Australia housing bubble

[zipping]

Why do people think we are seeing such high prices for houses particularly in Melb/Syd and other capital cities? Interest rates being low by our standards is one major factor.

Texas is actually doing well economically atm yet its median house price is quite low.

https://www.zillow.com/ca/home-values/

California on the other hand has always had the highest prices in the US

https://www.zillow.com/ca/home-values/

Here is an article on California housing that I believe is a great explanation for what we are seeing in Australia atm.

http://www.lao.ca.gov/reports/2015/f...sing-costs.pdf

Thought it may be a good discussion thread considering the impacts if it were to burst and the Feds seem to be making noises about addressing the issue in the next budget.

[zipping]

Anyone selling up to take advantage of the market or are people still happy to try get in or invest in a second property.

[Techno]

Originally Posted by zipping

Anyone selling up to take advantage of the market or are people still happy to try get in or invest in a second property.

not in a million years

[T3rminator]

Sounds like the folks who aren't very good at making forecasts, aren't very good at interpreting data either. That or they were just batting for the blue team.

https://www.abc.net.au/news/2023-02-...tion/102020610

One of the biggest decisions the current board has made in recent times was the unveiling a 0.25 percentage point rate hike in May 2022, taking the cash rate from an historic low of 0.1 per cent to 0.35 per cent. It was the first time the central bank had raised rates since 2010.

A key part of its justification was that there was evidence of strong upwards pressure on wages growth.

Close to a years' worth of official data now shows that evidence was misleading — wages were not rising to any great degree.

.............................

The Consumer Price Index (CPI) for the December quarter rose 1.3 per cent, bringing annual inflation to 3.5 per cent.

To be clear, before the Reserve Bank made any move on interest rates, inflation was already well outside the bank's own target band of 2 to 3 per cent.

The RBA eventually decided to lift the cash rate at its May meeting, several months after inflation showed signs of being a problem.

[GASWAGON]

Negative gearing has ruined it for everyone.

And the Chinese are taking buying up big in countries all over the world.

[zipping]

Negative gearing is where a loan is used to buy an asset and there is a loss because the income generated is lower than the interest repayments. It's often used to explain a property purchase but it can equally apply to a share purchase or other investment.

It's been with us for a long time. In 2010 there were 1.2 million Aussies with a negatively geared property which is 14.3% of individuals that lodged a tax return owned investment properties while a greater 19.2% of individuals that reported a taxable income owned investment properties.

http://blog.corelogic.com.au/2013/05...inancial-year/

Whilst some pressure comes from negative gearing when people speculate on prices going up is it really the driver behind the sharp rises we are seeing?

Some more recent info here

https://www.businessinsider.com.au/s...the-rba-2016-2

Good article

http://theconversation.com/policyche...g-reform-58404

It does provide an incentive for people to invest in property just on balance it seems to me unlikely to be the driver behind the last 4 years price expansion.

[asagaai]

As CoolBFWagon said, the Chinese are a huge country, becoming very wealthy, and they like investing their hard earned in a stable country in bricks and mortar that is safe. Property is very expensive there in their big cities, and Australia is good buying for them.

So Sydney, Melbourne are seeing big inputs of Chinese purchasers.

Also, SMSF re now being used to purchase properties which further increases prices.

So the older more well heeled are further using negative gearing/SMSF to buy property and cash in on capitals returns, and in effect will have the young slave away to pay for their capital gains, all while getting the young to pay their rents as the young cannot get into property.

[vztrt]

Originally Posted by CoolBFWagon

Negative gearing has ruined it for everyone.

And the Chinese are taking buying up big in countries all over the world.

Negative gearing has been around since the 80s yet house prices didnt start to deviate from its normal tangent line (median house price vs average wage) till the government halfed the cgt. Making housing more desireable wasnt a good move.

This needs to be scaled back as the market needs a correction. The house prices in my area are rediculous.

[zipping]

Originally Posted by vztrt

Negative gearing has been around since the 80s yet house prices didnt start to deviate from its normal tangent line (median house price vs average wage) till the government halfed the cgt. Making housing more desireable wasnt a good move.

Yes but increasing CGT would impact the stock market greatly I would assume?

[FairmontGS]

Originally Posted by zipping

Yes but increasing CGT would impact the stock market greatly I would assume?

There would be a rush away from housing to equities. That's not necessarily a bad thing but then the price of stocks will rise - not because they are better stocks but because they will be bid up. Dangerous territory.

[vztrt]

Originally Posted by zipping

Yes but increasing CGT would impact the stock market greatly I would assume?

It would impact the politions pockets.

There should also be a limit on the amount of houses that are negatively geared and only Australians citizens should be able to buy propertly below 5 million.

[Polyal]

Its a pretty crap situation all round.

One idea I had was governments properly investing/encouraging companies to move to more "regional" areas.

