Forum Replies Created
Yeah, for the people who missed the Norlane boat, Corio is well worth looking at.
Von Krumm wrote:This is what has me worried. With all the bears in the market at the moment I am not sure what to start investing in?
I have finally finished uni and got a decent salary but not sure if I should go back and get an Economics degree just to decipher all the information in the current volatile climate.
Australia’s house prices are ridiculous, 7x average personal income. Now I know there's no reason why they can't climb further but surely it would be easier investing in other markets…
I understand there is money to be made in a falling market but it seems even more unlikely for a first time buyer. How are we supposed to compete?
Don't get me wrong. The period of acquisition is over for me because I am FULLY invested, NOT because I'm staying away from property as a form of investment. They're two different things altogether.
Yes, Australia might seem expensive when using simple calculations, but I've seen far worse in other countries.
First home buyers CAN compete. They should look to buy a house in an area that is currently not so trendy. The house should be solid but older and without the mod cons, with the potential to comfortably live in immediately and to add value over time. The biggest mistake is for a FHB to think he/ she can keep up with all the Joneses and buy a property so expensive that the loan repayments cause severe stress and make it impossible to pay off any principle. The first home does not have to be the LAST. But it provides a substantial platform to step up to a higher quality property down the track.
Of course, you could also decide to rent and direct savings towards other forms of investment, such shares or commodities. That requires discipline however. A home loan forces a person to save, to pay their loan before paying themselves. For some people, the natural inclination is to spend all their savings if they don't already have some big commitments in place. In this way, I have benefited much from property investment. I'm extremely tempted to buy a new car and would have done so if not for my loan repayments. And we all know that a car will be worth less in 10 years time, whereas property is likely to have increased in value over that time, even above and over your interest payments or any other expenditures on the house, if you have bought well.
For me, the period of acquisition is over for now. I'm focusing on paying down debt maintaining my investments and letting time work its magic.
Andrew_A wrote:…and locations (1m+ coastal) getting hammered, always a good time to be making money, mostly from value adding presently as the capital growth has been absent.Coastal is where I'd be buying now if I had the cash. Then again I've always been partial to properties near the sea.
Thanks for the information Andrew. At first glance it may appear house prices are falling through the floor. However, taken in perspective, even the negative 5.51% for Brisbane ain't bad. I live in Melbourne and have personally seen the median prices in some suburbs increase by 20% or so within a 12 month period. A 4-5% drop in prices isn't troubling at all, particularly considering the toxic news floating around in the media. Certainly if you did buy at the peak it could create some worries about potentially having negative equity. But IMO, property is mostly about going long term, so looking 5-7 years, or even 10 years ahead…who knows what else the future would hold by then? After all, property is hardly the sort of stuff that we trade like shares.
"Rather than capping rents in the private rental market, we need to be focusing on increasing supply in both the public and private rental market."
Fully agree. The final statement in this article is arguably the most important, highlighting a pertinent issue best described by the dreaded 'S' word.
DWolfe wrote:Well you would have quite a few people selling an unencumbered property worth 1.1mill for $995k. The tax would then be avoided, and you would get a drop in property prices.As a form of tax evasion, yes it's conceivable that this could happen, and we'll get a temporary drop in median prices in suburbs where most of the houses are selling for slightly over a million dollars. Temporary in the sense that there may come a time where buyer activity will recover in such suburbs because people will see 'value for money' (because houses are selling for less than they're actually worth) and send prices further beyond the magical 1 million dollar mark.
This of course assumes that the ONLY asset in the inheritance was the house, hardly the case with most boomers, I suspect. They usually still have some savings, some shares, maybe a few bits of gold and diamonds or other valuables stashed away…
Which leads to the next question: How exactly do we plan to fairly value all of these belongings to determine if their total value exceeds $1 million and hence liable for a 20% tax? Or are certain objects exempt from the calculation of total value of an inheritance?
If a house is involved and there is a mortgage on that property, does the property HAVE to be sold in order to realise a profit or a loss and count that in as part of the inheritance?
Pauk wrote:fword
The boomer inheritance pool was estimated at $400 billion. Take of 20% for the possible property falls to come and it is still a substantial amount at approx $61k each? Please check my maths…Sorry, what discussion were these figures in relation to? What do you mean by the part about '$61k each'?
