Society/Culture Australian Property Prices to Crash?

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Suspense

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3 options? Simplistic view.

Option 4) State & Federal Government introduce legislation to Further Regulate Housing Industry By;

- Increase Interest Rates.
- Reducing Investor Capacity to own Multiple Properties, either out rightly or by significant tax increase.
- Further Introduce Significant Tax Benefits to People moving further Away from Major Cities.
- Introduce Meaningful Public Transport Infrastructure to Areas further out of CBD's.
- Reduce Tax Benefits of Investors E.G Negative Gearing.
- Significant Removal/Reduction of Stamp Duty & Land Tax to new home buyers. Investors remain at full amount.
- Increasing interest rates prematurely has a significant economic cost
- Multiple property investors already have a significant tax increase (LT) - the issue is that NG allows them to offset the effect of that tax
- Tax benefits for people living out of the city is interesting. We used to have the Zone Tax Offset - but that was really only for remote areas IIRC (not regional)
- Yes. See Victoria's Big Build
- Agreed. As tax distortions, abolishing NG and 50% CGT Concession are two easy fixes - save for the whining from entitled property investors
- We have FHO exemption/concession - the threshold values probably need adjusting at this point. FHO don't pay LT.

Ned is right - boosting housing density in inner/middle suburbs, along transport corridors and opening up growth areas for development has the most significant impact on house prices (apart from abolishing the main residence CGT exemption - which would be political seppuku on a grand scale)

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The reason why the solution with the largest effect size (boost density in middle suburbs) is so politically unpopular is not due to the selfishness of investors - but the selfishness of NIMBYs living in those areas.
 

Ned_Flanders

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3 options? Simplistic view.


Option 4) State & Federal Government introduce legislation to Further Regulate Housing Industry By;

- Further Reducing Lending Capacity Based on Income.
- Increase Interest Rates.
- Reducing Investor Capacity to own Multiple Properties, either out rightly or by significant tax increase.
- Further Introduce Significant Tax Benefits to People moving further Away from Major Cities.
- Introduce Meaningful Public Transport Infrastructure to Areas further out of CBD's.
- Reduce Tax Benefits of Investors E.G Negative Gearing.
- Significant Removal/Reduction of Stamp Duty & Land Tax to new home buyers. Investors remain at full amount.
these all hit symptoms and not the cause (and I'll focus on houses, not apartments or townhouses):

- cant face banks to lend money, and you dont want to repeat the mistakes of the GFC
- RBA is independent of Govt, and their interest rates are based upon inflation targets. right now rates are low because even with govt spending going nuts, inflation is barely above 2%. rates will start going up soon, inflation is gradually rising and we are set for increases in 2021. not the massive ones you probably want however - inflation isnt out of control.
- do this and you stop developers adding to stock with house conversion to units. also will not increase stock and suppress prices. investors fled during covid, and prices barely budged
- This has been tried precovid with minimal success (vic had a treechange campaign for example). post covid with WFH I think this will happen in some form. but we are tinkering here. the majority of jobs are not viable for WFH
- already happening. Melbourne Metro is designed to replace tram networks which will be relocated to the middle summers. SRL will replace the outer loop bus lines. I have less of an idea on the improvements on the VLine routes as they keep facing multiple hurdles
- no issue, get rid of it now, but it wont change demand for stock
- Lets say we are talking a $1,000,000 unit in Chadstone. Stamp duty is just $42k. A $40k reduction isnt making that in the price discount range you want

the issue here is population. 3.3m in 2000. 5m today. thats more competition for houses full stop. not from developers. not from evil boomers. from interstate and international migration. if you want inner/mid city housing to become cheaper, you need to get the population down, and massively (we are talking 1-2 million)
 

Ned_Flanders

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- Increasing interest rates prematurely has a significant economic cost
- Multiple property investors already have a significant tax increase (LT) - the issue is that NG allows them to offset the effect of that tax
- Tax benefits for people living out of the city is interesting. We used to have the Zone Tax Offset - but that was really only for remote areas IIRC (not regional)
- Yes. See Victoria's Big Build
- Agreed. As tax distortions, abolishing NG and 50% CGT Concession are two easy fixes - save for the whining from entitled property investors
- We have FHO exemption/concession - the threshold values probably need adjusting at this point. FHO don't pay LT.

