Is The Government Doing a Good Job around Housing Affordability?

The more I read the news, the more I think that the current government is doing nothing for 'anyone' on housing affordability (yes I know rates are part of the problem). I also believe that there is a mild form of 'cronyism' that has polluted our debate around housing affordability. I sometimes think that Scott Morrison is still working for the property council of Australia and has not realised that he is treasurer. I don't even think that the most loyal liberal supporter actually believes he is doing anything about the housing affordability debate besides talking in circles!!

(Rant) His latest attempt at putting more money into the housing market by freeing up super contributions of younger people is so transparently poor that economists and some in his own government are unable to support this. Now if housing was more affordable I think that it would be a good idea to free up money for young people, but at the current time this will just be a transfer of wealth to developers with little hope for growth in the short term.

I believe in abolishing negative gearing and reducing the CGT discount but let's have a debate around all the options. More importantly lets make it fair so that we don't crash the housing market. Let's reduce the incentives slowly to avoid a crash.

I am keen to know what other people think!!!

Do people believe that prices will continue going up? (I don't)
Do people believe that housing is a good investment now? (I don't)
Do people believe that Scott Morrison is the right person to right the imbalances and make the right choices for the country? (I don't)
Is there a way of changing policy without waiting to vote out the liberals (and I am sure that this will happen in the next election.)?
How can we force the governments' hand? A politician once said that to enable democratic process, people need to get organised? How does one do this?

It would be great if buyers would exit the market. Normally price is a natural deterrent but yet there are still large amounts of buyers out there who think they will miss the train. Unfortunately it is the first time buyers who will really pay the price for entering the market at the wrong time, less so people 'shifting' from one house to another.

I would appreciate any thoughts!

EDIT

Anybody interested in who used negative gearing should read.
http://www.abc.net.au/news/2016-04-26/negative-gearing-by-oc...

Here is an article about our politicians.
http://www.abc.net.au/news/specials/curious-canberra/2016-05...

Comments

  • +2 votes

    I believe in abolishing negative gearing…

    The govt cant do that because it would crash the house prices. As much as everyone whinges about skyrocketing prices no one will touch NG because of the backlash.

    Only way to curb it is to stop negative gearing on houses purchased after X date. Or only allowing a single property to be negatively geared at any one time.

    • +6 votes

      Agree to an extent. You need a mass dumping of properties to have a crash. But removing negative gearing will have exactly the OPPOSITE effect. You see property prices will NOT crash for one big reason. Those with negative gearing status will hold onto their prized negatively geared property for as long as they can. So in fact there could be an acute shortage of property on the market for a while. So whilst there will be less investors in the market, there will also be significantly less stock too. yes, prices will drop but it wont be a crash

      • +3 votes

        Not necessarily. In the end the issue isn't negative gearing but the capital gains people are holding out for - when you take out million dollar loans no amount of rent is ever going "pay it off" for you in the good ol' days where property investing was about rental income not capital gains.

        If cutting off negative gearing for all but new homes kills off that investor demand that drives up expected house flipping prices then it doesn't matter if someone existing is NG'd or not; having NG itself is meaningless if the ponzi scheme of property no longer exists - i.e. you no longer have the backyard BBQ obsession of holding onto property at little cost simply waiting to cash in on the capital gains, which will no longer happen (hopefully).

    • +3 votes

      NG should be gradually phased out over a 10 year period. 60% of Aus investors are negatively geared. In the last 30 years home ownership has shrunken from 84% to 49%.

      •  

        Negative gearing has been around since at least 1936.

        If it was to blame why didn't it cause housing prices to shoot up in the 1960s or earlier?

    • +2 votes

      I think housing issue should be decided by the market. There are many places in Australia that people can buy cheap house. You can look at those mining area when mining boom finish. Their prices drop significantly. People buy house in capital city because of job opportunities, and many utilities. The government dont invest in regional area that make people do not want to buy area. Housing crash will affect state income. I think the solution to solve housing is to invest regional area, grant benefit for people buying home in remote area.

      • +7 votes

        Barnaby, is that you?

      • +6 votes

        The argument that I keep hearing from parts of the government that houses are cheap outside metropolitan areas is so ridiculous I can't understand why they would even start. Sure, I could buy a house out in the country for 400k. But then I would need to commute for 3 hours each way to get to work since I work in a Metropolitan area. My specialty doesn't have jobs in rural or non-metropolitan areas, but I could always give up on that career and look to something near my new 400k house, like a general store owner or a farmer.

