Society/Culture Australian Property Prices to Crash?

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Frank Grimes

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2) Housing Construction Prices have not changed generally throughout the years. It's the cost of Land that has increased. So your comment about tradies is meaningless.
It has actually changed quite a lot over the years. Materials are so expensive now and availability limited there has been a big increase of theft of construction material on construction sites.

Though, the increase of construction costs is still just one of many factors for house prices increasing. There is more than just one factor influencing it.
 

HirdsTheWord

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I don't know about that.
take away the recent pandemic, housing construction costs have risen 70% over 20 years since 2003.

When you take in account CPI etc its not exactly mind blowing.....being something like a 3.5% increase year on year which is basically CPI. Pending where you live of course.

 
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HirdsTheWord

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It has actually changed quite a lot over the years. Materials are so expensive now and availability limited there has been a big increase of theft of construction material on construction sites.

Though, the increase of construction costs is still just one of many factors for house prices increasing. There is more than just one factor influencing it.
Take away the pandemic which has obviously caused its own issues on supply etc...House construction prices have grown 70% over 20 years.......That's basically inline with CPI....obviously each state differs but its not like construction prices have the same price increases that land does,

 
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HirdsTheWord

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About time the inquiry was told what everyone already knew, time to get rid of negative gearing.

 

HPKS

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If houses prices continue in the trend we’re going we may end up finding on retirement there’s a lot of people who don’t have a house and may find it more cost effective to enter an aged care facility than rent or use their super to buy a cheap regional house then have to draw a government pension. Long term if nothing is done we could have a major problem on our hands. If people start choosing aged care over renting then we’ve basically got a de facto government housing scheme. Something needs to be done.
 

Suspense

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Population growth would contribute to it of course but the declining % of home ownership in younger age groups would suggest that its indeed investors.

Someone posted in an earlier post that 1/3 homes is owned by an investor, that is a HUGE amount if true.
I don't agree. Investors compound the issue - but they are not the key driver the price increases. Investors invest in property due to the high capital growth over the last two decades - this capital growth isn't driven by mere investor speculation, but by rapid population growth (beyond all estimates in the late 90s) and dwindling access to detached homes that aren't on the far metro fringe. Many investors would still invest in property - even if it were not preferentially taxed.
 

Madas

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I don't know about that.
As a builder of 30 years I can 💯% confirm that they have and in the last 10 months more so than I’ve seen in about 20 years

The Covid situation along with bushfires in 2019 created the perfect storm for timber supply .
Labour has gone up across the board as tradies can go to the next guy if you aren’t willing to pay their escalated fees , so with contracts in place , there’s no choice but to pay them .
Then you get the Grand Design factor where everyone wants an “architectural “ house with all the bling ( big windows , open plan , fancy kitchen, fully tiled bathrooms , European appliances, flash alfresco, brand new furniture........ the list goes on )
All that stuff costs money .
Now with FOMO at its peak worst time in history people are outbidding and outstripping supply .
It’s full on and all we can do is try our best to keep it real and affordable for people .
I’m pretty ethical so keep my fee the same as always but I know other builders and materials suppliers taking advantage and price gouging the hell out of the situation.
And the worst thing is I can’t see an end in site .
We have 2 years worth of work on the books and that’s before the massive wave of migration I’m anticipating in 2023.
Interest rates rise might cool things slightly but the supply won’t improve and I can’t see prices coming back down till the next major downturn.

Summary- get used to the higher prices , they are here to stay 😕
 

yodellinhank

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As a builder of 30 years I can 💯% confirm that they have and in the last 10 months more so than I’ve seen in about 20 years

The Covid situation along with bushfires in 2019 created the perfect storm for timber supply .
Labour has gone up across the board as tradies can go to the next guy if you aren’t willing to pay their escalated fees , so with contracts in place , there’s no choice but to pay them .
Then you get the Grand Design factor where everyone wants an “architectural “ house with all the bling ( big windows , open plan , fancy kitchen, fully tiled bathrooms , European appliances, flash alfresco, brand new furniture........ the list goes on )
All that stuff costs money .
Now with FOMO at its peak worst time in history people are outbidding and outstripping supply .
It’s full on and all we can do is try our best to keep it real and affordable for people .
I’m pretty ethical so keep my fee the same as always but I know other builders and materials suppliers taking advantage and price gouging the hell out of the situation.
And the worst thing is I can’t see an end in site .
We have 2 years worth of work on the books and that’s before the massive wave of migration I’m anticipating in 2023.
Interest rates rise might cool things slightly but the supply won’t improve and I can’t see prices coming back down till the next major downturn.

