Society/Culture Australian Property Prices to Crash?

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Deliverance

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That's hard to believe and a bit of pork barrelling.
It's kind of impossible really.
When 60% of australia's residential investment portfolio is neutral and or cash flow positive.

Do you kids deliberately oversight facts?

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You'll have to take it up with SQM. Although, this is kind of their bread and butter.
 

Frank Grimes

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So what is the main factor for housing unaffordability then?

Negative gearing? No, in the previous election the Gratten Institute research said prices would only fall 2% with it's removal. (Probably should be removed because it's a waste of tax payer money than anything though).

Immigration? We just went through a Covid year where immigration was near non-existent and the house prices are still rising to ridiculous levels.

I personally think it's down to the banks lending criteria and low interest rates.

People can only pay for a house what they can afford, and what they can "afford" is based on what the banks can lend them.
A house can't be sold for a million dollars if nobody has a million dollars to spend.

The only thing that I've seen having an effect on house prices falling was when the banks got spooked by its royal commission a few years ago. The banks tightened their lending criteria and house prices actually started to fall. The government actually asked the banks to loosen their lending criteria. When the banks did, the house prices started to rise again.

Sure it may new it will require a bigger deposit (Just like The good old days in the 80's which those who can't afford house now brings up), but the declining house prices as a result will mean that the percentage of the deposit will be that bad.

For example, say a million dollar house increases from a 10% deposit to 20% (100k to 200k instead). However, due to falling house prices because of the tighter lending criteria, the million dollar house is now 800k instead. That would mean the deposit would be 160k and the buyer would have a much lower loan to pay off.
 
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Ned_Flanders

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That might be true, but there are still significant amount of investors buying existing dwellings both historically and continually, and using means like NG to get tax benefits, then leasing them out. This is where I see the issue.
Okay, let's get one thing straight - you are still making a loss when you NG

Noone picks a property for the NG benefit. If they are not making a profit on the rental income, it's because they expect to make a capital gain when they sell - which means they plan to sell in the short term.

People are investing in property because of the capital gains. Rental is just about meeting most the debt repayments.

For an existing dwelling, this makes the margins even tougher, so you are even more reliant on achieving that capital gain.
 

iluvparis

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Then they are doing something wrong. We saved just over 50k a year between us for 5 years to get our deposit, if you average it out. We were 23 when we started saving. We obviously started out on less money after Graduating Uni but we steadily increased.

The Average Income in Australia is 88k. As a couple that's circa 180K.

Saving 50k of this is easily achievable. Yes you need need to make sacrifices along the way but really, its not that hard.
Yes that is the average income but the MEDIAN average HOUSEHOLD income is only 95k - there is zero chance you are saving $280,000 of that over 5 years.
 

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Okay, let's get one thing straight - you are still making a loss when you NG

Noone picks a property for the NG benefit. If they are not making a profit on the rental income, it's because they expect to make a capital gain when they sell - which means they plan to sell in the short term.

People are investing in property because of the capital gains. Rental is just about meeting most the debt repayments.

For an existing dwelling, this makes the margins even tougher, so you are even more reliant on achieving that capital gain.
of course you make a loss. No sh*t you do.

But when properties are going year on year record growth it is worth taking the loss between repayments and rent when the property price is going up so drastically. You cover the loss on the basis that the property price continually goes up. which is forecasted to be 17% this year ALONE.

Investors can see huge % increases over 4-5 years spans of which they can make hundreds of thousands of dollars when they eventually sell, then use the equity to do it all over again.

This is why it is so unfair to compare a boomers work ethic against a Gen Y or Z. The boomer doesn't work harder, they just have the benefit of Equity on their side to be able to maximize their money.

1617759414578.png
 
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HirdsTheWord

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Yes that is the average income but the MEDIAN average HOUSEHOLD income is only 95k - there is zero chance you are saving $280,000 of that over 5 years.
Ok, take the median house hold income and apply the same % of saving.

You should still be able to save 30-40k a year in which you would have a 250k Deposit in say 6 years.

it is doable.

People just don't want to sacrifice. a big reason why house hold income is so much less than the average individual income is because a lot of women choose to stay at home with their kids instead of going back to work and contributing salary. This is fine, but its also a choice they are willing to make.

if you aren't saving 50-60% of what you are making than you are living above your means.

