Plenty of press recently about property prices, bubbles, opportunities etc etc. In reality, it's the voice of the people that set the market rate… Wondering what everyone's collective thoughts are?
We're considering purchasing a place (in Brisbane), but all the noise in the press has added a level of uncertainty to our considerations. Help please!
How do you see the property market panning out over the next 5 years?
Depends where the young man lives. Tas and regional areas havent seen much growth over inflation
Not much jobs over in Tas, esp for younger people.
Same in Greece
Actually RE like all investment markets moves in cycles. So the guy about to die of old age would have seen the market go both up and down many times.
OP, if you're thinking about entering the market now ask yourself if you could afford a mortgage interest rate of 8% or even 10%. Then ask yourself if your neighbours could afford it.
Not a bad point, Bystander.
Have certainly asked ourselves if we could afford a 10% interest rate, but have never considered the neighbours!
sorry what do the neighbours have to do with OPs decision
@havok44:
he's saying if the average person in the area you want to buy can't afford 8%+ interest rates then they'll sell and flood the market. which would be the optimal time to enter the market.
interest rates will rise again, when that happens and how high they go is open for debate.
That's not technically true. The property market DID go down during the GFC, and that was 5-6 years ago. So a young man 5-6 years ago could not have die of old age unless he has a weird illness…
"In reality, it's the voice of the people that set the market rate"
I disagree with that. Where property is concerned, it's generally more concrete factors like supply and demand, and to a lesser extent regulatory influences (for example incentives/disincentives for foreign investment in property, the opportunity to utilise negative-gearing etc.) that set the market rate of real estate. Given our ever-growing population, the relative shortage of available housing in the most-desired areas (i.e. mainland capital cities), and the fact that negative gearing will not be abolished by either government any time soon (it would be political suicide), I predict the price of housing will continue to rise more rapidly than inflation for many years to come.
ERGO, buy as soon as you can.
A housing market analyst on telly the other day said his analysis revealed that houses in Melbourne are going up in value by an average of about $1000 per week, and in Sydney by $2000 a week. I know Brizzy is a bit different, but it puts things in perceptive.
Thanks GnarlyKnuckles, some good points in your comment there.
"it's generally more concrete factors like supply and demand"
When I said that it was the voice of the people which sets the market rate, 'demand' is pretty much what I was eluding to. At any stretch, looks like there's more optimism here (at this stage) than there is among the media.
I live in Sydney, working the CBD, but can't justify $1M+ for a place so I rent here and bought an investment property in Brisbane. The growth rate may not be as high as its been in recent years, but as long as it keeps pace with investment and gives me a positive return, I'm over the moon. It's better than near 0% in a savings account.
If you are buying a place to live in, and intend to hold, does it matter if your area flattens or even drops a little over the next few years? Yes, we all want to say we're getting rich from property, but if you find a house that you can make a home, and you believe what you pay is reasonable, then ignore what others think. Your home is a very personal decision and is unlikely to compare on paper to a black and white investment.
Good luck
I'm always considering to invest in other state, how do you manage the property in other state? Is it much a hassle? Did you buy brand new so it's not much of a maintenance? Did you travel there to inspect before buying it?
I spent 10 years in Brisbane and only moved to Sydney about 3 years ago so still know the area pretty well. I bought off the plan with the intention of paying a property manager (which I would do even if it was in Sydney).
I used a buyers agent to do the leg work for me (flying backwards and forwards wasn't a practical option) so off the plan worked for me. If you're interested, drop me a PM and I'll send you his details. He is based in Sydney and I was happy with what I negotiated with him.
Well considering experts reckon we have a 30,000 shortfall in new properties per year currently, that can only mean one thing.
Also consider the material they start using in building homes is not as good as it used to be.
For example, the timber width is now nearly halved by the time the builders/council approving.
All that means is before they were overbuilt and wasteful with timber because then, timber was cheap.You should see the size of the beams in my old Qlder, ridiculously over engineered.
You could have the same width if you want, but it will add to cost considerably
Davros is quite right, and the general principal extends beyond timber. I can't help but recall how 'double-bricking' (of the external walls) was all the rage decades ago… yet 'double-glazing' (of the windows) in those same double-bricked houses, which would actually have ensured substantial benefits in the long term via insulative/ sound reduction qualities, was unheard of. Builds are actually a fair bit more coordinated/ sophisticated these days, re both design and materials; not less so.
Some standards have been cut back, which is worrying. I had a house built a few years ago and the builder used MDF for all skirtings. It's quite easy to damage and swells if paint is damaged and it gets wet. Decades ago even budget end builders used solid timber.
