Society/Culture Australian Property Prices to Crash?

[Ned_Flanders]

That’s a ridiculous statement. 20 years ago my parents bought a 4 bedroom large family home for $200k 45 mins from the CBD.They could easily afford the repayments on a modest single income of around $50k.

Fast forward 20 years and I’ve purchased a 3 bedroom subdivided block house for $600k in the same neighbourhood with my partner on a pretty good combined income.

So I’ve paid triple that amount for a worse house. We both have great earning potential so won’t struggle with repayments but can you see the way it’s going is unsustainable and why young people feel disenfranchised with how it’s turning out? I’ve got plenty of friends who have pretty much given up on owning a home.

Moving away is not a viable option for most people. They aren’t wanting to live 15 minutes from the CBD in a fancy house. They just want to live in a modest house around everything they’ve ever known and they should be able to. Packing up to go and buy in Bendigo isn’t an option.

there has been a 50% increase in Melbourne's population over that time. the outer burbs of your folks are not the outer burbs of today. there is a reason people commute in from Wallan and Drouin

 

[Royal Flush]

Yep..
Those complaining are doing it from a $2000 iphone, sipping a $9 kambucha which was ordered in by uber eats.

read your own table, we bought when that chart plateaued. it went up again in 2015ish, but nowhere near the degree of the earlier boom

and here is the facts

- my wife and i had one holiday every second year in order to save money, and when we did travel, we had strict caps on hotel costs and spending while away
- we cancelled our original plan to have the wedding in china to save money, and didnt go over until 3-4 years after we were actually married
- we bought our first new car this year. every other car was second hand and sub $20k because we were saving money
- we didnt do takeaway, and had one restaurant meal a weekend
- we capped presents to ourselves at $200, and have never had anniversary presents
- we cancelled foxtel, took the train/bike to work instead of driving, and took our own lunch into work. this changed later, we agreed to spend no more than $10 a day on lunch and coffees
- we got rid of the drier and stopped using the dishwasher
- we used a push mower instead of a petrol one, and composted all green waste for the garden

you can call me a liar, but we spent 2 years saving to get in a position to save the required deposit, and then we kept spending to a minimum to break the back of the loan.

On Pixel 4a (5G) using BigFooty.com mobile app

 

[Golden_6]

there has been a 50% increase in Melbourne's population over that time. the outer burbs of your folks are not the outer burbs of today. there is a reason people commute in from Wallan and Drouin

That's not the point though. The point is that you get much less for far far more. There is an ever increasing gap between the average house price and the average wage. We're not talking about living in Kew, we're talking about suburbs like Lilydale or Montrose which are right on the edge of suburbs.

 

[DaRick]

The problem with the "just buy where you can afford" line is that, as a general rule, the lower the house prices, the higher the unemployment rate.

I accept that people should have realistic expectations about where they live, and there's no disgrace in living with the old folks until you're ready to buy, but there is still a systemic issue at play here, as shown by house prices recently going through the roof.

I don't have a problem with the 'support networks' argument, but IMO that's a side issue.

 

[Royal Flush]

16,117 australians purchases their first home in February 2021.

(65% increase from Feb 2020)
Hence the boom.

It would be useful if some of these explained how they purchased their first home.
As no doubt they're not boomers

On Pixel 4a (5G) using BigFooty.com mobile app

 

[DaRick]

16,117 australians purchases their first home in February 2021.

(65% increase from Feb 2020)
Hence the boom.

It would be useful if some of these explained how they purchased their first home.
As no doubt they're not boomers

On Pixel 4a (5G) using BigFooty.com mobile app

I suspect the BoM&D contributed to the purchase in quite a few of those cases, and quite possibly on rather generous terms.

 

[FRUMPY]

lol, "jealousy"........no ones jealous …..this is something boomers don't understand, pack of selfish arseholes actually.

Most People have not worked harder, OR smarter, they were simply in the right place at the right time. There would be a HUGE amount of people across the main city's of Australia who wouldn't even be able to afford to buy the house they own in 2021 based on their incomes, they simply have equity because they were in the market before it exploded before other people, based on nothing else but their age.

That isn't working harder or smarter. That's being fortunate. Yes they had high interest rates but it was nothing compared to the amount of debt people take on now to get a house.