Pauk wrote:Yes I believe, death taxes are fair for estates over $1million. The 20% would only apply to the amount above $1million.Sorry, but if this happens, I'll pack my bags and head back to Singapore to die instead.
DWolfe wrote:…rely on lotto tickets every week.D
Haha, sometimes I come scarily close to being like that. Thank goodness for an early financial education from Dad (gave me books to read) and Mum (got me excited about the stock market).
Gotta admit, I've played the lotto once…when they had that $90 million grand prize up for grabs. In case nobody remembers, two sisters won it. Wonder how much of that $90 million they have left…
Pauk wrote:ummester
Mmmmm…. a 'love bubble'. I like it.fword
1/3 of boomers do not want to leave any inheritance. Not a good stat to be proud of. Much the same across western nations.
Immigration means we now have 5.2 million boomers from the 4.1 million born here. 80% will require full or part pension. It did not work and only kicked the can down the road. Various govt departments have proven that immigration will not substantially change the fiscal impact of our ageing nation.So, life is gonna be real tough for our next generation. And in the light of this information, you're proposing we slap a 20% estate tax on the 2/3 of boomers who WILL leave some form of inheritance?!
Then again, I believe that amongst the 1/3 of boomers who aren't leaving any inheritance, a good proportion of them simply can't because they have hardly enough money to get them through their golden years.
Going further from this, I suggest all of us need to do some serious financial planning NOW to ensure we are self-sufficient in our retirement years, instead of relying on our future generation to pay for our pension! Gotta say, I pity our kids!
ummester wrote:Anyways, if they aren't going to move until they die, what do they really care what it's worth? It's not like they can take the value of their homes to the grave, is it?Well, if I had any kids, the value of my home makes a difference as to how much of a legacy I leave to my children. Not only that, the OP is proposing a 20% estate tax. I know that life isn't going to be easier for the next generation and would like to give them as good a head start as I could. My decision to bring kids into this world, hence my responsibility to look after them in any way possible. Look, I'm not even a parent yet, but I'd like to know how the parents amongst us feel about this.
I am amused at the apparent apathy towards our future generation by saying things like:
1. I don't care if the home, which I fully own, drops in value. I don't take the money with me when I die.
2. Implement estate tax of 20%, because it's a 'sperm lottery' if we don't.Why do we have 'deceased estate' houses for sale? That's because children who inherit these houses from their ancestors usually decide to sell the house so that they can get a 'fresh start' and move on without being reminded of the parents who they've lost. They usually also have to sell within a set period to avoid CGT (basic understanding). So, come time to sell, the sale price obviously determines how much of an inheritance the kids will receive.
Pauk wrote:Affordable housing is when a common first year teacher can buy an average home for 4 times his or her single salary.
What is the ballpark figure for the salary of the said teacher? Can you elaborate further on what constitutes an 'average home'?
sharve01 wrote:Potentially the people who answered this question are above average wealth…Not in my case.
Pauk wrote:1. They will be less workers per dependent as our participation rates start their decline. Less people to pay more tax, if you want to get the revenues from the workers.Combine that with a tax free threshold for those under $40K pa salary as you suggest and it'd be a recipe for disaster. This will be further compounded by my prediction that there will be an even greater proportion of Australian residents at that salary level (adjusted for inflation) compared to today, should this tax structure come into place. Tax on those earning over $40K pa is likely to increase compared to current levels.
Pauk wrote:2. Emigration – peaking
http://www.immi.gov.au/media/fact-sheets/05emigration.htm
http://www.immi.gov.au/media/fact-sheets/05emigration_1.htm – they have not updated the chart and it was approx 88,000 last financial year.
http://www.couriermail.com.au/news/national/emigration-rises-as-aussies-bail-out/story-e6freooo-1226200172844Thanks for the information, very revealing. It remains to be seen if this trend of increased emigration is likely to continue. In the last article it mentions that half of emigrants have chosen to move to UK, US, NZ and Singapore. Given current economic conditions, it'd be interesting to consider if some of those emigrants who previously went to UK and US would return to Australia. I know a little about the veterinary industry and can say that it is (or was) common for vets in Australia to seek employment in UK and US because of superior benefits and remuneration. With the advent of the crisis, many of those vets lost their job and have since returned to find jobs in Australia.