Other times I would agree that building standards were massively over engineered. I paved around my house a few years ago. Standard paver thickness was 50mm with 75mm for the driveway. Years later I have yet to see a broken paver so the standards are good enough. When a relative paved 30 years ago all pavers were 90mm thick, even the ones on light traffic pathways.
I am in a bit of a situation myself.
Looking at buying an investment house for $500k.
Not sure which way the wind is going to blow.
Buy now or pay off existing debt?
I'm also in a similar situation, have $500k to buy an investment. Even though I have a mortgage, decided to buy an investment house. Hoping to sell this after 3 years and buy a better owner occupied using the profit and current home equity.
Do you both have 100% Offset for your PPOR loans?
interest rates will increase over the next 5 years, that will bring house prices down.
"… that will bring house prices down."
No it won't. It may cause them to stop increasing in value so rapidly, but it will not actually cause housing prices to decrease. Or is that maybe what you meant?
i think that is what he meant, prices will stop increasing rapidly, house prices never go down, unless there is a war or something..
one could argue that any cash rate rise would cause property prices to increase slower, while the tenants would be the party that pays for it in the form of higher rent.
Interest rates are the main determinant of RE prices going forwards. People can only spend as much as they have access to.
So imho the middle and lower end of the market are where people rely more on credit and tend to have a higher Loan to Value Ratio. Interest rates are currently set at an "accommodative" or even expansionary level. At some point in time they will revert to a more neutral level and that will mean people will not be able to borrow as much.
When that will happen is anyones guess. But Fed Chair Yellen has repeatedly said that US rates are on track to rise some time this year. Most likely it will only be a little and will not be followed quickly by another rise. Even though the RBA does not move at the same time or speed as the US, international interest rates do have some influence on our own rates.
So, if rates here come down, expect RE prices to rise and vice versa.
Doesn't that lead to only loaded foreigners being able to afford houses (because they pay in cash)?
Now is the time to buy prices will start to rise again soon.
People hoping or expecting house prices to go down??? never happen. Value increases may slow but go backwards… there is too much demand.
They said exactly the same thing in Ireland ;)
and before the sharemarket crash in the GFC. And about the price of Tulips a few hundred years back. The other old favourite is "this time its different".
This country is coming off a long and very lucky economic run driven by mining demand. The longer term effects of that are yet to play out but are likely to see us trying to compete in service industries with countries who have much lower employment costs while paying higher taxes to keep our government solvent and pay the pensions of retired baby boomers who own most of the property assets we pay so much for and they got for a song.
If the changed economic landscape translates to higher unemployment (quite likely) this will certainly affect the housing market, a market already stretched to the limit of affordability in relation to what people actually earn in income. And that is with historically low interest rates in place. They of course will last forever, right?
What has caused such increases in prices over time? Well we used to have mainly one income households, now its two income households. Interest rates used to be quite high, now they are at historic lows. Money became cheap to borrow so we borrowed more of it to buy the same things. Because everyone could borrow more the prices went up. The government responded with grants and concessions. Everyone had even more money available so prices went up even more.
Unless you want child labour we cannot go beyond two incomes per family. Interest rates can't really get much lower. So where does future growth come from? It simply is not realistic for everyone to earn $100k plus, despite what tubby Hockey might think. Only a certain percentage earn in that bracket and that percentage won't change much. Incomes are falling in real terms, not rising.
There has to come a point where people simply won't accept what they have to give away in lifestyle options simply to own property. Even quite awful suburbs in Sydney a long way from beaches or the CBD now demand huge prices for even very ugly houses. One drab suburb and long commute is much like another, regardless of which city or even country it is in, so why pay these prices to live what is not even a particularly pleasant existence? Self interested media propaganda can only take it so far. Unless of course we simply hand over the market to cashed up overseas investors and become a nation of renters.
The biggest problems are certainly in Sydney as the rest of the country has not had the same ridiculous and rapid price growth. If I wasn't already settled here with young kids and other family close by, I would seriously consider cashing out and moving elsewhere. It simply isn't worth the cost for what you get in return, which for the most part is very ordinary, generic suburbs that could be anywhere. Its great if you can afford the top end of the market, but that goes for almost any city in the world. To those 2-5% of people, enjoy. For the rest not already in the market, some serious decisions need to be made.
Magnificent post Brianqr!
