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sabre_ac

sabre_ac

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Sep 10, 2000
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I thought I might start a thread about property conditions in Australia (or abroad) and whether or not it appears to be a good time to buy. There seems to allot of expert's out there giving their opinion and it's a case of reading them all and making up your own mind.

Melbourne property prices to fall further, RBA says

http://theage.domain.com.au/melbourne-property-prices-to-fall-further-rba-says-20130327-2gtww.html

"Melbourne's housing market is heading for further price falls and "softer" conditions, according to the Reserve Bank of Australia"

One of the few articles I have read lately that actually suggest the market will fall and singling out Melbourne (Australia's most liveable city and not it's most expensive) as the danger zone. Though it should be pointed out that it is focusing on the oversupply of apartments, which is a market that appears to be a little less consistent than the house and land alternatives.

I wonder how many apartment owners are buying a home or an investment. I like the idea of downsizing, relying less on a car and having enough space for what you actually use. This may still be a work in progress though
 
The problem is that property reporting is infested with vested interests. Many people are either bulls (property infestors, baby boomers nearing retirement, news agencies with RE advertisers, the real estate industry, the government) or bears (FHB, people who "missed the boat" etc.)

Melbourne has been earmarked as the exception to the rule for some time now. I have seen a number of pessimistic article on the Melbourne housing market- this is nothing new. Far too many inner city partments coupled with the most expensive stamp duty in the country and its no wonder that BOTH first home buyers and property infestors are reluctant to get involved down here. Won't see a huge drop in prices, but probable stagnation coupled with a slight deflation in the value of rents once inflation is taken into account. Either way, prices are not going to crash here anytime soon.

Personally I think the attitude of Australian governments toward property in this country is deplorable. They will do ANYTHING to prop up this bubble- CGT and stamp duty are some of their juciest carrots, while negative gearing is predominantly aimed at Boomers and their votes. Government intervention in asset markets never ends well. It's capitalism completely and utterly ****ed. Savers subsidising the wealthy.

Once (if) it (hopefully) bursts it will be an absolute bloodbath.

And yes, I have a vested interest. I'm one of those (prospective) FHB.
 
Going to be tough in capitals for years to come. No crash, just a slow correction with some areas growing more than others. Patchy growth basically. Will really need to do diligence on where to invest.

Don't believe the media. They will only print opinions that either say very positive or very negative. No one will read articles that say the likely truth is somewhere in between.
 

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Smell The Glove said:
Personally I think the attitude of Australian governments toward property in this country is deplorable. They will do ANYTHING to prop up this bubble- CGT and stamp duty are some of their juciest carrots, while negative gearing is predominantly aimed at Boomers and their votes. Government intervention in asset markets never ends well. It's capitalism completely and utterly screwed. Savers subsidising the wealthy.
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I pity da fool who believes this tripe.

"oooh, I'm GenY. Me me me me and f***ing me. I'm 24 and can't afford a house in Malvern where I grew up! It's a disgrace! I won't be able to afford a house until I'm mid 30s and will have to buy in Heidelberg. It's all the Baby Boomers fault! Wah wah wah"

Let me provide you with some perspective:

1. The housing market needs to be propped up. Why would we allow it to crash? What good does that do except fill your own tailored agenda?

2. Negative gearing is not aimed at baby boomers nor votes. It incentivises people to buy property so people can rent. It also allows normal people to build wealth. It's not aimed at baby boomers, it just happens that most people aren't in a position to invest in property (financially and mentally) until they are 35-40+. This now appeals to gen X, and soon will appeal to Gen Y when they find time to stop posting selfies of themselves on facebook and indulging themselves in the delusional that other people give a fat ***k about every minute of their lives.

3. The opportunity is just as available to gen Y as it was baby boomers. Sure property is less affordable compared to wages but when baby boomers were buying their first houses they were typically mid 30s, single income with kids, and had to move further out from the city than their parents lived. Nothing has really changed, you just choose to believe the self indulgent crap that Gen Y espouse.

Once (if) it (hopefully) bursts it will be an absolute bloodbath.
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The only thing I see as a disgrace is someone wishing our property market bursts. Part self interest, part envy. If you ever enter middle age with a white picket fence you will look back with shame. If you don't, you'll probably think the same s**t and probably have not much to your name.

And yes, I have a vested interest. I'm one of those (prospective) FHB.
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What's tragic is you're been tricked into think Baby Boomers had it easy. Buy a house has never been easy. Nothing has changed. People were saying the same s**t you are 15 years ago. Their peers bought houses and moved through a cycle.