        • +2 votes

          I live on the outskirts of Geelong, in Lara.

          We are looking at a first home with 4 Bdr, 680 sq for under $400 000.

          No stamp duty from July, $20 000 FHB.

          $41 Myki pass per week as still Zone 1 and 45 mins on the train to CBD.

          Best of both worlds - our families are here, I am able to work in the city or in Geelong. Recently got offered a position here to do same role that I am doing in Melbourne and Canberra as an IT architect, in Geelong, for roughly $200 more then the daily rate I get now.

          I am 25 and my partner is 23 and it makes being an owner occupier feasible.

          I think Barnaby is right some days. Give me Lara any day and I'll have the bulk of my house paid off in next ten years and utilise the equity for a 'nicer' (see: more convienent) area later.

        •  

          @togaboyau:

          It's fine if you're working in Geelong, but if working in melb, doing a 1:45 trip to and from work every day wouldn't be so great. I do ~45 minutes to work each day on the train & tram and even that feels like a lot.

        • +1 vote

          @togaboyau:

          There are quite a few good pockets around where properties are relatively affordable in Melbourne. Sydney is proper (profanity) though. The equivalent of Lara/Corio in Sydney you're probably looking at 500-600K.

          I've got cousins in Corio and their house is old and almost dilapidated but was $210K for a 3 bedroom house on a 600 sqm block 5 years ago. Super cheap. They catch the vline into Melbourne for work every day.

          Something like this http://www.realestate.com.au/property-house-vic-corio-125028... would have very low mortgage repayments (~$1300/month).

        •  

          Its the most stupid argument they could make. People, forced out of the city, ARE moving to regional areas. And guess what thats doing to housing prices? I live two hours southwest of Sydney, practically in the bush, and in the five years since I started renting here I have seen entry level house prices go from about $350,000 to $550,000 and its rising fast.

        •  

          @togaboyau:

          Yeah I tried that for 5 years.

          It only works if your job is near southern cross though, otherwise you have to faf around for another 30-45 minutes catching another tram or train or bus to get to work.

          Train is packed AF by the time it reaches Lara (when it's not delayed or cancelled) so you spend that trip standing anyway.

          Adding to that, Corio/Lara can be very hit and miss in terms of criminality/safety. You could be living in a very safe street, but walk down a block and you'll see torched cars and broken windows.

          I was also looking for work in Geelong, and ended up working from home after moving away, so go figure :/

        •  

          @batouchu:

          Quite happy here living 5 mins from station at Lara. We feel safe, leave the doors unlocked like I did when I was a kid and haven't seen any crime whilst here. Prices won't come tumbling down any time soon and we are making the best of a bad situation.

          We don't come from money and don't think the world nor Australia owes us land and a house alas - Beggars can't be choosers.

    • +3 votes

      In my opinion, they should "quarantine" the losses such that you can only use them to reduce the tax you pay on the associated income.

      i.e. your investment property loan interest means your rent income is tax-free, but you still pay tax on your salary.

      I think some other countries do this. Of course it would have to be phased in somehow to avoid upsetting the existing investors.

    • +3 votes

      Frankly, a house price crash is what is required. Why should some people have multiple properties while a large percentage can't have any?

      • +2 votes

        this is like asking why a small portion of people gets paid millions+ but majority don't.

        • +5 votes

          Not quite, both of my parents did not have large incomes at all yet could afford a house 10km away from Sydney CBD. Buying it in 1995 for $400,000. Here I am with a pretty good income and unable to even touch anything remotely close to Sydney. No one is being paid millions here, it's generational to an extent.

        • +1 vote

          @nomunny:
          Interest rates in 1995 were 10.50%
          You should be comparing the costs involved directly, e.g. interest repayments monthly, instead of property value
          Also Sydney's population has grown from ~3.7m to ~5m since 1994, so clearly there is increased demand to live here.
          Whether or not the government is doing enough to give supply is another issue

        •  

          @ryan1894: So an interest rate would @10% over 25 years would mean a total repayment of approx 800k, the house is worth over 2 million currently. Yes, the population has grown but so has development and a continuation of government to incentivise investors through negative gearing. In effect this is dividing poor from rich, keep it going and there will no longer be a middle class.

        • +2 votes

          Everyone should have a good opportunity to have a roof over their head, regardless of how much they earn.
          Investors should be limited to 1 or 2 properties IMO.
          Investors owning 10-15 properties and pushing prices up and making so much money is just so wrong.
          Wealth gap will get bigger and there will be increased in domestic violence/divorce (stress paying off huge mortgage) and homeless people.

