Property Watch

[Scotland]

Australian governments won't let cap city real estate markets 'collapse'.

If someone speculatively holds a dozen properties with minimal equity hoping for capital gains and the market crashes and they lose out, I won't lose any sleep. Why should investing in real estate be any any different to investing in shares in a company or starting up a small business etc?

The problem is, for every property owned by an investor, there are two equivalent properties owned by owner occupiers. It's easy to sit back and say 'Australia would better off if that $400k house was only $300k', but what about 'working families' who already own these properties or are paying them off at $400k? Any government that actively seeks to stop home owners from losing value will win votes. Lots of votes.

 

[Smell The Glove]

Australian governments won't let cap city real estate markets 'collapse'.

If someone speculatively holds a dozen properties with minimal equity hoping for capital gains and the market crashes and they lose out, I won't lose any sleep. Why should investing in real estate be any any different to investing in shares in a company or starting up a small business etc?

The problem is, for every property owned by an investor, there are two equivalent properties owned by owner occupiers. It's easy to sit back and say 'Australia would better off if that $400k house was only $300k', but what about 'working families' who already own these properties or are paying them off at $400k? Any government that actively seeks to stop home owners from losing value will win votes. Lots of votes.

Its paper wealth. That's the key here. Increased house prices mean an increased percentage of disposable income goes towards paying off a debt on a non productive asset. Great for the banks, society loses. That's why we have the most profitable banks in the world.

And then the principal difference between investors and OOs is that investors (or infestors) take an active interest in inflating the market for capital growth, while OOs are principally concerned about the size of their mortgage relative to their income.

And when disposable income drops, that's when retailers lose out on sales, sack staff, which leads to higher unemployment yadda yadda. Governments are far more sensitive to unemployment figures than whether Mr and Mrs Smith in Watsonia just lost a theoretical $20K on their home. Its an invisible figure until they actually decide to sell. Only investors flip homes.

And Australian governments will have no choice but to let these markets collapse if they simply cannot afford to prop them up any longer. That's why governments prop up house prices - the CGT is far too juicy a carrot for them not to. The greatest tool for keeping house prices high is immigration. Thats why governments conveniently ignore debating actual immigration and focus on demonizing a bunch of poor boat people.

But when an entire generation (ie. Gen Y) start complaining about housing affordability and start causing social and civil unrest, governments will have no option but to deal with the issue.

 

[LouisCK]

Australian governments won't let cap city real estate markets 'collapse'.

If someone speculatively holds a dozen properties with minimal equity hoping for capital gains and the market crashes and they lose out, I won't lose any sleep. Why should investing in real estate be any any different to investing in shares in a company or starting up a small business etc?

The problem is, for every property owned by an investor, there are two equivalent properties owned by owner occupiers. It's easy to sit back and say 'Australia would better off if that $400k house was only $300k', but what about 'working families' who already own these properties or are paying them off at $400k? Any government that actively seeks to stop home owners from losing value will win votes. Lots of votes.

There's only so much a government can do regarding house prices, such is the size of the market.

 

[kickazz]

A crash leaving highly leveraged people in a bad position probably won't do too many people any favours.

Lowering of prices may be a vote - loser, but I'll tell you a bigger one: Mass Unemployment. If Aussies continue to be over-leveraged in non-productive assets, then productivity will go down, and then unemployment goes up. Only thing worse than a governement that allows 'Working families' to lose value on their home would be a government that allows 'Unemployed Families' to lose value on their home.

Property is only worth what people are prepared to pay for it. We've had a boom because of recent wage inflation and pretty lax lending criteria. I don't think a crash is a good thing at all, but perhaps tightening on lending criteria so that Working Families have more money to spend on other things, things that in turn that keep people in jobs, will be better for the economy and win more votes overall.

So governaments will not want a crash, but I can't see them really wanting to actively prop the market up with additional legislation.

 

[Scotland]

I am not pro-high house prices, FYI. A long way from it. I think the Australian obsession with real estate wealth is unhealthy.

I disagree with:

And then the principal difference between investors and OOs is that investors (or infestors) take an active interest in inflating the market for capital growth, while OOs are principally concerned about the size of their mortgage relative to their income.

There is an inordinately large number of people who obsess over the value of their PPOR and think that the more the value of their house goes up, the richer they are. How many times have you heard the phrase 'add value to my/your home'? Sure if my house goes up $100k and none of the other houses on the street do the same then it's a win for me, but how often does that happen?

I agree with:

Its paper wealth. That's the key here. Increased house prices mean an increased percentage of disposable income goes towards paying off a debt on a non productive asset. Great for the banks, society loses. That's why we have the most profitable banks in the world.