A lot of areas with large blocks and future subdivision would never devalue, but there are a lot of units/houses in Perth built on divided blocks that are overpriced in my mind.
surprised not a single vote for the actual correct / most likely answer - flatline for the next n years (that one vote is mine)
Funny how you proclaim that your 'answer' is the correct one, without offering even a scrap of a reason. So do tell; why on earth do you think prices are about to flatline 'for years'? The only thing that would possibly cause a temporary flatline would be if negative-gearing was abolished. Which is not going to happen in the next 5 years.
if neg gearing were abolished, we'd see a 10% drop in the short term and long term stagnation - i.e. a massive correction. Flatlining doesn't need neg gearing to be abolished - i think you're way off the mark.
regarding why I'm correct, well I can spew stats n spin facts but put it this way - this forum is ozbargain, not exactly full of property moguls and seasoned investors. The majority is voting for "prices to continue increasing" which means if the sheep are keen then their money is already in the market, so who is waiting to buy? everyone that can get in are already in.
on the other hand i'm not betting on a fall either because there's a genuine housing shortage and solid fundamentals to support current price levels (immi rate, pop growth projections, wage levels, unemployment rates and other macro indicators etc)
"…not exactly full of property moguls and seasoned investors"
"… if the sheep are keen"
Wow man… are you intentionally trying to insult the general OzB community, or is that just the usual/default tone of your communications (i.e. smarter-than-everyone-else/ arrogant)?
I don't believe that you can "spew facts and spin stats" that suggest that property prices will flat-line for years, as you initially suggested. Also, suggesting that there's no one left who wants to buy is completely baseless/demonstrably false… the stats on the numbers of people taking out new home-loans are freely available, and they don't suggest that there's no one left wanting to buy.
The only reasonable stuff you said in your most recent post was at the end of it, where you seem to be disagreeing with yourself to a degree ("… there's a genuine housing shortage and solid fundamentals to support current price levels").
Anyways time will tell, and I'm pretty sure you'll find house prices don't flatline "for years"; there's many reasons why they wouldn't, and no reasons why they would.
@GnarlyKnuckles: i wasn't disagreeing with myself, that last bit was the gist of why i don't think it will fall. But I don't think the likelihood of it going up in 2016-18 to be very high at all
no i don't communicate like this usually, but yes in the context of financial related things i don't think much of ozb users. I'm a regular on a leading property forum and if you check the poll results / threads on similar questions (and there are plenty) the votes gravitate towards flatline as well. My facts and stats will be a rehash of what's found on the internet from places like that.
It's likely that prices will slow in the next few years, but they won't stall or go down from what I've seen. Well, maybe in a few parts of the country, but the overall trend will still be up.
But I agree with GnarlyKnuckles - why do you think we'll see flatlining prices more widely in the coming years?
What's going to happen after that?
maybe a 5% dip by 2018 followed by more stagnation, then eventually months of several sharp rises in mid 2024, when skynet becomes self aware.
Brisbane always very steady. no trigger to point a massive boom than in Sydney
The time machine hasn't been invented yet…
Here is my crystal ball:
Interest Rates will be flat this year in Australia given the slow growth in the global and local economy and inflated property/stock prices. The government will use other (less effective) means to try and curb the investment in property and is bubbling the market in Melb/Sydney. However growth in house prices in syd/melb will climb although slower than the last two years.
2016: There will be an election this year most likely and I think the winds of change will cause the Liberals to put some stimulus back into the economy but probably won't change anything for 2016 except for the pipeline of government projects. The tools the regulatory bodies would have used to curb investment should take hold firmly this year. If China/Greece pan out ok this year, I'd expect a rise or two next year providing that the economy here shows some growth outside the property sector and the needed pipeline of natural resources starts to grow again. Otherwise you are looking at a flat year again on rates or if something hits the fan, a possible cut. I think this is the year we'll see low to flat growth in houses
2017/2018/2019: If the government changes hands at the end of 2016 there will most likely be a slightly higher uptick for funding flowing into proposed projects that would have helped Labour win. Otherwise expect slightly more moderate spending from the Libs (although it appear much larger in the campaign that has just been run). This stimulus along with the positive story I spun in 2016 will mean greater prosperity in Oz and abroad and given everyone would have adapted to the regulatory changes in investment housing, the slow upward march in house prices will flow. If you are a believer in the "hits the fan" scenario, again the global outlook will look bleak and the fallout from Euro/China will have a trickle down effect into our economy with could lead to low or no GDP growth. Action will need to be taken given that will have an impact on jobs/Sovereign ratings/political pressure etc. This may see some pressure released from the housing market and you might see a downturn. Might look like 10 to 30% in melb/Sydney, maybe 10-15% everywhere else, just depends where the job fallout happens and the severity of the issues that arise. Will that fall happen in 6 months? Probably not, as the government will try and step in to see an "orderly exit" of the housing market (for investors) if there is going to be one, add to this the pent up demand for owner/occupiers that will buy and hold when they see a perceived bargain will help the this. could that 10 to 30% happen over a number of 3 to 4 years. Most definitely — if the government and fiscal policy locally and around the globe doesn't stop the start of the economic spiral. But this is all a bit doom and gloom!
