Monday, July 23, 2012

Australian Houses: Gold / Silver Ratio - June Update

It's been almost 6 months since updating these charts and although they haven't change dramatically I thought I'd run through a quick update.

You can see previous charts on the blog here:

Another post which may be of interest was the below where I looked at how much better off someone saving in Gold and Silver could be over several years while waiting for the correction in house prices to play out:

Of course actual results may vary depending on how your local area performs and whether Gold/Silver perform as well over the medium term as I expect them to.

Data source for below charts: 

Key Figures:

Sydney (Ounces to buy a house)
Precious Metals Peak (January 1980): 103oz Gold, 1811oz Silver 
Housing Peak (February 2004): 1100oz Gold, 69,143oz Silver
End of 2011 (December 2011): 403oz Gold, 22,019oz Silver
Middle of 2012 (June 2012): 418oz Gold, 23,968oz 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
End of 2011 (December 2011): 353oz Gold, 19,264oz Silver
Middle of 2012 (June 2012): 349oz Gold, 19,994oz 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
End of 2011 (December 2011): 263oz Gold, 14,336oz Silver
Middle of 2012 (June 2012): 259oz Gold, 14,840oz Silver

The average prices for Gold and Silver fell from AUD$29.80 and AUD$1626.98 in December 2011 to AUD$27.80 and AUD$1592.29 in June 2012, a fall of 6.7% and 2.1% respectively which in part explains the poor performance of the metals in relation to housing over this 6 month period.

In $ terms Melbourne houses recorded a fall of around $20,000 from December 2011 to June 2012, Brisbane a fall of $15,000 and Sydney saw a rise of $10,000. 

Once converted to their respective Gold and Silver ratios none of the cities saw a large move, more so consolidation near current levels.

In Silver all ratios saw an increase, meaning that in all cases houses outperformed Silver (even though prices in $ terms fell in Melbourne and Brisbane, the drop in Silver price was greater). Gold outperformed slightly in comparison to Melbourne and Brisbane houses, but the rise in Sydney house prices (and small fall in Gold price) saw Gold bettered.

While housing has largely outperformed the metals over the past 6 months I expect this will change considerably in the not too distant future. As I've recently pointed out on the blog several times I believe that the correction in Gold and Silver is nearing an end and we could soon see an explosive move higher. The fundamental drivers behind the precious metals bull market are still in place and providing Gold and Silver remain above their important technical support levels (US$1500/$26), we should see these ratios drop (to the benefit of those holding Gold and Silver) over the last half of the year as spot price moves higher:




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  1. Like your work BB, but Saying something will go up unless it goes further down is not very insightful...refer your last sentence

    Ps agree with the ratio conclusion, house prices will fall relative to both the PMs

    1. Yes that was poorly worded. My base case expectation is that Gold and Silver remain above the support levels and move higher in the latter half of the year, changed the wording slightly to reflect this.

  2. Great work BB. Be nice to see some stats covering crazy Perth houses too. Hope the price comes crashing.

    1. Thanks. I would love to add the other capitals, but unfortunately the data for the other cities doesn't go far back enough to provide meaningful context e.g. Perth data with same Residex indices only goes back to 1990.

  3. Thanks for the data, they're one of the greatest indications on purchasing power.

    However, do we have data prior to 1980? It'll be interesting to see how the previous bull/bear markets.


    1. Hey Andy, you can see Share Lynx have a series here which goes further back:

      But my understanding of the data collection techniques for house prices pre 1970s was pretty sub par (collecting adverts from newspapers and so forth rather than actual sales data) so not sure how accurate this longer series would be.