It would move people out of the cities to follow the jobs, the cities are big and ugly enough to fend for themselves.

Alot of these regional areas have been hit with the industrial down turn and really could do with a spruce up.

You then also take some demand for housing from the cities and outlying areas and the market will naturally sort itself out.

[FairmontGS]

OK. So 20 years ago I was encouraged by Gov-Co to invest for my own retirement and avoid the public teat. I did so all my life and have done pretty well. Went without on many fronts and invested instead.

Now I'm to blame (as a greedy investor) for the unaffordability of housing and the smashed avocados are being given every advantage Gov-Co can muster...

Go figure.

[zipping]

Great point Fairmont.

Median house price in Melb is nearing $800k In 2010 it was $465,000. Spectacular return for investors. In 1997, 20 years ago it was $125k.

https://www.domain.com.au/news/melbo...170123-gtvh6k/

https://services.land.vic.gov.au/lan...2011Sample.pdf

Dam the second link is Victorian median price not quite apples with apples but illustrates the rise.

[Mercury Bullet]

I don't care, I own my own house and owe nobody nothing.

I know lots of people in Perth who have bought investment properties there and are currently being burnt big time. Most of them thought they were buying a money tree, problem is there's no-one to water it.

[roKWiz]

Originally Posted by Mercury Bullet

I don't care, I own my own house and owe nobody nothing.

I know lots of people in Perth who have bought investment properties there and are currently being burnt big time. Most of them thought they were buying a money tree, problem is there's no-one to water it.

I'm with you Mercury, the problem is everyone want to be a middle man these days. Sitting back at the café checking all their portfolio's barking orders at the staff no doubt.

[Franco Cozzo]

Median house price close to 7 figures - no one can afford so buy so buy out in the South Eastern suburbs and use the M1 Freeway to go to and from work - toll road:



1 hour 20 min delay Monday-Friday for a toll road while it takes 2+ hours to go to your house you can barely afford mortgage payments on in Dandenong only 30km away from work in Melbourne where your house gets broken into every second week by Africans - but it only cost $600K.

Or you might be one of the lucky ones and live where I do 62km from work in Melbourne where our highway is free and our houses only cost $450K!



Except we're all currently doing 0KM/H out of the 100 permitted.

#mostliveablecity

[FairmontGS]

Originally Posted by Franco Cozzo

Median house price close to 7 figures - no one can afford so buy so buy out in the South Eastern suburbs and use the M1 Freeway to go to and from work - toll road:

image

1 hour 20 min delay Monday-Friday for a toll road while it takes 2+ hours to go to your house you can barely afford mortgage payments on in Dandenong only 30km away from work in Melbourne where your house gets broken into every second week by Africans - but it only cost $600K.

#mostliveablecity

Yeah yeah yeah. Whinge excuse whinge excuse

And you're being racist!

[Pepscobra]

Why the hate towards Negative Gearing?
Without it there would be no financial reason for people to buy investment properties. Who would then provide the properties to service the rental market? The Government?
Negative Gearing is basically the governments way of providing housing through private ownership.
I know it's easy to blame NG for high property prices, but its impact is minute.

[Raptor]

It's the negative gearing + capital gain tax discounts together. Investing is meant to be a risky business, the above policies have pretty much made it as safe as houses (see what I did there) for the past few decades.

Time for a major correction IMHO - driven by sensible policy adjustment.

If the above policies were meant to add to the housing supply - they have failed whenever an investors purchases an existing property (i.e. most of the time).

If the capital gains tax discount was to adjust for the erosion caused by inflation - why is it still so high whilst inflation is now so low?

Housing should be for living in, investors money should be spent on more productive assets.

Wonder why the retailers etc are doing it so tough, not employing anyone and generally grinding the economy to a halt? It's because after people pay for rent or their mortgage there's SFA all for anything else.

.

[Tom Tucker]

Originally Posted by Raptor

It's the negative gearing + capital gain tax discounts together. Investing is meant to be a risky business, the above policies have pretty much made it as safe as houses (see what I did there) for the past few decades.

Time for a major correction IMHO - driven by sensible policy adjustment.

If the above policies were meant to add to the housing supply - they have failed whenever an investors purchases an existing property (i.e. most of the time).

If the capital gains tax discount was to adjust for the erosion caused by inflation - why is it still so high whilst inflation is now so low?

Housing should be for living in, investors money should be spent on more productive assets.

Wonder why the retailers etc are doing it so tough, not employing anyone and generally grinding the economy to a halt? It's because after people pay for rent or their mortgage there's SFA all for anything else.

.