I'd have to wonder if those migrating to NZ have done so for reasons other than employment. Retirement perhaps? And for those migrating to Singapore, my condolences to them, for they shall experience 'unaffordable housing' in every sense of the word. Fortunately, the tax structure in Singapore is favourable and does not discourage high-income earners.
Pauk wrote:3. Population growth does not dictate house prices changes. We have 22% of our homes now as lone occupants and rising to 32%, so our real people per household is 3.14 for the non-lone occupants.Hence the previous point that population growth and Am I right in saying that you suggest the proportion of lone occupant households is set to increase? If this is the case, wouldn't it increase the demand for housing?
Pauk wrote:4. Certainly the anti-speculation laws on residential property in Germany kept a lid on massive bubbles or massive falls. It certainly made housing more affordable.We have yet to see 'massive falls' as a result of bursting of 'massive bubbles' in the Australian property market. I entertain the possibility, for the sake of discussion here. As such I agree with your statement about Germany to a certain extent. However I disagree that affordable housing is the result of anti-speculation laws. Consider that Germany's population is little changed today compared to what it was in the 1970s. I have to argue that their 'more affordable' housing is in part due to very little population growth and over an extended period of 2-3 decades.
The population of Germany has been headed down since 2002 with an average loss of 50,000 people per year. Nevertheless, neither this population drop, nor anti-speculation laws stopped the growth of house prices, with the average price of an existing home increasing by 4.5% YOY in September 2010.
http://www.globalpropertyguide.com/Europe/Germany/Price-History
Anti-speculation laws that existed from the time of Hitler did not prevent the 'bubble' from occuring in Germany in the 1990s, which is discussed in this article:
http://www.spiegel.de/international/business/0,1518,552901,00.html
It possibly gives us yet another reason why German property has yet to experience a 'boom' and hence remained affordable.
Pauk wrote:7. We certainly do not have affordable housing in Australia….yet.I'd like you to define 'affordable housing'. Consider the factors of land size, size of the house (just basically, number of bedrooms, bathrooms, living areas, off street parking in the form of carport, garage or lack thereof) and also location (eg. how many km from the CBD). I also firmly believe that decentralisation will alleviate the affordability issue.
Pauk wrote:8. My projections of 29 million and then decline stays well within the UN projections.Looks like the figures from ABS are a little more optimistic than these from the source you quote. Perhaps consider figures from both sources in your research?
Pauk wrote:On Germany
It is not recent anti-speculation laws for resendential.
1920 Hitler made it so.http://constitutionalistnc.tripod.com/hitler-leftist/ (Item 17)
http://www.ptireturns.com/en/tax_info/de.php
http://www.globalpropertyguide.com/Europe/Germany/Taxes-and-CostsYes, but totally incorrect for some to claim that anti-speculation laws were the sole reason for the continued affordability of German property.
Pauk wrote:fword
1. 1/3 of our population growth in real numbers is our demographic momentum, or more people living longer.
2. 66% of our NOM are temporary Visa holders.
3. We are currently experiencing peak emigration.
4. What do you think the June population growth percentage will be? My guess 1.3% (0.7% is our natural growth)
5. In the next 25 years our death rates double and anti-immigration is already taking hold.
6. From my sociological studies and research, Australia will peak at approx 29 million and then decline in population, some time around 2040.
7. From 2006, international students who are here for longer than 12 months, get included in our official population growth percentage, thus the false peak of 2.1%.That paints a very bleak picture for Australia. How many people will be left to pay the taxes and welfare benefits with the increased proportion of the graying population in this country? People may talk 'anti-immigration' now, but they'll double back quickly when they see the negative effect its having on the country. The key point is that this country needs new blood and on a regular basis, otherwise it's going to be in strife and turn into another 'Germany' in terms of population growth.
Now I don't know how your research led to your figure of a population of 29 million around 2040. I had a look at the figures in ABS and they show that projected population in 2056 is actually somewhere between 30.9 and 42.5 million, and in 2101 the projected population is between 33.7 and 62.2 million. So your estimated figure is really at the lowest end of that scale. The lower end of the projection will occur when deaths outnumber births starting in 2048, with NOM henceforth accounting for continued population growth, although at a slower rate.