Ned is right - boosting housing density in inner/middle suburbs, along transport corridors and opening up growth areas for development has the most significant impact on house prices (apart from abolishing the main residence CGT exemption - which would be political seppuku on a grand scale)

View attachment 1095207


The reason why the solution with the largest effect size (boost density in middle suburbs) is so politically unpopular is not due to the selfishness of investors - but the selfishness of NIMBYs living in those areas.
its not completely a NIMBY issue. Monash Council basically say yes to any knockdown proposal in all but a few select areas. The consequence is streets designed for suburban houses are now accommodating 2-4 units each block. with most only have 1 car spot*, it means the second householder is parking on the street. Drive down streets in Chaddy for example, you are driving in a single lane and dodging parked cars the length of the road. for higher density to genuinely work, you need to get people to abandon their cars (as happens in HK, SIN, Tokyo, and NYC)


*yes you can have units with 2 car garages. these come at a price premium though. As an example, I can build 2-3 x 2 car/4 bed townhouses on block in Box Hill and sell for $1.1-1.2 each. If i reduce down to 1 car, tiny rooms, and 2-3 beds, im only getting $8/900k. if i dont care about the area, the pump and dump with the small units pays more at the end of the day

FWIW ive seen units where the third bedroom cant even fit a queen sized bed (yes you can use a double, but you wont be having furniture)

Also if you want to see where we are going, look at M-City at the corner of Blackburn and Princess Highway. 100% retail at the bottom and all apartments above is basically what you see common as mud in China
 
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Suspense

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its not completely a NIMBY issue. Monash Council basically say yes to any knockdown proposal in all but a few select areas. The consequence is streets designed for suburban houses are now accommodating 2-4 units each block. with most only have 1 car spot*, it means the second householder is parking on the street. Drive down streets in Chaddy for example, you are driving in a single lane and dodging parked cars the length of the road. for higher density to genuinely work, you need to get people to abandon their cars (as happens in HK, SIN, Tokyo, and NYC)


*yes you can have units with 2 car garages. these come at a price premium though. As an example, I can build 2-3 x 2 car/4 bed townhouses on block in Box Hill and sell for $1.1-1.2 each. If i reduce down to 1 car, tiny rooms, and 2-3 beds, im only getting $8/900k. if i dont care about the area, the pump and dump with the small units pays more at the end of the day

FWIW ive seen units where the third bedroom cant even fit a queen sized bed (yes you can use a double, but you wont be having furniture)

Also if you want to see where we are going, look at M-City at the corner of Blackburn and Princess Highway. 100% retail at the bottom and all apartments above is basically what you see common as mud in China
Which is why medium/high density should be prioritized in areas already serviced by very good PT options.

I'm referring to the 'Protect Fitzroy North's Skyline' types. Those who oppose any form of redevelopment at Preston Market. The Greens-Dominated council opposing State Govt funded social and affordable housing last week etc.
 

Royal Flush

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Suppose all the suggestions in this thread occured (besides the absurd like limiting how many properties are allowed to be purchased by an individual)

Abolish NG and CGT discount. Urban planning and development (which already occurs) and any other workable suggestions

What do people think this will actually achieve in property prices?
Are we talking single figure retraction at most, or we thinking double digit.

Eitherway, what will the next plan be, because rest assured that won't make housing affordable to x income ratio.

Because globally, property prices grow all over the western world.

What's the solution?

To achieve a single income x to mortgage ratio you'd need the following to occur;

A decline in population growth.
A decline in economic growth.

I can not see any other way




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Rob R

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Suppose all the suggestions in this thread occured (besides the absurd like limiting how many properties are allowed to be purchased by an individual)

Abolish NG and CGT discount. Urban planning and development (which already occurs) and any other workable suggestions

What do people think this will actually achieve in property prices?
Are we talking single figure retraction at most, or we thinking double digit.

Eitherway, what will the next plan be, because rest assured that won't make housing affordable to x income ratio.

Because globally, property prices grow all over the western world.

What's the solution?

To achieve a single income x to mortgage ratio you'd need the following to occur;

A decline in population growth.
A decline in economic growth.