You Sir, hit the nail on the head. I'm glad I'm not the only one that has a problem with a rampant speculative market on residential property

[Sprintey]

Open market to widgets from all nations, stop protecting local widget maker, stop making widget, layoff local widget assemblers, import cheaper widget from China to $ave $$$, see immediate Aussie lifestyle improvement today (bargain mate!), $$$ flow to China; allow open RE ownership, $$$ comes back with vengeance turbocharged by yuan printing, Chinese $$$ buyers compete for housing stock, housing prices rise exponentially, your kids can't afford housing in the country of their birth. Nor can the laid off widget assemblers.

Traffic goes mental. Sit back and have a beer while admiring the great deal you got on the widget.

(To be fair, could replace 'China' with UK or US or Uzbekistan or many others...)

[b0son]

Pepsicobra, people dont invest in rental properties with a view to earn a steady rental income, they do so to get a capital gain. Being able to negative gear along the way removes a lot of the risk of speculative investing because the taxpayer effectively picks up the tab for managing your cashflow. And when you have limited supply but low barrier to entry, you inevitably end up with demand exceeding supply and price growth.

[FairmontGS]

Originally Posted by b0son

Pepsicobra, people don't invest in rental properties with a view to earn a steady rental income, they do so to get a capital gain. Being able to negative gear along the way removes a lot of the risk of speculative investing because the taxpayer effectively picks up the tab for managing your cashflow. And when you have limited supply but low barrier to entry, you inevitably end up with demand exceeding supply and price growth.

I'd have to disagree with that point B0son - I know I have invested for the income stream that my properties provide, as have all my friends.

But you may be right nowadays, maybe the focus has swung too heavily on speculation of gain from price increases.

[zipping]

Originally Posted by b0son

And when you have limited supply but low barrier to entry, you inevitably end up with demand exceeding supply and price growth.

This gets to the heart of the matter. It's great for those in the market but governments all over are suppressing supply through zoning, regulations and tax. NSW and Vic governments through stamp duty are seeing.

It's in their interests because of the taxes collected.

http://www.pitcher.com.au/news/vic-s...property-taxes

Literally a transfer of wealth from private to public hands.

[Trump]

The root cause of the housing affordability problem (and the rest of the economic woes) isn't negative gearing or capital gains related, nor is it about supply and demand. It exists along with the other economic maladies because the banks control the currency and not the treasury. Because as it stands, for every dollar in the form of cash, there are ten more that are credit-derived (any form of bank-sourced credit).

Sound money issued by the treasury and only the treasury (whether it be in the form of physical notes and coins, their electronic equivalent, gold and silver or a combination of all three) wouldn't allow the banks to issue credit hand over fist and fuel a speculators paradise.

[FairmontGS]

Originally Posted by Trump

The root cause of the housing affordability problem (and the rest of the economic woes) isn't negative gearing or capital gains related, nor is it about supply and demand. It exists along with the other economic maladies because the banks control the currency and not the treasury. Because as it stands, for every dollar in the form of cash, there are ten more that are credit-derived (any form of bank-sourced credit).

Sound money issued by the treasury and only the treasury (whether it be in the form of physical notes and coins, their electronic equivalent, gold and silver or a combination of all three) wouldn't allow the banks to issue credit hand over fist and fuel a speculators paradise.

No no no no

It is entirely about supply and demand. Look at Sid-en-knee - we're full to the gills! There's no more viable land and what is available is down the Hume with rubbish infrastructure.

And yet, Gov-Co continues to allow people to settle there - up to 80,000 short-fall of people looking for a dwelling in the city last year. Add that to the existing back-log, plus he fact that there's so much money washing around looking for an investment, and there's your problem.

But you can't force people into settling away from where they want to live - that's called China, a command economy.

I don't know what the answer is...

[Trump]

Originally Posted by FairmontGS

No no no no

It is entirely about supply and demand. Look at Sid-en-knee - we're full to the gills! There's no more viable land and what is available is down the Hume with rubbish infrastructure.

And yet, Gov-Co continues to allow people to settle there - up to 80,000 short-fall of people looking for a dwelling in the city last year. Add that to the existing back-log, plus he fact that there's so much money washing around looking for an investment, and there's your problem.

But you can't force people into settling away from where they want to live - that's called China, a command economy.

I don't know what the answer is...

If the economy was truly a free market capitalistic creature, I'd agree 100% with you. Supply and demand are the cornerstone of a free market economy. However, the beast we have has the outward appearance of a free market economy, however it is anything but due to so much manipulation at the hands of so few.

[FairmontGS]

Originally Posted by Trump

If the economy was truly a free market capitalistic creature, I'd agree 100% with you. Supply and demand are the cornerstone of a free market economy. However, the beast we have has the outward appearance of a free market economy, however it is anything but due to so much manipulation at the hands of so few.

You know what meme I'm going to post up if you persist with this, don't you?

[Trump]

Originally Posted by FairmontGS

You know what meme I'm going to post up if you persist with this, don't you?

You're cruisin' for a bruisin' Mr GS...