Society/Culture Australian Property Prices to Crash?

[Deliverance]

So I’m a property investor and in true capitalist form I am hoping my properties increase in value over my lifetime so I have sufficient funds to retire with , meanwhile providing affordable rental accommodation for people who require it ( haven’t put our rent up in about 4 years and kept the same happy tenants )

Is it ok that I’m capitalist but not ok that I’m an investor? I’m confused?!

Your solutions whereby the government provides affordable housing is in fact sound more socialist than capitalist.
A balance of both would be ideal IMO but where does the government get that kind of money ?

Their current capitalist model incentivising investors to build more housing satisfies this demand .

Perhaps what we are both saying is that investment incentives are ok for new housing but should not extend to buying existing properties?

Bolded is the problem here, all about me me me. Housing investment in this country is about building personal wealth. It's a selfish means to an unnecessary end. The person in your example could easily plow cash in to shares, super, bonds, cash or other investments and be perfectly well off for retirement. As it is, they're sucking up housing supply to the detriment of others. Investment properties are usually existing dwellings, they add very little to new housing stock. How many investors are sitting around thinking "Ooh, that migrant family in Melton probably can't afford a home, I'd better build one so they can have a roof over their heads"

 

[Taylor]

Property is far more attractive as an investment because it's right there, you can touch it, it makes money and you can drive past it and it's right there.

If the world goes off a cliff you still own one house worth of investment, whatever that means. If the buying power of the dollar dives you've got a bigger number, but it's still one house. The reality is that your shares, your bonds, your super - none of which are worth a single cent to you if it hits the fan, but if you've got a house you still have a house, you still have somewhere to live. Even the money in the bank can disappear since there isn't enough cash available for people to all draw it out anyway.

Nobody is snuggling under their stock portfolio at night.

You need only look at how pensions haven't risen to see that it's not a me, me, me thing. Nobody should expect to be looked after adequately. People without aren't exactly giving things away after holding out their hand for years.

The solution is bulk, low cost housing built as a construction industry stimulus. Nobody with money will want to live there, demand will be purely low capacity owners - and people will still prefer to buy something $100,000 more expensive and an hour further away from the city AND complain about it.

 

[HirdsTheWord]

Property is far more attractive as an investment because it's right there, you can touch it, it makes money and you can drive past it and it's right there.

If the world goes off a cliff you still own one house worth of investment, whatever that means. If the buying power of the dollar dives you've got a bigger number, but it's still one house. The reality is that your shares, your bonds, your super - none of which are worth a single cent to you if it hits the fan, but if you've got a house you still have a house, you still have somewhere to live. Even the money in the bank can disappear since there isn't enough cash available for people to all draw it out anyway.

Nobody is snuggling under their stock portfolio at night.

You need only look at how pensions haven't risen to see that it's not a me, me, me thing. Nobody should expect to be looked after adequately. People without aren't exactly giving things away after holding out their hand for years.

The solution is bulk, low cost housing built as a construction industry stimulus. Nobody with money will want to live there, demand will be purely low capacity owners - and people will still prefer to buy something $100,000 more expensive and an hour further away from the city AND complain about it.

This is why superannuation is important and your point only highlights the flaws of what the government has created and has cultivated over the last 20 years, Housing should never been an investment scheme. Housing is not a commodity, it is a necessary means to put shelter over your head.

1/4 homes in this country being owned by a private investor is a disgrace. The supply argument is utter bullshit. There are more than enough homes in this country to cater for its population if you remove investors.

We need more people owning their own home going into retirement, so they are less reliant on government pensions. Home ownership across ALL age groups is dropping, including people about to go into retirement currently dropping. The only ownership % that is rising is Private Investors. This is not a good thing.

People do not need to own multiple properties at the detriment of future generations ability to buy their home.

The system as it stands is a s**t show for everyone except the wealthy and its getting progressively worse year on year, someone needs to start seriously thinking how a kid born is 2020 is going to afford a house in 2050 without a hand out. Something needs to be done now.

 

[Madas]

$8 million in that location would be for the land because the house is just a shell.

Emphasis the point even further sorry .
The point is that someone who isn’t even funny has got $8m to spend on a shell .
If he was smart he would wait 2 years when the price of that place comes back down 20% plus .

 

[HirdsTheWord]

Emphasis the point even further sorry .
The point is that someone who isn’t even funny has got $8m to spend on a shell .
If he was smart he would wait 2 years when the price of that place comes back down 20% plus .

So why has he got the 8m in the first place?

