1 thing I would suggest is save as much money as possible for a deposit and take your time do research on the area you are buying into and speak to the local council to see what things they have approved to be built.

[castellan]

No they do not always go up as there is inflation to understand.
One would be best to understand from what you earn a year principal as some sort of guide line, like the average wage in say 1970 vs etc.
It surprised me one day that when talking to the dude that bought my dads old house, years later he was in such a rapture, i thought what a fool he was as he did not understand at all, the true worth. typical goy, brain dead. yes he did well but not to the extent of what he boasted.

It's the same with people buying cars, as one time during high inflation and truing their cars over every year, came to me boasting that their old car lost no value, they got basically what they bought it for.

Funny thing is a mate came to me proud as punch that he had just made it to becoming a millionaire. yes a millionaire was someone back in the 70's but not now. as just a dumpy house cost half a million today.

Then you see this lot that sit down with someone showing a graph of how they are going to have a lot of money in 40 years, but it's worth will be jack to what they assume.

[Jim Goose]

Bit of a catch 22... but the fact more and more people buy a home as an "investment" drives prices up. this makes it harder for other people to actually buy/ rent a home.
The house then remain vacant because fewer people can afford to rent the rediculas price asked by owners of "investment" homes.

Then when they try and sell they wonder why no one wants to buy at an inflated price.

Sadly very few people buy a house to actually "live" in or to turn it into a "home"..

[Troll]

I would love nothing more than buying a nice block of land the only problem is that since my work takes me everywhere buying a property at the moment would likely be an investment so I would want tenants and from what I have seen getting good tenants for a property is an excruciating experience.

[Resurrection]

http://image.e.rpdata.com/lib/fe5915...rk_indices.pdf

[Franco Cozzo]

Lets say if you buy a house and live in it for 10 years, its doubled in value over those 10 years.

You sell it.

Unfortunately you need somewhere to live, you go buy again but all the other houses have also increased in value, so you're back where you started.

Unless if you have a rental property, than you have to deal with real estate agents and people trashing your house for you.

[flappist]

I have 3 houses.

All have lost value in the last 2 years.

One is now only worth only about 40% more than I paid for it while the other two are 300% and 600%.

Two are rentals that were/are being paid off by the tenants.

On AFF you may find a core group of the "doom and gloom" brigade who are all experts on the economy and multi gazillionaires due to their clever investing.
They often drive around in their 15 year old barely roadworthy cars looking for the cheapest fuel with shopper dockets and laughing at the poor people who have invested in a home for their family rather than being clever like them and renting until the price of houses come down to where they can afford it, I mean where they can take advantage of their gazillionaire status to become slum lords.

The price of houses is like the price of petrol.
Yes it goes up and down and sometimes seems like a bargain but I remember paying 9c per litre once, I wonder if I should wait until it is back there before filling up.......

[Work Horse]

[Work Horse]

I don't want to be a prophet of doom, I invest in property.

I'm just saying...

[BENT_8]

So someone with the user name TROLL, with 14 posts, asks one of the most controversial questions to ever grace this forum and you lot buy into it...

Hook
Line
Sinker...

Mind you, a good debate would wake the place up a bit, im over the solar energy, cop bashing, speeding driver threads that have flooded the place of late.

[mr smith]

Originally Posted by flappist

I have 3 houses.

All have lost value in the last 2 years.
One is now only worth only about 40% more than I paid for it while the other two are 300% and 600%.

Two are rentals that were/are being paid off by the tenants.

To answer the OP...no they dont always go up.

I always suspected old flappy had skin in the game during the last house price thread, which has shown the "doom and gloomers" to be on the money.

[Resurrection]

'doom and gloom brigade' tend to be realists and are vilified for telling that things aren't always as rosy as they seem.

[flappist]

Originally Posted by Resurrection

'doom and gloom brigade' tend to be realists and are vilified for telling that things aren't always as rosy as they seem.

Over the last 50 years, in Australia, in how many years have house prices dropped?

[zilo]

Originally Posted by flappist

Over the last 50 years, in Australia, in how many years have house prices dropped?

Perhaps an answer to your question, and a bit of advice for the original thread starter is....

Always read the prospectus before diving into any investment.

They always print the disclaimer....unless they are a Real estate Agent...

"past performance isn't a guarantee of future earnings"

If it's a mandatory disclaimer for shares, gold, superfunds etc...

Then surely it also applies to property purchases as well?

[Resurrection]

Originally Posted by flappist

Over the last 50 years, in Australia, in how many years have house prices dropped?

Not very often. However that does not mean one should not be cautious. If somebody purchased a house just before one of these down periods was about to occur it could take them many years to recover their losses.

[Troll]

It is an interesting topic for me personally because I'm at the stage where:

A) I can go put a deposit on an investment property
B) I can go out and buy a dream V8 Ford

Sure you hear the usual arguments about buying a car being a waste of money but you only live once and you need passion in your life. Also the thought of being in debt for something worth multitudes my yearly income for the next 20 years is a scary thought especially with so much uncertainty in the global economy.

[BENT_8]

Originally Posted by Troll

It is an interesting topic for me personally because I'm at the stage where:

A) I can go put a deposit on an investment property
B) I can go out and buy a dream V8 Ford

Sure you hear the usual arguments about buying a car being a waste of money but you only live once and you need passion in your life. Also the thought of being in debt for something worth multitudes my yearly income for the next 20 years is a scary thought especially with so much uncertainty in the global economy.

You'll have to excuse my suspicions at your asking this question, it has been asked in many guises over the last few years and usually ends up the same way.
Problem is its a very emotional topic for many, lots of people have their life savings tied up in property and refuse to believe that it can dissolve before their eyes.
On the other hand, as someone eluded to, some sit back paying rent waiting for 1990 prices on 2013 income to cash in on a bargain.

You would be nieve to think you could buy property today and realise a 600% profit in less than 10 years.
Those days are gone.

It really comes down to your intentions, if you are buying to rent it out there are many aspects that need to be factored in, not just someone paying your mortgage, sure the economic gain is attractive, but one bad tennant can leave a sour taste as some here have experienced.

If you wish to buy it to live in one day, or use it to fund future purchases, then eventually you should see some equity in it.

If you are looking for a personal residence and can wait for a year or two then i think any rent paid in the mean time will be accounted for in further declining values, you may even end up in front.
The only real difference will be the date you pay it off.

Either way, sound financial advice from a professional is what i'd be seeking.

[homegrown]

Originally Posted by Troll

It is an interesting topic for me personally because I'm at the stage where:

A) I can go put a deposit on an investment property
B) I can go out and buy a dream V8 Ford
.

Bit of a useless story but thought I'd share,
When I was looking for a car awhile back I ran into this XA GT Hardtop for sale. Before the price boom. And the guy said $h*t Mate how old are you? Go save for a deposit on a house then go play with cars. Maybe because I was a fresh faced kid and he didnt want to see his GT be mistreated. But for some reason that really stuck with me. So I got my house and now I will never own a GT but at the time houses where go up faster than you could save.
So I really need to find that guy so I can shake his hand for being so foward.

[Troll]

And if housing is a bad investment what is a better investment? Stocks? My mate lost an Afghan trip of cash in stocks.

Is it safe having money in the bank? Look at how all these US/Euro banks have nearly gone under after investing in supposedly AAA Financial Products.

Maybe it's better investing in Gold and Spices from the Indies.