Ridiculous Australian house prices.

[nomadpete]

Nearly right, Nev.

 

"The  "System" is a bit rigged in  favour of those who know the right People. Not what you Know,. Its WHO you know.. "

 

Actually it is WHAT you know... about the Right people, that makes them really helpful.

 

Just ask Donny. It works for him.

[facthunter]

HE uses them and then dumps them in the Poo. IF he gets back in he'll COME AFTER THEM.  THAT should be sufficient to BAR him from EVER being the POTUS again..   Nev

[old man emu]

The big problem in Australia are our Landlord & Tenant laws. In most comparable countries the laws make things equal for the two parties, if not weighted to the tenant's side.  In Australia, they are biased the other way. Short term leases are the problem. How can you feel secure if you are only assured of the roof over your head for 12 months at best?

[nomadpete]

44 minutes ago, old man emu said:

The big problem in Australia are our Landlord & Tenant laws. In most comparable countries the laws make things equal for the two parties, if not weighted to the tenant's side.  In Australia, they are biased the other way. Short term leases are the problem. How can you feel secure if you are only assured of the roof over your head for 12 months at best?

Not sure how your post relates to either thecost of housing, thecost of rentals, or the shortage of either?

 

As for the tenancy laws, I don't think they are biased toward landlords. I had a rental for 15 years and it was not a great moneymaking business.

[facthunter]

I think it's a mugs  game renting out houses from the Landlords point of view. You'd be better off In an Industrial estate where more realistic people use it.  Some people just trash the place. Nev

[spacesailor]

Singapore uses their ' superannuation ' scheme,  to pay the deposit on the family home , ( high'rise flat ) .

Seem to work well over there. 

I believe the ' superannuation ' is a rort.

How can you live 20 / 30 years on the money you lost to super ., When inflation eats it's way through those savings. 

Look at the wages paid thirty years ago, then the amount we get now. 

spacesailor

[octave]

38 minutes ago, spacesailor said:

How can you live 20 / 30 years on the money you lost to super

 

Interest favorable taxation also schemes like salary sacrifice. 

 

  Eight years ago we had stuff all super but we decided we wanted to retire early so we got serious about stuffing as much as possible in super and taking advantage of everything we could to build super. We thought we had left it too late but we managed to retire at 56 not with a fortune but comfortably without needing to work.  Of course, it won't last forever but it will last past the age where we can get an aged pension.    

 

Without super we would both still be working.

[facthunter]

The alternative to super is a pension and how can we afford a pension that you can live on  for everyone.? A pension will always be minimal and you run the risk of being labelled some kind of parasite and a failure who should do the right thing AND just DIE.  To refer to super as YOUR money when it's taxed favourably as part of an agreement is duplicitous.  AS I said previously, that  would effectively be a high cost in the long term arrangement as it would deplete your super . Plenty of things could be improved with super but that doesn't mean we should discontinue it ..Nev

[old man emu]

In my opinion, I think that you can live off superannuation IF you have been able to pay off the mortgage you took out 25+ years ago when the average suburban home, on a block of ground you could toss a bull in, was around $125 - $150K, and you benefited from the low interest rates towards the end of the mortgage period. If you got wiped out by the mid-80s high interest rates, you never recovered.

[facthunter]

Depends on how resourceful you are and what you can Make do with. I don't think a lot of the younger generation GET that. They were brought up on easy CRED (NOT a piggy bank saving attitude) and have a "have it now" mentality in response to endless pressure from adverts and their Peers to borrow with little attention to the Paying it OFF, side of things. They wouldn't have a clue what a Recession was.  Nev

Edited August 26, 2023 by facthunter

[octave]

In our case, we built our first house in 1985 during the high-interest period although we did have a slight advantage in that my wife worked at the Commonwealth Bank so we got a slight discount (still high-interest rates though) If I  remember correctly $30K and the rest (25k) came from a defence home loan.   After about 5 years (1990) we sold up and bought  44 acres in the bush, we owner built our modest house and virtually dropped out.   We lived well on minimal income. 

 

One thing we did that enabled us to retire early was selling our 44-acre property and we bought modest premises.  We stuck this money from our property into super.   We did not see the sense in being property well off but still going to work. Our place now is not worth a great deal (but we like living here)  and we are reasonably income secure. I cant really understand what joy there is in having a million-dollar property but dragging yourself into a job you don't enjoy or not having enough to live on. 

[facthunter]

There has to be more in life than spending such a large effort in having a Ticky Tacky house in a street full of bored and unhappy people in a similar plight. it's a treadmill you are on and the "system" makes it hard to live differently,. You get locked in. When babies come along you're getting the income halved.  Nev

[octave]

11 minutes ago, facthunter said:

Depends on how resourceful you are and what you can Make do with. I don't think a lot of the younger generation GET that.

 

I read an article the other day about some people in Wellington NZ who bought a house on a large block together. I think it was 2 couples and 2 single folk.  Wellington house prices are crazy. They bought this shabby house which was quite expensive (for 1 buyer) and demolished it. They then built what could be described as 6 townhouse-type buildings and some shared facilities.    I think we are a bit stuck on the 3-bedroom house on a suburban block containing mum dad and 2.7 kids.

