Sunday, September 11, 2011

Australian Houses vs Gold & Silver

Several times over the last 12 months I have updated and talked about the charts showing Australian houses priced in Gold and Silver. Here are the previous posts:


Data source for below charts:


Note: Residex figures used for today's update are duplicated months July to September as newer data not available. Gold/Silver are monthly averages as per Perth Mint prices up to August, I used spot price (AUD $1775/$39.50) for September to reflect current ratios.

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We've seen a large drop in the ratio given Gold's run up in price over the last 2 months since I last updated the charts. In the charts from July the last price for Gold used was $1500, whereas today $1775 was used (an increase of 18%).

Here are the key numbers from the chart:

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 (September 2011): 380oz Gold, 17,076oz 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 (September 2011): 330oz Gold, 14,848oz Silver

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 (September 2011): 246oz Gold, 11,051oz Silver

The fall from grace in Sydney is particularly impressive as prices rocketed and peaked in that city much earlier than others. If you'd owned a house (median value) in Sydney in 2004 and sold it, turning it into Gold ounces and then swapped it back now you'd have almost 3 median houses in the same city (without taking into account stamp duty/costs) and if we see the ratio return to the low seen in 1980 you will be able to swap those 1100 ounces of Gold for around 10 houses.

If we were to see ratios return to those seen in January 1980, assuming no further move down in house prices we would need to see Gold move to around AUD$6500 and Silver to $375. If we saw a 30% correction in house prices then Gold and Silver could return to lower levels (AUD $4500/$260) to achieve similar ratios to the 1980 peak.

What's interesting to note is that the Gold to house price ratio in the United States is already back to it's 1980 lows at around 95:1, so if Gold continues to move higher it has the potential to send this ratio much lower than the 1980 peak in Gold.

CLICK CHART TO ENLARGE

Here are the charts for Australian capital cities (Sydney, Melbourne and Brisbane) priced in AUD Gold:

 CLICK CHART TO ENLARGE

  CLICK CHART TO ENLARGE

  CLICK CHART TO ENLARGE

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10 comments:

  1. Good on you mate! Nice to see updated charts. Thanks

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  2. No problems Val, it's an interesting ratio to be watching.

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  3. Regarding your earlier blog on the Dragon coins, do you have a feeling for market prices on the 1oz gold coins?

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  4. I haven't seen any change hands on local forums, on eBay Germany the prices of the 1oz Gold coins appear much more reserved than the Silver coins... recent sales indicate a price around 1400-1500 Euros is the norm.

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  5. The only one think can be improved with those charts is to go further back in time. 1980 crash was not the same magnitude as GFC and is a weak point of reference.
    See is you can extend chart to 1930, I know it is a big ask :) Even for one city or even Australian median...

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  6. I'm not sure on their source for the data, but if it helps sharelynx.com goes back that far with one of their charts:

    http://www.sharelynx.com/chartstemp/chartslt/OzDataHP023.php

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  7. I noticed ShareLynx Gold has collated the same data and they have covered Perth, but only goes back to 1990:

    http://www.sharelynx.com/chartstemp/chartslt/OzDatamHP16.php

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  8. I would love to see those charts updated. It appears that is trend is maintained, we will come to the point with the next 12 months when one better to exchange metals for property...

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  9. The time could definitely come quickly Val, no doubt about it.

    Pretty busy over next couple of weeks, but definitely intend to keep these up to date regularly. Hopefully within the next month or so I will update.

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