Just buy your house, shut the ***k up, and wait 10 years until the market has moved up, you have paid your debt down, and wages increase making your debt even more insignificant.
 
bunsen burner said:
Just buy your house, shut the ***k up, and wait 10 years until the market has moved up, you have paid your debt down, and wages increase making your debt even more insignificant.
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No, we won't, Boomer. You've run out of suckers to prop up your investments. If you think that I'm going to pour my salary into your bank account account (see http://upload.wikimedia.org/wikipedia/commons/0/0b/Melbourne_House_prices_from_1965_to_1912.jpg ) then you have another think coming.

Instead I'll wait until the Boomers finally start dying off to pick up some of their property for a more reasonable price. :thumbsu:
 
ClokesShankedIt said:
No, we won't, Boomer.
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I'm Gen X.

You've run out of suckers to prop up your investments.
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"Suckers"? Wow, you sound deluded.

If you think that I'm going to pour my salary into your bank account account (see http://upload.wikimedia.org/wikipedia/commons/0/0b/Melbourne_House_prices_from_1965_to_1912.jpg ) then you have another think coming.
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You know there's other factors other than just price to wages ration, right? I have listed them but you seem intent in wallowing in doubt and despair.

Instead I'll wait until the Boomers finally start dying off to pick up some of their property for a more reasonable price. :thumbsu:
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They'll just hand them down to their Gen X kids who will then hand down to their Gen Y kids.

While you're waiting people like me are amassing a sizeable asset base. As time goes on your offended is going to compound. Ironic considering.
 
ITT: angry bunsen.

Anyway, ignoring the the fact that property is unlikely to 'crash' as many believe (the level of ownership is high, why would anyone who owns their own home outright sell in a firesale?) I don't think people grasp what a crash would represent. 5% unemployment, globally high wages and a property crash will not occur simultaneously. It's not as simple as what goes up must come down, so if we get to the point that today's $500k house is $250k then the person who can't buy it at $500k probably won't be able to buy it at $250k anyway.

I think the Australian property obsession is unhealthy and am hopeful if nothing else that the past few years (and perhaps future few years) will give people a chance to catch their breath and use some common sense when it comes to buying real estate. Far too many people thinking a $500k house will be worth $250k next week because the inevitable crash is coming or $1m because they're planning on painting it and putting in an IKEA kitchen.
 
People like to directly blame property for it's comparitive unaffordability but the truth is there's a lot more to it. Our economy is maximised due to the boom 10 years back.

For you nuffies who think this is a bad thing, let me explain it to you:

10 years ago we had a boom. Millions of traditional working class moved into middle class. Bogans were all of a sudden earning $100k a year as a tradesman. Their house prices went up, their wages went up, they started voting Liberal (that part not nec good).

As a whole this has more positives than negatives. These people won't move back to being working class. And the people left behind? Too bad. They had their opportunity and didn't take it. If we took working class values and waited for the week links we'd stifle our standard of living.

The negative is that we are maxed out. People want $250k houses but the truth is we can't build them because every tradie building it is getting $100k.

The good news is that we are having a slow correction rather than a bust. Given the state of boom can never last for long periods, the way it's panned out really is optimal.

So you self indulgent Gen Y haters need to suck it up and take some perspective of why it is like it is, that it's a positive thing, and you too can have your dream just like those wrinkly phone-on-belt baby boomers did all those years ago. Your opportunity is just as available today, you just can't see it because all you can see is hind sight for baby boomers and not for Gen Y. Tip: baby Boomers didn't have hindsight in their era either. The more things change, the more things stay the same.
 
That is a great example of the typical bullshit that gets trotted out to disguise the fact that the secret to owning property in Australia was being born in 1960 rather than 1984..
 
ClokesShankedIt said:
That is a great example of the typical bullshit that gets trotted out to disguise the fact that the secret to owning property in Australia was being born in 1960 rather than 1984..
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I pity da fool who believes this.

I'm Gen X and was born way after 1960 and have done ok. If you're born in 1984 you're not even 30. There will be more property booms you know. And if you buy now and hang onto for 20 years (like those baby boomers who you despise did) there will be growth.

It's easy to say baby boomers had it easy when you look at the growth they achieved. But this is typical of every single era in Australian property - buy a family home in mid 30s, by the time you're retired in another 25 years your property is worth 8 times as much. Pretty standard stuff. It's called compounding.
 
I just bought a house for 377,000 in the outter suburbs in an area I'm really not that keen on (Werribee). I feel like we got a good price on it (despite it being above the area avg price) because the owner seemed to be in a bad way

I really like the value for money you get on the actual house in the area (as opposed to what 377k would get you in yarraville or richmond), however the location from the city is a pain in the ass (unfixable traffic problems etc)

The house is fantastic, 4 bedroom 2 bath and double garage with 2 living areas and quite a large kitchen. Block is 600sqrs however the house is escaping me for the moment. The street is quiet and clean, modern houses all built in the early 2000's

Anyway, I didnt buy this house as an investment, I bought it as a home, however I'm obviously still interested in the long term benefits of it.

