Hi all,
Wondered whether people agree with API Magazine (March edition) that property is about to start to climb again? [buz2]
Not sure if I am that optimistic, but I hope he is right. [biggrin]
Del
I disagree.
A few reasons:
+ House prices at record highs compared to wages & rent
+ Household debt at record highs
+ Consumer confidence plummeting with every rate rise
+ GDP at zero & set to stagnate
+ Unemployment set to rise
+ Inflationary pressures growing
+ Interest rates being forced up by ^ and US hikes
+ all but the most VI media becoming bearish
+ pressure to remove the ‘middle class welfare’ of PI tax breaks
+ PI sentiment low / nearing negative in most areas of Australia
+ First time buyers holding out for lower prices
+ ‘Growth areas’ (WA & SEQ) almost entirely driven by speculators…I’m really struggling to balance these with any +ives for HPI. I don’t believe house prices will be supported by immigration or a shortage of land.
Alternative views welcome.
Cheers,F.[cowboy2]API magazine has to talk it up like RE agents
Im more in the BIS camp.
“Never argue with an idiot, as they will bring you down to their level and beat you with experience”
mmm, well, I’m still waiting for the API magazine to land in me post box!
If they were to remove the Tax breaks ie N.G. there would be a lot of Mum and Dad investors out there hurting badly..A lot of these people have multiple properties relying heavily of the tax cuts..what will happen to there properties? I guess they will not be able to pay the mortgages. I do feel sorry for them…Chris
ive read that same article by John Edwards, and cant help but be totally confused with all the messages that abound. some say flat or very low growth others like Edwards suggest that, `…the slump was drawing to a close and house prices would be on the move again this year.’ i thought we were just entering the slump?????? anyway if you look in API’s april edition this phenomenon of actual vs perceived growth gives some credence to Edwards statement. [baaa]
Did I blink and miss the slump?
Who does API think it’s kidding??!! In my neck of the woods (SA) the market’s only just coming off the boil, and judging by writers on this website, other areas are in a similar state.
It’s no surprise that API went from a quarterly mag to a monthly mag in the not so distant past – we’ve been in a boom and subscriptions went through the roof. Now it wants to ensure it keeps its readership, not to mention the many advertisers who are dependent on a booming property market.
Articles like this one only discredit the many good and honest writers who contribute to this mag and who – if they have a vested interest in taking a certain slant – at least make it less blatant.
cheers,
CarlinHi all,
I guess that there are certain areas of Australia, that are defying the trends.
These areas perhaps have new infrastructure going there etc… (I can think of at least one city like this – in QLD)…
The majority of Australia, I wouldn’t be so optimistic about though.
Hopefully they will remove the Exit Tax in NSW soon, and this may help NSW.
I guess API Magazine has to keep up the interest in property…
Del
Originally posted by christobell:If they were to remove the Tax breaks ie N.G. there would be a lot of Mum and Dad investors out there hurting badly..A lot of these people have multiple properties relying heavily of the tax cuts..what will happen to there properties? I guess they will not be able to pay the mortgages.
This:
The RBA has been trying, oh so politely, to tell Howard that his tax system is to blame. The usual suspect is negative gearing. This Government is the first in history to cover the mortgage burden of property investors for three years in a row. In the 2000-01 and 2001-02 tax years, total rental deductions exceeded rental income by $696million and $622 million respectively. The next round of tax statistics, due before the May budget, are expected to confirm the shortfall doubled to about $1.2 billion in 2002-03.from The Australian is the latest in a growing chorus of media articles and financial commentaries opposing the growing burden imposed by property related tax breaks on the economy and tax payers.
I expect the first casualty of change will be depreciation, followed by the staggered removal of CGT concessions for multiple IPs. I doubt any government would have the balls to introduce such changes retrospectively, but absolutely believe this will be introduced for future property purchases.
And just think about it – you’re worried about the ‘Mum and Dad investors’ with ‘multiple properties relying heavily of the tax cuts’, but what about the young family who are priced out of buying their first home on account of these same property speculators yet still have to subsidise these ‘investors’ through the taxation system? Is this really fair?
Cheers, F.[cowboy2]F,
Your cheer leading exercise for significant property reductions and ill-conceived public policy recommendations/prognostications does raise the eyebrow but only before I start laugung out loud (incredulously)Mr Megoleganis is another cheerleader of the intellectual left if you look at his background and writings, however, again his position is also flawed.
He uses flowery and emotive language to make his point that we are heading into deficit & that the economy has “sunk”, without any supporting evidence.
