The House Price Thread

[Power Raid]

They were proposing this in Canberra around the time I left. I don't know how it got on but there sure was a lot of squealing about it.

Sub-dividing blocks, building up rather than out and filling in bush/parkland.

I was making 85% during the boom and help by the first home owners grant, in just a 9 month period doing the same in WA. That's over 100+% on an annualised basis. 35% (in 9 months) was the norm over a 12 year period.

Things have settled now but that demonstrates higher density zoning benefits the wealthy and established but hurts the first home buyer.



The solution is stop pork barrelling big cities and promote growth in our second tier cities.

 

[Power Raid]

In terms of the list above, I'll throw a few simple policy ideas into the mix to see what people think and get some discussion.

1. Removing negative gearing, but with a 'grandfathering' clause that means it can be claimed on properties already owned (essentially the policy Labor took to the last election).

2. Reducing or limiting negative gearing across the board. This could be done with a cap on the losses that could be claimed overall (say $20,000), or the number of properties on which losses could be claimed (e.g. claimed only on 1-2 properties). The aim would be to discourage people loading up on 8-10 investment properties. Would need to have a phase in period so the market wasn't flooded with properties.

3. Introducing a %levy on loans for investment properties (~0.5%-1.0%). Any money collected by the government could be used to assist first-home buyers in some way (grants, stamp duty exemptions etc.) and/or put into social housing schemes.

4. Cutting the capital gains tax discount bought in by the Howard Government.

5. Investment in job creation in and transport to regional centers, where property is more abundant and better value. Could also include infrastructure projects or financial assistance to entice businesses (e.g. NBN, financial incentives such as payroll tax deductions)

I'd be interested in any other ideas that people would have.

1. you can't remove negative gearing without favouring the rich, the established and hurting the ordinary person. This was the fatal flaw in Labor's policy but sure support it, if you want the rich to get richer and place a glass ceiling on the ordinary person.

4. Cutting CGT discounts like Labor's policy favoured speculative short term investing rather than long term investment. This would kill R&D, development, technology and quality new businesses requiring long lead times to cash flow.

The smart way to get around Labor's policy would be to set up overseas where CGT is zero including investing back into Australia. In short all our funds and investment businesses would shut up shop and move overseas. Leaving the only source of funding being banks and the only investment opportunity being property.


A smarter way of dealing with the issue is leave negative gearing in place but reduce CGT discounts over sensible periods of time to PROMOTE long term investing.

Abolish the CGT free status foreigners have and bring them into line with Australian tax residents.

Introduce a proper property tax.

 

[Power Raid]

I'm not a fan of point 1 of you are going by Labors policy. I can see unintended consequence with this. Over time there will be few places to rent in the inner or middle suburbs. If investors only invest in new housing only then that pretty much means the only avalisble properties for renters will be either the outer suburbs or CBD apartments. It will make the rents much more expensive for the inner/middle suburbs (but may make it cheaper for the outer suburbs).

I agree with point 2. This wouldn't hurt the Mum and Dad investors but will stop people who are leveraging themselves with 4, 6, 7 properties for the tax breaks and the idea of flipping them off regular basis.

On point 3. I'm not sure about the Levi idea. The problem with giving grants, reduction in Stamp duty etc is that it increases house prices. Remember the first home buyers grant in the 00's.

Point 4. I agree that the CGT discount should be reduced. 50% is very generous. I think there is no coincidence that house prices started to increase rapidly since it was introduced in 2000. In the end this is the main driver IMO. Negative gearing makes people invest for the yeilds while CGT makes people invest in hoping for increasing house prices.

Absolutely agree with point 5. Approx 45% of Australia's population live in two cities. This is why house prices in these cities are the most unaffordable. Australia needs to become more decentralised and there should be more incentives for people to move to other areas.

100%

any investment is a risk reward proposition. If the risk stays the same or increases (as per Labor), then the reward needs to increase. Thus new development simply occurs on higher multiples and increases property prices faster.

Further the rich can continue to negative gear against investment income, whilst the worker gets shafted and told "workers don't deserve the same tax treatment as the wealthy". It cracks me up that Labor voters support stupid policies like this. Perhaps they don't understand the consequences and just want to believe.

 

[hoianbulldog]

I purchased a 3 bed 1 bathroom house in inner nw suburbs of melb in nov 99. Sold it last week at auction. Rented it out since 2003 so it has had little money spent on it.

Capital appreciation over 17.5 years was $1,225 per week. That is frkn insane in anyones language. That rate cannot be sustained, surely?

I think i may have got out at the right time but only time will tell.

 

[Power Raid]

I purchased a 3 bed 1 bathroom house in inner nw suburbs of melb in nov 99. Sold it last week at auction. Rented it out since 2003 so it has had little money spent on it.

