Who Is Responsible for Continuous House Price Increases

I went to few auctions to see how it works

The few houses i visited are very bad , good for nothing other than the land price

But saw quiet few people seriously bidding on it

I have checked everything - it is old house and visibly needs very good renovation

very far from school

very far from public transports

not in a convenient location too

land size is also <300 sqm

basically , if I want to buy such a house i can't go above 400k

but in auction people went over and finally it stood at 650k and then agent still persuaded others to bid more which then started more bidding and finally got sold for $680k

The agent being friendly told me after the auction that reserve was $450k and vendor is really happy

But I was wondering what made the buyer to go for such high price!

Seriously for $680K , so much better house with large lot close to all amenities were all available and easily

Seeing this , I believe there needs to be some common sense used by buyers to assess what they are paying for!

I see reasons for increase in house prices due to

  1. People who have lot of money from the home countries and buying land here
  2. Real estate agents who can sell houses not worth the amount to much higher prices
  3. People who think that if they dont buy houses now will never be able to buy

what do you all think?

Is it not a inflated market and certain section of people intentionally keeping the prices high?

And a real estate agent tells me that people queue at their office from 9 pm the previous night to buy a lot in their new release and even if the go for toilet , they will lose their place in the queue.

Seriously!!! Is house and land seriously not available much? The publications like domain and herald sun keep writing stories that create a fear that houses are really getting out of reach!

Is there a way to find good houses and which are worth their right price?
Is there a way to avoid real estate agents when you buy a house( they may be needed for selling house but for buying they should never be used) Thats what I feel

Poll Options

  • 52
    People misguided by media articles about scarcity of houses
  • 282
    People who bring truck loads from their home countries
  • 7
    People who dont value their money enough
  • 102
    Real estate agents

Comments

    • Plus this "great Australian dream" of owning your own home. I expect that concept was when people were going out in the sticks.
      The guy who mentioned that renting is a viable option gets downvoted.

      Personally, I hate cheap housing. I bought 20 minutes out of the city. Now everyone is selling their local acreage to build apartments and townhouses, so I have to share the roads with all these extra people who have come out for the cheap housing.

  • +1

    It's hoarding and/or manipulation perhaps.

  • supply and demand

  • if you want a hope in hell of buying a house for $300k you cant be serious in melbourne.

    look at adelaide or hobart (seriously).

  • Combination of things

    • low interest rates
    • in some areas an actual shortage of supply vs demand
    • capital gains tax discount
    • negative gearing
    • capital gains tax exemption for own home
    • means testing exemption for own home (for pension, also others?)
    • attractive safe harbour for foreign money

    All but the first could be addressed by the federal government, current and former, so when you ask who is responsible I would blame them. The first wouldn't be that much of an issue if the others were addressed anyway, so essentially all of the blame can be placed at their feet.

    As a recent buyer in a high risk area (Melbourne CBD apartment) it would be reasonably painful for me to see a significant drop, but I think that the correct move by the government is to address those issues which will bring on a significant correction in prices. Sucks for me, doesn't really affect most owners that have only paper gains anyway, and massively benefits everyone that's not currently in the market - including all future generations.

    They don't have the balls to do it though, they'd rather kick that can further down the road and have it be someone else's problem - the electoral pain they'd suffer from idiot home owners feeling butthurt about their lost paper gains would destroy them and it's too tempting to play politics with it instead of coming to a bipartisan plan to share the blame around, so nothing will be done until it gets a lot worse than it is.

    Edit: Just to note, all of the options in your poll are wrong as to the ultimate blame.

  • -1

    yomama is responsible

  • -1

    The answer lies in who wants the white race to go extinct.

    "Academic studies done since the 1930s have found a high correlation between European fertility rates and the availability of cheap, affordable housing. In fact, researchers have found that the price of housing is an even better predictor of fertility than the level of income."

    http://freewestmedia.com/2016/12/28/how-europes-demographic-…

  • +2

    6 Years ago, went to an auction where the agent had said ~300k for a house that was pretty much looking like it was about to drop on people's heads.. but was of relative decent location.. It went for 1.2M .

    The question in my mind was how could the agent drop a figure so far off what people were willing to pay for it ? One of the problems with the industry are scummy RE agents

    • It's meant to be illegal, but who polices that? The seller, agent, bank, builder and government win.

  • +1

    A lot of these property buyers have had massive growth in their other investments.

    e.g. cba share in 2009 = $25, today $80. mqg share in 2009 $22, today $103.