So in short: House prices are "probably" going to increase slowly over the next 5 years. But this author isn't going to invest in them (unless I am going to live in it and is within my cash flow to pay it off!)
If you are buying to make a buck in the short term you would have to be very lucky to make it work, entry and exit costs will make sure of that.
If on the other hand your investment horizon is long term I would suggest focus on the what and where to buy as opposed to reading the market. Do the research on the area and if the prices have stepped outside a longer term averages suggest you look elsewhere.
Personally I think Melbourne and Sydney markets would be a no go zones. Other places have more chance of a short to medium term appreciation. Good luck.
Im looking in the Maroochy area at the moment. Have been for ~2 months. I can tell you the following:
That is what I have been seeing, looking for a 3+ bedroom place. Realestate.com.au emails me every week, QLDs Auction clearance rate is usually around the 50% mark (was 40% once last month).
If you are unsure, just go to open homes for a month and talk to agents/see what is selling/how long has everything been on the market for. That is how you get an idea in the area you are looking to buy.
It depends on which city.
I'm assuming you're from QLD as you mentioned QLD.
Melbourne/Syd would be snapped up around the $600-850k mark.
Whoops - yeah should have clarified, Im looking in the Maroochydore/Sunshinecoast area, QLD.
I'm a pretty firm believer that Melb/Syd is a completely different market to where I'm looking. The only thing they have in common is the mortgage rate affecting them.
Seeing the same thing in Brisbane, TurtleMaster. I wonder if that means that the low-end of the market (400-600k) has been over-stimulated because of low interest rates?
We've been to a few open homes in the high 500s and a handful in the low 600s. Amazing how many more people were at the "high 500s" homes than the ones in the low 600s. Wonder if that's a bit of a psychological cutoff for investors who have flooded the sub-600k market?
I definitely think its either a psychological thing, possibly also related to a mortgage thing. 20% deposit is $100k when you get to a $580k house + stamp duty etc..
I also think investors would rather have 2x lower value houses than one expensive one.
Either way, Maroochydore expects 50% population growth over the next 7 years, and the QLD gov expects 2 million new people to move into the space between Gold Coast to Noosa over the next 10 years. So buying in a decent location, and somewhere that is not in a flood zone, is top of my list.
So long as there are buyers it won't go down.
Two major events will cause massive disruption to the pricing of worldwide assets (including US stocks and Australian properties):
The massive corrections of the Chinese stock market (this one is caused by numerous reasons too many to list here including margin lending to retails investors, massive overpricing of companies etc etc)
The opening (or at least less restrictions) on average Chinese investors to the outside world.
One of the major reason why the Chinese market is overheating is because the local stock market is one of the only few investment options for the average investors (other being the local property market). It is very hard for the average Chinese citizen to transfer their money abroad, there are some options like paying a middlemen 20% of the value but not available to everyone. Imagine if these money suddenly frees up. This will be happening in the next 2-3 years (source are alot of investor notes from major investment banks. Simple google search will suffice rather than me listing the link here).
Right now despite all the fear mongering the real reason of the bubble is not overseas money. But it might not stay like that soon enough.
I just read an interesting article: http://www.smh.com.au/world/a-nightmare-in-paradise-20150711…
When and not if the Chinese government opened its restriction, the Australian government will have to introduce policies to counteract this. An easy one is a ban on foreign ownership which is not as easy as it sounds and might even be illegal with the TPP (I dont know what is in the TPP seeing that it is all being discussed secretively)
Also another thing before someone points this out to me: yes I know the chinese stock market just took a massive beating but it is still massively up this year and still has a long way to go down. alot of selling restrictions are still in place and 50% of the names are still currently on trading halt
my parents are saving up (me too, abit, from my part time job) so they can put a deposit in my name because by the time i need to buy a house the prices would have sky-rocketed into oblivion. The prices of syd properties are no joke, esp the popular areas. I used to think a million could buy you 10 houses, nope! An apartment in my area (hurstville) was sold for 1 million…
Take 30% of your salary. See if it is enough to repay the monthly loan. Next, work out if you can still live if you need to pay 50% of your salary on the loan if the interest rate fluctuates. If you are in the green for both scenarios, go and buy a house and don't look back. You can also try to secure a fixed interest rate to minimize the effects of interest rate fluctuation.
IMHO, Sydney prices are not proportionate with income as it has been skewed by investors, so anyone buying needs to do their maths really well to make sure they can continue payments if things go a little sour.
Great advice, thanks IMFrugl.
Precisely IMFrugl.
That's exactly what we did.