Capital appreciation over 17.5 years was $1,225 per week. That is frkn insane in anyones language. That rate cannot be sustained, surely?

I think i may have got out at the right time but only time will tell.

look what happened to property prices in japan as the countries industry moved overseas.

we will have a similar but different journey. our decline will be just as long as theirs, probably not as sharp and may well be hidden somewhat in currency deflation.

but geez the last 25 years has been great for Australia and Australians. I do feel for the next generation trying to break into the market and at the same time having to pay off the last 10 years of government debt, that they weren't the beneficiaries of......ouch

 

[WCE1987]

Now whether you are a renter condemned to be at the mercy of a Land Lord for life or a Property tycoon who owns 8 houses and a few flats nobody can deny this is a major issue.

Thoughts as to why? Solutions? Even if you think it is a problem and people should suck it up or do we go full Socialist?

Thoughts?

1) Reform banking so that loans don't take into account negative gearing
2) Increase housing supply
3) Reducing cost e.g Stamp duty for those moving x-distance from the city
4) Reducing cost e.g Stamp duty for those purchasing housing in rural or certain areas.
5) Change zoning restrictions

What ever they do it will be hard as the housing issue is most evident in Sydney and Melbourne. All states approach might not work on some policy and have a more negative effect in other states. Need to be a combination of states and federal changes.

In WA we have 'key-start' which is a government backed 2% deposit loan, that can only be access by those that earn under 70k to bring lower income earners into the market. http://www.keystart.com.au/home-loans/perth-metro

 

[GreyCrow]

I wonder if the Government will institute the new policy. Give the house to my wife and make me pay for it

 

[Scotland]

First prize in 'housing affordability' is to make prices stagnate as long as possible until they come into line with incomes.

If prices crashed overnight the only winners would be 'the rich' during the next upswing. And some public sector employees like teachers and nurses who have stable, long term employment. All the muppets who think they will pick up a cool hipster pad in Fitzroy for 1998 prices and pay for it with their retail/hospitality job are clueless.

Property is prohibitively expensive to buy and sell. If you decided to buy a modest $450k unit, pay the mortgage and build equity for 5 years and then move up to a modest $600k home the difference in repayments would be about $6,000 a year at today's interest rates. Loan terms these days are anywhere from 20-30 years with most people favouring 30 year terms because the repayments aren't manageable on shorter periods. $450k @ 4% over 20 years is $2700 a month which a lot of people just can't do.

Anyway, if you are at $450k @ 4% then in 5 years you'll build $40-80k in equity depending on the loan term and how much you can afford per repayment. The cost of the changeover: at least $40k in agent commissions, settlement fees, stamp duty and other government fees. That's absurd. The system is so screwed it actually needs perpetual growth just to allow transactions to occur without people getting ****ed.

Unfortunately removing stamp duty is inflationary ('hey I have to come up with $20k less, I have $20k more to spend' logic) but is necessary and would normalise after a period.

 

[The Edukator]

You've bought a pos if your capital growth is circa 25% over 5 years.


Sent from my iPhone using Tapatalk

 

[Mootsy]

But wouldn't a collapse only happen if a lot of properties go on the market at the same time with people desperate to sell?

Even then some may hang on and wait for the tide to turn.

And even if there is a crash people who are cashed up will swoop in and pocket the savings and back up we go. Or the government will just up immigration.

I don't think it'll drop sharply, I think it could just be a slow correction, cushioned by a steady flow of foreign investment, strong employment will help with that...

The bears tend to be a bit black and white and use old economics to explain that it's a bubble like Ireland etc, without taking into account modern day circumstances affecting the markets and economy.

Remember it's just two states where it's occurring over here and it's all very concentrated and easily manipulated..

Also remember that it's only the key/obvious suburbs in both states where there is high prices, simply because there is a lot of demand currently, so it's concentrated, you just won't have the sort of luck that people did in the 1990s anymore, best to rent or buy small or buy in progressive up and coming suburbs.

 

[Pessimistic]

Thought bubble

Pensioners or those about to be pensioners can downsize. But get to choose between

1 pay capital gains on the house you lived in for a period and otherwise qualify cut exempt. Get this discounted by the amount you pay in stamp duty on your new home. The rest can go into super without affecting the pension eligibility

Or

2 pay no capital gain but proceeds count for super test. Pay stamp duty on new place

Idea is downsizing becomes a no worse off proposition

 

[Rear Admiral]

Now whether you are a renter condemned to be at the mercy of a Land Lord for life or a Property tycoon who owns 8 houses and a few flats nobody can deny this is a major issue.