    Those lucky enough, bitcoin in 2008… almost nothing. now?

    • My home in 2009 = the same as 2018. Should have just bought shares, or bitcoin and rented. Or at least a house in Sydney.

  • Try my area. Minimum to get in is low $2M.

    • sounds like a typical sydney suburban house within 15km of cbd.

      • It is.

        So expensive for a family.

        If I was at and auction for $6-700k or even $1-1.5M I wouldn't be complaining.

  • +2

    Major factors

    1.Immigration.
    2.Low interest rates.
    3.Limited supply of new housing due to slow land release, red tape and council fees.(often due to poor infrastructure)
    4.Limited supply of qualified trades people.
    5.Baby Boomers are pretty well reliant on high prices and rents, neither government really wants to lower prices. "Other party wants to destroy house prices!"

    Minor factors
    1. Negative gearing & Capital gains discount
    2. Investors in general
    3. Overseas investors

    How to lower prices
    1. Freeze immigration(I don't agree with this but it'd work - last year NSW had 98,600 immigrants arrive)
    2. Increase interest rates(Would create mortgage stress/bankruptcies and put more stock onto the market)
    3. Cut red tape, build good infrastructure, allow developers to build shoeboxes(Costs income, costs money with little benefit within 4 year political cycle and could create slums)
    4. Prioritize trade visas(would piss off the unions) and apprenticeships.(Costs money)

    My advice(I know you didn't ask for it), Sydney and melbourne are high risk investments and have been for a long time. If all the above stay the same I could see unit prices dropping as they enter the later stages of property cycle and some chinese/highly leveraged investors(APRA tightening) are unable to close on their off the plan purchases. Home prices to stagnate but just as likely to go up or down moderately. Most likely major change from above would be a rise in interest rates which would trend the predictions downwards.

    Wait it out to hopefully scoop a cheaper unit or save your 20% for the $2mil house, move to anywhere except Syd and Melb use it to pay cash on a modest home and enjoy your life.

    • +1

      I suggest that the government takes back all land, then either:

      a) give it back to traditional owners, and we can restart buying; or
      b) have a lottery and each citizen is allocated a home… immigration policy could be based on whether there are any homes left over (obviously they will be in the sticks because the best real estate went first)

  • As a home owner of 9 years, I have struggled to cover the mortgage on many occasions. I purchased my first house on a subdivided block in 08, and upgraded in 2012.
    I wouldn't sell my property if I didn't "have to" or simply wasn't getting an offer I couldn't refuse.
    High stamp duty in Victoria discourages people from upgrading, and therefore many never move and leave their "cheap" property. Those that do, often rent the first property to avoid the costs associated with selling.

    I feel bad for young people now, but with so many home owners having made such huge sacrifes to own property, I expect most will refuse to sell under the optimum price. I doubt the real estate bubble will ever really "burst" but rather fluctuate slightly.

    Good luck on your house hunt. I know it's an exhausting and heart breaking experience.

    • I feel bad for anybody who has to live in Sydney or Melbourne. No, seriously, if buying is unaffordable then so is renting. You get very little for your money. But a young person who doesn't have to live in these cities is no worse off than any other time in history. My daughter won't have any more trouble than I did 30 years ago.
      We were complaining about the price of real estate then too, and reminiscing how cheap homes were in our parents day and if only they'd bought up the whole town when prices were so cheap.
      I think we all know that future generations will have the same complaints.

      Surely prime real estate is a valuable, non-replaceable commodity and there will always be somebody willing to pay a little more to get it. Therefore it is inevitable, and maybe we're already there in Sydney and Melbourne, that eventually only the mega rich will afford these prime properties. The rest of us will find a market we can afford to play in.
      Sometimes kids want to play in adult games. A first home buyer wanting a home in Sydney is like an 8 year old wanting to play for Storm.

      • That's the problem with this upside down market.

        I have $300 per week to put towards housing. With that I can borrow $240,000 and pay $1,300 per month on a mortgage. I do have the required 20% deposit and enough to cover the transfer fees. I just can't find anything around $300,000.

        The rent I pay is less than that (not by much) and includes council rates, buildings insurance and maintenance. By not having those expenses I am saving money each week.

  • +2

    Do not forget the IO vs P&I Cliffs guys. At the height of the IO loans generation in 2014-2015, a lot of them are due to mature in 2019-2020, due to the new lending measures APRA introduced, there will be a lot of people who would not be able to refinance as IO and has to start paying principal at potentially much higher rates environment! Long story short, there might be a situation where some of them will be forced to sell, especially with household debt to disposable income at level high while wages barely growing. The rich will get richer, because they will still have the capital to buy more during the crash, while the middle/lower class would have their hands forced if they have leveraged themselves up to their eyeballs.