Summary- get used to the higher prices , they are here to stay 😕
Heard a fair few independents have been walking away due to the cost increases. Too much money to lose by honouring their contracts.
 

Madas

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Heard a fair few independents have been walking away due to the cost increases. Too much money to lose by honouring their contracts.
It’s bloody ridiculous !
We are bleeding and it’s not only the price increases that we have to swallow it’s the delays on the jobs causing cash flow issues getting paid , more overheads while on site longer , more protection and security of finished work ...... it just goes on .
I truly hate booms !!
Been through about 3 now and they are nothing but a sh*t show .

We have tried to lobby the government via The Master Builders Association to change the legislation around Contract Law which prohibits us including a Rise and Fall clause in our contracts , but by the time they legislate it will be over .
And then a minority of unscrupulous builders will take advantage of it and ruin the purpose of protection . It bloody sucks that we have to absorb these price increases on behalf of the people who created the problem in the first place .
 

Madas

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Back when we were looking at some work, the builder said it would be cheaper to borrow money for the build and pay the interest than wait until we had the cash, such were the price increases on copper alone.
It’s crazy 🤯
Steel has gone up 60% in 8 months and there’s another 15% hike January 1st

Timber has doubled and is predicted to double again by mid next year .
We are pricing jobs now for next year having no idea what prices we are going to have to pay and trying to explain this to clients.
It’s crap 💩
 

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yodellinhank

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It’s bloody ridiculous !
We are bleeding and it’s not only the price increases that we have to swallow it’s the delays on the jobs causing cash flow issues getting paid , more overheads while on site longer , more protection and security of finished work ...... it just goes on .
I truly hate booms !!
Been through about 3 now and they are nothing but a sh*t show .

We have tried to lobby the government via The Master Builders Association to change the legislation around Contract Law which prohibits us including a Rise and Fall clause in our contracts , but by the time they legislate it will be over .
And then a minority of unscrupulous builders will take advantage of it and ruin the purpose of protection . It bloody sucks that we have to absorb these price increases on behalf of the people who created the problem in the first place .
Unfortunately there's plenty of unscrupulous builders, some very high up in the Master Builders Association.
 

HirdsTheWord

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It’s bloody ridiculous !
We are bleeding and it’s not only the price increases that we have to swallow it’s the delays on the jobs causing cash flow issues getting paid , more overheads while on site longer , more protection and security of finished work ...... it just goes on .
I truly hate booms !!
Been through about 3 now and they are nothing but a sh*t show .

We have tried to lobby the government via The Master Builders Association to change the legislation around Contract Law which prohibits us including a Rise and Fall clause in our contracts , but by the time they legislate it will be over .
And then a minority of unscrupulous builders will take advantage of it and ruin the purpose of protection . It bloody sucks that we have to absorb these price increases on behalf of the people who created the problem in the first place .
I am a client side PM in commercial construction.

There is absolutely no way in this earth that I would sign a contract with a Rise and Fall clause in a contract. There would be way too many builders & subbies who would take the piss out of it.
 

Deliverance

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So may I ask a question:
In this Utopian world where houses are cheap as chips because;
•Building materials grow on trees
•Tradies earn nothing
•Land and it’s related infrastructure of roads , power , sewage systems etc are gifted by generous philanthropist developers

How much should a house and land cost to be affordable?
What percentage of the over 18 population would still want to rent therefore how many rentals are required ?

Begs a serious question, somebody has to provide rentals .
Not everyone wants to tie a mortgage around their neck at the age of twenty .

It’s easy to blame the government, their incentives schemes to investors produced rental stock of all shapes and sizes and affordability . Not just government housing project dog boxes .
The cheap money that follows bust cycles inevitably encourages people to borrow and spend more than they otherwise would .
Hence investors outbid each other for property.
All of this is part of free market capitalism which no one is going to stop in our lifetime ( unless the Chinese invade us and turn us into Communists - but that’s for another thread )

So perhaps the way to turn the flame down on this overheating every time we come out of a bust cycle is for the banks to only lend say 80% of what someone is able to borrow based on their income ( not the proposed value of the property or asset )
After the banking RC, APRA tightened lending conditions and house prices fell. Scomo loosened the borrowing reigns and prices rose again. ALPs negative gearing changes were forecast independently to reduce prices by about 10%.
Not much population growth recently, so it's pretty fair to put the problem at the feet of government at the moment, perhaps with the exception of interest rates.
 