        • +1 vote

          @neostarsx: I don't think limiting properties for investors is the way to go, but I think reducing or removing incentives to invest in property is.

          Why should the government be allowing tax breaks and incentives for multiple property investors? The only people that benefit from these investments are themselves (and the banks). Less tax for the government and community, higher prices for all else…

          First Home-Buyers? Sure, give them an incentive. Superannuation contributions? Sure, it lessons the burden on the pension later. But there is not really any benefit to the government for allowing all those tax breaks and benefits on property investment (Except the self-serving interests of the property investing ministers themselves).

        •  

          @Rumstein: I hope your kidding all those "incentives" do is bump the price up by the amount you are allowed to use. An investor is more than welcome to sell to upgrade their investment property if they wished, rather than wipe out all the entry level housing.

      • +1 vote

        I went to school, I studied hard, I got a good job, made sacrifices to purchase my first and subsequent properties. why cant I have multiple properties.

  • +7 votes

    I think grandfathering of negative gearing changes is a bad idea.

    It just means that existing investors will not get rid of their property until they die because it maintains its tax benefit over other investments.

    So we need to get rid of all negative gearing but for existing investors the negative gearing should be slowly abolished over 5 years. ie if they earned $100 from rent and had $120 in expenses let them deduct $120 the first year, $100 the next year … down to 0 in the last year.

    • +5 votes

      if the investor is still relying on negative gearing by the time they die then they would have lost a LOT of money. it would be pretty hard to buy a negatively geared property at the moment at current interest rates (excluding sydney and melbourne)

      •  

        ha ha …. so true, but expenses can be manufactured.

        • +2 votes

          The point of negatively geared investments is to get a deduction on income tax. Most retirees - even comfortably off ones - are not going to be paying income tax.

    • +4 votes

      Negative gearing on a specific property would gradually disappear anyway as rent inflation applies.

      • +1 vote

        Not really, as the interest rates will rise sometime in a year or two.

        •  

          Yes really. Slow exponential growth in rent will always catch up to interest on a fixed (or even decreasing) principal. The only way this would not happen is if the principal were allowed to grow.

    • +3 votes

      I think grandfathering is a completely valid strategy.

      For example we take a look at the Capital Gains Tax, and all property held before 1985 is exempt from the CGT. Did this ruin the economy? Definitely not. It did however made some home owners hold onto their house very dearly, and if they sold their property they'd get quite a bit of windfall. This is an all benefit grandfathering event, and eventually, once the generation moves on, then the pre-CGT asset is no more.

      Now we look at NG. NG overall is quite a bad idea. It feeds off the idea that house prices will continue to move upwards (more than some threshold). It has a flow on effect that one person says NG is going great, then another person will join the NG train and unsustainably buying property, artificially bringing the price up. You hear everyone talking about NG only because it has been drilled into certain investor types that it is great. I have a few friends that do NG their property, and when I asked then why, they just said "why not?".

      If we do grandfather NG, demand for NG property is decreased, so the house prices should flatten or increase less for some period. This will then lead the pre-No-NG properties to be worth less (as they are held to have appreciating asset cost), and so they might decide to sell up.

    •  

      It just means that existing investors will not get rid of their property

      That should ease the concerns of the people worried about not having enough rentals available, so not necessarily a bad thing I think.

    • +1 vote

      ozzieblue You will cause a property crash! You have no idea. You dont want to scare investors into selling out all at once. That will crush both investors and renters. OMG! Grand fathering has been successfully used in the past and will be used again to maintain stability in the property market and to protect the rental market. There will be natural attrition of negatively geared stock over time as investors find better places to put their money.

      • +5 votes

        That will crush both investors and renters.

        I don't buy it.

        If all the investors sell, who is going to buy? Either other investors, or new first home owners (i.e. the former renters).

        Yes, some investors will lose money if the policy changes - it's called "regulatory risk" and investors in any area should take it into account.

    • +2 votes

      Agree, but it's also not the worst idea because inflation will take care of negative gearing. It's virtually impossible for someone to negatively gear a house that was bought 20 years ago, especially in Syd and Melb where the price has gone up significantly during this time. A 2 million dollar property now in Melbourne would have costed around $500,000 approximately 20 years ago. Interest on $500,000 = $20,000 (assuming you took out an interest only loan on 100%), which is a mere 1% of $2 million, so unless the property is leased out for less than 1% return, inflation will kill negative gearing over time. The sad thing is that even with such a massive compromise grandfathering negative gearing, they still can't pass damn law in parliament.

