Forum Replies Created
- fWord wrote:Arguably, government 'red tape' and regulations have caused a virtual land shortage. And the high cost for developers may then contribute to a shortage of new projects. We then have a shortage of affordable housing. If this is indeed the case, then people need to start moving their 'rage' to a different target. Abolishing negative gearing ain't fixing the problem. People should be lobbying the government to provide better public transport and infrastructure, decentralisation of services and amenities away from capital cities into smaller 'satellite' cities, and provide government subsidised housing.
And no, we're not worried about a FHB strike. I think the key issue at hand is that FHB don't know who their true enemy is and property investors are being called greedy punters heading a ponzi scheme.
We all know that if we want answers, we should ask the correct questions and also not bark up the wrong tree.
I'm not trying to claim that removing NG will fix the problem – just that removing NG won't create the nightmare rental scenario that it has been politically expediant to try and sell as the truth for the past quater decade.
Removing NG outright will kill the market and likely the Australian economy – it would stop the flow of much credit dead in it's tracks. NG is something that has to be carefully phased out over time – it can't be removed outright.
And I agree that the Australian shortage is something that has many factors – land availabilty not being one.
Land release. Credit fueled demmand. Govt stimulated demmand. Poor city infrastructure and planning. State govt funding over-reliant on housing transaction. NG is just another factor that adds to the overall issue.
The big wild card is the thing that Steve hinted at in his USA interview thread – the willingness of the poulace to believe in housing assets as being bullet proof and over indebt themselves because of it. This is why these get up campaigns and recent news stories may present perhaps the most important piece in destabilizing the Australian RE bubble – they show a subtle yet growing change in what people are willing to believe about the asset class.
It wasn't debt that killed the tulip bubble – it was people finally realising that tulips weren't worth as much as they were paying for them.
Here's an extra bit on NG – as this thread has caused me to refresh my memory on it's history:
Quote:Supporters of negative gearing argue that its abolition would lead to a ''landlords' strike'', driving up rents and exacerbating the shortage of affordable rental housing. They point to ''what happened'' when the Hawke government abolished negative gearing (only for property investment) in 1986, claiming that it led to a surge in rents, which prompted the reintroduction of negative gearing in 1988.This assertion has attained the status of an urban myth, but it isn't true. Rents (as measured in the consumer price index) did rise rapidly (at double-digit annual rates) in Sydney and Perth, but that was because in those two cities, rental vacancy rates were unusually low before negative gearing was abolished. In other state capitals (where vacancy rates were higher), growth in rentals was either unchanged or, in Melbourne, actually slowed.
Suppose, however, that a large number of landlords were to respond to the abolition of ''negative gearing'' by selling their properties. That would push down the prices of investment properties, making them more affordable to would-be home buyers, thereby reducing the demand for rental properties in almost exactly the same proportion as the reduction in their supply.
And that, of course, is the reason why negative gearing will forever remain untouched – because the negative reaction and loss of votes from people who would experience declines in the value of their properties would outweigh the positive reaction from people who would benefit from lower property prices and would change their votes accordingly.
It's something to remember next time you hear a politician saying he or she is committed to improving housing affordability, or increasing participation in the workforce, or both.
From this article http://www.smh.com.au/business/imagine-a-tax-system-that-penalised-work-20110329-1ceqb.html
fword,
Singapore has something related to housing requirements that Australia does not – an actual land shortage.
Oh, Canberra has the 99 year lease thing also. Being landlocked, ACT can argue it has land shortages.
And ultimately, re the FHB strike, what does it matter? If the property market is so stable – what difference will it make if a majority of new entrants decide to opt out? Investors can flip with each other and pretend their asset values are solid foirever, can't they?
fWord wrote:I've said this before and the information comes from a book I read at the library:Negative
gearing was once abolished back in 1985, only to be reinstated two years later. The attempt to remove negative gearing actually led to a rise in house prices and rent. When negative gearing was restored in 1987, house prices and rent increased yet again!Considering what an epic fail it was in the past, I challenge the government to do it again. More to the point: can you (yes, all those who think negative gearing should be scrapped) stomach the potential increase in rents and/ or house prices? Can you truly tolerate the resulting negative fallout (which falls on renters and would-be first home buyers) from something you're proposing?
As is so often said: Careful what you wish for. You might get more than what you bargained for. 'Never eat anything bigger than your head', and don't try to paint complex issues in a simplistic manner.
What's the book?
Here is a recent Domain article
Here is a SMH article based on a bankers research of what actually happened
http://www.smh.com.au/articles/2003/08/24/1061663676588.html
We have rememberred a political myth. NG removal does not have the effects we have been led to believe it does.
xdrew,
you suggest that 30 years ago the government did provide a reasonable level of public housing. I agree they haven't in a long time, not sure if it has been a full 30 years but definately more than 15. Why is it not possible that they cannot provide a reasonable standard of public housing again?
