Society/Culture Australian Property Prices to Crash?

Madas

Norm Smith Medallist
Aug 16, 2020
5,791
7,256
AFL Club
Fremantle
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 💩
 
Oct 22, 2008
17,318
19,554
Geelong
AFL Club
Essendon
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.
 
It’s crazy 🤯
Steel has gone up 60% in 8 months and there’s another 15% hike January 1st
I am a little annoyed we didn’t do the major work years ago. We just put it off again and again. Would have been a great investment.
 
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.
 
Jun 19, 2011
17,840
30,088
MCG
AFL Club
Hawthorn
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.
 
I am a little annoyed we didn’t do the major work years ago. We just put it off again and again. Would have been a great investment.

hindsight is a wonderful thing.
 
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 ****ed before the pandemic and it had nothing to do with Construction Costs, The pandemic has just ****ed it even more.
 
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.
 
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.
 
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

Premiership Player
Apr 6, 2012
4,044
5,596
Perth
AFL Club
Sydney
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

Premiership Player
Apr 6, 2012
4,044
5,596
Perth
AFL Club
Sydney
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.

 
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.
 

HPKS

Premiership Player
Apr 6, 2012
4,044
5,596
Perth
AFL Club
Sydney
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.
It’s a massive issue that will effect younger generations into retirement. House prices have exploded since the mid nineties, wage growth is not keeping pace with the cost of living so it doesn’t take a genius to figure out home ownership is completely out of reach for a lot of people and will effect retirement which in turn effects the cost to government budgets. And it appears it’s not going to get better it’s going to get worse. Like I said for some who don’t have a house it will be cheaper to walk into retirement & straight into aged care. For me it’s not an issue but for whenever I have grand children it will be.


so your reckon theory is a load of cods wallop as shown by the data.
 

HPKS

Premiership Player
Apr 6, 2012
4,044
5,596
Perth
AFL Club
Sydney
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.
Bit off topic but don’t start me on the not for profit charities bs. I worked for two years in the funding side of an aged care facility. Charity my ass
 

HirdyLannister

Norm Smith Medallist
Apr 26, 2013
9,258
12,964
Cersei's bed
AFL Club
Essendon
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.
Some might do that but alot don't.

My olds will refuse age care I know I'll be caring for them which I rather than seeing how those places are run.
 

Frank Grimes

Premiership Player
May 8, 2007
4,984
9,910
between two bowling alley
AFL Club
Richmond
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 inRemove 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.

People correctly point out that rents won't be affected by investors pulling out of the market because the house will be to sold the a renter who has become home owner. However, the same would apply going the other way because the supply and demand isn't affected.

This is because it is a zero sums game.
If the investment property is going to be sold as a principal residence:
- The demand in the rental market would go down buy one person, however the supply in the rental market is also less one house.
- Supply on the first home buyers market would increase by 1. The demand in the buying a house due to the renter becoming a home buyer would go also go up by 1.

The main reason for high prices imo is the availability of cheap credit (how much banks are willing to loan).
 
Last edited:

HPKS

Premiership Player
Apr 6, 2012
4,044
5,596
Perth
AFL Club
Sydney
Some might do that but alot don't.

My olds will refuse age care I know I'll be caring for them which I rather than seeing how those places are run.
A lot say this but in the long run don’t have a choice. If they’re non ambulant or have dementia or incontinent which from my experience is becoming more and more prevalent most people are just not able to do this as dementia requires non stop care for safety reasons and non ambulant residents require 2 hourly repositioning because if you don’t pressure area problems become horrendous or if they’re incontinent & unable to look after their own personal care they’ll require you to change them and attend to their personal hygiene needs at any time of the day. Which also means if they’re incontinent they’ll require a toileting schedule. Literally one fall in the garden can & does regularly lead to mobility issues. You’ll basically be giving up full time work for all of this. There’s a lot who can’t stop working or do and go onto a carers pension which eats into government budgets. I’ve admitted a lot into care in this type of scenerio. And when it happens it’s a frightening experience for the elderly. I admire you for wanting to look after your loved ones at home & I truly hope it works out but I’ve seen a lot of broken down family members in their 50’s admitting Mum or dad to care and after reducing their income to care for Mum or dad are unable to help out their children financially. anyway all the best with it for you & I hope it works for you 👍
 

HPKS

Premiership Player
Apr 6, 2012
4,044
5,596
Perth
AFL Club
Sydney
People correctly point out that rents won't be affected by investors pulling out of the market because the house will go to sold the a renter who has become home owner. However, the same would apply going the other way because the supply and demand isn't affected.