On the topic of peak emigration, how did you come to this conclusion? What are the reasons for people leaving? I had a look at net migration rates for Australia and found the figures for a 10-year time frame.
http://www.indexmundi.com/australia/net_migration_rate.html
It shows net positive migration for the entire period. In 2000 it was 4.26 migrants/ 1000 persons. It was at its lowest in 2007 at 3.78 migrants/ 1000 persons in 2007, and highest in 2008 at 6.34 migrants/ 1000 persons. It currently sits at 6.03 migrants / 1000 persons. Is this the 'false peak' that you are referring to, the one that occured from 2007?
From ABS, Australia's population increase for the year ended 31 March 2011 is still greater than that recorded for the year ended 30 June 2006 (312,400 versus 303,100). Australia's population growth rate has declined since 31 December 2008 and is at its lowest since 30 September 2005. Nevertheless, what was the trend of house prices since 2005/ 2006? I'd hence venture further to say that house prices can rise on the back of strong population growth, but the rate of house price growth is NOT inextricably linked to the rate of population growth.
Now I appreciate all those figures but unless we're going to be armchair academics, we'd be better off discussing more practical things.
As alluded to earlier (and as other writers have also stated before), decentralisation is a realistic answer to the 'housing affordability crisis' that some like to debate about. I'd like to suggest offering rebates and benefits to companies that set up offices in 'satellite cities'. In Melbourne, such 'satellite cities' include Frankston, Box Hill, Dandenong, Ringwood…there are some ailing commercial properties in these areas that the government could purchase, revamp and increase the density before leasing or selling back to the public.
Moving jobs to these satellite cities, a number of which are currently considered 'outer suburbs', we increase the 'desirability' of these suburbs accordingly, with people settling there to be close to work, taking the heat off the CBD. Currently, travel times are ridiculous. My brother takes a 90 minute (each way) bus ride to and from the city every working day from a 'middle-outer suburb' 20kms from the CBD. The roads to the city and within the CBD itself are choked with traffic many hours of the day. I personally drive through the Metropolitan Ring Road to get from the same house to an outer North suburb to work, a trip that takes anywhere from 50 to 70 minutes each way. Really, the Ring Road was obsolete even before it was completed. At only two lanes each way at some parts, it's just not sensible.
What this hence means is that concurrent with efforts to decentralise jobs and businesses, infrastructure and transport to such satellite cities needs to be dramatically improved to keep up with the associated traffic flow. To me, this is the key. People want to live near to their place of work. Move the jobs wherever, provide the necessary infrastructure, and people will follow. Currently there are a lot of low-rise commercial buildings in these satellite cities that could benefit from being revamped and transformed to become a more vibrant hub of activity. Watch out however, for the NIMBY attitudes that are likely to arise, and understandable of course. There's going to be some resistance from current residents because few people enjoy seeing a big business park go up just across the road from their house.
Another suggestion that I raised on this forum in the past was that of governent subsidised housing. People in Singapore are well familiar with this concept. People who qualify for the [strict] criteria for government subsidised housing can buy high-rise flats or apartments that are substantially more affordable than 'landed' property, not because it is paid for in its entirety by the government, but mostly because their associated land value is much lesser. These apartments are small and comfortable but they're far from glamorous. There's several hundred of them stacked into each block, and there could be numerous blocks clustered into a fairly small area. Additionally, you purchase them from the government on a 99-year lease, not freehold.
Someone once remarked that we shouldn't ever see something like that in Australia because it would be the equivalent of a ghetto or a slum. Far from it however. If done correctly, as Singapore has, it performs its function more than well enough, and is still clean and safe. But for this to succeed, people's mindset also has to change. At the moment it appears that most people value having space and a real backyard. When price is a deciding factor however, we can either choose to live in a house that has space but is a long commute from work or in lodging that is not as spacious or private but in close proximity to amenities and our place of work.
Buying a house these days is difficult, something I fully appreciate because I'm one of those people. But this is reality. Can't have your cake and eat it. Affordable housing is there, just a matter of where you're prepared to live, or what you're prepared to live in.
ummester wrote:So fword, where are the undersirable parts of our country? Or is all Australian housing uniquely desirable?What's considered 'desirable' or 'undesirable' is up to the subjective opinion of the individual. Therefore I shall not actually list places (amongst those that I know) because it may insult. If anybody has access to last weekend's Melbourne Magazine (as part of The Age), it discusses the issue of 'livability'. Alternatively, head over to tmmblog.com.au and look at the posts from 27 November 2011.