    •  

      negative gearing only works on properties when the increasing value offsets the costs. Either rents will have to skyrocket or a lot of investors will run screaming for the hills, especially when interest rates rise. Investors aren't going to sit on loss making properties simply to stay on something that is losing them money.

    •  

      Can someone please explain why was Negative Gearing introduced in the first place? What was the economic reasoning at the time NG was introduced?

      • +1 vote

        There was no "introduction of negative gearing".

        You are assessed on your income you derive from an investment property. You incur expenses on that property (or depreciation).

        It would not be fair to tax people on income without giving deductions for their expenses. When deductions exceed the investment's income, this is negative gearing.

        The net negative amount is able to be used to offset other taxable income (unlike CGT which is quarantined against capital gains/losses).

        • +4 votes

          According to the wiki article above, up until 1985 the expenses were only allowed to offset rental income, not other income such as salary like it is today.

      •  

        Interest payments are usually a tax deduction.

        Negative gearing just extends this so that income from one labour can have taxation reduced against other income.

        The US has tax deductible interest rates on owner occupied housing. That has an even bigger effect on housing finance. However, across the US housing is substantially more affordable than it is in Australia.

        Only in supply restricted places like SF and NYC do you get really high housing prices.

    • +1 vote

      if they earned $100 from rent and had $120 in expenses let them deduct $120 the first year, $100 the next year … down to 0 in the last year.

      Negative gearing (the part that people don't like) is where the investor can claim in excess of their related income and offset the excess against other income streams.

      In your example, only the $20 in excess of $100 is considered negative gearing. You are in fact proposing that investors (over a 5 year period) not be allowed to claim ANY expenses against their revenue at all.

      If you applied this logic to businesses, shops (as an example) cannot offset the following items against their revenue :

      • Stock.
      • Rent.
      • Employees.
      • Electricity.
      • Asset depreciation.

      You will find most businesses will close.

  • +61 votes

    The government gives zero fu cks about housing affordability. They need to keep their wealthy benefactors happy by implementing economic policies that generate further wealth for the ruling elite - at the expense of the working class.

    Compounding this problem is the fact the masses are easy to manipulate - many relatively impoverished people will vote for parties and policies that are in direct conflict with their own interests, as they are susceptible to rhetoric from politicians and propaganda from mainstream media owned by the aforementioned wealthy benefactors. The wealth disparity in this country is growing rapidly and will continue to do so, as the reduced access to quality education and underdeveloped critical thinking abilities will prevent the downtrodden from unifying to protect their interests, resulting in a vicious downward spiral.

    Don't confuse the current lack of housing affordability with government incompetence - it is a malicious, insidious and carefully crafted stratagem to further their own agenda.

    • +16 votes

      Nailed it.

      Also Turnbullshit owns at least 5 residential investment properties as well as being Teltra's most valuable employee so he's hardly motivated to do it.

      • +9 votes

        How many investment properties are owned by Rudd etc. How many investment properties owned by officials from the ACTU, CFMEU etc. This is not a Labor/Liberal thing. If you are looking for ciorruption, ever heard of a bloke called Eddie Obied or the 2 sacked Labor pollies in Victoria for rorting the living away from their primary home? How about the guy Gillard had to sack for using his Union credit card for hookers. Way too simplistic to say it is the rich Liberals looking after themselves, much more complicated than that, wake up!

        • +8 votes

          Of course it's a Labor/Liberal thing because the former has a policy to abolish it and the latter won't touch it. So saying that it is rich Liberals looking after themselves is perfectly valid. If Labor people also use negative gearing - and they do - you should actually give them credit for wanting to abolish it.

        • +2 votes

          @dazweeja: I agree, but Labor aren't that great, they had plenty of opportunity to abolish it when they were in power and didn't.

        •  

          @abb:

          True but Shorten is not Gillard or Rudd. I think current Labor policies on NG, Capital Gains, Superannuation and an EIS are very reasonable and honestly quite brave. Rudd and Gillard wouldn't touch SSM either and Shorten has personally introduced two (failed) bills to legalise it. It's unfortunate he has the charisma of a cardboard box though.

        •  

          My only chance is to let my rich parents buy my property, or just get a high paying job. Not too sure yet.

    • +9 votes

      OMG. Someone who understands the bigger picture. Amazing 10/10 for airal3rt !
      You probably also understand the grand plan behind Trump bombing Syria, Afghanistan and next North Korea….its got and nothing to do with bombing ISIS or saving innocent women and children.