If we are really serious about reforming policies regarding property, then lets consider all the state taxes and levies that are imposed by Federal & State governments. Why is it property is singled out more heavily than shares? If we had the same rules applying to both shares and property then I would say that at least the taxation system does not distort investment decisions, biasing towards shares. Not economically efficient.
Land Tax, stamp duties, mortgage stamp duties, exit taxes it doesn’t end. A quid prop quo thankyou. The political ground swell in NSW and Victoria regarding respective property taxes, will simply underscore the political reality that any government who wants to tinker with property taxes/levies is playing russian roulette with their incumbency. And so it should, they have sucked the property revenue bong for long enough.
Maybe API is trying to boost
their circulation.
I read somewhere that it had slumped
dramatically since the boom stopped.With due respect Woodsman, I didn’t intend to cheerlead, just point out an alternative view, and that there is pressure for reform of PI tax concessions. Whether anything comes of it or not, property investors need to remember that some 83% (?) of Australians don’t own more than one property, and some of them vote too.
Why is it property is singled out more heavily than shares?Property investment is unproductive.
Share investment is productive.
Property investment can have a short term positive growth effect on the economy as people spend their new found wealth and borrow to invest in construction etc, but this is unsustainable. Eventually debt must be repaid, even if it is ‘equity’ debt secured against a percieved increase in the value of the family home or investment property(s). An excess of property investment draws funds away from sustainable economy-friendly investments in the present and places negative pressure on retail (and those same investments) in the future as debt reduces discretionary spending. It places a burden on first time buyers, reduces the feeling of ‘place in society’ that ownership brings for those priced out, forces young couples to delay starting a family therefore increasing the burden of an aging population… shall I go on?Share investment leads to increased productivity by allowing companies to grow, build infrastructure, employ more workers, increase exports, raise wages etc. leading to a healthy, sustainably growing economy and increased tax or lower tax rates…
If tax laws on investing are biased toward shares over houses, I would argue that this is perfectly fair and good government policy.
The other issues you have raised – ‘Land Tax, stamp duties, mortgage stamp duties, exit taxes’ – are just some of the costs to be considered when investing in property. If such investment is not financially viable then don’t do it! Simple. I do agree that land tax needs reforming, but only because land prices have risen out of line with inflation (once again largely under pressure from property speculation oddly enough)! If land prices fall as I predict, this will remove the pressure on businesses and reforms will be unnecessary.
All said, I still think there is a place for a balanced level of rational property investment. I’m watching and waiting – when and if it makes sense for me to invest in residential property I intend to do so. This will require consideration of current and future taxes and concessions as well as price and return. Does this make me a hypocrite? I guess so.[blush2]
Anyway, back on the subject of API Magazine’s assertion ‘that property is about to start to climb again?’…[biggrin]
Cheers, F.[cowboy2]
Foundation,
I believe ‘property’ is extremely productive. Many examples of this can be shown in every city;
Post offices
Local factories
CBD office buildings
Airports
Container yards near ports
Supermarkets
Petrol stationsAll of these one can buy, and serve a very useful and productive service to the economy.
People tend to restrict their thinking to residential only…and call this ‘property’…which shows a lack of experience in the property market if they refer to it as such.
On the counter argument…if you don’t have decent housing, one could say that both houses and units do indeed serve a very useful purpose.
Looking at the long term graphs for property over the past 100 yrs, I have no doubt ‘property’ will continue to rise.
Heck, I’ve jumped in boots and ‘all, so my money is where my mouth is I suppose.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Hey Woodsman
thanks for your post, you must be reading my mind.[biggrin]
Originally posted by Dazzling:I believe ‘property’ is extremely productive. Many examples of this can be shown in every city;
[blush2]Err, yes. Sorry, I was strictly speaking of residential property.
Looking at the long term graphs for property over the past 100 yrs, I have no doubt ‘property’ will continue to rise.I suggest you overlay inflation on a second y axis or adjust the ‘property’ trend line for inflation. Does this change your view? (Residential property only [biggrin])
To save time, try page 13 of David Rees Commsec Presentation for the graph of Sydney house prices to wages (extends to -100 years). Wages are roughly aligned to inflation, so you’ll get my gist.Heck, I’ve jumped in boots and ‘all, so my money is where my mouth is I suppose.And I’ve recently jumped out, so ditto, stand to lose by being wrong. Once again, I agree that commercial property is a whole different kettle of bricks.
Cheers, F.[cowboy2]F, I think you overlook the associated industries that have grown around property related investment. Yes, most are service related industries, however, this part of the economy represents a significant portion of economic activity.
Do not people use their excess equity to also invest in the sharemarket. Many will use these funds with a margin loan to increase their leverage into the sharemarket….Is this not a productive use of their equity?
