Society/Culture Australian Property Prices to Crash?

[HirdsTheWord]

If this home had tracked inflation, it would be worth $37,000. It just sold for $2.7 million. Here's why

A nation that once prided itself on its egalitarianism and high levels of home ownership is experiencing rising inequality due to a growing chasm of wealth between those who own homes and those who never will, writes Stephen Long.

www.abc.net.au

Pretty good article yet everyone is still curtailing the elephant in the room.

It's about time someone puts the blowtorch on Investors and removes them from the market.

 

[Donakebab]

That is insane

I seriously do not understand how there is not more hysteria about this from Government and Authority bodies.

Just let the can-do capitalism run its course, classic move from the don’t-do government, which is no surprise when the LNP has been infiltrated prosperity theology nutjobs.

 

[Madas]

When houses earn more than jobs: how we lost control of Australian house prices and how to get it back

In some quarters, the median Sydney home earns more from capital gains than the median worker earns from wages. Now’s a good time to wind back the measures that push prices up.

theconversation.com

I think this article sums up what most are saying on here .
I was looking for a graph that showed the average cost of constructing a house over a period of time as I had my suspicions that the introduction of GST might have been a catalyst point for a 20% increase in cost to build .
Surprisingly it made little difference according to this graph .
Good article I thought .

 

[Madas]

When houses earn more than jobs: how we lost control of Australian house prices and how to get it back

In some quarters, the median Sydney home earns more from capital gains than the median worker earns from wages. Now’s a good time to wind back the measures that push prices up.

theconversation.com

I think this article sums up what most are saying on here .
I was looking for a graph that showed the average cost of constructing a house over a period of time as I had my suspicions that the introduction of GST might have been a catalyst point for a 20% increase in cost to build .
Surprisingly it made little difference according to this graph .
Good article I thought .

Can anyone explain this part though ?


The case for a central housing bank
Taxes should focus on land rents, in the form of increasing residential property values or windfalls from changing land use. Taxing away future rents would dent speculation.

 

[HirdsTheWord]

When houses earn more than jobs: how we lost control of Australian house prices and how to get it back

In some quarters, the median Sydney home earns more from capital gains than the median worker earns from wages. Now’s a good time to wind back the measures that push prices up.

theconversation.com

I think this article sums up what most are saying on here .
I was looking for a graph that showed the average cost of constructing a house over a period of time as I had my suspicions that the introduction of GST might have been a catalyst point for a 20% increase in cost to build .
Surprisingly it made little difference according to this graph .
Good article I thought .

Australia has some of if not the most generous housing investment tax benefits on planet earth.

Prior to the introduction of these tax benefits housing values generally rose inline with CPI.



There has been a cultural issue in this country ever since the inception of these tax benefits in the early 2000's, and that issue is that Housing is not seen as a place to live, but it is seen as an investment first and foremost.

We have pretty much passed the point now where unless you have help from your parents and or are the beneficiary of inheritance you will not be able to buy a free standing house in metropolitan Sydney. Getting a good education and a good job is no longer enough which is fundamentally wrong.

There is one way and one way only to rectify the issue, and that is to remove investors ability to gain tax benefits on buying free standing houses, if not limiting hem from buying additional housing at all. How we continue to allow people with existing wealth gain tax advantages over people who cant afford their first home is simply astounding and really shows you where the Governments priorities are.

 

[The Edukator]

If this home had tracked inflation, it would be worth $37,000. It just sold for $2.7 million. Here's why

A nation that once prided itself on its egalitarianism and high levels of home ownership is experiencing rising inequality due to a growing chasm of wealth between those who own homes and those who never will, writes Stephen Long.

www.abc.net.au

Pretty good article yet everyone is still curtailing the elephant in the room.

It's about time someone puts the blowtorch on Investors and removes them from the market.

Current market price moves have been influenced by home buyers. Investor levels have been significantly lower than home buyers during the pandemic and lower than previous levels prior so how can you blame them for the current conditions? Bit obtuse don't you think?

Sent from my SM-G975F using Tapatalk

 

[Deliverance]

"Weaker home loan growth for every category of borrower except investors is increasing the pressure on banking regulator APRA"

Investor loan growth makes APRA’s job tricker

Investors are borrowing more as owner occupiers and first home buyers pull back, suggesting regulators need new tools – if any at all – to cool the hot market.

www.afr.com

 

[Frank Grimes]

Current market price moves have been influenced by home buyers. Investor levels have been significantly lower than home buyers during the pandemic and lower than previous levels prior so how can you blame them for the current conditions? Bit obtuse don't you think?

