The House Price Thread

[Run n Spread]

Now whether you are a renter condemned to be at the mercy of a Land Lord for life or a Property tycoon who owns 8 houses and a few flats nobody can deny this is a major issue.

Thoughts as to why? Solutions? Even if you think it is a problem and people should suck it up or do we go full Socialist?

My $.02. This is very much a structural issue bought about over time and while there are major issues I don't think there is any one single cause:

1. Negative Gearing
2. Capital Gains Tax Breaks
3. Immigration
4. Cheap Credit and Low Interest Rates
5. Cultural Factors
6. Supply Issues and High Density Living Spaces or lack there of

all play a part. With 1, 3 and 4 the most significant. Property as an Asset class is basically shitting over every other investment and that is where people's money is going. Not just the rich but everyone with a few bucks to spare it seems. And good for them I simply thou do not know how long this can continue. Everything has a ceiling. Growth can not continue forever.

Thoughts?

 

[Pessimistic]

I already had a thread. But you described it better

 

[Upgrayedd]

They wouldn't dare make housing affordable because it's one of the biggest industries where Australia gets oversea's investments

The system works fine!

 

[Admiral Byng]

7. Transfer costs in the form of stamp duties. Restricts the rate of turnover, people hang on to properties long after they become unsuitable because of the stamp duty hit involved in moving.

 

[Scotland]

http://www.news.com.au/finance/real...e/news-story/2c48a4ee9aa75abc14f95b7cdebba007

As a nurse Damien takes home around $60,000 dollars a year after tax, $11,000 of which he estimates is spent on rent.

In six years of fulltime 40 hour weeks he has managed to save $6000. He admits he could have saved more if he hadn’t taken an annual trip overseas but with house prices in his area averaging $2.1 million, or 35 times his annual income, it wouldn’t have made much difference. Even unit prices are above $1 million in his area and still well beyond his means as an everyday working class Australian.

Elsewhere in Sydney prices are less than in the East, but the average house still costs over $1 million.

Errr, what?

$49,000 in the hand - after accommodation costs - and he saves $1,000 of it? People raise families on less. Sort your life out, son.

 

[Scotland]

But yeah, the problem is asset values - not incomes. The only way incomes are going to go up significantly is if we inflate and subsequently devalue the dollar.

The solution requires a cultural shift away from funneling income into real estate as an asset class. Needs more appropriate taxation of land and investment properties which won't happen while the baby boomers (who got rich on the deal) don't hold the majority of votes.

 

[Pessimistic]

As I mentioned in the other thread. Plenty of Genx ers have benefited from property boom too

And gen x and y will retire with much better super balances than boomers

 

[Pessimistic]

They wouldn't dare make housing affordable because it's one of the biggest industries where Australia gets oversea's investments

The system works fine!

Plenty believe it's people spending equity which is keeping the economy going

 

[VineyIsLORD]

Now whether you are a renter condemned to be at the mercy of a Land Lord for life or a Property tycoon who owns 8 houses and a few flats nobody can deny this is a major issue.

Thoughts as to why? Solutions? Even if you think it is a problem and people should suck it up or do we go full Socialist?

My $.02. This is very much a structural issue bought about over time and while there are major issues I don't think there is any one single cause:

1. Negative Gearing
2. Capital Gains Tax Breaks
3. Immigration
4. Cheap Credit and Low Interest Rates
5. Cultural Factors
6. Supply Issues and High Density Living Spaces or lack there of

all play a part. With 1, 3 and 4 the most significant. Property as an Asset class is basically shitting over every other investment and that is where people's money is going. Not just the rich but everyone with a few bucks to spare it seems. And good for them I simply thou do not know how long this can continue. Everything has a ceiling. Growth can not continue forever.

Thoughts?

Agree with you.

And all of those things remain due to a capitalist system where property developers' desires of larger profits have come ahead of the basic human right of shelter.

 

[VineyIsLORD]

As I mentioned in the other thread. Plenty of Genx ers have benefited from property boom too

And gen x and y will retire with much better super balances than boomers

Gen Y wont get to touch their super

 

[VineyIsLORD]

http://www.news.com.au/finance/real...e/news-story/2c48a4ee9aa75abc14f95b7cdebba007



Errr, what?

