Society/Culture Australian Property Prices to Crash?

[hamohawk1]

If you're on the average Aus salary or there about negative gearing is simply not worth your while. The ROI is incredibly mediocre at best when compared to what can be achieved through much less risky trading i.e. blue chip stock. One of the biggest con's that have been sold to 'mum and dad' (apart from those who were bloody lucky getting on mid-late 90's to now.

Conversely, if you're a high net income earner it can be a very useful way of lowering your tax, which again is the way it definitely works in their favour.

 

[Cuzz09]

If you are on $300k a year Whats the point of having 50 properties. Might as well have your dream house and pimp it out exactly how u want it

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[Scotland]

If you are on $300k a year Whats the point of having 50 properties. Might as well have your dream house and pimp it out exactly how u want it

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$300k is $190k after tax. Everyone has their own definition of dream house but that sort of money while life changing isn't a golden ticket. At the marginal tax rate of 45% above $180k you are better off putting some of that money into some kind of investment that will pay off with future capital gain.

 

[HirdsTheWord]

They wealthy households like HirdsTheWord who are on 300k+, removing negative gearing won't impact them so he is happy to remove the tax exemption. Means less competition to buy more properties with the minnow fish dead in the water.

Me personally, Luckily these rate rises won't impact us financially, our debt to income is 2:1 not including the rental which service's itself (positively geared).
I just hate paying interest which is dead money.
We live a pretty frugal lifestyle already, enjoy cooking at home and have no kids while enjoying plenty of holidays.

Why would high household incomes like mine want to buy additional properties without things like NG?

The only reason i have an Investment property is for Tax Reduction. AND keep it for my Daughter for when she is older.

If NG and other housing tax rorts are removed and property is cheaper i would be less inclined to keep it as capital growth would be a lot less, thus Housing as an investment would be less attractive to me. I would probably sell and move money to more lucrative investment propositions with better returns to create a better nest egg for my daughter.

People forget that if you remove investment from housing, yearly growth wont be anywhere near what it is now thus its much more sustainable for future housing affordability. hence my major support for removing investment.

 

[HirdsTheWord]

That doesn't show the true picture.

The richest tenth of households owns almost half Australia’s private wealth followed by a “comfortable middle" of 30 per cent with 38 per cent, leaving the lowest 60 per cent - who tend to be younger – with 16 per cent of household wealth.

Income is more equally distributed than wealth. The best-paid 20 per cent of households had an average pre-tax income of just under $300,000 a year, the middle 20 per cent $116,000, and the bottom 20 per cent $41,000.

View attachment 1419542
The rich, the comfortable middle and the rest: Australia’s wealth and income ladder revealed


The "comfortable middle" love a bit of negatively gearing because it's all that they can do to bring down their taxable income - as opposed to the wider tax minimisation strategies that those in the "rich" category have access to. Those in the top 5% aren't pissfarting around with Negative Gearing.

not sure what you are getting at. What you have shown is income brackets, not the proportion of which income uses negative gearing.

I already showed you those stats, which back up that the general people that benefit from negative gearing is top 25% of income earners.

 

[Nuggs Bunny]

I have zero sympathy.

Banks are supposed to ensure people have a 2%-3% buffer.

If they are selling up after 0.85% RBA rise they clearly could not afford the property they bought in the first place.

People need to crash and burn to ensure the housing market is sustainable long term.

You should have some sympathy though, because the people who will hurt the most from this are people who have borrowed recently and have borrowed the maximum amount of money they could get with a 90:10 loan to deposit ratio. Generally the people that fall into these categories are first home buyers who are buying houses well below the average house price in Melbourne, the sort of properties that a lot of people here are offering up as "affordable". It's incredible how perceptions have turned because not more than 6 months ago, the general sentiment in this thread was that first home buyers should be doing everything they can to buy their first house as quickly as possible because property is always a great investment and you should take a risk to get on the ladder. Lots actually took that advice. I truly feel sorry for any first home buyer that pulled out all the stops and borrowed to the hilt to get their first property only to be stuck with two big rate rises now.

The point about banks is also interesting, perhaps if Australia had non-recourse loans for mortgages then banks would also have some obligation to ensure that people have a 2-3% buffer. Yes, the individual should wear some responsibility for the loans they take out, but I don't quite understand why we don't also ask the question of banking corporations with 10,000+ employees as to why people will be ending up with loans they cannot afford after only a couple of rate rises. I don't understand why we're content to absolve them for the consequences of negligent and unethical business practices while financially illiterate, poorly educated and impressionable private citizens are expected to take 100% of the liability.

 

[HirdsTheWord]

You should have some sympathy though, because the people who will hurt the most from this are people who have borrowed recently and have borrowed the maximum amount of money they could get with a 90:10 loan to deposit ratio. Generally the people that fall into these categories are first home buyers who are buying houses well below the average house price in Melbourne, the sort of properties that a lot of people here are offering up as "affordable". It's incredible how perceptions have turned because not more than 6 months ago, the general sentiment in this thread was that first home buyers should be doing everything they can to buy their first house as quickly as possible because property is always a great investment and you should take a risk to get on the ladder. Lots actually took that advice. I truly feel sorry for any first home buyer that pulled out all the stops and borrowed to the hilt to get their first property only to be stuck with two big rate rises now.