 

[Taylor]

This is why superannuation is important and your point only highlights the flaws of what the government has created and has cultivated over the last 20 years, Housing should never been an investment scheme. Housing is not a commodity, it is a necessary means to put shelter over your head.

1/4 homes in this country being owned by a private investor is a disgrace. The supply argument is utter bullshit. There are more than enough homes in this country to cater for its population if you remove investors.

We need more people owning their own home going into retirement, so they are less reliant on government pensions. Home ownership across ALL age groups is dropping, including people about to go into retirement currently dropping. The only ownership % that is rising is Private Investors. This is not a good thing.

People do not need to own multiple properties at the detriment of future generations ability to buy their home.

The system as it stands is a sh*t show for everyone except the wealthy and its getting progressively worse year on year, someone needs to start seriously thinking how a kid born is 2020 is going to afford a house in 2050 without a hand out. Something needs to be done now.

Houses don't appear, with all the work involved in them, out of need from nothing.

The need doesn't create the solution, the means do. Investors have the means.

I agree in principle that everyone should have shelter but it's not like every shelter is equal. As I said above, you would have trouble giving away low cost housing in bulk buildings built by the government because people want nice things.

Nice things cost money

 

[Madas]

Bolded is the problem here, all about me me me. Housing investment in this country is about building personal wealth. It's a selfish means to an unnecessary end. The person in your example could easily plow cash in to shares, super, bonds, cash or other investments and be perfectly well off for retirement. As it is, they're sucking up housing supply to the detriment of others. Investment properties are usually existing dwellings, they add very little to new housing stock. How many investors are sitting around thinking "Ooh, that migrant family in Melton probably can't afford a home, I'd better build one so they can have a roof over their heads"

I’m talking about building new houses as investments and don’t get me started about the I bit .
If we are all happy to live in a capitalist economy then unfortunately whether you like it or not it’s all about I .
If you want to have a discussion about democratic socialism we need to roll over to another thread because this one is about house prices being unaffordable.
I for one abhor the social disparity and wealth inequality that Capitalism brings but I like it’s freedoms.
Reading some of Ayn Rands works opened my eyes to the mechanisms of both systems and their benefits.

Property is far more attractive as an investment because it's right there, you can touch it, it makes money and you can drive past it and it's right there.

If the world goes off a cliff you still own one house worth of investment, whatever that means. If the buying power of the dollar dives you've got a bigger number, but it's still one house. The reality is that your shares, your bonds, your super - none of which are worth a single cent to you if it hits the fan, but if you've got a house you still have a house, you still have somewhere to live. Even the money in the bank can disappear since there isn't enough cash available for people to all draw it out anyway.

Nobody is snuggling under their stock portfolio at night.

You need only look at how pensions haven't risen to see that it's not a me, me, me thing. Nobody should expect to be looked after adequately. People without aren't exactly giving things away after holding out their hand for years.

The solution is bulk, low cost housing built as a construction industry stimulus. Nobody with money will want to live there, demand will be purely low capacity owners - and people will still prefer to buy something $100,000 more expensive and an hour further away from the city AND complain about it.

Thank you and agreed .
When I was in my twenties ( 30 odd years ago) we were told very succinctly that we needed to fund our own retirement because by the time it came around there would be a pittance of a pension . So we were encouraged to invest .
Many of us weren’t bought up in families where share trading was even discussed so had no idea on how that works. Many entered the trade environment and have been largely self employed since , most S/E tradies back in those days didn’t contribute to superannuation , the young ones now are getting smarter .
Agree in emphatically that in my personal circumstance I prefer to drive past my investment and know that everyone needs a house to live in , so as long as you haven’t leveraged yourself too far you should be able to ride through recessions when they come . I know people 20 years older than me that lost everything they own including their house in the GFC crash as it was all tied up in shares and SMSF.
Share trading to me requires a lot market research and preferably insider knowledge , not something many of us have .

 

[Madas]

So why has he got the 8m in the first place?

Lucky to be associated and Carried by Hamish Blake who actually is funny .

 

[HirdsTheWord]

Houses don't appear, with all the work involved in them, out of need from nothing.

The need doesn't create the solution, the means do. Investors have the means.

I agree in principle that everyone should have shelter but it's not like every shelter is equal. As I said above, you would have trouble giving away low cost housing in bulk buildings built by the government because people want nice things.

Nice things cost money

There is nothing wrong with your stance, however my point is Investors should not be given financial benefits (via tax breaks etc) to buy additional properties when someone buying their first home does not get these benefits.