It doesn't have to end up like NY – it can revert to what it once was.
cuteyoungchic,
It's possible I was confused:) You didn't mention rental increases. Only that the government didn't want to provide extra public housing. Not sure if that was true in the 80s but I agree that it would definately be something government would take into consideration now.
Don't you think, however, that providing public housing for down on thier luck citizens is a government responsibility?
luke86,
It just depends what you think is the lesser of 2 evils.
Current affordability is unsustainable. A bubble exists. That much seems obvious. A correction is required for sustainable economic growth in Australia's future.
Without a crash, there will be stagantion – aka Japan. The country will take years to recovery this way but overleveraged individuals will be able to hold on longer.
With a crash, there will be unemployement – aka America. In this scenario, once the bottom is reached, new growth will start in earnest much sooner but overleveraged individuals will be ruined for life.
I don't know whats better for the country, just putting the possibilities out there in simple terms. The govt, RBA and big lenders seem to think stagnation will be the better outcome – so we may end up with that.
The mindset of the people is a fickle thing though and can have alot of effect on an economy.
SmartGenY,
As far as I know the only other place that has similar NG benifits to Australia is Canada and, not surprisingly, it is the only other bubble that hasn't popped yet.
cuteyoungchic,
It is a commonly held misbelief that removing NG in the 80s caused rents to rise. It only happened in Sydney and not the rest of the country. It was reinstated because of REI lobbying, not because of a rental crisis.
As for % of NG property vs not – who knows? I do know there are aprox 1.5 mil Australians currently NG property and that the number has increased drastically over the past 10-15 years.
devo76 wrote:To me a correction of 10% or so is to be expected after a good run.I just don't buy into the crash . My backyard is still relatively affordable having had minimal growth since 2003( you could say a long slow hiss instead of a pop).and where you invest is where it matters. Actually I would be quite happy with a slight correction as I am far from my borrowing limit and want more properties for my portfolio. I know cycles have ups and downs and a knew that the down side may come into play with my 2009 purchase. I have 20 years minimum before I cash in so it was and still is well within my risk profile. So in a nutshell a correction of 10% or so is calculated and allowed for. A crash is unlikely but also survivable. But with cashflow, a buffer and time on my side. I see nothing ahead that is out of the ordinary within the bigger picture.So time is on your side – that is good for you.
Either long stagnation or a slow deflatory correction will be better for the country in the short term – though it could produce a stagnant economy in the long term (aka Japan).
A loss of more then 25% in a small space of time (less than 2 years say) will be bad for the country in the short term – though it will allow more growth when the dust settles.
I have no idea how it will play out – just interesting to see that some of the less fanatical bulls (like Steve and yourself) are open to the prospect of reasonable correction now.
And yes, for investors, owners or potential buyers that haven't been too greedy, market conditions will move into their favour over the coming years. If your lvr or equity spending is low, or you have some cash in the bank, you'll be fine.
It's the psychology of this that is interesting, I think. It's like Steve was getting at in his thread on what buffet had to say.
If the idea that owning a house isn't the be all end all of Australian life takes hold, the bottom will fall out of the market. The market needs the leverage generated by entry level demand to flow through it.
Doesn't really matter in the end. These blogs may help those unable to afford a home to feel empowered and not entrapped by their circumstance (which is a good thing) but they won't make the banks lend.
devo76 wrote:First of all. 56% blah blah. That would place many properties across Australia at below their replacement cost.Secondly why must there be a crash from here. I agree that values are way high. But i also believe that a few years of flat growth will sort this out. yes we are pricey compared to many countries. many of these countries are in the toilet so not really a fair comparison.What about when these countries recover. Do we honestly expect there values to stay where they are.
Yes values are high. yes a correction is probable. But a nationwide crash of 40-50% unlikely.
Hey devo,
Don't really disagree with anything you posted here but am interested to know why you now find a correction probable?
If I remember correctly, in 2009/2010 you thought it was unlikely.
Also, not sure that home values now are signifigantly more than they were (nation wide) in 2007. 2008 took some value of most places in most markets, don't forget and the 2009 FHB boost only took them a little above the 2007 peaks (5% or so) and the median has continued to rise since by upgraders endowed with the extra lvr from 2009.
It's kind of a classic double peak – which is bad in stocks.
QLD Buyers Agent wrote:I would say it is the difference between property Investors and property Traders. Investors have a long term focus and traders try to 'pick the market'.One thing for sure is that the availability of credit will be a big factor in the performance of the property market in the next 36 – 60 months.
Yes. Which leads perfectly into the next comment.
mattnz wrote:You would have to be crazy to expect rents to increase just because landlords overpaid for properties.
