Wednesday, February 16, 2011

Australian Housing Priced in Gold and Silver

The last time I covered this topic it was one of my first blog entries (Link). The statistics for that post were a bit cobbled together as I had not been able to find a constant data series for Australian house prices (so several sources were used). Recently though I stumbled across the Residex House/Unit Price Indices, this source has data going back to 1979 for 3 capital cities (Sydney, Melbourne and Brisbane). I have used this source to chart a more accurate set of houses priced in ounces of Gold and Silver.

The Perth Mint data I used was the monthly bid average (AUD) for Gold and Silver.

Source of data used for charts:


Besides the source of housing data the other change between my last version of this series and today's is that I have charted monthly figures rather than annual, this provides a clearer idea of the real highs and lows that we've seen over the last 30 years.

Sometimes it can be a little difficult to judge the numbers from a chart, so here are some of the key figures:

Brisbane (Ounces to buy a house)
Precious Metals Peak (January 1980): 62oz Gold, 1091oz Silver 
Housing Peak (February 2004): 600oz Gold, 37,696oz Silver
Currently (December 2010): 327oz Gold, 15,605oz Silver

Melbourne (Ounces to buy a house)
Precious Metals Peak (January 1980): 67oz Gold, 1181oz Silver
Housing Peak (February 2004): 661oz Gold, 41,538oz Silver
Currently (December 2010): 423oz Gold, 20,221oz Silver

Sydney (Ounces to buy a house)
Precious Metals Peak (January 1980): 103oz Gold, 1811oz Silver
Housing Peak (February 2004): 1100oz Gold, 69,143oz Silver
Currently (December 2010): 481oz Gold, 22,947oz Silver


For the ratios to return to the previous precious metals peak we would need to see Silver increase to around $400oz and Gold to increase to around $7,000oz. That is if house prices were to stay priced where they are currently, in my opinion there is a greater chance that we will see house prices fall while precious metals continue to rise.

Will we see a return to the ratios seen during the last Gold/Silver bull market? As much as property owners might hate to hear it I suspect they will return to similar numbers. I think it's a real possibility that at some point during this precious metals bull market we will have houses available for around 100oz of Gold or 2000oz of Silver in any Australian capital city.

Does that mean it's time for home owners to sell up and move the proceeds to precious metals? Probably not for the average family, let's face it you can't very well live in a bar of Gold/Silver and it's not going to provide your family the stability that owning your own home does. For the savvy investor the time to exit property and switch to precious metals was early 2004, however that doesn't mean that there's not still time to cash in on the trade if you were so inclined.



CLICK IMAGE FOR LARGER VERSION

BRISBANE

MELBOURNE

SYDNEY



BB.

7 comments:

  1. Wow, there's some interesting Head and Shoulder patterns evident, particularly for Melbourne and Sydney.
    Nice analysis BB.
    (BCT aka The Prince at www.macrobusiness.com.au)

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  2. nice charts mate, could you please do one for Adelaide please??

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  3. Hi Anon, unfortunately the other cities don't go far enough back with Residex data to measure a full cycle so would question the benefit of posting them up. This is a chart I did for Adelaide around 12 months ago (so not right up to date), but was using data mixed from multiple locations:

    http://forums.silverstackers.com/uploads/61_adelaidegoldsilver.png

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  4. Hi ... that data is interesting (in your comment reply on Adelaide) I guess the difficulty with the early data is also the proximity of Nixon's decoupling US from Gold

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  5. Hi Excellent job! Have done similar graphs for myself over the last few years. How often do you plan on updating these graphs? Cheers

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  6. Hi Anon, here is an update from September 2011:

    http://www.bullionbaron.com/2011/09/australian-houses-vs-gold-silver.html

    I will probably do an update early in the new year (once data is available around Feb) when I can update them for the entire 2011 year.

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