I just cant imagine ever selling this house for more than 500k in my lifetime, I'm not educated in property at all but I'm aware of my parents building our family home in 1985 for 80k then selling it for 280k in 1998 so I'm aware that booms happen etc, but I just cant visiualize houses like mine in that area ever being more than 500k etc

Can a smarter man than me shed some light on the future of housing out here? (10-15-20 years)
 
bunsen burner said:
2. Negative gearing is not aimed at baby boomers nor votes. It incentivises people to buy property so people can rent. It also allows normal people to build wealth.
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My opinion on negative gearing is this - society needs to provide housing for people somehow. This can be done via public housing, and it can also be achieved / augmented by giving tax breaks to people who invest in housing to rent out to people. From a government bottom line perspective, they both cost some money, and they both house people. Tick.

The problem I have is when -ve gearing is used on EXISTING, unimproved property. In this case, the investor is taking money out of the public purse without providing anything back in the way of housing that didn't already exist.

In my opinion, -ve gearing should stay, but it should only apply to:

- Money spent on new dwellings.
- Money spent on making existing dwellings more liveable (ie you get a tax break on costs of adding an extension, fixing the kitchen, putting in new carpet, etc)
 
JuddsABlue said:
I just cant imagine ever selling this house for more than 500k in my lifetime
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Easily before then. What is most likely to happen:

Melbourne is still correcting since the boom of a few years back. Will stay thereabouts for a few years and creep up again, or conversley stay relatively flat for a long period before another mini boom. Either way, sooner or later $500k will be the cheap end of the market. I bet 15 years ago when it worth $150k you never would have dreamed it would be eventually worth $377.


I'm not educated in property at all but I'm aware of my parents building our family home in 1985 for 80k then selling it for 280k in 1998 so I'm aware that booms happen etc, but I just cant visualize houses like mine in that area ever being more than 500k etc
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You just have to trust the history of Australia real estate.

What will make it grow:

1. Inflation. There's 4% per annum
2. Other organic growth - increase in wages, increase in cost of building materials etc
3. Value relative to competition (an example being the reason why you bought there). If everything else increases then there is a point where people can't justify better suburbs and buy there. When this consists of young middle class buyers (professionals and young families) you get gentrification
4. Gentrification.
5. Improved infrastructure and attractions.

Can a smarter man than me shed some light on the future of housing out here? (10-15-20 years)
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I can't but I will say this:

1. Enjoy owning your own home. Live in it. Embrace it (but not too much)
2. Don't bother watch it grow in value - it will just make you feel like you're losing and tempt you to do stupid s**t like sell. Check the value every few years (compare prices to what else is for sale and make sure you take into account houses sell for less than they are advertised. If you get wind there's a boom (unlikely this decade), then start watching it's value. During a boom you might watch it jump $1k per week.
3. Pay the s**t out of your loan. Out everything you can on it. Dominate it like you're Gary Ablett Jnr.
4. Have a rough goal in your head about an upgrade and don't lose site of where you're at now. Postcode is important. Typically the better the postcode the better your well being. If Wezzabee gets a bit of a run on, then think about upgrading to Newport or Essendon or somewhere with better transport and more teeth per capita. If you end up with kids this is where postcode becomes very important.
 

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kickazz said:
My opinion on negative gearing is this - society needs to provide housing for people somehow. This can be done via public housing, and it can also be achieved / augmented by giving tax breaks to people who invest in housing to rent out to people. From a government bottom line perspective, they both cost some money, and they both house people. Tick.

The problem I have is when -ve gearing is used on EXISTING, unimproved property. In this case, the investor is taking money out of the public purse without providing anything back in the way of housing that didn't already exist.

In my opinion, -ve gearing should stay, but it should only apply to:

- Money spent on new dwellings.
- Money spent on making existing dwellings more liveable (ie you get a tax break on costs of adding an extension, fixing the kitchen, putting in new carpet, etc)
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Good in theory, and maybe bigger incentives for new dwellings / reduced incentives for existing, but

1. Not every renter wants to live in a Craigieburn or Narre Warren, nor an apartment building
2. As soon as you heard all investors to new property you kill the demand for existing property. New property appreciates as a result, returns for investors decrease, and you end up with a 2 geared market with artificially created prices for each one.