HirdsTheWord

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As a builder of 30 years I can 💯% confirm that they have and in the last 10 months more so than I’ve seen in about 20 years

The Covid situation along with bushfires in 2019 created the perfect storm for timber supply .
Labour has gone up across the board as tradies can go to the next guy if you aren’t willing to pay their escalated fees , so with contracts in place , there’s no choice but to pay them .
Then you get the Grand Design factor where everyone wants an “architectural “ house with all the bling ( big windows , open plan , fancy kitchen, fully tiled bathrooms , European appliances, flash alfresco, brand new furniture........ the list goes on )
All that stuff costs money .
Now with FOMO at its peak worst time in history people are outbidding and outstripping supply .
It’s full on and all we can do is try our best to keep it real and affordable for people .
I’m pretty ethical so keep my fee the same as always but I know other builders and materials suppliers taking advantage and price gouging the hell out of the situation.
And the worst thing is I can’t see an end in site .
We have 2 years worth of work on the books and that’s before the massive wave of migration I’m anticipating in 2023.
Interest rates rise might cool things slightly but the supply won’t improve and I can’t see prices coming back down till the next major downturn.

Summary- get used to the higher prices , they are here to stay 😕
Of course construction prices have gone nuts, that's because of a pandemics impact on supply issues.

Generally though over the last 20 years Construction prices have increased like ~4% year on year, pending which state you live in. That's borderline CPI.

Housing was f’ed before the pandemic and it had nothing to do with Construction Costs, The pandemic has just f’ed it even more.
 

HirdsTheWord

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I don't agree. Investors compound the issue - but they are not the key driver the price increases. Investors invest in property due to the high capital growth over the last two decades - this capital growth isn't driven by mere investor speculation, but by rapid population growth (beyond all estimates in the late 90s) and dwindling access to detached homes that aren't on the far metro fringe. Many investors would still invest in property - even if it were not preferentially taxed.
I don't agree.

If 1 out of every 3 homes is owned by an Investor than of course population issues increases exaggerated issues, because housing is already tied up by investors.

Remove investors from the Market and it frees up the supply required for these population increases, it also allows renters who cant afford to buy the opportunity to become home owners due to cheaper prices.

Investors are the main cause of the issue, no matter which way you slice it. Everything else just makes it worse. Every key statistic points to Investors being the root cause of housing price growth, not the only cause but the main one.

How does a country like ours priorities tax benefits for people who already have wealth, over those who don't?. its down right wealth inequality no matter which way you look at it.
 

Gigantic

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If houses prices continue in the trend we’re going we may end up finding on retirement there’s a lot of people who don’t have a house and may find it more cost effective to enter an aged care facility than rent or use their super to buy a cheap regional house then have to draw a government pension. Long term if nothing is done we could have a major problem on our hands. If people start choosing aged care over renting then we’ve basically got a de facto government housing scheme. Something needs to be done.
But eventually, those in retirement now will die and either they'll pass on their wealth and/or home(s) to their kids/grandkids or market equilibrium will sort itself out. If those in their 20s, 30s or 40s now will have trouble owning a home by retirement, then what about all those who come after them? Are we saying no one will own a home?

The trends for home ownership of age demographics near or in retirement isn't actually gloomy. In fact, I reckon we'll continue to see the positive upward trend in the coming census results.
 

Chief

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The trends for home ownership of age demographics near or in retirement isn't actually gloomy. In fact, I reckon we'll continue to see the positive upward trend in the coming census results.
But often homes are signed over to aged care “charities” to cover expenses at end of life. It can’t be an investment for retirement and a legacy for your kids.
 

HPKS

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But often homes are signed over to aged care “charities” to cover expenses at end of life. It can’t be an investment for retirement and a legacy for your kids.
And let’s not forget that on death their “kids” are in their 50’s getting half of what’s left meaning they ain’t replacing what their parent had. They ain’t using half of what’s left to go get a 40 year mortgage then. And as you say that’s after the other parties have dipped their fingers in the pie. Most times the ones arguing there’s no problem have it pretty good and want to keep the status quo.
 

HPKS

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But eventually, those in retirement now will die and either they'll pass on their wealth and/or home(s) to their kids/grandkids or market equilibrium will sort itself out. If those in their 20s, 30s or 40s now will have trouble owning a home by retirement, then what about all those who come after them? Are we saying no one will own a home?

The trends for home ownership of age demographics near or in retirement isn't actually gloomy. In fact, I reckon we'll continue to see the positive upward trend in the coming census results.
Home ownership is not getting easier so stop trying to spin that it is. Every bit of data says that. They don’t just reckon it, it shows out in facts not hunches.

 

Gigantic

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Home ownership is not getting easier so stop trying to spin that it is. Every bit of data says that. They don’t just reckon it, it shows out in facts not hunches.

That blog doesn't show any data on home ownership? Also the "data" is a guy on Reddit who mistook average wage for median wage.

I'm not arguing that housing affordability is not an issue. It clearly is. Dwelling prices in particular.
 

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