It places a burden on first time buyers, reduces the feeling of ‘place in society’ that ownership brings for those priced out, forces young couples to delay starting a family therefore increasing the burden of an aging population… shall I go on?Now the property boom is responsible for the ageing population. [biggrin] I think the delay in people having families started long before the last property boom.
Originally posted by woodsman:F, I think you overlook the associated industries that have grown around property related investment. Yes, most are service related industries, however, this part of the economy represents a significant portion of economic activity.
No, I didn’t ignore this;
Property investment can have a short term positive growth effect on the economyThese ‘associated industries’ are not sustainable unless households have an unlimited appetite for debt.
Do not people use their excess equity to also invest in the sharemarket. Many will use these funds with a margin loan to increase their leverage into the sharemarket….Is this not a productive use of their equity?I am somewhat comforted by the thought that this may be true. However, I doubt this is the most common way the additional debt has been spent.
Now the property boom is responsible for the ageing population. [biggrin] I think the delay in people having families started long before the last property boom.I concede this is true. I intended to illustrate the intergenerational friction commonly spoken of by my non house owning friends and workmates.
Now if we’re not going to get back on topic, could somebody please post the contents of This article as I am unable to get my registration to work![angry2]
Cheers, F.[cowboy2]Originally posted by foundation:
Now if we’re not going to get back on topic, could somebody please post the contents of This article as I am unable to get my registration to work![angry2]For your viewing pleasure, Foundation:
Bargains galore as house prices plunge
By Hannah Edwards
March 27, 2005
The Sun-HeraldA list of more than 400 of Sydney’s bargain homes is available in the print edition.
Sydney house hunters looking for quality properties have never been so spoilt for choice.
A report by Home Price Guide exclusively for The Sun-Herald reveals the price of hundreds of properties across Sydney on sale since before September have dropped by as much as 40 per cent.
In Dulwich Hill, a three-bedroom terrace was first listed for sale last May for $980,000. Now it’s a bargain buy for $580,000.
In Double Bay, a luxury apartment on Carlotta Road first listed in March 2003 for $2.79 million is for sale for $1.95 million – a fall of $840,000.
In Hunters Hill, Ellie and Kevin Allen’s Euthella Avenue home is for sale for $1.15 million – $800,000 less than it was first listed last June.
Ms Allen is certain her three-bedroom house has all the right ingredients: it is close to the city and the ferry, and has water views. But like many vendors, she has been left wondering why the house has not sold.
She said: “We have come down a long way and want to sell. We’d never have put it on the market if we had known it would be like this.”
Home Price Guide head of research Louis Christopher said the list showed there were plenty of great buys available – as long as buyers knew where to look.
“A number of these properties are a very good buy at their current asking price,” Mr Christopher said.
He said the huge price drops were a sign many vendors were more willing to listen to the market and price their properties accordingly.
Home Price Guide figures show that it now takes even longer to sell a house by private treaty in Sydney, rising from 95 days in January to 97 days in February. It takes 83 days to sell the average unit, up from 77 days in January.
If the Reserve Bank raises interest rates next month, as many experts predict, the market is expected to slow further.
“Expectations of further increases in interest rates are undermining demand,” said CPM Research chief executive John Wakefield.
“Auction clearance remains low as a result, and sellers are being forced to adjust reserve prices if they wish to sell. These are the ingredients of a buyer’s market.”
While Ms Allen is willing to adjust the sale price, she is adamant they will not be giving the house away. “I just had a call from someone offering $870,000 and that is just ridiculous.”
The Allens are pleased with their new agent, Toni Alexander, from Richardson & Wrench Hunters Hill, who they say is doing “everything she can”.
Ms Allen said the family hadn’t considered an auction as it would be embarrassing, with the neighbours coming through and no one bidding.
Nine properties were taken to auction yesterday with four selling under the hammer.
An older-style Manly apartment passed in at $810,000 while an oceanfront penthouse at Salamander Bay was passed in without a bid.
Hmmmmm???
All I can say is that BIS Shrapnel have just revised their 2005 estimate of new housing starts in Australia from 160,000 down to 145,000. They were trailing HIH which had already factored a slump in 2005 followed by a minor recovery in 2006. Now the two are more closely aligned…
I’m in the building industry and we rely on these and other lead indicators to predict demand for our building products. Our sales division is now projecting a terrible 2005 based on a “worst on record” commencement to the year in Q1.
Sorry guys, but its all still doom and gloom in my neck of the woods and I reckon API is just trying to boost a flagging circulation in the down market.
Cheers,
Michael.
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