Incentives for ordinary mum and dad investors who, if they take the plunge, will not impact the cost of the pension to the Govt. is not such a bad thing.
 
bunsen burner said:
2. As soon as you heard all investors to new property you kill the demand for existing property.
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Well that's sort of my whole point - I don't see why my taxes should be wasted on a non-productive asset, ie an existing dwelling that the owner does not spend money on to improve. The reason negative gearing exists is to help deal with the ever (so far) increasing demand for housing, and using taxes to improve the wealth of an individual without actually producing anything or creating jobs etc seems pretty daft to me.

The M&D investors do need encouraging to alleviate the burden on welfare, sure, but the investment needs to(as all investments should) actually produce something. Doubling the price of a shithole in Carlton without actually making any changes to it at the expense of roads and hospitals? I think not.
 
As for my forecast for the future - I think it will ease / go up slowly for a while. No chance of a Japanese style bust or what happened in the US. Australia is still one of the most desireable places to live in the world.

As for another boom - well I try to look at what created the last boom - various things like high (or is that low?) LVRs had an effect, but the real driver is wage inflation, Australians became relatively highly paid in a shortish period of time. I struggle to see where the investment in jobs in this country is heading (mining topping out, manufacturing, retail struggling) so that may be flat for a while, BUT we are a pretty resourceful country so I'm confident that maybe not in 5 but def in 15 years we'll see some prosperity again. JuddsaBlue - pretty sure your place will be worth 500 in your lifetime.
 
Those who say housing prices will go down are missing the point. Housing prices will never go down. Prices in general never go down. This is in part due to inflation and in part due to supply and demand, with an increasing population and limited space and cities that leads to only one direction.

The best way to look at something like housing is purchasing power. That is what proportion of income needs to go on the standard mortgage and/or what is the multiplier of the median house price to the average income. Is it 6 times more, 8 times more 2 time more etc. Is 30% 50% 80% of your incoming going on a mortgage?

This is where a correction will be in my opinion. The gaps in the difference between yearly income and house prices will tighten (i.e. Income will increase in terms of inflation, houses also but less so thus narrowing the gap).

The reason older people obsess over property prices is because the boom has left owners with a nice nest egg and given a wealth base to and a source of income if sold. This enables a passive income to be generated for retirement.

Younger people acknowledge that they are stretched in terms of housing and may be stuck renting thus there is a bit of resentment there that they probably won't own a home, be able to afford a mortgage.

Tough yes but each generation/time frame has its challenges. The best bet I think is to look for another source of passive income wealth. Generate cash and assets from that. Property probably won't be the boon it was for the boomers, yet something else will be. Trick is to identify it and hopefully invest early.
 
http://au.news.yahoo.com/thewest/a/-/wa/16485528/perth-median-property-price-soars/

REIWA president David Airey said the growth was driven by an increase in turnover and more houses being sold above the median price.


"While the proportion of sales under $500,000 has fallen, there was a marked increase in sales between $500,000 and $1 million," he said.


"The $600,000 to $700,000 range was the most dominant price point above the median during this period and is a healthy illustration of consumer confidence through trade-up activity."


Homes in the $600,000 to $700,000 range and the $800,000 to $1 million range combined represented about 20 per cent of sales in the three months to March 31. The $400,000 to $450,000 range was the leading price range in the overall market, representing 12 per cent of sales.
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You spin that any number of ways. Unsurprisingly, Mr REIWA is talking up the market. Give the same data to a 22 year old uni student and the first home market is dead and bargains are just around the corner.

I implore anyone looking at buying a house (first, second, last, IP - whatever) to do their own research and leave newspaper articles as above for cleaning the BBQ.

In the past 9 months in my area, the monthly median house price has fluctuated $175k between the highest and lowest points. The number of properties listed for sale typically fluctuates between 10 and 25, so it's not hard to see why. In the past 5 years in my area, the annual median house price has barely moved year on year. Playing by numbers, your median house is worth less in 2013 than it was in 2007 accounting for 3-4% inflation per annum. The sky is falling, hark!

If you look deeper, you'll get a better feel for the area. The odd $350k-400k properties that came up in 2008/9 no longer come up. Comparable properties are typically around $450-475k and tend to sell quickly. It's very rare to see anything at all listed below $450k. Most properties that come up are in the $600-800k segment and there is significant variation in land size, dwelling type/age etc. in this bracket. The newer townhouses tend to sell the fastest and fetch the best prices and it's not uncommon to see older 3/4 bed family homes take a long time to sell or be taken off the market. Properties are few and far between in the $1m and above category - there just aren't that many of them to sell and they don't have a huge influence on the market. There are also typically very few properties available for rent in any segment, and rents tend to be fairly high relative to property values.

That's just one person's opinion on one small area in one city. Do your research, people!
 
In case anyone is unsure, state real estate institutes are there to look after the interests of real estate agents. They are no more trusty than an agent.
 
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