Thoughts as to why? Solutions? Even if you think it is a problem and people should suck it up or do we go full Socialist?

My $.02. This is very much a structural issue bought about over time and while there are major issues I don't think there is any one single cause:

1. Negative Gearing
2. Capital Gains Tax Breaks
3. Immigration
4. Cheap Credit and Low Interest Rates
5. Cultural Factors
6. Supply Issues and High Density Living Spaces or lack there of

all play a part. With 1, 3 and 4 the most significant. Property as an Asset class is basically shitting over every other investment and that is where people's money is going. Not just the rich but everyone with a few bucks to spare it seems. And good for them I simply thou do not know how long this can continue. Everything has a ceiling. Growth can not continue forever.

Thoughts?

Glad this Thread was started .

It's actually points 1 - 4, inclusive. But if you had to prioritise, point 3 (Immigration) would be the main factor. Why? Because not only does it increase the demand on housing by increasing the population size, it also has the two-fold effect of increasing the size of the labour market, thereby freezing/lowering wages, where in in most instances, Australian workers are being displaced from jobs. And the extent to which this is occurring is obscene. Those that disagree either aren't aware of all the issues at hand, or they're lying (typically to protect business interests). People can either support or oppose high immigration levels, but the investigations and discussions on current Immigration levels show overwhelmingly that it's to the detriment of most Australian workers. But the other points mentioned above are also a huge issue and need to be addressed. Those that disagree....it's simply a question of how big a hole they wish to dig for themselves and how stupid they wish to appear.

From the date of Federation until just after World War 2, Australia also had high levels of Immigration, but back then our population was only a fraction of what it is now. And we needed lots of workers to help build essential infrastructure. In addition, our economy was protected with Tariffs and we had a booming manufacturing industry. Since then, outsourcing and technological unemployment has stripped Australia of jobs in the millions, yet our population levels are going up through the stratosphere.

In essence, we are now reaping the (bitter) harvest of the (so called) "Right and Honourable" John Winston Howard Prime Ministership , where this has resulted in:

• More and more people + less and less jobs = mass unemployment/underemployment + wages not increasing.
• Negative Gearing and Capital Gains reform = Investors buying up all the existing housing stock.
  
• Housing numbers not being able to keep up with the size of the population = huge spike in housing prices.

While the economy is supposedly "booming"....real unemployment rates (unemployment + underemployment) are going through the roof. And we are opening the floodgates to immigration levels to address an alleged skills shortage. It's only when the Libs/Nats get chucked out can we hope to address this issue. We cannot "grow" our way out of this mess....it's now a matter of redistribution of wealth - both jobs/income and property.

These links below are but a few of the discussions on the related issues:

Insight Web Extra on Housing

https://www.sbs.com.au/ondemand/video/11721283529/insight-web-extra-on-housing

IN WK Desperate Housing Part 1 of 3

https://www.sbs.com.au/ondemand/video/11647555908/in-wk-desperate-housing-part-1-of-3

strong employment will help with that...

The Jobs Game

http://www.abc.net.au/4corners/the-jobs-game/6247206

http://www.abc.net.au/4corners/the-jobs-game/6247206#transcript

"But there's one fundamental problem: there are many more unemployed people than there are available jobs."

Bill Shorten claims 77pc of 457 visa workers excluded from checks thanks to FTAs

http://www.abc.net.au/news/2017-04-...7pc-of-457-workers-exempt-from-checks/8455300

 

[Rear Admiral]

They wouldn't dare make housing affordable because it's one of the biggest industries where Australia gets oversea's investments

The system works fine! is completely and utterly stuffed.

 

[Rear Admiral]

But yeah, the problem is asset values - not incomes.

It's both. Asset values are a huge issue, no question about it....but because of a combination of outsourcing and technological unemployment and absurd immigration levels, wages (in real terms) have not risen in decades. CGT (Capital Gains Tax) and Negative Gearing are also a massive problem and need to be scrapped (or only available for first home buyer/occupants), but the skyrocketing demand on housing because of increasing population (read: immigration) is a huge factor in all this.

The real problem when looking at the economy is that many people think that adding more and more people to any given economy it somehow miraculously "creates more wealth". This is absolute garbage. Wealth, and ultimately jobs, are based on access to natural resources....not having more and more people.

 

[Rear Admiral]

7. Transfer costs in the form of stamp duties. Restricts the rate of turnover, people hang on to properties long after they become unsuitable because of the stamp duty hit involved in moving.

Its already beginning.

Reality is stamp duty is inefficient and inconsistent.

Scrap Stamp Duty and (massively) increase Land Tax. This will go a long way to helping sort out this mess.