Note that I obviously agree housing prices to income is beyond a joke, hence why i'm suggesting things need to be done to stem the housing price increases.
 

Bombermania

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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.
There is space and the government's town planners have been using it to build greater density and there is the Fisherman Bend site.
 

iluvparis

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Ok, take the median house hold income and apply the same % of saving.

You should still be able to save 30-40k a year in which you would have a 250k Deposit in say 6 years.

it is doable.

People just don't want to sacrifice. a big reason why house hold income is so much less than the average individual income is because a lot of women choose to stay at home with their kids instead of going back to work and contributing salary. This is fine, but its also a choice they are willing to make.

if you aren't saving 50-60% of what you are making than you are living above your means.

Note that I obviously agree housing prices to income is beyond a joke, hence why i'm suggesting things need to be done to stem the housing price increases.
It staggers me how easily people are able to extrapolate their own position in the world to the rest of society and assume it is the same.

The average saving rate is generally about 5% and you want to claim with a straight face that people who aren't saving 50% of their income are living beyond their means.

It is a laughable argument all around.
 

Ned_Flanders

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of course you make a loss. No sh*t you do.

But when properties are going year on year record growth it is worth taking the loss between repayments and rent when the property price is going up so drastically. You cover the loss on the basis that the property price continually goes up. which is forecasted to be 17% this year ALONE.

This is why it is so unfair to compare a boomers work ethic against a Gen Y or Z. The boomer doesn't work harder, they just have the benefit of Equity on their side to be able to maximize their money.

View attachment 1095989
Soooo much wrong here

Firstly not every property goes up in price. We have one that we bought 10 years ago that we would sell for a loss today. And that's before we add in the interest losses and inflation.

Secondly, you need to understand what this stat represents. It's not the value of property increases, its the value of property of SOLD. It does not include the changes in value for those properties not on the market or that are passed in.

This matters because last year a massive number of properties were withdrawn from sale. Now I'm not talking due to covid restrictions, I'm talking because the prices being bid were so low that the usual post auction reneg never happened. I was looking at some which were withdrawn from market prior to sale because the indicators were so bad.

I was personally effected by this, we wanted to sell all our investment properties but we cancelled because we couldn't get any buyers at the price we needed. So we rent, and wait to see what changes this year.

Since the gfc, if you rent and invest the savings in a basic fund you will do better over 20 years than if you bought. This is unheard of in Australia. And I will tell you right now, if renting is a better long term financial choice, investors are not making 17% pa.
 

Suspense

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5) high speed rail link from brisbane to melbourne (via newcastle, sydney, canberra, wodonga)
Aside from the different population and immigration metrics, two reasons for Japanese flat-lining Housing prices:

1. HSR

We find that Shinkansen connections negatively affected land prices in Japanese prefectures. We regressed the log of land price on the Shinkansen variable. The results are presented in Table 6. We find that a Shinkansen connection in the previous year reduced land prices by 33% in the current year. Regressions using changes in land prices rather than log-levels show similar results (Table 7). A decentralization story would be consistent with the results we find: the Shinkansen helped Japanese cities to decentralize, which in return reduced the property prices in cities from what they otherwise might have been.

2. NIMBYs have less power

Over the past decade, Japan has consistently built almost 1 million new homes and apartments each year, according to official statistics. In the U.S., where the population is more than double Japan’s, 1.25 million new homes were built in 2018.

Unfortunately for other countries wrangling with housing affordability crises, the Japanese formula is not easily exportable. Many of the cities where demand for housing is the stiffestβ€”New York, London, San Francisco and Stockholm, for exampleβ€”impose strict rules on land use and new construction, partly due to local political pressure.

But in Japan, the responsibility of regulating urban space largely shifted to the central government in 2002 under the Urban Renaissance policy. Mr. Sorensen said it had held at bay the β€œnot in my backyard” movements that often inhibit housing construction in the U.S. through their influence over local governments.
 

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HirdsTheWord

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It staggers me how easily people are able to extrapolate their own position in the world to the rest of society and assume it is the same.

The average saving rate is generally about 5% and you want to claim with a straight face that people who aren't saving 50% of their income are living beyond their means.