    • +4 votes

      Was coming into to write something along the lines of the above, you you summed it up so well, there is no need.

      None of this will ever change until those priced out become a voting majority, and only after they pay attention and see things for what they are.

    • -1 vote

      Thank you comrade Lenin! This is not the only Government to do nothing about this. Arguably things were well on the way when Gillard and Krudd were running the show and they didnt do anything to Negative Gearing either.

      The only sliver of truth in your class based conspiracy theory to worry governments of all leanings is that taking away Negative Gearing will effectively take away the votes of everyone with an investment property. Contrary to public opinion many people with investment properties arent media moguls or mining magnates, there are plenty of regular people on regular wages that own investment properties. Although it is tough for people trying to break into the housing market, there are also regular people that have staked their future on their 2 or 3 investment properties appreciating in value. Causing the kind of market correction that would make housing affordable would probably destroy those people, they may end up with hundreds of thousands in negative equity that they have no hope of ever repaying.

      Dont assume that the struggling masses will rise up to overthrow their fat wealthy oppressors anytime soon. You may find loads of regular tradies, nurses, policemen, soldiers and retail workers that have somehow managed to get enough for an investment property would not be lining up for the revolution.

    • +2 votes

      Not to mention that the vast majority of politicians also invest in property.

      There's an obvious conflict of interest.

    • +2 votes

      Exactly, couldn't really have put it any better.

      "This country was founded on the principle that the primary role of government is to protect property from the majority, and so it remains."

    • +1 vote

      very right.

      intentional scarcity of new developed land is another factor, then its sold at high margins taking in view the development and regulatory costs.

      Stamp duty is another example, the current rates are totally outdated and now proving a huge cost on home buyers. Govt does not care as they make billions.
      http://www.dailytelegraph.com.au/news/nsw/stamp-duty-slashin...

  • +7 votes

    Do people believe that prices will continue going up?
    No, but if you do the maths it's not worth waiting for a crash even if you're buying to live in.
    Ppl said it's gonna crash since 2001. But from 2001 until now 2017, how many times the house prices have been doubling over 100s percent? A 300k house in 2001 is now over a million.
    Even if a crash comes, it'll only be a 20% drop at most or likely a 10% correction which sums to nothing really.

    Do people believe that housing is a good investment now?
    Short-term investment ? No.

    Do people believe that Scott Morrison is the right person to right the imbalances and make the right choices for the country?
    Scott who? don't know & don't care.

    Is there a way of changing policy without waiting to vote out the liberals ?
    No. Unless something drastic happens. Go extreme.

    I am sure that this will happen in the next election ?
    You think the opposition gonna do what they've promised? It's too big to fall and they won't want it to fall in their hands else it'll be real ugly as the mess unfolds.

    How can we force the governments' hand? A politician once said that to enable democratic process, people need to get organised? How does one do this?
    No. Getting organised won't get what you want because democracy never really exists.

    • +3 votes

      You are quite correct in what you say.
      However don't underestimate Labor.
      The did away with negative gearing in 1985
      They already took the removal of negative gearing to the last election and came ever so close.
      Now with the pools on their side and with property still at dizzy highs they will do it again citing a lack of action form the present govt.

      • -6 votes

        Didnt see Rudd or Gillard taking away negative gearing when they were running the country into the ground a few years back! Also why dont you tell us what happened when Keating did take it away last time? Rents skyrocketed and he quickly had to do a backflip 6 months or so later. Personally I dont like it either but it is more complicated that Labour/Liberal.

        • +6 votes

          Is that you Smokin' Joe? Still pushing this lie?

          When negative gearing was abolished in the 1980s, rents only rose in Perth and Sydney for a short time. And that was due to local factors (record low vacancies of less than 1%)

          This old chestnut needs to be put for bed forever.

        • +2 votes

          Rents skyrocketed and he quickly had to do a backflip 6 months or so later.

          The biggest joke of all is that those who threatened/foretold of big rent rises are those who jacked up the rents then yell "I told you so". Let them jack up the rents, and subsequently find themselves priced out of the rental market. ScoMo asked who would buy the properties if you take the cough "Mum/Dad investors" out of the market … easy, more first home buyers. He can't have that can he though to his investment portfolio.

        • +2 votes

          @dufflover: When interest rates where cut I didn't see land lords pass on the saving to the tenants? So I find the whole concept that rents would skyrocket if negative gearing is removed a bit of a cognitive dissonance. The only time we've renegotiated rents down is simply due to supply and demand, there is one hell of a lot of rental accommodation now and our family is seeing a drastic change in attitudes to renters.