Why should someone who already has wealth, be given benefits to create more wealth over someone who doesn't?.

It makes ZERO sense.

 

[HirdsTheWord]

I’m talking about building new houses as investments and don’t get me started about the I bit .
If we are all happy to live in a capitalist economy then unfortunately whether you like it or not it’s all about I .
If you want to have a discussion about democratic socialism we need to roll over to another thread because this one is about house prices being unaffordable.
I for one abhor the social disparity and wealth inequality that Capitalism brings but I like it’s freedoms.
Reading some of Ayn Rands works opened my eyes to the mechanisms of both systems and their benefits.






Thank you and agreed .
When I was in my twenties ( 30 odd years ago) we were told very succinctly that we needed to fund our own retirement because by the time it came around there would be a pittance of a pension . So we were encouraged to invest .
Many of us weren’t bought up in families where share trading was even discussed so had no idea on how that works. Many entered the trade environment and have been largely self employed since , most S/E tradies back in those days didn’t contribute to superannuation , the young ones now are getting smarter .
Agree in emphatically that in my personal circumstance I prefer to drive past my investment and know that everyone needs a house to live in , so as long as you haven’t leveraged yourself too far you should be able to ride through recessions when they come . I know people 20 years older than me that lost everything they own including their house in the GFC crash as it was all tied up in shares and SMSF.
Share trading to me requires a lot market research and preferably insider knowledge , not something many of us have .

There are zero issues with living in a capitalist society so I agree with you.

My issue is wealthy people are given investment tax benefits to accumulate more wealth over first time home buyers who do not have access to the same benefits.

 

[HairyO]

So why has he got the 8m in the first place?

He may not. He may have $2m and is borrowing $6m.

 

[HirdsTheWord]

He may not. He may have $2m and is borrowing $6m.

well he would still have the cashflow to accommodate it!

 

[Madas]

This is why superannuation is important and your point only highlights the flaws of what the government has created and has cultivated over the last 20 years, Housing should never been an investment scheme. Housing is not a commodity, it is a necessary means to put shelter over your head.

1/4 homes in this country being owned by a private investor is a disgrace. The supply argument is utter bullshit. There are more than enough homes in this country to cater for its population if you remove investors.

We need more people owning their own home going into retirement, so they are less reliant on government pensions. Home ownership across ALL age groups is dropping, including people about to go into retirement currently dropping. The only ownership % that is rising is Private Investors. This is not a good thing.

People do not need to own multiple properties at the detriment of future generations ability to buy their home.

The system as it stands is a sh*t show for everyone except the wealthy and its getting progressively worse year on year, someone needs to start seriously thinking how a kid born is 2020 is going to afford a house in 2050 without a hand out. Something needs to be done now.

You know what , I agree with you and have all along but only in the differentiation between investors receiving incentives to build new housing as compared to buying existing properties.
One of the simple solutions to tackle unaffordability would be to remove tax incentives to buy existing properties.

Another thing I see as a solution is working with my local council to try and create aesthetically pleasing , well located but affordable group dwellings that take up less land and share common infrastructure costs .
I’m really looking forward to working on these projects in my final years before retirement to say I’ve tried to contribute to this growing problem.

 

[FRUMPY]

Because his FOMO has led him to pay way more than that property is worth and exacerbate the problem of people creating these ridiculous bubble economies that just aren’t sustainable.

It’s just a show off wank , look at me , I’ve got $8 million dollars
Could have bought an amazing house for $2 million and used the rest to create housing for the homeless or victims of domestic violence.

That’s why !

 

[Taylor]

There is nothing wrong with your stance, however my point is Investors should not be given financial benefits (via tax breaks etc) to buy additional properties when someone buying their first home does not get these benefits.

Why should someone who already has wealth, be given benefits to create more wealth over someone who doesn't?.

It makes ZERO sense.

I agree with you but I'll take a devil's advocacy position for the sake of debate.

It makes sense if we are thinking of utilizing surplus means above the base cost of living into something that benefits others in the wider community, reducing their cost or risk or access because they either can't afford or otherwise can't secure the lending to get in.

The current cost of buying a house is roughly $100,000 cash and then $600 a week in mortgage payments. That's quite a threshold to jump, but if someone else takes their $100,000 and puts it into the house for you and you paid them $600 a week in rent then they've subsidised your access to the property for the cost of them receiving the future gains.

They take the risk, all the risk. The renter can walk out on short notice relative to the time property is held with nothing hanging over them. Their own employment security isn't as vital because they aren't servicing a debt.