$49,000 in the hand - after accommodation costs - and he saves $1,000 of it? People raise families on less. Sort your life out, son.

I want to know where he is renting for less than $1,000 a month.

 

[VineyIsLORD]

7. Transfer costs in the form of stamp duties. Restricts the rate of turnover, people hang on to properties long after they become unsuitable because of the stamp duty hit involved in moving.

Most ALP state governmemts are planning on moving away from stamp duty in favour of land tax, eventually.

 

[tandino]

Most ALP state governmemts are planning on moving away from stamp duty in favour of land tax, eventually.

That's going to be a tough sell

 

[VineyIsLORD]

That's going to be a tough sell

Its already beginning.

Reality is stamp duty is inefficient and inconsistent.

 

[volcboy]

In terms of the list above, I'll throw a few simple policy ideas into the mix to see what people think and get some discussion.

1. Removing negative gearing, but with a 'grandfathering' clause that means it can be claimed on properties already owned (essentially the policy Labor took to the last election).

2. Reducing or limiting negative gearing across the board. This could be done with a cap on the losses that could be claimed overall (say $20,000), or the number of properties on which losses could be claimed (e.g. claimed only on 1-2 properties). The aim would be to discourage people loading up on 8-10 investment properties. Would need to have a phase in period so the market wasn't flooded with properties.

3. Introducing a %levy on loans for investment properties (~0.5%-1.0%). Any money collected by the government could be used to assist first-home buyers in some way (grants, stamp duty exemptions etc.) and/or put into social housing schemes.

4. Cutting the capital gains tax discount bought in by the Howard Government.

5. Investment in job creation in and transport to regional centers, where property is more abundant and better value. Could also include infrastructure projects or financial assistance to entice businesses (e.g. NBN, financial incentives such as payroll tax deductions)

I'd be interested in any other ideas that people would have.

 

[Maggie5]

My brother has come up with a solution for one of his children. Has two (both married), the son is already in his own home and has been for some time.

His daughter still renting.

Got them together and as they are both beneficiaries when he dies, he suggested that he get a valuation on the home (modest two bedroom in Brunswick) and that his daughter pay to the brother his half, daughter and husband move in with him rent free with the aim of building an extension to suit her later on.

Her husband is very handy and has mates in the building trade so should work out well for them.

Two months in and they are still getting on well.

Maybe more parents, especially those living alone could do this.

 

[volcboy]

My brother has come up with a solution for one of his children. Has two (both married), the son is already in his own home and has been for some time.

His daughter still renting.

Got them together and as they are both beneficiaries when he dies, he suggested that he get a valuation on the home (modest two bedroom in Brunswick) and that his daughter pay to the brother his half, daughter and husband move in with him rent free with the aim of building an extension to suit her later on.

Her husband is very handy and has mates in the building trade so should work out well for them.

Two months in and they are still getting on well.

Maybe more parents, especially those living alone could do this.

The only issue with this is; what if children don't have parents who own a house? Or who don't own a house in a desirable, high-growth area like Brunswick? If children are children of renters, should they simply be financially 'locked out' of buying a house?

It's like the suggestion of Turnbull that wealthy parents should 'shell out' to help their kids buy a home; all fine if you have wealthy parents, but what about if you do not?

 

[Scotland]

I want to know where he is renting for less than $1,000 a month.

Shared house that is $900 a week.

I'd be surprised if my yearly expenses were $1,000 a week including accommodation.

 

[VineyIsLORD]

In terms of the list above, I'll throw a few simple policy ideas into the mix to see what people think and get some discussion.

1. Removing negative gearing, but with a 'grandfathering' clause that means it can be claimed on properties already owned (essentially the policy Labor took to the last election).

2. Reducing or limiting negative gearing across the board. This could be done with a cap on the losses that could be claimed overall (say $20,000), or the number of properties on which losses could be claimed (e.g. claimed only on 1-2 properties). The aim would be to discourage people loading up on 8-10 investment properties. Would need to have a phase in period so the market wasn't flooded with properties.

3. Introducing a %levy on loans for investment properties (~0.5%-1.0%). Any money collected by the government could be used to assist first-home buyers in some way (grants, stamp duty exemptions etc.) and/or put into social housing schemes.