The point about banks is also interesting, perhaps if Australia had non-recourse loans for mortgages then banks would also have some obligation to ensure that people have a 2-3% buffer. Yes, the individual should wear some responsibility for the loans they take out, but I don't quite understand why we don't also ask the question of banking corporations with 10,000+ employees as to why people will be ending up with loans they cannot afford after only a couple of rate rises. I don't understand why we're content to absolve them for the consequences of negligent and unethical business practices while financially illiterate, poorly educated and impressionable private citizens are expected to take 100% of the liability.

Not my sentiment.

I have no issues admitting that Investment is the main driver of housing prices and it should be fixed to ensure housing affordability long term.

BUT people still need to live within their means. Buying a house with that high of an LVR is extreme risk territory, and its the purchases risk if they buy it. I feel sorry for homebuyers that they don't get a fair chance at affordable housing, but i certainly have zero sympathy for someone who buys something they inherently cant afford.

 

[Nuggs Bunny]

Not my sentiment.

I have no issues admitting that Investment is the main driver of housing prices and it should be fixed to ensure housing affordability long term.

BUT people still need to live within their means. Buying a house with that high of an LVR is extreme risk territory, and its the purchases risk if they buy it. I feel sorry for homebuyers that they don't get a fair chance at affordable housing, but i certainly have zero sympathy for someone who buys something they inherently cant afford.

Similarly, I have no sympathy for a bank that sells an extremely risky financial product to somebody only for the bank to pursue the purchaser for losses due to mortgages in Australia being full-recourse. When a risky loan is issued, there are two parties that know what they're getting into. One party can be from any walk of life and have no financial knowledge at all aside from what is explained to them by the other party. They wear the full liability of the deal. The other party has dedicated teams of people to assess markets, risk and need financial licenses to sell these products to the public. They're free to chase the first party to get the full amount of their loss back.

And telling people to live within their means is seriously hollow after the last ten years of encouraging people to hustle into the property market with risky s**t like "rentvesting", 5% deposits and buying off the plan because nothing is more important than owning your own house and "getting ahead".

 

[HirdsTheWord]

Similarly, I have no sympathy for a bank that sells an extremely risky financial product to somebody only for the bank to pursue the purchaser for losses due to mortgages in Australia being full-recourse. When a risky loan is issued, there are two parties that know what they're getting into. One party can be from any walk of life and have no financial knowledge at all aside from what is explained to them by the other party. They wear the full liability of the deal. The other party has dedicated teams of people to assess markets, risk and need financial licenses to sell these products to the public. They're free to chase the first party to get the full amount of their loss back.

And telling people to live within their means is seriously hollow after the last ten years of encouraging people to hustle into the property market with risky s**t like "rentvesting", 5% deposits and buying off the plan because nothing is more important than owning your own house and "getting ahead".

I don't really know what you want me to say about banks, that's how they work.

As per the bolded bit i get it, The housing system in Australia is absolutely ducked. There are things that need to be done to fix it, that people don't want to do. But that's life, people need to assess their risks and live within the risk profile they want to. An LVR of 90% is high risk and if you do it than you bear the brunt of that.

The sentiment that you should buy a house to get ahead is in fact the total issue. society needs to stop seeing housing as a vehicle for investment, it is the governments responsibility to fix it. Housing should be place you live. This is entirely the issue of why the market is out of control. We are culturally skewed that we need to buy housing to "get ahead". Until investment changes in housing, nothing else will.

I own an investment property and i can see it as an issue. The problem is that the tax minimisation is so good, you'd be dumb not to do it. As selfish as that is.

 

[hamohawk1]

Its a bit of a finger point exercise but when you break it all down both major parties have pretty much cooked the housing market and there is every chance its going to bust in the next year, 5 years, 10 years or 50 years.

Shame on both parties for not having the guts to try and fix this up when they both had the chance. If it all goes to s*it its the reason voters will probably continue to drift away from both parties.

 

[kickazz]

Its a bit of a finger point exercise but when you break it all down both major parties have pretty much cooked the housing market and there is every chance its going to bust in the next year, 5 years, 10 years or 50 years.

Shame on both parties for not having the guts to try and fix this up when they both had the chance. If it all goes to s*it its the reason voters will probably continue to drift away from both parties.

Political poison unfortunately.

States are complicit too with Stamp Duty.

 

[Frank Grimes]

Its a bit of a finger point exercise but when you break it all down both major parties have pretty much cooked the housing market and there is every chance its going to bust in the next year, 5 years, 10 years or 50 years.

Shame on both parties for not having the guts to try and fix this up when they both had the chance. If it all goes to s*it its the reason voters will probably continue to drift away from both parties.

Federal Labor did try to remove negative gearing and reduce the Capital Gains Tax discount, but it wasn't a vote winner and may even have been detrimental to them in the election. They must have determined it was detrimental to them because they scrapped it as a policy.