Plenty of investment advisors promote the idea that renting and investing the difference can leave you better off, but we know the reason that doesn't work for so many and why their own home is usually the primary and only serious investment people make in their lives is because it's effectively forced savings.

But allow me to raise an alternative. Owning an investment property doesn't make you money. Think of how much you pay on a mortgage over thirty years, do we really expect property to triple in price from here?

The entire concept is money making from banks and other lenders that secure your payment of multiples of your house price over decades, the employers keep you working because you have to.

 

[HirdyLannister]

We're looking at signing paperwork to build a 3rd property, 250sqm block and will put a low maintenance house on it. Probably be all in at 500k or less
Rent it out claim depreciation, still early 30s and earn less than six figures.


Done rough calcs on my super too, very conservative I'll have 6 million if I work for another 30 years but I don't trust the government,they'll see everyone having millions and they'll * us somehow with super in 20-30years.

 

[Madas]

I agree with you but I'll take a devil's advocacy position for the sake of debate.

It makes sense if we are thinking of utilizing surplus means above the base cost of living into something that benefits others in the wider community, reducing their cost or risk or access because they either can't afford or otherwise can't secure the lending to get in.

The current cost of buying a house is roughly $100,000 cash and then $600 a week in mortgage payments. That's quite a threshold to jump, but if someone else takes their $100,000 and puts it into the house for you and you paid them $600 a week in rent then they've subsidised your access to the property for the cost of them receiving the future gains.

They take the risk, all the risk. The renter can walk out on short notice relative to the time property is held with nothing hanging over them. Their own employment security isn't as vital because they aren't servicing a debt.

Plenty of investment advisors promote the idea that renting and investing the difference can leave you better off, but we know the reason that doesn't work for so many and why their own home is usually the primary and only serious investment people make in their lives is because it's effectively forced savings.

But allow me to raise an alternative. Owning an investment property doesn't make you money. Think of how much you pay on a mortgage over thirty years, do we really expect property to triple in price from here?

The entire concept is money making from banks and other lenders that secure your payment of multiples of your house price over decades, the employers keep you working because you have to.

Spot on
There is a need for rental accommodation, I can’t say for sure what % of the population needs it but it’s there.

Property investment is a huge capital outlay and a massive yoke around one’s neck so a perfect mechanism to keep people working , paying taxes and banks making huge profits.
I look at it as forced saving and the tax benefits somewhat negate the massive amount you are paying back in interest over the life of the loan.
Definitely smarter ways to make money but some of us don’t have the capacity or understanding to undertake them .

I guess incrementally, share trading can be done in smaller portions with quicker returns if done wisely.

 

[Frank Grimes]

I have an investment property myself. Despite that I am actually in favor of the removal of negative gearing (admittedly easy for me to say seeing I'm positively geared). When I invested I personally wasn't even thinking of negative gearing. I was just thinking of holding the property long term for a continuous income.

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.

 

[HirdsTheWord]

I agree with you but I'll take a devil's advocacy position for the sake of debate.

It makes sense if we are thinking of utilizing surplus means above the base cost of living into something that benefits others in the wider community, reducing their cost or risk or access because they either can't afford or otherwise can't secure the lending to get in.

The current cost of buying a house is roughly $100,000 cash and then $600 a week in mortgage payments. That's quite a threshold to jump, but if someone else takes their $100,000 and puts it into the house for you and you paid them $600 a week in rent then they've subsidised your access to the property for the cost of them receiving the future gains.

They take the risk, all the risk. The renter can walk out on short notice relative to the time property is held with nothing hanging over them. Their own employment security isn't as vital because they aren't servicing a debt.

Plenty of investment advisors promote the idea that renting and investing the difference can leave you better off, but we know the reason that doesn't work for so many and why their own home is usually the primary and only serious investment people make in their lives is because it's effectively forced savings.

But allow me to raise an alternative. Owning an investment property doesn't make you money. Think of how much you pay on a mortgage over thirty years, do we really expect property to triple in price from here?

The entire concept is money making from banks and other lenders that secure your payment of multiples of your house price over decades, the employers keep you working because you have to.

Firstly, i'm not sure what state you live in but in NSW its almost Triple that amount just for the deposit.

Secondly Owning an investment Property DOES make you money, in the long term. I have no issues with this if you can afford it. But I disagree anyone should be getting tax benefits to do so, unless First Home Buyers also get tax benefits on their properties.