4. Cutting the capital gains tax discount bought in by the Howard Government.

5. Investment in job creation in and transport to regional centers, where property is more abundant and better value. Could also include infrastructure projects or financial assistance to entice businesses (e.g. NBN, financial incentives such as payroll tax deductions)

I'd be interested in any other ideas that people would have.

6. Wait for the whole thing to collapse in epic fashion. Get a taste for human flesh. Be armed.

 

[Maggie5]

The only issue with this is; what if children don't have parents who own a house? Or who don't own a house in a desirable, high-growth area like Brunswick? If children are children of renters, should they simply be financially 'locked out' of buying a house?

It's like the suggestion of Turnbull that wealthy parents should 'shell out' to help their kids buy a home; all fine if you have wealthy parents, but what about if you do not?

For those that do own a house, was only an option. There are many elderly people living on their own in their house.
Brunswick is not a high growth area.

 

[Howard Littlejohn]

They wouldn't dare make housing affordable because it's one of the biggest industries where Australia gets oversea's investments

The system works fine!

They need regular turenover at high prices to maintain the fiction of economic growth. It goes into GDP figures and nobody wants to be the government forced to admit a real economy recession has been underway for a few years.

 

[volcboy]

6. Wait for the whole thing to collapse in epic fashion. Get a taste for human flesh. Be armed.

A collapse in Australian house prices will come, one way or another. Whether it is sudden fall or a slow car crash depends on global economic issues. Whether the banks can survive it or crash with it leads to whether your second or third sentences come true.

 

[Run n Spread]

Agree with you.

And all of those things remain due to a capitalist system where property developers' desires of larger profits have come ahead of the basic human right of shelter.

Best explanation I have heard comes from Ricardo's Law of Rent/Tax. I can't be bothered going through absolutely all of it but in essence it states: The Value of Rent/Income of a set piece of land is the excess the best piece of Land (plot a) can produce as opposed to a crap piece (Plot B).

Now while this is a economic theory it can be skewed to include property.

i.e. You buy a crap house in a crap area which is unsafe and in the middle of nowhere.

Over a decade however council and government launch a crackdown, kicking the meth heads out, building a new transport network, some gardens. Suddenly Property tycons move in and buy in, businesses establish and the area is gentrified as respectable families move in etc. The value goes up tenfold.

Now as an owner you have done sweet f all to contribute to the meteoric rise. Just bought and sat. (A share holder at least contributes capital). The value of your land is as a result of the Community tide that rose around you not your brilliance. Thus why should the owner reap all the profit for the value?

Now if this is Owner/Occupied and the owner has their base, fair play there has to be fairness. Yet if it is an investment stream and they sell at a Gold Price they should be taxed. As their "income" from the sale is a result of the hard work of others not them.

 

[Run n Spread]

A collapse in Australian house prices will come, one way or another. Whether it is sudden fall or a slow car crash depends on global economic issues. Whether the banks can survive it or crash with it leads to whether your second or third sentences come true.

Problem here is say Interest Rates move up to 6%. A hell of a lot of people are screwed and screwed further with a slowing economy. Now if the bank can't recoup its debt it can't pay out deposits. It can't pay all its deposits it basically cuts off its cash flow which leads to some very pissed off people and those that can't finance their next meal.

That happens then banks are under and useless. How will people work? They will need to be paid in cash/some other currency of value. They won't pay tax so will have their currency and have to fend for themselves. Given most Australians are urbanised and wouldn't have the slightest clue how to work the land you are suddenly trading in goats and cows at a subsistence level.

Summary: Interest Rates aren't going anywhere for a while.

 

[VineyIsLORD]

Problem here is say Interest Rates move up to 6%. A hell of a lot of people are screwed and screwed further with a slowing economy. Now if the bank can't recoup its debt it can't pay out deposits. It can't pay all its deposits it basically cuts off its cash flow which leads to some very pissed off people and those that can't finance their next meal.

That happens then banks are under and useless. How will people work? They will need to be paid in cash/some other currency of value. They won't pay tax so will have their currency and have to fend for themselves. Given most Australians are urbanised and wouldn't have the slightest clue how to work the land you are suddenly trading in goats and cows at a subsistence level.

Summary: Interest Rates aren't going anywhere for a while.

In case you have forgotten the Rudd years, taxpayers are on the hook for basically all of it.