        •  

          @jnewau:

          dude I want to see housing become affordable again, but when you take away the incentive to create / maintain rental stock it wont take too long (1-2 years) for rents to increase substantially due to a lack of rental supply….

          so I dont think it's an old chestnut….

        • +1 vote

          @mrjizzler: If there's no rental supply, that means that either a bunch of investors bought property just to sit dormant, or (more likely) the prior renters are now home owners…

        •  

          @abb:

          Disagree….Developers are all of a sudden going to supply the market with stock because conditions are favourable because NG has been axed?!! I can see the banks lining up to fund their projects and presales hurdles being met!! NOT!….

          The affordability discussion is really focused on Sydney and Melbourne. Look at the population growth rates…..

          Do you really think cutting NG will create supply!??? Sure there will be some newcomers relying on the Tax breaks to fund their obsecene mortgages, but landlords that have been long that probably aren't NG anyway will just sit back and wait for natural rental demand absorb stagnant supply in no time…..

          The answer is for no government intervention other than reinstating more traditional lending standards….

        •  

          @mrjizzler: Are you saying all the developers are just going to retire because prices plateau? I don't buy it. They'll keep developing. There are developers currently doing their thing outside of Sydney and Melbourne, so obviously they don't need the stratospheric prices to make a living.

          I think cutting NG will allow more renters to become owners.

        •  

          You have stated "but it is more complicated that Labour/Liberal" several times now. How about you do a little research first.

        •  

          @abb:

          Yes that's exactly what I'm saying. Do you think a bank will lend without presales? Most development presales are a healthy balance of investors and owner occupiers.

          Remove one of the ingredients to the cake mix and you don't get cake.

    • +2 votes

      A Question: So why don't you own any property yourself? You seem to have a lot to say about it - but don't really offer anything from experience. May be when you do save enough - you'll have a totally different perspective …. as a home owner.

      You do a lot of generalising as a lay person eg.."you old people"?

      Many average run of the mill people own multiple investment properties - not just politicians.

      Your simplistic model of offering social housing just to families who have bright kids - sorry, can't really fathom? How does this help disadvantaged families out of poverty?

      • +7 votes

        There are about 2 million people (out of 24) with investment properties. About 30% hold more than 2 properties. Most of those aren't the tradies, etc that you talk about.

        Unfortunately I don't hold too much sympathy for people with more than 1 property when I have none. But let's be fair and remove negative gearing and CGT in such a way as to allow the orderly release of properties back on to the market.

        •  

          unless for some miraculous reason there is extremely insane amount of properties that come onto the market at varying location all at the same time, I don't see how prices of property will fall that much that make it easy for any first home buyer to purchase,

          I have a home and a mortgage and an investment property. but as soon as the price starts falling and becomes affordable for me to secure another property, i'll probably buy another one. I'm sure I wont be the only one either. so if the prices fall enough that it becomes affordable then everyone will purchase, it becomes then a competition for what is available and then prices will increase again.

          property is a unique commodity. unless government legislation, banking rules, property development releases and a whole host of perfect conditions all happen at the same time what are the chances of a price correction.

          how much are expecting the price of property to fall? 10%, 20%

          I know people even if I gave them what my house is worth now at a 20% discount, they still wouldn't be able to gather a 10% deposit let alone 20%

  • +11 votes

    Nothing will change until the have-nots outnumber the haves, or until millenials wake up and realise they are being sold down the river

    • +2 votes

      When the haves outnumber the have-nots our country will be doing pretty well

    • +1 vote

      It is very unfortunate that, in the nicest way possible, the have-nots also frequently have-no-brains as shown more and more frequently nowadays with the election of Trump by the poorest people in America, so that their government can cut tax on the wealthy.

      Similarly, the Australian public elected a government that is pro-wealthy despite their policy frequently only benefit the top 10% of population.

      How is a tax system fair when you work your ass off to make $90,000 a year of honest living, and have to pay 37% + 2% = 39% tax, when the rich families out there easily make millions by living in a beach side mansion and pay absolutely no tax on capital gain? A rough estimate would suggest that a Point Piper mansion has gone up $8 million dollars ($50 million x 16%) over the last 12 months alone, and yet its owner would pay zero tax on it. Fair? Yes apparently.

    • +6 votes

      Not exactly true, I own a house and in a position to benefit from NG. But I will vote for the party which is prepared to abolish NG. I want a fairer Australia for all of us.