 

My son has his own company and has a reasonable income. He could have bought a regular house but instead bought a house with his business partner and his business partner's wife (also a business partner). They bought a large 2 story house that had duplicated facilities on each floor.   They also own a bunch of cool cars together.  We consider this couple he owns a house with as his family and also our family.    I am often struck by how well they all get on with each other,   I wonder if stubbornly sticking to the dream of one family in a house on a block might be a little limiting.

[spacesailor]

My oldest daughter ( grey nomad ) , has only retired last year , in 18 or so months their super had run to a worrying level. 

So had to sell off one Investment property,  

Both of them were upper ( ish ).salaried workers . With salary offset to super .

My idea for the ' brick & morter ' Investment.  Seems to have paid larger dividends. 

spacesailor

 

[octave]

3 minutes ago, spacesailor said:

My idea for the ' brick & morter ' Investment.  Seems to have paid larger dividends. 

The value of bricks and mortar is irrelevant unless you rent it out, borrow against it, or sell it.  I know quite a few people who have a house that is worth a lot but complain that they don't have enough money to live on.  What good is a million-dollar house if you struggle on the pension?

[spacesailor]

There you go !.

A few  nice suburban houses rented out , With redevelopment potential. 

Bought for about $ 100,000 ish , each .

Demolish one , to build a triple ' town house ' , with reloes. & friends,  to do considerable work .

AND , Hey presto,  your sitting on $ millions. 

We're missing a ' plumber ' in our family . LoL

spacesailor

 P S. Their son is going to overtake them at the rate he is going . 

 

 

[octave]

Just now, spacesailor said:

There you go !.

A few  nice suburban houses rented out , With redevelopment potential. 

Bought for about $ 100,000 ish , each .

Demolish one , to build a triple ' town house ' , with reloes. & friends,  to do considerable work .

AND , Hey presto,  your sitting on $ millions. 

We're missing a ' plumber ' in our family . LoL

spacesailor

 P S. Their son is going to overtake them at the rate he is going . 

 

 

So is this what you have done?

 

 

I don't necessarily disagree with this but having been a landlord for a few years I did not much enjoy it,  It is easy to think that being a landlord just involves buying a few properties and then sitting back while the money rolls in but it is a little more involved than that.  Buying houses, doing them up, and selling them can be lucrative if you do it right but it is still work, OK if you enjoy it but a pain if you don't.    

 

There are many paths to living a financially secure and happy life.  I could have bought a second house and rented it out and maintained it all the tie hoping my tenants would be responsible and would not screw me over.  Instead, I chose to easy route, reasonably safe investments, and bugger all work to do.

[facthunter]

They haven't found a way to take it with you  and people who put a $ value on everything are lousy to be with. nev

Edited August 26, 2023 by facthunter

[octave]

11 minutes ago, facthunter said:

They haven't found a way to take it with you

Absolutely,  we won't be leaving much of an inheritance and there are no expectations from my offspring.  We opted for not working too much instead of wealth and a big house.

[facthunter]

there's nothing more revolting in the education system than some poor little RICH kid who says he can "buy and sell" you, when you're the teacher and He's 15 years old.  Nev

[Jerry_Atrick]

In theory, Australian house prices, even in the cities should be more moderate than what they are. Generally, the price of anything is based on the supply and demand of that thing; rarely does it actually have to do with the cost of production and distribution. When there are distortions in the markets, as there are in the Aussie (and UK) housing market, then one of the sides of demand or supply are distorted. In addition, another distortion is that the available money to participate in the market is affected... add money to the market and the prices will be inflated; take money away from the market and the prices will be deflated.

 

One would expect regulation to create distortions in the market as housing, like the labour and rental markets are about peoples' lives. Therefore, allowing the market to go unchecked can result in disproportionate unfairness due to the actual non-level nature of the playing field of theoretically perfectly competitive markets.

 

According to Google Maps, Melbourne is contained within the red dotted outline (would use another city, but I know Melbourne best)

 

I was surprised that Melton, nor even Rockbank isn’t considered in the boundary of Melbourne. Melbourne's population is expected to rise to 5m people - say about 2m dwellings and associated infrastructure will be needed. Over the years, particularly in what would traditionally be called Melbourne, your 1/4-acre properties have been subdivided to put villa units on them, developers have been building upwards (apartments - and Melbourne's skyline is a blight with them). The green band between Bundoora and Doncaster is settled but semi-=rural areas of Eltham, Warrandyte, etc. I didn't realise that the urban areas of the Mornington Peninsula were now part of Melbourne - there ya go. But looking at this map, there is plenty of supply to meet demand - and if one draws a circle around the boundary - much more availability to meet demand of 2 - 3 million dwellings.

 

So, what has been driving the prices up?