It is a laughable argument all around.
who the hell is saving 5% of what they make?

That's is ******* laughable and no wonder a lot of people are struggling.

Barefoot investor recommends saving at least 40% for instance. Very good read.
 

Royal Flush

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OK, you know more than SQM. πŸ™„

How far removed from reality are you that you think 100k is not significant to most people?

now you are deliberately being annoying for the sake of it.
NG and CG Discount have been discussed ad nauseam.
Most of your points have been proven inacurate at the least.

100k is a lot.
100k is not a lot in regards to a 1 million property. People normally have a range, That range is based on their deposit
and how much the bank is willing to lend. in this example 900k-1.15 mil with a 200k deposit.

the difference between a property thats 1.1 mill or 1 mill is usually a few streets away.

EXPLAIN TO US HOW THIS HAS MADE HOUSING MORE AFFORDABLE?
 

Deliverance

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now you are deliberately being annoying for the sake of it.
NG and CG Discount have been discussed ad nauseam.
Most of your points have been proven inacurate at the least.

100k is a lot.
100k is not a lot in regards to a 1 million property. People normally have a range, That range is based on their deposit
and how much the bank is willing to lend. in this example 900k-1.15 mil with a 200k deposit.

the difference between a property thats 1.1 mill or 1 mill is usually a few streets away.

EXPLAIN TO US HOW THIS HAS MADE HOUSING MORE AFFORDABLE?
You. "A property is 100k cheaper"
Also you. "How is that making hosing more affordable?"

Trolling surely.
 

FRUMPY

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Then they are doing something wrong. We saved just over 50k a year between us for 5 years to get our deposit, if you average it out. We were 23 when we started saving. We obviously started out on less money after Graduating Uni but we steadily increased.

The Average Income in Australia is 88k. As a couple that's circa 180K.

Saving 50k of this is easily achievable. Yes you need need to make sacrifices along the way but really, its not that hard.
but what about the 2 daily coffees i buy from a cafe
but what about buying my lunch every day
but what about buying a new car
but what about going overseas annually
i cant work out why i cant afford a house deposit
 

HirdsTheWord

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but what about the 2 daily coffees i buy from a cafe
but what about buying my lunch every day
but what about buying a new car
but what about going overseas annually
i cant work out why i cant afford a house deposit
Hard to give up the coffees but we defiantly didn't do the rest of it haha. maybe a good thing I don't like avocados.

Now that we are on very good incomes and have our house we have splurged on a car.
 

FRUMPY

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who the hell is saving 5% of what they make?

That's is ******* laughable and no wonder a lot of people are struggling.

Barefoot investor recommends saving at least 40% for instance. Very good read.
You'd be amazed at the number of people who actually live beyond their means and then cry foul - i even brought up budgeting whether to have kids/more kids and people of BF couldnt believe people work out if they can afford kids before having any/more.
 

HirdsTheWord

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You'd be amazed at the number of people who actually live beyond their means and then cry foul - i even brought up budgeting whether to have kids/more kids and people of BF couldnt believe people work out if they can afford kids before having any/more.
We read and follow the barefoot investor who recommends you save 40% of income and live off 60%. We increased our savings yo 60% and we still do pretty well. Obviously a bit of an outlier as our household income is significant.

works well for us.

Those only saving 5% as someone quoted previously seriously need to re look at their budget.
 

Royal Flush

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You. "A property is 100k cheaper"
Also you. "How is that making hosing more affordable?"

Trolling surely.
Here we go again The looney merrygo round.
Why do you persist in doing this to yourself? Youve made enough foolish statements as it is.

Housing affordaility, is an issue at the lower end of the scale.
Not the high income earners.
 

FRUMPY

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Here we go again The looney merrygo round.
Why do you persist in doing this to yourself? Youve made enough foolish statements as it is.

Housing affordaility, is an issue at the lower end of the scale.
Not the high income earners.
Agree, not sure there are many out there complaining about having to rent and not being able to buy a house because they can only get a loan for $900k and not the million required for their property of choice
 

HirdsTheWord

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Here we go again The looney merrygo round.
Why do you persist in doing this to yourself? Youve made enough foolish statements as it is.

Housing affordaility, is an issue at the lower end of the scale.
Not the high income earners.
what do you define as high income earners?
 

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