  • +9 votes

    The have not's outnumber those who have by quite a large margin.

    62% of the wealth held by 1/5 of the population.

    Check out the graph on ABS.
    http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/...

  • +7 votes

    It might be a good idea to purchase a more modest property to get on the "Ladder", and trade up over the years as family and income dictate.
    I do think the low interest rates have assisted in the escalating prices of recent years. Importantly, having a large buying frenzy from the Chinese, as their home base is maxed out, encouraging them to shift funding to Australia must have boosted prices in a large way.

    I have it confirmed by a close friend working for a prime inner city Council that many investment?! - homes owned by the Chinese investors are kept unoccupied much to the dismay of Councils, also contacting the owners is very difficult in their homeland in case of problems. So there are many facets to this affordability conudrum, it will be a tough job to manage the situation by ANY of the various governments. Keeping the large levels of migration to a sensible level might also assist!!!.

    •  

      Why would they leave the homes unoccupied and miss out on rental income?

      • +2 votes

        Trophy homes.
        http://www.smh.com.au/nsw/thousands-of-empty-homes-adding-to...

        Some people think that leaving it empty reduces the wear and tear and therefore the value. If they're only getting 3% return on rent but property prices are going up 10%, they think the value of it matters more.

      • +12 votes

        Because they are using Australian Property as a way to hide money. They dont trust the Chinese government and are suspicious that corrupt officials could sieze their $$ and assetts in China. Australian assetts are comparitively cheap by some Chinese standards and having property here is a way to lock some $$ safely away in a foreign place where their own government cant get hold of it. Having to manage the whole tax/investor/negative gearing/fixing a busted aircon unit over christmas hassle isnt worth the effort, they just want to park a couple of million offshore somewhere safe,.

        One of the greatest threats to the property market is a big crash in the chinese economy where loads of these folks all want or need their money back (ie sell their property) in a short space of time causing a market correction.

    • +2 votes

      I thought it was legislated that foreign investors were supposed to occupy property (at least for a period)? Clearly that isn't the case anymore then or at least not being policed. I don't understand why foreign investment isn't being restricted. We had a period of about 12 months in our area where all we got in the mailbox were letters from the local estate agent telling us that they had interested asian investors looking in our area. Seems to have died off recently but seems pretty obvious part of the price driving problem. Nearly all of our area is being sold off as investment or development.

      • +4 votes

        Legislation doesn't help unless it's followed up and enforced. IIRC Real estate agents don't have to report who they are selling too, only the banks have to report on lending to foreign investors. If foreigners come and pay cash outright, what's to stop them? There is minimal enforcement of the legislation…

    • +7 votes

      "It might be a good idea to purchase a more modest property to get on the "Ladder", and trade up over the years as family and income dictate."

      I really wish the "ladder" myth would die.

      There is no such thing as a property ladder and "trading up".

      Here's the only way that "trading up" works:

      • In the future, you have more money (a LOT more) than you did when you started (i.e. your salary doubled / tripled [taking into consideration inflation])

      That's it. It's the only way you can ever "climb the ladder". And the reality is, even if you never bought at the beginning, you could still have bought your bigger place at the same age later in life when you recieved that raise (assuming you saved / invested during that period).

      The truth of the "property ladder" process is this:

      • Take out a fat loan when you're young for a shit dump of a place.
      • Pay it off or come close to paying it off
      • Take out a second loan to "trade up" to a bigger place
      • Now you "moved up the ladder"

      Except the truth is, you didn't. Essentially what you've done is turned (for example) a 30 year $300,000 mortgage into a 60 year $1,000,000 mortgage. If you skipped the middleman and instead of getting two loans, simply got the 1 loan for 60 years from the start you'd be in the same position! So there's no "trading up" or "working your way up the ladder".

      The ladder myth exists to get people to buy, it's marketing speak by those in the real estate game. It gives buyers false hope that somehow property will make them wealthy, when it doesn't. It leaves you in the same position you were always in, and gives you a lot of debt to pay off.

      It's fine to buy property, that's ok, you can buy property or you can invest wisely in stocks, or in a business, whatever, but just don't believe this ladder myth bullshit. You don't have to "get on the ladder", and there's no "working your way up".

      •  

        You are right."working your way up" actually means work and be in debt until you drop dead.