Rents reflect the supply and demand for accommodation and what the average household can afford to pay for it. The significant premium of 8% per annum holding cost vs 3% rental return of the average house reflects SPECULATION that a greater fool is willing to pay even more than you did for a poor investment.
Connect the dots. Housing specualtion has run rampant everywhere (not just down under) because of easy credit.
Only difference here is that it has gone on longer, created a bigger bubble and thus far had more government support than elsewhere.
xdrew wrote:When people start talking about costs and pricing structures i like delving back into reality rather than realty. At the moment the rough building cost per square metre piles out at about $8500 per square and goes upward from there for premium finishes .. or down from there for wholesale costings. So thats your calculation you use for building a house on a block of land.The other ingredient is the block of land. Now unless you are buying in the cow country, a block of land has a barest minimum of 150k for a 700m2 block. No matter where you go.
So plug these two together, and you get a 25 sq house (212.5k) and a block of land at 150k … thats 362k. Allow for a premium for position .. allow for a discount for older houses … and i think … thats roughly what the market is .. at the moment.
Where can you discount? since it costs about 40k to organise full facilities to the block of land .. there isnt much room there. And I believe the $8500 is looking very cheap since expenses have crept up around it .. where to cut back … on the workers?
It's quite possible that land and all wages connected to the REI are also in a bubble.
grimnar wrote:For us, it has been this way since we settled this country. Home ownership can only occur as the result of sacrificing something for your future security or lifestyle benefits, whether that be location (decentralising and even family ties), convenience, choice of employment, or any number of other lifestyle and other needs.True, there have been other hard times. But there have also been much easier times. 80's, early 90's.
Why would an article like this exist if our houses were really affordable?
maz,
does you agent collect fees from you even if the place doesn't rent?
Some of the property shown is just within 4x av wage, granted. Though averge earings in this country may be a little lower than that. Av full time wages are around 67k but overall av earnings are harder to judge and haven't been listed accurately since the 80s. I do agree that around 55k is a reasonable assumption though.
However, less than 20 years back, a starter house was 3 bedrooms on 1/4 acre, not 2 bedrooms on 500m2. The value for money of the product has greatly decreased in this country over the last 2 decades.
I agree with Dwolfe that decentralisation is a needed element in increasing value. The way our cities infrastructure and state government budgets are currently structured would suffer greatly if it took off, though.
I also think Dwolfes parent brought at a good time – middle of recession. The country sorely needs another so that people do take less for granted <moderator: delete language>.
1. Some cities – Melbourne, Sydney, Canberra – do not have 200k units, your pushing to find them at 300k.
2. Affordable has been factually qualified outside Australia as being 4x the average income or less. Of course, we are different, so our affordability levels must also be:)grimnar – 5x income is not affordable by global standards. Not to belittle your efforts of ensuring home ownership via sacrifice – but world standards suppose that individuals shouldn't have to sacrifice as much as Australian's do just to own a depreciating material asset.
Dan42 wrote:ummester wrote:say a 500k car = a 10mil house, where are the houses that equal 5k and under cars?Oh, and BTW, the difference between a 500k and 5k is proved by the qulaity of the vehicle. How does that work with housing? You can get a 5k car within 30km of a city:) And cars depreciate with age – as houses should.
I agree that land value should apreciate, to a sustainable degree.
It's quality of house AND the land it's built on. The 'quality' of the land is pretty much determined by it's location, so a block of land in the desirable inner suburbs is worth more than the blocks of land 40km from the city.
And yes you can get a $5k car within 30km of the city. That's because they have wheels
So where are these houses equivalent to 5k cars, the real budget jobs? And, if you can find me one sub 100k house in some back of nowhere location, why are 5k cars so numerous and 100k houses so few and far between?
I'm not trying to say that some houses aren't worth a motza – same as some cars. Some top end and middle tier houses are reasonably valued, no argument from me there. But bottom end houses in this country are way overvalued.
Dan42 wrote:ummester wrote:The difference is there are no houses down under that have prices equating to budget cars.Really?? None at all? I'd beg to differ.
say a 500k car = a 10mil house, where are the houses that equal 5k and under cars?
Oh, and BTW, the difference between a 500k and 5k is proved by the qulaity of the vehicle. How does that work with housing? You can get a 5k car within 30km of a city:) And cars depreciate with age – as houses should.
I agree that land value should apreciate, to a sustainable degree.
Dan42 wrote:fWord wrote:The result: masses of people who cannot afford a house. This does not mean that all houses are unaffordable. It merely means that property that is located in a desirable location become too expensive for most to be able to buy.But isn't this the same for any consumer item? I'd like to buy a Ferrari 458, but I can't afford one. So I buy a car that I can afford.
We couldn't afford to pay $1m for a house in a blue ribbon suburb, so we bought, 2 and a half years ago, in a suburb where we could afford a decent house.
What's the difference?
The difference is there are no houses down under that have prices equating to budget cars.