I worked out that 30% of my income will be able to pay off our mortgage income although both of us worked. We ended up paying 6 years off our mortgage in 1 year. My wife then had a baby and stopped working but we are still paying more than minimum payment every month and live comfortably.
Yes we could have bought a lot more expensive place and get a larger return but the mortgage stress will be huge !
We live in a massive country of land, yet we can barely afford our accommodation. Isn't that ironic? Our government is letting poisonous foreign money ruin our peaceful lives.
If our gov were smart it would impose a similar system that sng has and charge an extra 20% or whatever it is if you are a foreigner.
They would be even smarter to drop the fee if they are buying more then 150klm from a city
The government isn't able or doesn't want to fix the problem. If we have better transportation solutions and infrastructure to a lot of this unused land, it would open up the market.
As an example I work in the CBD, but I can't live more than 20km from it as the commute would take too much time. In this day and age there are technology that is capable to solve that, yet we are not investing in it.
Here's a couple of points from my perspective, as someone who has worked both as an economist and a federal lobbyist for the property industry.
The current price boom is being driven almost entirely by investors, particularly foreign investors: That's why big price gains are limited to the foreign investment hot spots of Sydney and Melbourne, with most other markets either going nowhere (Brisbane, Canberra, Adelaide, Hobart) or experiencing price falls (Darwin, Perth). Investors are fickle, which makes this kind of speculative growth highly unsustainable compared to growth lead by owner occupiers.
There is no housing shortage: That is to say there's no underlying shortage of housing for people to actually live in. It's a myth perpetuated by the property industry to sell product. Construction is going crazy at the moment, and we're building record numbers of houses at the same time as population growth is slowing. The real giveaway is in rents which nationally are increasing at the slowest rate on record, and in many places are either going no where of falling. Why? Because we're building more than enough houses for people to live in. Goldman Sachs expects an oversupply of 75k houses by the end of 2017.
Australia is probably heading for recession: To me, people appear to be massively underestimating the economic shit storm currently facing Australia. Between the closure of Australia's car manufacturing industry and the wind down in mining, Australia will most likely lose somewhere between 100,000-200,000 jobs over the next 2-3 years. Unemployment in the double figures is entirely within the realm of possibility. People talk like the mining boom is already over, but the bust has barely just begun.
You need either increasing incomes or increasing levels of debt for house prices to rise: The Australian Treasury expects income growth over the next decade to be at its lowest level in 50 years. At the same time Australia's banks are already massively leveraged into housing, and largely reliant on offshore borrowing to fund and rollover their mortgage books. Foreigners are happy to lend to Australia while the economy is looking OK, and the Federal Budget is available to guarantee our banks' debts, but if those things start to deteriorate, credit will become much less available. The Australian Prudential Regulation Authority is already forcing banks to tighten credit following the report of last year's Financial System Inquiry, which found them worryingly under-capitalised.
Bottom line is I wouldn't be rushing out to buy a house anywhere until a lot of the uncertainty in the Australian economy is resolved, probably in 2-3 years time.
Some great arguments in there - appreciate the write up!
To go back to your personal situation, if you're primarily after a place to live for many years rather than a speculative investment, and you're in a position to buy with a large deposit, low LVR, can weather higher interest rates, lower levels of income, potential job loss, and potentially lower house prices, then you're probably fine.
I just know far to many people who have taken a 97% LVR loan at something ridiculous like 9 times their combined incomes, who realistically are probably bankrupt if even the slightest thing doesn't go according to plan.
know far to many people who have taken a 97% LVR loan at something ridiculous like 9 times their combined incomes
So like putting 30K down on a million dollar property?. Banks actually do loans like this? The LMI must be astronomical.
I think that's the winning argument mate. Bottom line is what are you planning to do with it. If you're looking for a quick buck I don't think property investment is the way to go at the moment. However if you're looking at starting a family and having a roof over your head then your goals are completely different and you should be looking to find a place that you like, is in a good area with some potential for growth and is within your current means.
Something like that, although I think it might be 95% LVR, plus an additional 2% for LMI, with that amortised into the loan, to give 97% including LMI.
Most lenders restrict their maximum LVR to 90% (ugh) for lots of people, but there are a fair few who would absolutely give 97% LVR loan to people. Financial executives and managers simply don't care anymore because they've already seen that western governments will simply bail out their over-leveraged banking systems when they eventually collapse. Defaulting will never be allowed to happen - governments will simply shift the debt to public books and steal borrow depositors money.
I would like to add some of my insight to your points.
The property market has a parasitic existence on the industry and it relies on already existing savings. It is not a productive asset for the national economy, it does not generate revenue in the current account of the nation. Ex: The money earned by someone which is spent on mortgage is not spent on goods and services, hence it reduces the amount of money circulating in the market into an asset which does not generate income. Property inflation can go on as long as the earnings keep pace with the national economy.