      • +1 vote

        The fact they use the word "market" says it all. When people talk about a ladder, I have never seen it used to talk about buying a place to live and then possibly selling/trading up to a bigger one. It always leads onto some crap about ending up with your own share of the never-can-lose-investment-of-housing, in the end perpetuating that very problem.

      • +1 vote

        yep and even getting on "teh ladder" in a rising market is BS as well. Because although your shithouse bottom rung house has gone up in value after a few years, that house you aspire to a few rungs up, has gone up in value even more than yours has. In a falling or stagnant market its even worse to get on teh ladder. the only way teh ladder makes sense is if you buy more than one house, and look where that got us.

  •  

    Mediocre job, but the recent train line improvements in Vic have added some points

  • +15 votes

    Firstly, the Government of the day (early 1980's)caused this situation by not adopting the tax policy of income splitting i.ie The fact that if only one person works in the family, they would be able to reduce the overall tax burden of the family by sharing the breadwinners income thereby reducing their tax. By treating all as individuals, they incentivised both couples to get jobs. That in turn worked for a little while but then the real estate market realised that people could now afford more and the prices went up until we have now reached a point that it is almost mandatory that both work to afford to pay the mortgage. As an off-shoot, the family unit has suffered even more with divorce up, child issues that eventually becoming mental issues in adulthood.
    The Government response? Prop-up low income families with Centrelink payments, then when the budget is in crisis, blame welfare costs and start cutting benefits.
    There seems to be a never-ending supply of really stupid people running our democracy.

    • +6 votes

      I couldn't agree more.

      The industries with vested interests tell us that the price increases are all to do with lack of supply etc. and no doubt it has been a factor to some extent, but i believe the biggest driver of them all was simply that people could afford to spend more and outbid each other, due to single income households becoming double income.

    • -2 votes

      Man boccos and scorpiovegas have got a bee in thier bonnet with this one issue and its ancient history (1980s) anyway. That was 30 years ago.
      So its not fair that couples in a relationship can work and combine their income to buy a property. Hmmm. What a load of crap. There will be plenty of couples out to blast you on this one.
      This is all totally irrelevant to this topic. Sorry
      Artificially low interest rates have played the major role in this property boom as has the invasion of foreign buyers.
      You only have to see how the property market got a boost each time interest rates went lower Sherlock

      • +6 votes

        have got a bee in thier bonnet

        No bee in my bonnet, just my opinion on what was probably the biggest driver of price increases over the 30 or so year period.

        So its not fair that couples in a relationship can work and combine their income to buy a property

        I don't think the point being made is whether it is fair or not. More so that for the majority in the present day there is simply no longer a choice but for both partners to work while children go to day care.

        This is all totally irrelevant to this topic. Sorry

        I don't consider a discussion of how the market got this point irrelevant.

        Artificially low interest rates have played the major role in this property boom as has the invasion of foreign buyers.

        Would prices ever have reached this high if the single income household remained the norm as it was pre-80's? No way. And now that double income is a done deal, I doubt such price increases will ever be seen again, except possibly after an almost equally compelling price decline, or if the children start chipping in to make triple or quadruple income households. Wouldn't that be great?

        You only have to see how the property market got a boost each time interest rates went lower Sherlock

        Probably means people that couldn't afford at the previous rate have joined the party. Unfortunately they'll be the first victims if a serious crash, or significant interest rate rise occurs.

    •  

      The real estate market didn't realise that people could afford more and that drove up prices….. There is a lot more to this and it is about the social fabric of modern society. Some of this is about women becoming better educated, wanting careers and have opportunities that they didn't have before to work. Also it is about supply and demand -
      the more there are means that everyone is being taken care of and there exists surplus to demand and people wanting more material possessions. It is like anything that when you start at the bottom and then your salary increases with time and more experience - you believe that you are worth more to an employer. You also want to move up the scale of home ownership; car ownership; and lots of other material possessions. (Just like when people who start drinking wine from cask wine progress to the cheapest bottle wine and then more expensive bottle wines as their palate changes from the cheap shitty to the expensive smooth wine.)

      Young people have been born into a world where material possessions have been plentiful. They deliberately choose not to live in bare basics or second hand. It's got to have the best of everything - and be located close to everything.

      • +1 vote

        I like your wine drinking analogy. I'm still at the bottom of the barrel with my cask wine ;)

  1. airal3rt on 15/04/2017 - 15:41
  2. ozzieblue on 16/04/2017 - 11:47
  3. Diji1 on 15/04/2017 - 17:32
  4. boccos on 16/04/2017 - 08:49
  5. 2ndeffort on 17/04/2017 - 00:01
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