 

First, there’s the planning laws and restrictions. I know in Vic there is some controversy at the moment, but generally these are required to ensure a balance of housing people, preserving recreational space and some quality of living, adequate facilities, safety, access, transport, and latterly, environment. Yes, planning has not necessarily achieved these, but they are restrictions. We don't want dwellings on every spare cm of land. Planning restrictions distort the availability of supply side, which drives up prices.

 

Help to Buy grants: These cause more problems than they solve. They add money to the property market, which drives up demand, and drives up the prices. These are usually only available for new builds, but as the prices of the new builds go up, when they are flipped, the sellers looking to buy in more established areas have more money than they would have, adding money into the supply and further forcing up prices.

 

Negative Gearing. This is both a demand and money distorter. The ability to offset your losses immediately against your income is, IMHO, the right thing to do financially. However, the housing market directly impacts peoples' live, and increases the price of housing, making it unaffordable for too many. Retail and professional investors are drawn into the market increasing demand. Allowing the loss to offset taxes payable on income at the time of the loss rather than the end of the financial year, provides more money (affordability). The increase in prices due to demand is then used as collateral against the next loan for the next property and so the spiral continues.  If you want to bring house prices down, this is the one you get rid of - even if you allow all the deductions at the end of the financial year. The ability for investors to minimise the impact to their free cash flow is the big one.

 

In the UK, we have never had negative gearing, but we did allow all the deductions at the end of the financial year. In fact, some of the depreciation allowances were more generous that Australia. When the government decided it needed to rein in the residential property prices, it started removing these deductions. After all, if a house is meant to be owned and lived in, then these deductions are not needed by most of the homeowners, right?  They phased out virtually all deductions - interest, depreciation, maintenance, etc. And it did work - it slowed the markets down as a) a lot of landlords decided to put their properties on the market (increased supply), and b) the demand of all the mum and dad investors dried up. Now, only companies can get those deductions, but pay full whack of capital gains taxes (private landlords don't).

 

Macro-economic factors (interest rates, etc) also help, but specific to the residential property market, these are the things that could work.

 

Edited August 26, 2023 by Jerry_Atrick

[Marty_d]

True,  but look what happened when Labor tried to bring in modest changes to capital gains discounts. Scott Morrison. 

[onetrack]

It's a self-feeding vicious cycle that needs to be broken. People are making windfall gains on their properties they just sold, and can therefore bid up the next property they're buying - because they expect to make huge capital gains on that one, too.

 

In all my life, I have never seen such a manic property market, as exists here at present. Houses come up for sale, we poke fun at the asking price - and it's sold in a week. "House-open" days sees people queuing up to inspect the property, with lines of vehicles. In my area, it's an exceptional case that a house doesn't sell within a fortnight.

 

And the agents are starting this stunt of not even putting prices on properties - they're out to see what big money turns up, offering $100,000 more than the estimated valuation. It's Tulip Mania all over again, and a lot of people are going to get burnt. 

The worrying part is the level of Asians investing in property here. Sydney property must be pretty well nearly all owned by the Chinese, by now.

 

I read an article recently that said the average property investor in China has lost $1M in the current property downturn in China. Don't think for one moment that the Australian property market will never undergo a "major price correction".

 

When China sneezes, we're in for a bad dose of property 'flu.

 

https://www.afr.com/world/asia/why-china-s-property-market-is-in-freefall-20221004-p5bn4q

[Jerry_Atrick]

@Marty_d - you're right.. but that policy wasn't taken to the electorate in the UK, either. It is one that is implemented when in offie in reaction to a shock event. In this case, it was house price rises. It helped that it was a conservative government here that implemented it (or the second stage of it) - in reation to booming house prices. Also, it was done early in a term (5 years here, can only be shortened by a 2/3 majority vote). By the time the impacts were felt - this case the desired impacts and there wasn't a crash in the rental market as most predicted - it was a non-issue at the next election. It is not a policy to take to the people to get elected on - iot is one to use after getting in and then taking the results of that to the next election (of course, with an on-side press helps).

 

Also, just because it worked in the UK doesn't mean it will work in Aus. There are demographic, cultural, and structural differences.

 

@onetrack - I agree. In the posher burbs, the prices will normally hold well even in down turns, but that old adage in property - last up first down is very true. China is one influence on the Aussie housing market that has kept it going for so long - very different to the UK.  While predictions of the Aussie housing market's crash have been around for a long time, China's strength feeding the Aussie economy has been one area that have provided salvation. When that runs out, and it will, I hope I will have the money lying around to pick up some "relative" bargains.. the quesiton will be how long will it take to recover?

[red750]

33 minutes ago, onetrack said:

The worrying part is the level of Asians investing in property here.

That also appies in the eastern suburbs. The hideous 20 plus floor apartmrnt blocks in Box Hill are owned and occupied by Asians or Indians. Also around my place in Vermont. Most homes are snapped up by Asians. In a street with 42 houses on it, there are only about 12  Australian families.  You go into a shop, they are mainly Asian. Chemist Wharehouse - all Chinese, 7-11 - Indian, Maccas or Hungry's - largely Asian. They seem to be the ones with the money. Buying properties close to schools and colleges.