The problem is we're deluding ourselves thinking we can (economically) "grow" our way out of this, but it's now showing that we can't. What we need to focus on more is redistribution, much more than growth.

 

[Rear Admiral]

First prize in 'housing affordability' is to make prices stagnate as long as possible until they come into line with incomes.

All the muppets who think they will pick up a cool hipster pad in Fitzroy for 1998 prices and pay for it with their retail/hospitality job are clueless.

This here .

When looking at all this, people are delusional when thinking that only housing is part of the whole issue. A big part of the housing issue is income levels, in comparison to housing costs. One of the biggest rorts in Australian history has been The Howard Government's reclassification of the unemployed. You've got kazillions of Australian citizens only working a couple of shifts a week, yet they're classed as "employed". And those that are registered with business/agencies, but are actually working zero hours per week. It's not simply about dollars per hour of income (which the Libs/Nats/business community keep screaming about)....but a person's income as a percentage of their rent/mortgage.

Yes, absolutely, we need to do something about housing availability/prices, but the income side of the equation has got to be addressed. Until we can sort out this issue, the current housing dilemma will not go away.

 

[Rear Admiral]

As I mentioned in the other thread. Plenty of Genx ers have benefited from property boom too

Dare I ask from where you got this evidence?

 

[Rear Admiral]

And all of those things remain due to a capitalist system where property developers' desires of larger profits have come ahead of the basic human right of shelter.

 

[Pessimistic]

Dare I ask from where you got this evidence?

Do you want referencing too?

Would have thought it was self evident. Under 55 s who have owned property for ten years

Wondered if you meant the steepening in the last decade

 

[Power Raid]

Do you want referencing too?

Would have thought it was self evident. Under 55 s who have owned property for ten years

Wondered if you meant the steepening in the last decade

View attachment 418637

until we address foreign investment in property we will see more and more pain.

 

[Rear Admiral]

Do you want referencing too?

Would have thought it was self evident. Under 55 s who have owned property for ten years

Wondered if you meant the steepening in the last decade

View attachment 418637

My comment was in reference to:

Plenty of Genx ers have benefited from property boom too

In previous decades, while property prices have continued to climb....since around the 1970's onwards employment and wages have stagnated. So yes, your graph/chart is more or less correct - property prices have indeed gone up for decades. But I vehemently oppose any comment or inference that this has somehow helped the Gen X/Y Generations. Some younger people may be doing well, but this is massively the exception, not the norm. All this talk that "the economy is booming"....while businesses and numerous share prices have indeed skyrocketed (as have housing prices), this has not at all equated to an increase in employment and wages for the younger generations (born 1970's onwards). Real unemployment (unemployment & underemployment) and wage stagnation has become a massive problem throughout the developed world since the 1970's, and for these main reasons:

• Outsourcing of work to developing nations.
• Technological unemployment.
• Mass Immigration.

The investigation and evidence of these issues is overwhelming. So again, I agree that housing prices have indeed been rising for decades. But to suggest Gen X/Y generation have somehow benefited is entirely incorrect. When people suggest otherwise, they are either unaware of the evidence at hand, or they are lying (as mentioned previously: usually to protect business interests).

The problem is that we base our economy on continual growth, as there was a great proportion of land/resources/employment, in comparison to the population size. This worked quite well after WW2, but as our population has massively increased, it is not working now. You can only grow an economy according to access to resources, not on increased population and demand. A lesson that Right-Wing Economists have not yet grasped.

 

[Pessimistic]

Not all property in hot areas is held by over 55s. if you held property over the last ten years you're on the right side of the phenomenon

And if you came from England like myself, the phenomena re employment you highlighted really started in the 70s so in some ways if the boomers had charmed lives, that's not someone born after 1960

I personally think there's a group between the boomers and gen x/ y many boomers left school in the 70s which is the time you rightly highlighted

 

[medusala]

You can only grow an economy according to access to resources, not on increased population and demand. A lesson that Right-Wing Economists have not yet grasped.

Define "resources"

As for increased demand, that's the domain of the jew hating pervert not your typical right wing economist.

 

[Lebbo73]

Not all property in hot areas is held by over 55s. if you held property over the last ten years you're on the right side of the phenomenon

And if you came from England like myself, the phenomena re employment you highlighted really started in the 70s so in some ways if the boomers had charmed lives, that's not someone born after 1960

I personally think there's a group between the boomers and gen y many boomers left school in the 70s which is the time you rightly highlighted

Many Gen Xers have made money from property. I went to school with quite a few of them. Even I have made money. It wasn't that hard when prices more than doubled from 2000 to 2006.

 

[Pessimistic]

It used to be capital appreciation averaged out at a third wage

For us now it's a third and a fourth