Sent from my SM-G975F using Tapatalk

From my impression it was the first home buyers who initially started the denand/price growth since the pandamic, but over the last half a year it is mostly investors pushing it.

 

[HirdsTheWord]

Current market price moves have been influenced by home buyers. Investor levels have been significantly lower than home buyers during the pandemic and lower than previous levels prior so how can you blame them for the current conditions? Bit obtuse don't you think?

Sent from my SM-G975F using Tapatalk

I am not talking recent increases, even though it is being driven by investors, it started pout as first home buyers + upgraders.

I'm talking over a 20 year period since investment tax benefits were introduced.

Property should be looked at Long term, not year by year. The long term issues in the property market are 100% due to investors. It is inarguable that over a 20 year period housing has increased out of proportion to CPI.

 

[Suspense]

Australia has some of if not the most generous housing investment tax benefits on planet earth.

Prior to the introduction of these tax benefits housing values generally rose inline with CPI.

View attachment 1278653

There has been a cultural issue in this country ever since the inception of these tax benefits in the early 2000's, and that issue is that Housing is not seen as a place to live, but it is seen as an investment first and foremost.

Do you have a graph for pre-CGT house prices compared to CPI?

CGT laws ought to be amended as they disproportionately favour those with access to existing capital - but I'd argue that rapid population growth since the late 90s, which was completely unforeseen at the time, is the most significant factor in house price increases.


In 1998, the Australian Bureau of Statistics predicted that, based on low-growth assumptions, Australia’s population would reach 23.5 million people in 2051, a benchmark it went on to achieve in July 2014. The mid-growth forecast of 24.9 million people by 2051 was reached in 2019, 32 years early! The upper end forecast of 26.4 million, based on high-growth assumptions, will be reached in the next few years.

The current growth patterns of Australia will lead us to a population of 38 million by 2051, around 12 million higher than even the high-ball forecasts of the late 1990’s.

https://mccrindle.com.au/insights/blogarchive/the-rise-and-rise-of-australias-population/

 

[HirdsTheWord]

Do you have a graph for pre-CGT house prices compared to CPI?

CGT laws ought to be amended as they disproportionately favour those with access to existing capital - but I'd argue that rapid population growth since the late 90s, which was completely unforeseen at the time, is the most significant factor in house price increases.


In 1998, the Australian Bureau of Statistics predicted that, based on low-growth assumptions, Australia’s population would reach 23.5 million people in 2051, a benchmark it went on to achieve in July 2014. The mid-growth forecast of 24.9 million people by 2051 was reached in 2019, 32 years early! The upper end forecast of 26.4 million, based on high-growth assumptions, will be reached in the next few years.

The current growth patterns of Australia will lead us to a population of 38 million by 2051, around 12 million higher than even the high-ball forecasts of the late 1990’s.

https://mccrindle.com.au/insights/blogarchive/the-rise-and-rise-of-australias-population/

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.

 

[Madas]

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.

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 )

 

[HirdsTheWord]

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 )

I guess ill try and answer the numerous things you have raised

1) People only need to rent because they typically cant afford to buy. If housing was cheaper because of a lack of investors those who are renting would most likely be in a better position to become home owners. I think as trade off more home owners and less investors is a good thing. Homme Ownership Statistics show that older generations are owning a growing % of homes compared to young people.

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.

3) Its quite easy to blame the government actually when they are the cause of the problem; They have;

- Both Federal & State Governments have Zero long term planning for Housing Affordability. That's not me being cynical, there is literally no policy for it.
- Have since 2000 proactively provided more financial benefits to investors than they have new home owners.
- Provide next to zero long term infrastructure planning to more rural areas which people can consider buying homes.

 

[Chief]

Housing Construction Prices have not changed generally throughout the years.

I don't know about that.

 

[HPKS]

what do you all think retirees will do in 10-20 years if they don’t own a home on retirement?

 

[Frank Grimes]

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]

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.

The Cost to Build a House in Australia - Budget Direct

How much does it cost to build a house in Australia? There are a number of factors that will impact the total cost of building your house.

www.budgetdirect.com.au

 

[HirdsTheWord]

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,

The Cost to Build a House in Australia - Budget Direct

How much does it cost to build a house in Australia? There are a number of factors that will impact the total cost of building your house.

www.budgetdirect.com.au

 

[HirdsTheWord]

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

Figures show how insane property market is

Aussies who do not own their own home by the age of 45 are heading for trouble in retirement, a parliamentary inquiry has been warned.

www.news.com.au

 

[HPKS]

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]

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]

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

 

[Chief]

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

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.

 

[yodellinhank]

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]

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 s**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 .