And when disposable income drops, that's when retailers lose out on sales, sack staff, which leads to higher unemployment yadda yadda. Governments are far more sensitive to unemployment figures than whether Mr and Mrs Smith in Watsonia just lost a theoretical $20K on their home. Its an invisible figure until they actually decide to sell. Only investors flip homes.

Every prospective homebuyer in Australia should be made to read this post.

And Australian governments will have no choice but to let these markets collapse if they simply cannot afford to prop them up any longer. That's why governments prop up house prices - the CGT is far too juicy a carrot for them not to. The greatest tool for keeping house prices high is immigration. Thats why governments conveniently ignore debating actual immigration and focus on demonizing a bunch of poor boat people.

But when an entire generation (ie. Gen Y) start complaining about housing affordability and start causing social and civil unrest, governments will have no option but to deal with the issue.

Immigration is key. Let more people in and you stimulate demand for existing/new dwellings, and have more consumers for the retail sector. We gave up on being productive many moons ago, we're a 'services economy' now.

Personally I reckon the best thing that can happen to real estate in Australia is for prices to sit where they are for an extended period. Plenty of houses over hare are worth the same as they were in 2007 so we've had 6 years already. Excluding additional immigration demand I can see no reason for prices to rise in the immediate future.

 

[sabre_ac]

Immigration is key. Let more people in and you stimulate demand for existing/new dwellings, and have more consumers for the retail sector. We gave up on being productive many moons ago, we're a 'services economy' now.

Surely it would be new dwellings, the majority of new immigrants are not bringing significant wealth and are therefore not really going to impact middle to upper range of house prices.

A big driver for house prices is that allot of people are suddenly making big salary with little training or in jobs historically paid poorly. There is allot of mortgages taken on on the implied idea that current salaries for these people will remain that high indefinitely, which is not the case. How many times have we seen stories of teachers/school bus drivers quitting their job to drive trucks on the mines for more money.

Personally I reckon the best thing that can happen to real estate in Australia is for prices to sit where they are for an extended period. Plenty of houses over hare are worth the same as they were in 2007 so we've had 6 years already. Excluding additional immigration demand I can see no reason for prices to rise in the immediate future.

I think that's exactly what is happening, despite some of the clearly biased/leveraged "experts" broadcasting otherwise.

 

[LouisCK]

Surely it would be new dwellings, the majority of new immigrants are not bringing significant wealth and are therefore not really going to impact middle to upper range of house prices.

WRONG.

You're equating refugees with the majority. They're a tiny, tiny, percentage of new migrants.

 

[Scotland]

WRONG.

You're equating refugees with the majority. They're a tiny, tiny, percentage of new migrants.

Yeah, LouisCK is right here. Stopped watch and all that.

A big driver for house prices is that allot of people are suddenly making big salary with little training or in jobs historically paid poorly. There is allot of mortgages taken on on the implied idea that current salaries for these people will remain that high indefinitely, which is not the case. How many times have we seen stories of teachers/school bus drivers quitting their job to drive trucks on the mines for more money

Agree with this. Salaries tend not to go backwards, but work dries up.

I think that's exactly what is happening, despite some of the clearly biased/leveraged "experts" broadcasting otherwise.

I think this is needed. Not just because prices actually can't go up at rate higher than inflation forever and ever, but to change the mindset of Average Joe who is obsessed with the value of his PPOR and desperate to get an investment property.

 

[LouisCK]

In real terms household income has dropped significantly in the last 40 years.

 

[sabre_ac]

WRONG.

You're equating refugees with the majority. They're a tiny, tiny, percentage of new migrants.

What price range to you think the majority of new migrants are purchashing in?

My guess would be the below the 500k mark, so your talking new housing estate territory.

 

[LouisCK]

Guessing is about all we can do, but if the family can afford to put their kids through uni paying cash up front, and use the student visa to roll into skilled migration and get PR, they have plenty of coin.

 

[Smell The Glove]

What price range to you think the majority of new migrants are purchashing in?

My guess would be the below the 500k mark, so your talking new housing estate territory.

A statement not backed up by the facts. There is no evdience to suggest that immigrants add to the housing stock, moreso that they take from it. That's the whole point. Foreign buyers are no different to local buyers - just as local investors wont touch certain off-the-plan developments, neither will foreigners. No reason to suggest foreigner buyers are any less educated about the market they are buying into than locals. They go where the money is.

And let's not forget the AUD, which no doubt will see a major infux of Asian dinero to make up for any shortfall in FHBs: http://www.theaustralian.com.au/exe...-home-the-buyers/story-fn6njxlr-1226675103691.