I can not see any other way




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Decline in population growth to sensible levels sounds great. Melbouren and Sydney were well on their way to being over populated unlivable dumps with only property investors (including most pollies) were benefiting from.

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Ned_Flanders

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Decline in population growth to sensible levels sounds great. Melbouren and Sydney were well on their way to being over populated unlivable dumps with only property investors (including most pollies) were benefiting from.

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How do you do that without going Cultural Revolution?

We would have to not only ban migration into Melbourne and Sydney, we would have to enforce bans on people moving into either city from the rest of the country AND we would have to force massive numbers to leave.

And guess what, they will be first homebuyers. The minute you make being a citizen in Melbourne or Sydney a scarce commodity, the value of those permits would go through the roof. Just like what happened in China and the USSR (who had these migration restrictions), the rich will bribe officials to get them, and the poor will be forced out for bogus reasons (ie late on rates)
 

Rob R

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How do you do that without going Cultural Revolution?

We would have to not only ban migration into Melbourne and Sydney, we would have to enforce bans on people moving into either city from the rest of the country AND we would have to force massive numbers to leave.

And guess what, they will be first homebuyers. The minute you make being a citizen in Melbourne or Sydney a scarce commodity, the value of those permits would go through the roof. Just like what happened in China and the USSR (who had these migration restrictions), the rich will bribe officials to get them, and the poor will be forced out for bogus reasons (ie late on rates)
I was focussing on cutting foreign migration to Australia so that our net population growth is near zero. I dont see any legal way to force people to move away from the cities just incentives that won't be effective unless we somehow get businesses to move high paying jobs to regional areas.

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I was focussing on cutting foreign migration to Australia so that our net population growth is near zero. I dont see any legal way to force people to move away from the cities just incentives that won't be effective unless we somehow get businesses to move high paying jobs to regional areas.

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Other countries manage to be decenterlised so there is no reason why Australia can't and its an urban myth that most people work close to the CBD.
 

Royal Flush

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So modern Australia which has had a policy of immigration for the last 70 years should abolish that, so that you can buy a house .
Is this really what I'm reading?
Decline in population growth to sensible levels sounds great. Melbouren and Sydney were well on their way to being over populated unlivable dumps with only property investors (including most pollies) were benefiting from.

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Deliverance

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And why would private landlords agree to free rent?
Government landlords. It doesn't need to be free rent forever.

Or we could just keep spreading the outer suburbs indefinitely and overdeveloping the nner burbs.

Better use of government funds than franking credits, negative gearing and pork barrelled pre election grants.
 
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Ned_Flanders

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Government landlords. It doesn't need to be free rent forever.

Or we could just keep spreading the outer suburbs indefinitely and overdeveloping the nner burbs.

Better use of government funds than franking credits, negative gearing and pork barrelled pre election grants.
there are a number of issues with this.

once free, good luck ever getting commercial rents again. companies will threaten to relocate unless the free rent is maintained

also why does NAB get free rent, when Harry's Pies the local baker for 70 years has to pay rent?

and why is the govt subsidizing companies and not building more low cost accommodation for the poor?

also for this to work, you need to move 1m+ people out of melbourne. do bendigo and ballarat want 40-80 storey office towers in their cities to accommodate these workers?
 

Deliverance

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there are a number of issues with this.

once free, good luck ever getting commercial rents again. companies will threaten to relocate unless the free rent is maintained

also why does NAB get free rent, when Harry's Pies the local baker for 70 years has to pay rent?

and why is the govt subsidizing companies and not building more low cost accommodation for the poor?

also for this to work, you need to move 1m+ people out of melbourne. do bendigo and ballarat want 40-80 storey office towers in their cities to accommodate these workers?
Of course there's issues with it. It's a massive shift in thinking. But what we're doing currently is not sustainable.

Companies sign up knowing its free rent for a fixed term only. Once a city is established the free market will drive rents as it does currently.

Low cost accommodation for the poor? Where are thye going to build that? There's no space inner city, so it's going to need to be a ghetto out near Drouin where there's land but no jobs.

It's insane that 40% of our population lives in 2 cities in a country this big.
 