If we look up the speed and capacity at which China delivers modern apartment buildings, it is clear that the technique is available to provide housing in a very short time for everyone. They manufacture houses in spare parts in warehouses and then assemble them like Ikea furniture which have really good seismic ratings, weather proofing and lifespan. This is a new development and it can deliver low cost housing at a very rapid rate. By the methods Australia uses it is clear that this industry is artificially protected for political reasons. Protectionism is very harmful for consumers, they have to buy lower quality goods at a higher price.
Australia is heavily relying on primary industry export as the source of national income. There is no value added over here. Australia might have to significantly lower the AUD to encourage manufacturing back to avoid a recession which is probably the only way it can avoid it or what you have said about unemployment will be true.
I would say, hold on to your savings as the long term outlook is very negative. I cannot say anything about 5 years though.
Important 3rd point. Many people in Australia are too focused locally and don't look at the global picture. AUD has fallen 20% against USD in the last year. Any property which increased by 15% AUD in one year, actually fell by 5% against the global reserve currency. Every property investor since mid 2014 would have a better return by simply converting their money to USD and sticking it under their mattress (or opening a margin forex account and trading at multiples). And the AUD is heading nowhere but further down from here. If you are not looking to be an owner-occupier, weigh the returns from local real estate investment against foreign stock market and forex investment.
Although there is nothing wrong with your vanilla explanation for point 1. you should consider the positive impact rising house & land prices have for government. Land tax allows the revenues for them to increase with the value of property's so they have more in their coffers that could be used for economic expansion (key word being COULD because if there is something these governments don't seem to want to do in the last 2 years is be expansionary!)
Regarding your points of housing boom limited to Sydney and Melbourne, you need to understand these are the places of the majority of OZ working people work and live in. Therefore the crazy "boom" causes terrible pain to lots of OZ tax payers. Their miserable lives just begin: bear higher accommodation burden, or spend extra hours of travelling time since their jobs in the CBD or Metro while they have to live a remoter places. Those so called "investors" suck out these working people's lives. For example, some Sydney workers move to Central Coast because they cannot afford Sydney housing, one of the price is that every day they probably need to spend extra 2 hours on the way, that counts 1/12 of a day, about 0.8 days a week, 3.2 days a month, 38 days per annum. so over 20 years working age they sacrifice over 2 years life time, namely they are killed 2 years earlier than the time they deserve to live. Let alone the life quality they forfeit due to the tiresome long day travel.
Don't underestimate the poisonous foreign money particularly from China. Today China is very different than before. There are tens of millions of millionaires over there and their money is IMHO over valued right now (ironically the westerners have been criticised them under valued it in the past years). 10 years ago most of Chinese would envy you have 200k AU$ but nowadays, if there are way out to here they can easily, and would happily buy out most of the Australia capital cities. What? a house only cost $1m? that's cheaper than my 2 bedroom unit! - most Chinese from their major cities would think so, and happily take OZ properties as their safe heaven.
Therefore if the Australian government does not take it seriously in controlling this in-flowing flood of poisonous money, lots of Aussies will have long miserable way to go.
I agree with a lot of these points except the APRA statement. The banks are tightening CAPITAL not credit given then the BASEL III recommendations and the banks trying to get ahead of APRA enforcing this (although I've read that APRA might become more relaxed on this given this makes our banks less competitive on a global scale.)
The banks generally regulate themselves in regards to the domestic property market. They want higher than system growth if they are lagging in that area. But once they hit the dominate position they generally tighten the reigns as they don't want to be the runaway winner of mortgages in the country as that puts them in the riskiest position in a downturn (they only want to lead it by the required amount to truly say they are "No. 1" for marketing purposes.)
I know it's a free market but what our government need to do is to regulate the property market and make housing affordable for the average Joe. Isn't shelter a need? the average income earner shouldn't be spending > 10 years repaying mortgages. Why should healthcare and education be affordable but not housing?
The real cause of poor affordability is actually the opposite, too much government regulation in the market, which makes it very difficult and costly to build new housing.
In a free market, a basic new house and land package would cost maybe $150-250k. You'd pay easily that amount in taxes alone on a new house in somewhere like Sydney.
So move away from Sydney. I hear there are many other cities in Australia that are very affordable in comparison
This flippant comment that people throw out there really annoys me. If this poster lived in a little town with a population of 10k or less doesn't mean their affordability automatically goes up. Often jobs in those regions pay significantly less and have very high unemployment. Plus the employment you can gain doesn't necessary guarantee you a "career" where you can work hard to really multiply your wage.