You seem to have believed the image of immgrants being dirtly, poor boat people. The federal government must love you- you have swallowed their nonsense hook, line and sinker.

The Fed Gov will jump ramp up immigration whenever there is any indication that tax receipts are softening and unemployment is rising. Especially with Rudd in charge.

Rinse and repeat.

Beats having to actually implement policy to improve productivity. And its far easier (for the time being) to try and force FHB into expensive, overcrowded, infrastructure-less housing while they are still relatively young (20-32) and not nearly the bellweather generation politically like the Boomers/Xers.

That can't last forever though.

 

[LouisCK]

We need something to spur the boomers on to retirement, or preferably passing away en masse.

But its a problem for all the developed countries.

 

[Smell The Glove]

We need something to spur the boomers on to retirement, or preferably passing away en masse.

But its a problem for all the developed countries.

That's great for the Gen Yers and Zers who have parents who own property and can inherit.

No difference for the rest of us with parents that have nothing. We still have to compete with the foreign buyers and investors.

 

[Scotland]

http://www.perthnow.com.au/news/wes...-property-market/story-fnhocxo3-1226675342042

Apparently agents are 'leaving in droves'. I guess we'll miss the huge contribution they make to society...

 

[sabre_ac]

A statement not backed up by the facts. There is no evdience to suggest that immigrants add to the housing stock, moreso that they take from it. That's the whole point. Foreign buyers are no different to local buyers - just as local investors wont touch certain off-the-plan developments, neither will foreigners. No reason to suggest foreigner buyers are any less educated about the market they are buying into than locals. They go where the money is.

Where are your "facts" or hard numbers to back up your conspiracy theories? Buyers buy what they can afford or receive funding for. I still maintain its in the middle to lower bracket which is a big chunk of the new housing estates. If you can present any evidence to suggest otherwise I'm happy to concede the point. Whether they inflate the price is hard to argue for, but they I think they maintain demand.

And let's not forget the AUD, which no doubt will see a major infux of Asian dinero to make up for any shortfall in FHBs: http://www.theaustralian.com.au/exe...-home-the-buyers/story-fn6njxlr-1226675103691.

I currently haven't paid for a subscription to read that entire article, so it is difficult to properly comment. However reading the first paragraph they give access to, suggests its just another one of those "journalist pieces" attempting to pump up the market.

You seem to have believed the image of immgrants being dirtly, poor boat people. The federal government must love you- you have swallowed their nonsense hook, line and sinker.

Not at all, I am well aware most immigrants do not come to Australia on a boat or illegally for that matter. I do believe however they are in the low to middle income class with little capital.

The Fed Gov will jump ramp up immigration whenever there is any indication that tax receipts are softening and unemployment is rising. Especially with Rudd in charge.

Rinse and repeat.

The government will ramp up immigration while there is a shortage in labour, while there is work that Australians won't do (Which is what immigrants normally find themselves doing), immigration is good for this country.

Do you believe that high immigration is bad for the country (High as in greater proportions than the rest of the world?

Beats having to actually implement policy to improve productivity. And its far easier (for the time being) to try and force FHB into expensive, overcrowded, infrastructure-less housing while they are still relatively young (20-32) and not nearly the bellweather generation politically like the Boomers/Xers.

That can't last forever though.

We almost agree on something.

What do you mean by overcrowded? High density housing is the future and most people who have lived it or seen it abroad can testify to it working.

I do agree the current economic climate won't last forever.

 

[sabre_ac]

Surely the impact of climate change will become more of an issue on house prices and desirability to live in Australia in the future.


City living to get more hot and bothered

http://www.theage.com.au/national/city-living-to-get-more-hot-and-bothered-20130708-2pmcv.html

Parts of Australia's cities will be up to 3.7 degrees hotter by 2050, as urban expansion spawns ever more asphalt and concrete, new research suggests.


Perth could sweat through 50 degree summers

http://www.watoday.com.au/wa-news/perth-could-sweat-through-50-degree-summers-20130627-2ozhd.html

The likelihood of Perth sweating through a 50 degree summer sometime in the future is "quite high," according to new research released on Thursday.

 

[sabre_ac]

http://www.perthnow.com.au/news/wes...-property-market/story-fnhocxo3-1226675342042

Apparently agents are 'leaving in droves'. I guess we'll miss the huge contribution they make to society...

How long until industry itself becoming redundant?

With technology and social networking, the days of listing on an ebay type site which can provide accurate details on pricing and access to buyers isn't that far away.

 

[Scotland]

How long until industry itself becoming redundant?