Ned_Flanders

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Of course there's issues with it. It's a massive shift in thinking. But what we're doing currently is not sustainable.

Companies sign up knowing its free rent for a fixed term only. Once a city is established the free market will drive rents as it does currently.

Low cost accommodation for the poor? Where are thye going to build that? There's no space inner city, so it's going to need to be a ghetto out near Drouin where there's land but no jobs.

It's insane that 40% of our population lives in 2 cities in a country this big.
and you know what happens at the end of that fixed term? they leave

you need a reason for businesses to permanently relocate, and cash bribes are only effective as long as they are maintained

drive around melbourne and look at the state of the commission housing. most of it hasnt been touched in 50 years. much of it needs to be bulldozed and replaced with healthier and more efficient housing.

and dont disagree. but notions like yours tend to have one big disclaimer. "lets force everyone else to relocate to Bendigo, except for me, because I like melbourne my family is here and my career is here"
 

Deliverance

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and you know what happens at the end of that fixed term? they leave

you need a reason for businesses to permanently relocate, and cash bribes are only effective as long as they are maintained

drive around melbourne and look at the state of the commission housing. most of it hasnt been touched in 50 years. much of it needs to be bulldozed and replaced with healthier and more efficient housing.

and dont disagree. but notions like yours tend to have one big disclaimer. "lets force everyone else to relocate to Bendigo, except for me, because I like melbourne my family is here and my career is here"
Its more for the people buying houses in Officer who need to travel 1.5 hours each way to get to work in the CBD.
 

Ned_Flanders

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Its more for the people buying houses in Officer who need to travel 1.5 hours each way to get to work in the CBD.
you know why they choose that? because they get a bigger block of land than they ever will in Melbourne. and TBH the commute is only a little extra than most people do (as i previously said, i was 25km out of town pre-covid and it was a 55-65m drive)

people choose pakenham, officer, and drouin for lifestyle as much as price, because the idea of a first homebuyer buying a big block house within 30km of the cbd is now never happening (ffs it wasnt happening outside the west when my parents bought in the 70's)
 

Ned_Flanders

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ffs...

what you are suggesting has been tried by both liberal and labor govts. its never worked. dandenong never became melbournes second cbd. box hill isnt now. for sydney, parra is only marginally more successful, but marginally.

you need to ask yourself why a company bases itself where it does (and we are talking strictling office based work here)

1) convenient for staff to get to
I have worked in places where they were planning to relocate their Melbourne office from SE Melbourne to Laverton. It didnt happen. The costs made sense, the logistics made sense, but over half the staff threated to quit when they heard about it. Same happened when the TAC relocated to Geelong.

You can move the NAB to Bendigo, but how many workers will follow?

2) cost
tick

3) proximity to business
many orgs locate in the CBD because they have to, its where their customers are. law firms, consultancy groups, and their like need to stay in the CBD because thats where all their clients are. now you may say "thats fine, get the back office/admin staff out". Thats already been done. Many CBD firms have a shadow office in Mulgrave, Box Hill, Burwood, etc. these locations are chosen because the rent is cheap and its close to their labour pool.

4) dick factor
i kid you not, but an amazing number of places are selected because thats where the CEO/owner wants to work. people like this want to show off how successful they are, and you dont do that in Bendigo



want a case study on this? ask why Target shut down its HQ in Geelong and moved it down the road to Melbournes west. ask why sunrice is officially based in country NSW, but all senior staff are in sydney. why Saputo despite being a manufacturing icon in rural victoria, have their HQ at Freshwater
 

Rob R

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So modern Australia which has had a policy of immigration for the last 70 years should abolish that, so that you can buy a house .
Is this really what I'm reading?


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I have a house so doesnt help me. But cutting immigration to sensible levels would help with house prices, the environment, the growing congestion in cities etc. Just because immigration has been beneficial in the past doesnt mean high immigration levels are good now.

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Ned_Flanders

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I have a house so doesnt help me. But cutting immigration to sensible levels would help with house prices, the environment, the growing congestion in cities etc. Just because immigration has been beneficial in the past doesnt mean high immigration levels are good now.

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killing immigration will have serious economic consequences. its whats kept us out of recession until now
 

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