    The only one that can kick the can down the road further is the government by keeping interest lower (even driving it closer to 0%) or pull back on the measures implemented. But inevitably, you can only delay the inevitable for so long and the longer you delay, when the day comes, the effects would be more pronounced.

    Now don't get me wrong, I do not expect US style corrections, but 20%-30% is easily on the table. Never been a fan of Labour, but if they can take away negative gearing, this will help remove the froth nicely… In saying that, I would not be solely voting them based on this alone, but I will also look at their migration and trades policy as well.

    Our politicians are for far too long trying to do what is easy/convenient in the short term… We need a politician with 10 years vision, not the mentality that "I hope I retain my power now"… Sadly, we all know it is like wishing for a miracle. Maybe they also have a huge property portfolio huh?

    All just IMHO. DYOR.

    • -2

      The government is already making property investment less attractive: existing assets are no longer depreciable.
      I already lose money (negative gearing) to provide affordable housing. But rents will have to go up now to cover this shortfall.
      I'd love to give all the renters the names and addresses of those who campaigned for making property investment unattractive.

      Maybe some investors will say get stuffed and sell - but if enough do to make prices fall surely the cheaper properties would make a great investment for others??

      I don't see the part where you can make home prices attractive to first home buyers but not investors.
      And what a disaster if they did. Some people actually need/ want to rent, and they appreciate investors.
      The next "bubble" will be rent, and the government will have to bring in rent control.

    • Agree with many points you made. I, however, believe there there are many bigger culprits for housing affordability crisis than neg gearing. Neg gearing is present in many countries (investment is seen as a business) but increasing the housing supply and other amenities in all desired areas and also turning non-desired areas into the desired ones will do the trick. This isn't an easy task. A lot of work would need to be put in but that's the issue at the core. People don't want to live where supply is and there's no supply where they want to live. The 'reasons for them not wanting to live where supply is' need to be fixed. Affordability will automatically come in when the choices for buyers get widened.

  • The excessive capital of buyers from China.

  • Yourself. Earn more money please?

  • +2

    IMHO it's parents. I feel that baby boomer parents who own houses are pretty much funding houses for their kids.

  • Have to say sorry mate I am XD

  • australia needs bullet trains. this way first home buyers can buy houses 500km from sydney ar affordable prices, but only needs 1 hour to commute to work in sydney cbd :)

    • IT's so bloody hot out there.

  • I have a friend in WA who is going to pay some agents in the East Coast to buy 3-4 'quality' properties (i.e. good selection in popular areas will out perform the market in growth and attract good rental yield). I think this sort of mass acquiring of properties is part of the issue.. maybe creating artificial demand and propping up the unsustainable growth

  • +2

    Gov needs the stamp duty period.

  • +1

    Government obviously…

    You can't blame cashed up foreigners because they can only do what the government lets them.

  • +1

    I'm not sure why the Chinese cop so much of the blame and the caucasian baby boomers who own 4-5 investment properties get a free pass. Funny thing is the Chinese are welcomed in to buy property with open arms by those same baby boomers as they want their investment to continue to improve. The general population always blame the wrong people, and I think that's by design.

    • We blame both, the problem is the Chinese buy them, leave them empty. Also at least the boomers, the disgusting negative gearing practice, at least they are DAMNED AUSSIE CITIZENS. Our government letting foreigners 'steal' property out of the market for locals? Disgraceful.

  • Stop trying to put a theory to everything.
    Things are only worth what someone is willing to pay for it.
    Just cos you're not willing to pay A$XXX,000 for the home, doesn't mean someone else is overpaying for it.
    If you're the owner of the home, you're not going to sell a home for what its worth. You're hoping someone sees more value in it than it actually really is.

  • +1

    The government who is making the policies allowing immigrants and foreign investor but yet not realeasing lands fast enough and not providing efficient transport system.

  • +1

    Overpopulation- remember folks, Melbourne leadership wishes to double the current population by 2050

    http://www.planmelbourne.vic.gov.au/__data/assets/word_doc/0…

    So its fair to say, unless there is a major war\recession\natural disaster, Melbourne house prices will continue to rise

  • Merged from Housing Affordability Crisis - Do We Have One? How Do We Solve It?