With technology and social networking, the days of listing on an ebay type site which can provide accurate details on pricing and access to buyers isn't that far away.

I really see little value in what RE agents actually do nowadays.

I sure as hell wouldn't be giving one a 2-3% commission to sell my house at the minute considering similar properties are coming up and selling quickly in the same price range.

 

[Tzatziki_Man]

Houses are way to expensive here.

In America, Florida, right near Miami, you can buy a 4 bedroom home with 2,500sq space for 550,000. With a swimming pool in the back too. Here for 550,000 you can't purchase a house in the Northern Suburbs anymore. Ridiculous.

The property market has been reemed up the arse, those baby boomers with 12 homes (yes I know a few) will leave 4 for every child. Unfortunately for people like me (who's parents didn't set themselves up well and worked their arse off for my education) I'll have to save, stay consistent from my 20s and purchase a house in my late 20s, early 30s.

Houses aren't easy to buy, but with patience it can be done. I'm working on my career, making sure I have a high paying job, every year and saving my arse off. I'm saving about 5k every 2 months which is what I'm trying to do.

Opening up one of those government first home owner accounts can work well too.

Not all hope is lost, that's my point, but it's definitely difficult and frustrating for those young peeps without much support.

 

[thetank]

Negative gearing is holding up property prices. Remove that and property would revert to sane levels. Perhaps our economy would pick up as well, with more capital available for investment in business and technology instead of being parked away in non-productive real estate.

 

[sabre_ac]

Most people agree that baby boomers are holding a large chunk of the wealth, however what will happen to that wealth is definitely up for debate.

Australia is not a culture of "building generational wealth" especially when you compare to that of the Asian nations. This notion that house ownership will be passed down the generations and children of boomers without wealth will never catch up is over played.

I think the philosophy of "Spend the kids inheritance" is very prevalent, the boomers will downgrade in size and upgrade in lifestyle expenditure. Air and cruise liner travel will benefit in a big way from this as will restaurants and premium sporting or music events. Let's not forget that most boomers will live 20 years after retirement, medical and basic day to day needs will chew up a huge percentage of savings and investment. All of this is new territory as far as the oldies go.

While I don't necessarily believe that real estate is a good investment today, I'll always be of the opinion that owning is better than renting after a certain age or once you've hit a certain path in life (Some will debate this).

Those of us in our 20's or 30's have up to 40 years of work ahead of us, think about what has happened to the world in that time from a economic, technological and mentality perspective. To suggest that someone is disadvantaged because they don't have wealthy parents and will always be so a cop out. Especially when you take into account the opportunities at all stages in life present to the average Australian.

 

[bunsen burner]

Why should investing in real estate be any any different to investing in shares in a company or starting up a small business etc?

1. To protect the "great australian dream". Governments want to avoid non investors being caught in a massive crash. To be more specific, making sure there dream isn't worth significantly less than they owe on it.

2. To provide people with a way to build a retirement nest egg

3. To provide incentive for people to provide housing to renters.


Looks like you already explained point 1.

 

[bunsen burner]

Here for 550,000 you can't purchase a house in the Northern Suburbs anymore. Ridiculous.

A lot of people think the problem is property in itself but house prices are merely a function of the market. When you can't build an average house for less than $400k (minus land) because all the tradies are expecting $120k a year then no amount of artificial policies are going to change the house price unless it reduces wages.

Since we had the economic boom 10-15 years back out economy was put on steroids (but well controlled by sound policy). Prices are starting to move again but I suspect his will be short lived. It will take time for that boom to properly correct.

It's the cyclic nature of economies. I have 2 tips for you:

1. Your age might not have timed with the market but be thankful we have good economic managers on both sides of politics.
2. Welcome to the facts of life, son.

I'll have to save, stay consistent from my 20s and purchase a house in my late 20s, early 30s.

Sounds like you have to do exactly what baby boomers did. I just don't understand why Gen Y think it's normal to buy houses in mid 20s, or 20s at all? Maybe the word "GenY" is a clue?

Houses aren't easy to buy, but with patience it can be done. I'm working on my career, making sure I have a high paying job, every year and saving my arse off. I'm saving about 5k every 2 months which is what I'm trying to do.

Refreshing to see you understand reality. This is how it's always been and always will be.

 

[LouisCK]

Sounds like you have to do exactly what baby boomers did. I just don't understand why Gen Y think it's normal to buy houses in mid 20s, or 20s at all? Maybe the word "GenY" is a clue?

Its far more expensive to purchase a home as a percentage or multiple of annual income.

So yeah, it isn't something "Gen Y" is just imagining.