Not that I agree with the original OP comment on government regulation being the issue with affordability. That is just a small market force.
@serpserpserp: This flippant comment that people throw out there really annoys me.
Reality's a bitch eh?
Why do you have to go silly and say towns of 10k or less?
Brisbane prices are half of Sydney, so are most other capitals.
Many towns of 100k have property for half that again.
They aren't half the price. That isn't a reality.
Even places like Brisbane have their issues with professional jobs being acquired. Telling people to "just move" is about as useful as telling people to "get a better job". Might as well not even reply.
@serpserpserp: They aren't half the price. That isn't a reality.
Rubbish, there are plenty of houses within 15klm of the CBD with transport nearby for under $500k.
Whats Sydney now, near $1 million isnt it?
THAT is reality
No Sydney is not a million a house, not a reality.
Yes I can find you cheap houses in Sydney within 15km, doesn't mean most people want to live in them. There are a lot of cheap houses in Brisbane because half of it is a flood plain.
@serpserpserp: No Sydney is not a million a house, not a reality.
Median for sydney now is high $9's
Brisbane has a $5 in front
@serpserpserp:There are a lot of cheap houses in Brisbane because half of it is a flood plain.
Really showing your lack of knowledge now champ
Nothing like half and much was industrial and parkland, not resi.
http://b2cloud.com.au/wp-content/uploads/2011/01/Screen-shot…
That image just shows what was truly under water. My family in Milton/Paddington received some major water damage in the last flood. I'm from Brisbane originally champ, so I know the truth.
Also still not double the price, so can't be to upset with my half claim?
Not everyone wants to live in a place like Brissy remember, and the affordability issue around jobs/careers in other places apart from Sydney/Melbourne. Brisbane has very little going for it in regards to large corporations that require specialist jobs.
@serpserpserp: My family in Milton/Paddington received some major water damage in the last flood.
So is that supposed to prove something?
Me, my family and all of my friends did not have flood issues, that doesn't prove anything either.
@serpserpserp: I'm from Brisbane originally champ, so I know the truth.
I am here now and so do I.
Half of Brisbane being on a flood plain is not the truth.
@serpserpserp:Also still not double the price, so can't be to upset with my half claim?
Gee, a pedant.
Close enough to a $million and close enough to $500k is close enough to half for the real world and then there are all of those other places for even less that you conveniently dont mention.
@serpserpserp: Not everyone wants to live in a place like Brissy remember,
Australia is a big place, Sydney and Brisbane are not the only places you know.
@serpserpserp:Brisbane has very little going for it in regards to large corporations that require specialist jobs.
Fine, stay in Sydney, earn the big bucks and pay the high prices that a specialist can afford to pay.
@serpserpserp: They aren't half the price. That isn't a reality. No Sydney is not a million a house, not a reality.
Read it and weep from today's fin review
http://www.afr.com/content/dam/images/g/i/i/6/m/b/image.imgt…
Sydney $1000616
Brisbane $490855
@serpserpserp:
And your source is what?
Oh thats right, nothing.
Says it all .
Accept defeat graciously, be a man.
I really don't want to get into an argument over data but if you want to go have a look at the ABS data see if you can find anything to match the Domain stuff.
http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/6416.0Ma…
June data might not be out yet.
I know you'll bring me down to your level and beat me with experience of picking over tiny details with this fruitless argument. So I will stop here (although I though we had stopped! LOL guess you've been researching all that time champ!)
@Davros: Accept defeat graciously, be a man.
So you couldn't do it serpserpserp
Pedantic child it is then
Cities become larger. Urban precincts popup and become self contained cities. This is partly due to affordability of housing and people moving further out from the city looking for affordable housing. There used to be a time when I thought Strathfield was really far. Now anything within an hour of travel to the CBD is considered reasonable. Another few years, that figure may increase to 1.5 hours. I had a friend that was saving up to buy close to the city. He is still saving after 8 years. First home buyers need to become realistic and buy in affordable suburbs rather than trying to achieve the impossible. Do the time in a fibro shack out west, and you will be pleasantly surprised at where it can lead you.
I have been wondering for some time about the level of investment properties held by "Baby Boomers".
This seems to have been the go to investment for many older folks and i keep reading/hearing about these people with 5+ properties.
My question is, as they start dying off (and its gotta happen soon hasnt it?) what happens to all of their properties? Mass over supply with the (greedy GenY'ers) kids (remember theyve only had 1.6 kids) selling the properties off to grab the cash.
Im seeing a glut of houses = price crash
of course alternately…
Nothing changes and house prices continue to inflate beyond any type of logic.
Demographically speaking, the Baby Boomers make up about 25% of the Australian population, but they own nearly 50% of the country's housing assets.