The state governments would be interested in having more investors the owner occupants. The reason being is that investors pay stamp duty AND an annual land tax. An owner occupier it just pays stamp duty. Also the higher the price of the property the higher the tax paid for both stamp duty and land tax.

 

[Sqotty from office works]

And BANG it's all over.
Take your cryptocurrency,trades with plastic 4wd,s and trailers,over priced plastic houses( with spa bath) and your overseas holidays and suck on a fat bit of rope.
Boom all over, dow crashed,asx to follow and jobs and housing completely finished by Xmas.
Millennial crying will go on for 5 years.

 

[HirdsTheWord]

And BANG it's all over.
Take your cryptocurrency,trades with plastic 4wd,s and trailers,over priced plastic houses( with spa bath) and your overseas holidays and suck on a fat bit of rope.
Boom all over, dow crashed,asx to follow and jobs and housing completely finished by Xmas.
Millennial crying will go on for 5 years.

Scotty's 4% unemployment was meaningless then and now even more so now.

The next 6 months is going to be a blood bath.

 

[Sqotty from office works]

Scotty's 4% unemployment was meaningless then and now even more so now.

The next 6 months is going to be a blood bath.

Yep.
And the under 45,s don't even know or understand what is gonna happen.

 

[HirdsTheWord]

Yep.
And the under 45,s don't even know or understand what is gonna happen.

i wouldn't say that. i am well under 45 and well aware what is about to happen.

a recession was on the cards some time ago, those that entered into unsustainable debt within the last 2 years are the ones who are going to suffer.

 

[Sqotty from office works]

i wouldn't say that. i am well under 45 and well aware what is about to happen.

a recession was on the cards some time ago, those that entered into unsustainable debt within the last 2 years are the ones who are going to suffer.

Didn't mean you,meant generally.
I'm talking a dead employment market.
Nearly zero house sales
Nobody affording 2 hand 4wd,s
Tradies not willing to take a factory job to make ends meet.
Tradies wives not affording nails and hair cuts.
Nobody buying 2nd hand jetskis.,motorbikes canoes,paddle boards and sail boards.
Having to use the stove to cook.
Making kids walk or catchbus to school.

The millennial will starve and their brains will
Cave in.

Will be an interesting time.

 

[Cuzz09]

Didn't mean you,meant generally.
I'm talking a dead employment market.
Nearly zero house sales
Nobody affording 2 hand 4wd,s
Tradies not willing to take a factory job to make ends meet.
Tradies wives not affording nails and hair cuts.
Nobody buying 2nd hand jetskis.,motorbikes canoes,paddle boards and sail boards.
Having to use the stove to cook.
Making kids walk or catchbus to school.

The millennial will starve and their brains will
Cave in.

Will be an interesting time.

SOUNDS INTERESTING

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[kickazz]

Tradies not willing to take a factory job to make ends meet.

What factories?

 

[HirdsTheWord]

Didn't mean you,meant generally.
I'm talking a dead employment market.
Nearly zero house sales
Nobody affording 2 hand 4wd,s
Tradies not willing to take a factory job to make ends meet.
Tradies wives not affording nails and hair cuts.
Nobody buying 2nd hand jetskis.,motorbikes canoes,paddle boards and sail boards.
Having to use the stove to cook.
Making kids walk or catchbus to school.

The millennial will starve and their brains will
Cave in.

Will be an interesting time.

Most people Under 45 would have been working during the GFC, so most know what a recession is like.

Our Government are the morons here. They let everyone get so indebted that this recession will hurt more than all previous.

 

[kickazz]

Most people Under 45 would have been working during the GFC, so most know what a recession is like.

Our Government are the morons here. They let everyone get so indebted that this recession will hurt more than all previous.

Introducing QE (yes I know the RBA did that but it was kind of needed for Jobkeeper), Jobkeeper and simultaneously repealing the stricter lending criteria was really dumb.

Pretending that low unemployment was a function of anything other than low/no immigration was classic Emperor's New Clothes.

All the while productivity was obviously down.

 

[HirdsTheWord]

Introducing QE (yes I know the RBA did that but it was kind of needed for Jobkeeper), Jobkeeper and simultaneously repealing the stricter lending criteria was really dumb.

Pretending that low unemployment was a function of anything other than low/no immigration was classic Emperor's New Clothes.

All the while productivity was obviously down.

The Governments complete and utter ineptitude at managing houses prices is what the real issue is here.

They let housing get so over inflated and so indebted that people can barley handle simple rate rises.

 

[kickazz]

The Governments complete and utter ineptitude at managing houses prices is what the real issue is here.

They let housing get so over inflated and so indebted that people can barley handle simple rate rises.

Ineptitude would be one way to describe it, but policy after policy has made it seem like a much more deliberate undertaking. Stupid, yes. But still deliberate.

 

[HirdsTheWord]

Ineptitude would be one way to describe it, but policy after policy has made it seem like a much more deliberate undertaking. Stupid, yes. But still deliberate.

I suppose you are right.

When Fed Ministers own an estimated $300m of investment properties, you don't need to think too hard why they wouldn't want housing prices going down.

 

[Gigantic]

UBank now offering 35 year term home loans.