The Gap Between Incomes and Housing prices is growing yearly which means Debt to household income is also growing. To suggest people were harder working, or smarter because people bought houses when they were cheap relative to incomes is not only insulting, but its ******* stupid as well.

The graph below goes to 2015, it doesn't even show 2017 when the market peaked, and then now in 2021 where its going higher.



View attachment 1091054

They also didn't go overseas annually, buy everything brand new etc. People of today spend their money and then complain they don't have enough money for a house deposit etc.

Always laugh when people I know get a coffee or two every day from a cafe, have lunch or dinner at cafe/restaurant 2 or 3 times a week, go overseas every one or two years, have a brand new car (loan) then get to 30+ and complain about house prices and unable to scrounge the deposit....

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[Ned_Flanders]

That's not the point though. The point is that you get much less for far far more. There is an ever increasing gap between the average house price and the average wage. We're not talking about living in Kew, we're talking about suburbs like Lilydale or Montrose which are right on the edge of suburbs.

Again, 50% more people.

Lilydale is not a cheap outer suburb anymore.

Frankston was when I was a kid. Now it's out past skye

 

[FRUMPY]

lol please. This is horse sh*t in most circumstances and yet again another baby boomer throw away line.

People have Jobs, Family, Friends, support networks & Livelihoods that limit their ability to just move away from in order buy a house. A lot of people use their family circle to look after kids etc so they can save on day care etc

My grand parents lived in Preston and Thornbury, when my folks bought a house they got one another 25m from the city, when we bought out house it was another 20m from the city. It's the way it's always been. First house isn't going to be where you grew up, the prices are always alot higher than when your folks brought them.

People expect to buy 20m from the city and be able to afford it easily ....it's not going to happen.

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[Ned_Flanders]

My grand parents lived in Preston and Thornbury, when my folks bought a house they got one another 25m from the city, when we bought out house it was another 20m from the city. It's the way it's always been. First house isn't going to be where you grew up, the prices are always alot higher than when your folks brought them.

People expect to buy 20m from the city and be able to afford it easily ....it's not going to happen.

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my first house was a three bedroom unit we could barely afford

we didnt want a unit, my wife wanted a house with a large garden. but we compromised.

second place was a townhouse, slightly bigger, nice small garden, but still not what she wanted.

15 years later we have bought our first proper house.

people need to compromise and stop thinking that "not living in exactly the same house as mum" is compromise

 

[Suspense]

You need to live in the real world. Through trusts, company registrations, and sharing amongst the family it's possible to work around your cap very easily.

How is this known? Because it already happens.

To minimise tax, each one of these things is commonly done. All legal, all survive an audit, all happening today. Heck my missus is using them all (plus others) to keep our tax liabilities to a minimum.

This may 'work around the cap' - but you would no longer receive the benefits of NG.

No-one buys property in a company as companies are not entitled to the 50% CGT discount.

You can buy property in trust - but you can't NG it against your salary/wage income - as the rental loss would be captured at the trust level.

If you buy the property in another family member's name, the loss would be attributed to them, meaning you couldn't NG it against your salary/wage income. It is also high-risk and could be open to action under the general anti-avoidance provisions.

 

[Suspense]

This is the thing with loopholes. You close one, you inevitably open another.

Tax loopholes are closed all the time without inevitably opening another.

 

[Ned_Flanders]

This may 'work around the cap' - but you would no longer receive the benefits of NG.

No-one buys property in a company as companies are not entitled to the 50% CGT discount.

You can buy property in trust - but you can't NG it against your salary/wage income - as the rental loss would be captured at the trust level.

If you buy the property in another family member's name, the loss would be attributed to them, meaning you couldn't NG it against your salary/wage income. It is also high-risk and could be open to action under the general anti-avoidance provisions.

- negative gearing is not why you buy a house as an investment (this has been covered extensively)

- 50% only applies if you hold the property for 12 months+ Are lot of investors are developers who are renovating or demo/rebuilding on the site, and want out pretty quickly.

 

[Ned_Flanders]

Tax loopholes are closed all the time without inevitably opening another.

yes, and thats why the big end of town is paying sooooooo little in tax as per proportion of their income each year

 

[FRUMPY]

- negative gearing is not why you buy a house as an investment (this has been covered extensively)

- 50% only applies if you hold the property for 12 months+ Are lot of investors are developers who are renovating or demo/rebuilding on the site, and want out pretty quickly.