They also hold almost no financial assets, so there's a very good chance that they'll have to sell some of their housing when they retire if they want to maintain their lifestyles. BIS did a study a few years ago that found the aging of the boomers will create about a 30% drag on house price growth (relative to what it would have been otherwise).
http://www.bis.org/publ/work318.htm
The other interesting factor IMO is that most investment properties are negatively geared, which might be fine as a tax dodge if you're working and on a high taxable income, but doesn't make a lot of sense if you're retired.
I think you'll find that the average Boomer just owns their own home. Which they'll fight tooth and nail to keep and will adjust their lifestyle to the pension rather than sell down their house for cash to spend in retirement. Some Boomers might trade down if they live in a good suburb, but they are still swapping one dwelling for another. I refuse to believe (even though I'd love it) that Boomers aging will cause a property glut. You might find that 1% of the Boomers have a large property portfolio but they will be so well off that they'll hardly have to sell them all to generate a wage to live off and will pass the dwellings down via family trusts etc.
Boomers aging and dying will only allow the investors of the growing affluence Gen X to take the mantle from them. They'll inherit what wealth there is and it will consolidate even further with the rich getting richer etc.
Your final point on neg gearing: I would say most retirees are NOT still paying off properties unless positively geared!
Here's a different perspective from someone who has tried hard to understand the economics of Housing but keeps failing.
If two people want to buy the same house, it's the one who gets the most money from the bank who gets it. Nothing or little to do with the intrinsic value of property.
The banks own our government, and are using the government "guarantee" to increase their risk, and holding both political parties to ransom.
Prices will continue to increase while the banks can keep figuring out new ways to gouge it from their customers.
While interest rates continue to fall here in Australia, the banks will keep clipping part of the cut to support their profit requirements. When rates start to rise again, the banks already have their strategy. It's up to us mugs to figure out what it is.
Nothing will be done about negative gearing, which is really just a furphy anyway. With interest rates so low, you would have to be borrowing exorbitant amounts to get a tax loss. The government may even allow tax deductions for non investors, in a grovel to the banks.
Yeah, I'm biased and see the banks as the ultimate used car salesmen. And in my defence, are share price increases intrinsic, or also underpinned by bank lending?
are share price increases intrinsic, or also underpinned by bank lending?
I think it suggests that there is a lot of money out there that is competing for becoming capital, infact more than the things that have intrinsic value to them. This creates a conflicting situation which leads to corrections in the marketplaces.
Getting completely out of my depth on this, but I believe financial organisations account for half of the ASX200, and the BIG Four are half of that.
So if the incumbent government allows the housing market to falter (you can be sure it won't be the banks fault), will bank shares falter, and the rest of the market follow suit?
Bank shares falter whenever their lending risk, rate of lending and their deposits get affected negatively. Rest of the market suffers because of the scarcity of capital in the marketplace. Business lose their leveraging capacity which is why other industries follow suit. However banks conduct stress tests and it more likely that the money withdrawn from the housing is put into production rather than consumption goods.
@kaushik: I must be psychic, as well as paranoid about banks.
Less than two days later, the Grattan Institute has proposed a Property Tax to raise $7Billion a year, but remove Stamp duty.
Guess where the stamp Duty savings will go - straight into house prices, because that stamp duty becomes Equity, and the banks can LVR even bigger loans to guarantee higher prices.
Not saying it's going to happen, but I would love to know who funded the research that underpinned this proposal.
As long as you have the Richie chinese mainlanders here buying up everything and leaving them either empty or as investment. There's no chance it will go down.
It's the stupid government and the real estate agents all get greedy with commission and stamp duty hence it will never get fixed
Interest rate has nothing to do with it. Plus unemployment also will not have much impact.
We need to make these overseas investors leave. Either only allow new establishments to be purchased and let them pay to build our infrastructure else they should go
If you are a local and you have asian background, you are automatically being treated as a Richie chinese mainlanders. In reality it isn't the case, many local Australian born chinese are here hating those investors as much as anyone else. But you can't tell who is who
Sure neg me if you like. I'm telling you the truth here. Face the reality mate!
Grim reality is they have been doing it far longer then what we think. In my parents street there is 1 house sold to a chinese investor over 15 years ago. I have never seen them and the guy who lives across from them has only seen them a couple of times.
One place we looked at must have had 12 parties mostly Asian. Initially I thought it was investors but most were like me, Oz born Asians and we are probably all hating on each other.
Im all for making OS money pay for infrastructure. They are jacking up prices to stupid levels and I don't see how their money in Oz is of benefit to me. Maybe I should go and get some bank shares instead.
The young man that waited for the property market to go down years ago is about to die of old age.