    Ozbargainers are a tight bunch but they are a really smart group of people as well. So I figured a question like this would fare well here. Everybody keeps talking about housing affordability crisis. Do we really have a housing affordability crisis? If so, how does this manifest? Who is affected? And most importantly, what are the smart ways we can solve housing affordability crisis?

    I understand that people tend to think most of the burden rests with the government, and they sure can take different regulatory measures(as they have), but as a society, what can we do? can the banks do anything about it? can the developers do anything about it? can the fintechs do anything about it? and can the general population do anything about it?

    Hoping for an insightful discussion :)

    • Regulation is an immediate band-aid and like all medicines may be hard to swallow for those affected.

      But this problem is bigger than just real estate and the present situation. It requires a wholesale shift in thinking. Owning property in absentia has always been the killer of equity: equity in opportunity of ownership, not necessarily equity in ownership itself. (Some may never be interested in owning, some may never be interested in the work required to own). When that property is something that is necessary for survival - food, water, housing - it's a whole separate category of nasty to hoard at others peril.

    • +4

      Phase out negative gearing. Less demand by investors then.

    • +1

      Is there a housing affordability crisis? Is this a real question?

      The government gives zero (profanity) 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.

      • Perhaps you should move to Denmark or Sweden. Their citizens enjoy the government taking care of them in return for 50% of their income.

    • +1

      Housing Affordability Crisis - Do We Have One?

      Yes

      How Do We Solve It?

      Restrict property purchases to Australian citizens and permanent residents only. Less demand results in lower prices. Restrict the availability of finance by tightening lending criteria or by lifting interest rates.

      Solved.

      • Restrict property purchases to Australian citizens and permanent residents

        This won’t stop John from the uk or Jane from the usa from purchasing a property using a proxy.

        • Let them, just don't let the 'foreigners' buy property directly nor hold any real estate without providing sufficient proof of citizenship/residency. By not being able to provide this information you will not be able to own property.

          In this case the property will be owned by the proxy.

          • @KaptnKaos:

            providing sufficient proof of citizenship/residency.

            This won’t stop foreign investors from purchasing Australian property. Hancock Prospecting in partnership with a foreign investor purchased s.kidman not so long ago.

            No legislation may stop foreign investors from purchasing Australian property as long as they have an Australian entity supporting the purchase.

          • @KaptnKaos: @whooah1979:

            No legislation may stop foreign investors

            Never said there was, but it is something that the country should perhaps consider.

          • @KaptnKaos: @KaptnKaos:

            Why even bother to put forth a bill that doesn’t address the 10% of property sales?

    • How Do We Solve It?

      Get a good job

      • +1

        Or move to Tamworth

    • Well, my friend bought a house 2 days ago.

      My calculation is that, if I pay rent at the rate I am paying now ($520/week), without the bank interest, I would need 40 years to get to that amount of money. By that time, I would be 70+. Add to that: interest, insurance, council rates, etc and I would be over 100 years old until I would have paid off the house vs renting.

      Not worth for me.

      • But you haven't factored in the growth of your friends home.

        By your math, they have purchased a $1,000,000 home. What's that property going to be worth in 40 years.

        The growth of the property grow faster than the interest accumulates.

        Isn't the old adage that houses double in value every decade?

        • Well, yes and no.

          You are assuming that your property is going up in value by itself v.s. the others. You actually gain nothing.

          To put it this way, the same house you bought 30 years ago, sell it. With the amount of money you obtain on it, can you purchase another one exactly the same in the same neighbourhood without losing money? if yes by how much? Answer that and that's your gain over that house in that period.

          Your house goes up in value, so everyone's.

        • @zapy: > Your house goes up in value, so everyone's.

          And so does your rent. Your logic and calculations are flawed. "Not worth for me" isnt that simple

        • @steff: Well, yes and no. My rent goes up $10/week every year. Not that much compared to bank interest and house value.

          Still not worth for me.

        • @zapy: >Still not worth for me

          Possibly so. All I'm saying is there's a lot of variables to consider - equity for one. You're not 'gaining' anything by renting.

          Not saying renting is bad, just saying there's a lot more to the argument.

    • Perhaps we should ban private land ownership, that would probably help things be more affordable. After all housing should be a basic human right.

      • After all housing should be a basic human right.

        Article 17 refers to property. However, it don’t state that the cost should be reasonable priced.
        http://www.un.org/en/universal-declaration-human-rights/

        Article 17.
        (1) Everyone has the right to own property alone as well as in association with others.
        (2) No one shall be arbitrarily deprived of his property.

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