That's the way to do it, get a property with 25min of the city, tear down the old house and chuck 3 town houses on it.....just need the balls to do it, do it once and then keep doing it.

I work in Ivanhoe and I reckon a house a week are torn down to put 2-4 townhouses on it. Decent size blocks in Ivanhoe



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[Ned_Flanders]

That's the way to do it, get a property with 25min of the city, tear down the old house and chuck 3 town houses on it.....just need the balls to do it, do it once and then keep doing it.

I work in Ivanhoe and I reckon a house a week are torn down to put 2-4 townhouses on it. Decent size blocks in Ivanhoe



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we've done it, lotta work but you can make a decent earner if you manage it properly

 

[Kram]

we've done it, lotta work but you can make a decent earner if you manage it properly

You boomer bastard.

 

[Ned_Flanders]

You boomer bastard.

not a boomer

gen x, with a wife in the finance/property sector

i just do what she tells me to and STFU

 

[FRUMPY]

i just do what she tells me to and STFU

I do that and don't make any money, in fact lose money

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[Suspense]

- negative gearing is not why you buy a house as an investment (this has been covered extensively)

Sure - all I'm saying is that, under those scenarios posed, investors would not receive the tax minimising effect of negative gearing.

- 50% only applies if you hold the property for 12 months+ Are lot of investors are developers who are renovating or demo/rebuilding on the site, and want out pretty quickly.

Of course they hold for greater than 12 months. Why pay tax on $500,000 when you can pay tax on $250,000?

 

[Ned_Flanders]

Sure - all I'm saying is that, under those scenarios posed, investors would not receive the tax minimising effect of negative gearing.


Of course they hold for greater than 12 months. Why pay tax on $500,000 when you can pay tax on $250,000?

again - dont give two shits about NG, as i have said before on this board is has no point and should be killed. no property we have invested in has been due to NG benefits

on the latter, because you're fully geared and have agreements with the bank on when to repay their loans

 

[Suspense]

yes, and thats why the big end of town is paying sooooooo little in tax as per proportion of their income each year

Compared to when?

That's beside the point. There are decades of regulations/amendments that have successfully addressed a multitude of tax distortions in the system. Doesn't mean the system is by any means perfect, but it does mean that significant tax loopholes can be closed with regulations.

Off the top of my head, here is an incomplete list of the tax loopholes closed over the past 10 or so years:

• Division 7A Loans
• Non-Commercial Loss Rules
• Personal Services Income Rules
• Section 100A Trust Reimbursement Agreements
• Trust Streaming Amendments
• Transfer Balance Cap
• Division 6AA Taxation of unearned income for minors
• Division 40 depreciation amendments for second-hand properties

Please outline which loophole inevitably opened up in response to each.

 

[Ned_Flanders]

Compared to when?

That's beside the point. There are decades of regulations/amendments that have successfully addressed a multitude of tax distortions in the system. Doesn't mean the system is by any means perfect, but it does mean that significant tax loopholes can be closed with regulations.

Off the top of my head, here is an incomplete list of the tax loopholes closed over the past 10 or so years:

• Division 7A Loans
• Non-Commercial Loss Rules
• Personal Services Income Rules
• Section 100A Trust Reimbursement Agreements
• Trust Streaming Amendments
• Transfer Balance Cap
• Division 6AA Taxation of unearned income for minors
• Division 40 depreciation amendments for second-hand properties

Please outline which loophole inevitably opened up in response to each.

my expertise was in international transfers, so these ones i cant comment on. every time the ATO made a change, we responded. the notion the govt can ban people from owning more than one property and that would be effective is completely laughable

 

[Suspense]

on the latter, because you're fully geared and have agreements with the bank on when to repay their loans

Sure but these are rather unique circumstances. For property flippers, who make up a relatively small proportion of property investors, the CGT concessions do not apply - regardless of how long the property was held.

The conventional approach to property investment in Australia is medium to long-term hold for capital gain.

 

[Ned_Flanders]

Sure but these are rather unique circumstances. For property flippers, who make up a relatively small proportion of property investors, the CGT concessions do not apply - regardless of how long the property was held.

The conventional approach to property investment in Australia is medium to long-term hold for capital gain.

yes, but IF a ban on property ownership occurs, the question isnt "how to i minimize cap gains", its "how to i maximize profits across the potential portfolio arrangement i may have"

it may be better to pay more cap gains and still make a profit than not to invest at all