'Livability' IS 'desirability'. While their methods of assessing individual suburbs are not entirely flawless, it gives us a good idea of what people generally like to have, and generally as such, where they like to live.
ummester wrote:Personally, I consider all of Sydney and Melborne extremely undesirable – too many people all clustered together for my liking.Well, that's the personal opinion that you're entitled to have, and you're free to decide not to live in those cities or to leave, if you currently do live there. Also consider that there are regional towns of both Sydney and Melbourne where you could pick up a plot of land with an area of 1 acre or more, and not terribly far from the CBD itself. If you're worried about hearing your neighbours cough, that's where you should look to buy. I have lived in places where the population density is much greater than that of Sydney and Melbourne. It was truly an eye-opener, coming to Australia…we have so much space!
Pauk wrote:fword
1. We are all selfish.
2. Greed was good and now it is not so good.
3. Outright owners will care as prices fall, mortgage holders will care more and least to care will be the 32% of the total population that are renters.
4. I can not think of why house prices rising faster than wage growth, could possibly be a good thing for society. Perhaps you can enlighten me?1. Agreed. Like saying we are all human and we are all sinners.
2. Since when was greed EVER good?!
3. Obviously, to a great extent. In general, people do not care about things that do not belong to them. Looking at it another way, their opinions are based on their personal interests. Altruism does exist these days but you got to look a little harder to find it.
4. In respect to 'house prices rising faster than wage growth', depends on what house prices you're referring to. $350K houses were available 10 years ago when our 'inner city' was previously the 'outskirts'. $350K houses are still available these days, but they're more like 'apartments' in the CBD or little McMansions in the outskirts of the city.
Expensive houses indicate that both you and I do not live in a slum and that we're part of a growing city that is pushing its boundaries with burgeoning population growth. It is a sign of 'good things'. That same population growth pays the taxes and helps with welfare payments. That has its pros and cons. More revenue to the government, but it puts a strain on infrastructure if the city does not keep up with the increasing urban sprawl. It also makes some things more expensive, particularly if they are in limited supply and demand for them unrelenting.
It is not difficult to understand that house price growth is natural and a given if you have continued population growth and constant demand for the same limited resource.
Pauk wrote:Germany
GDP – $3.316 trillion (2010)
Taxes and Other revenues – 43% of GDP (2010)
Market Value – $1.43 trillion
Exports – $1.303 trillion (6 times greater than Australia)
Net Foreign Investment – $1.427 trillion more external than internally held.
20.6% over 65 and Median age 44
Anti-speculation laws for residential property helped build this nation.Australia
GDP – $1.236 trillion (2010 est.)
Taxes and Other revenues – 32.3% of GDP (2010 est.)
Market Value – $1.455 trillion
Exports – $212.9 billion
Net Foreign Investment – minus $114.4 billion (more owned than we own)
14% over 65 and Median age 37.7
Pro-speculation laws for residential property helped cripple this nation.Compelling figures, but let's not forget, the population of Germany is over four times that of Australia. The population of Germany is slightly over 80 million, versus little over 20 million for Australia. Australian residents are generating roughly 50% more GDP per person than a German resident. Even if we considered the over 65's in each country do not contribute at all to GDP, Aussies still generate 26% more GDP, on a person to person basis. And clue me in, is it better to get a greater or a lesser percentage of GDP from taxes and revenues? Personally, I think that there comes a point where tax stifles productivity. Go overboard with 'anti-speculation' measures and you'll get more than what you bargained for: a lack lustre economy.
Compare the population growth charts of Germany and Australia under Google's public data and you'll also see a startling difference: the enormous population growth in Australia versus the plateauing in Germany since 1995. The population is in fact little higher in 2010 than it was in the early 1970s. I have read articles that conclude that Germany has successfully implemented measures to ensure that their property prices do not increase, and that Australia needs to do the same. Really, I'm not a professor or a rocket scientist, but looking at the population growth charts, I'd say there's a very real reason why Australian property has become increasingly expensive.
Jamie M wrote:fWord wrote:Detached houses win so far…
I don't think I could live in anything else. I love having a backyard and a bit of space between the neighbors. We've lived in apartments and townhouses but I'd take a detached home over them any day.
Cheers
Jamie
Having lived in both a studio apartment (as a student) and in a detached house (currently), I cans see the advantages in each and could live quite happily in either, but got to agree with you that a house with all it’s space is still the way I’d go, given the choice.