This is because it is a zero sums game.
If the investment property is going to be sold as a principal residence:
- The demand in the rental market would go down buy one person, however the supply in the rental market is also less one person.
- Supply on the first home buyers market would increase by 1. The demand in the buying a house from the renter becoming a home buyer would go also go up by 1.

The main reason for high prices imo is the availability of cheap credit (how much banks are willing to loan).
Cheap credit is part of the issue imo. One other is state governments collect a lot of money from government fees so the higher the price the more revenue they obtain. Here’s a calculator for you to compare the differences


So for revenue reasons why would governments lower house prices? What do they have to gain?
 

Madas

Norm Smith Medallist
Aug 16, 2020
5,791
7,256
AFL Club
Fremantle
I am a little annoyed we didn’t do the major work years ago. We just put it off again and again. Would have been a great investment.
No better time than the present they always say ( although at the present you probably couldn’t get anyone to do it anyway )
 

Madas

Norm Smith Medallist
Aug 16, 2020
5,791
7,256
AFL Club
Fremantle
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.
I’ve been there
Was a commercial and mining construction manager PM over the years on and off but got out around 2012 when our opposition companies were going in at 0% margin and trying to make some money on variations just to keep their offices open , I believe it hasn’t changed a lot since then , still pretty cutthroat from what I hear with developers demanding cheaper build costs to increase their profit margins .
Went back to building houses and small commercial ( not so many back stabbers and ladder climbers either in the residential game which is nice )

I agree in principle that the rise and fall clause is dangerous, but in the current situation it is unfair and unethical that builders on fixed price contracts are having to wear these price rises .
It wouldn’t be unreasonable to have a reasonable price differential clause within a contract ( say +15 % ) and as long as you can genuinely prove that these price rises were out of your control you should be able to claim the difference.
Remember we are still building houses we signed up around August - October last year before anyone had any clue of the s**t that was about to hit the fan .
 

Madas

Norm Smith Medallist
Aug 16, 2020
5,791
7,256
AFL Club
Fremantle
People correctly point out that rents won't be affected by investors pulling out of the market because the house will be to sold the a renter who has become home owner. However, the same would apply going the other way because the supply and demand isn't affected.

This is because it is a zero sums game.
If the investment property is going to be sold as a principal residence:
- The demand in the rental market would go down buy one person, however the supply in the rental market is also less one house.
- Supply on the first home buyers market would increase by 1. The demand in the buying a house due to the renter becoming a home buyer would go also go up by 1.

The main reason for high prices imo is the availability of cheap credit (how much banks are willing to loan).
I agree
And I also can’t disagree that investors haven’t contributed to the problem of housing affordability.


So I haven’t delved into it deeply but I think a big question no one on here is really addressing is :
“ is there an actual need for rental houses ?”
I touched on it before and there absolutely surely has to be .
Example 1 - student leaves home , no credit history, no income . How they gonna buy a house ?
Here’s a link to home ownership around the world .


At 65% we are about on par with similar economies to our own such as UK , USA , Sweden .
I have no idea if those economies have government incentives for investment ( remember negative gearing applies to share trading also )

So why not provide incentives to mums and dads to invest in property with the hope that capital growth will assist them in retirement. That was the idea behind it from its inception I believe?
Therefore assisting the government in the future in having less people in government housing and retirement homes .

it’s a broadband rule meaning anyone can take advantage off these schemes

I don’t know the answer here
It’s like everything in this world , “you look after one group you piss off another “
No ones ever entirely happy and that’s just bloody life .
 

Madas

Norm Smith Medallist
Aug 16, 2020
5,791
7,256
AFL Club
Fremantle
If the government were serious about creating affordable housing, they'd copy the one tried and true model and that's the one Singapore designed



Yeh nah sorry

Very clever model and the forced saving scheme is the kind of discipline most people in Western countries need but who the hell wants to live in a flat ?!
And can you see those “ flats “ popping up in regional towns where housing affordability is nearly as bad as cities ?

How about removing GST on housing for first home buyers ONLY?

IMHO The introduction of GST added 20% to housing costs overnight when it was introduced and this has compounded ever since .
 
Back