Thirdly, have you been under a rock? from 2020-2021 alone properties on avg jumped 20%-30%. In some suburbs it has been as much as 47%.\

Fourthly, the reason people rent is because they cant afford to buy. if prices were lower likely alot of renters would become home owners.

in 1990 (30 years ago) the avg House price in Sydney was around $184,000....Today it is $1,500,000. That's 8 x Growth rate over 30 years.

You reckon in 1980 they expected properties to rise eightfold in value?

The current trajectory of housing in Sydney 100% is on pace to triple within another 30 years, if not more. This is why something needs to be done right now. otherwise we are completely ******* over future generations.

Conclusion? There is ZERO need for housing investment schemes in this country any longer. They need to be removed now in order to ensure future generations can buy.

 

[Jafa]

We're looking at signing paperwork to build a 3rd property, 250sqm block and will put a low maintenance house on it. Probably be all in at 500k or less
Rent it out claim depreciation, still early 30s and earn less than six figures.

I have two commercial properties and one rental - all rented. I find the commercial properties to be a much better option. The rent is higher, customer pays all the rates and insurance. The rental just covers expenses and the small interest amount.

One of the commercial rentals is in my super fund - the other we are moving across to a unit trust in the super fund. In 8 years I retire and the rent will be tax free. If you are worried about the government and your super - that might be a strategy to retain value.

Edit - I also have a some land in my super fund that I am developing with the money in my super fund. Its cheaper because the money is taxed at the lower rate. I cant live in it (until I retire) but I could rent it out if I wanted to. For us its our retirement location but for someone younger it could be an investment strategy. Doesn't have to be residential - if you had enough coin in there it could be a commercial venture.

 

[HirdsTheWord]

I have an investment property myself. Despite that I am actually in favor of the removal of negative gearing (admittedly easy for me to say seeing I'm positively geared). When I invested I personally wasn't even thinking of negative gearing. I was just thinking of holding the property long term for a continuous income.

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.

That's because labors policies were watered down.

Negative Gearing should be removed for EVERYONE. Labor only suggested it be removed from future policy, IE all those who had existing negative gearing could keep it. Get rid of it entirely and you are looking at a much larger drop.

 

[Gigantic]

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.

100% agree with you here. We're effectively incentivising loss making with negative gearing.

There's a terrible culture of tax minimisation where people ask how they can reduce how much tax they pay, rather than how they can increase their after-tax income. You may end up at the same spot, but the attitude is different.

 

[Madas]

I have an investment property myself. Despite that I am actually in favor of the removal of negative gearing (admittedly easy for me to say seeing I'm positively geared). When I invested I personally wasn't even thinking of negative gearing. I was just thinking of holding the property long term for a continuous income.

I don't think it's removal will have a major impact on property prices as others may think (Gratten Institute research suggested it would only drop prices by 2% based on Labors policies last election). However I'm against it for two reasons:
1/ the idea of someone deliberately making a loss to reduce their taxable income from their working wage doesn't sit right with me.
2/ I think it is just waste of tax payers money in general. The money gained by it's removal would be better used on something else.

I mentioned this earlier in The thread but it’s just another way of circulating money into the economy.
There’s nothing intrinsically wrong with it in principle.
It’s an easy target hence people get fixated on it .
If it works as a stimulus to get young people into the market and has them saving for retirement it’s a good thing. Keeping them working once yoked is another way of the government ensuring a steady income of taxes.

For those who didn’t get in the super train early enough and went property instead , they are hoping for a passive income in their retirement.
If there’s any left after that then their kids and grandkids may get the benefit of an inheritance, but retirement and old age is expensive so not necessarily going to happen.

 

[HirdsTheWord]

100% agree with you here. We're effectively incentivising loss making with negative gearing.

There's a terrible culture of tax minimisation where people ask how they can reduce how much tax they pay, rather than how they can increase their after-tax income. You may end up at the same spot, but the attitude is different.

I don't have an issue with minimizing their tax, lets be honest. The government does a pretty shitty job of spending it. however when tax breaks cultivates expressed housing growth that's when it becomes an issue.

 

[Frank Grimes]

That's because labors policies were watered down.

Negative Gearing should be removed for EVERYONE. Labor only suggested it be removed from future policy, IE all those who had existing negative gearing could keep it. Get rid of it entirely and you are looking at a much larger drop.

I don't have any research on what it would have been if it applied to everyone, but I still don't think it would have had a major impact on house price wise.

The biggest impact of removing negative gearing would be on those who purched the investment property before it's removal. The investors who purchased their investment property 5, 10, 20 years previous would have less and less impact on them over time because the property would be less negatively geared or even positively geared as time goes by.