How can we get property prices down? Future generations will be screwed.
Why Are Houses So Expensive Here?
deme on 11/09/2021 - 12:35
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Time for the Millennials to declare war on the Boomers, once they are destroyed and killed, the piece of housing pie will be shared equally and sweet for all.
When will the civil war start? Sons killing fathers, daughters killing mothers….. streets filled with blood and screams…….
Bit bleak. How about a Chinese flu from a biowarfare lab?
Chinese can't even make a decent vaccine, so that says to me they can't even make a killer virus very well (1/3 of 1% isn't a killer virus).
The mental imagery I got from this of families fighting in the streets in their pyjamas has made my day lmfao.
There's plenty of regional areas with no shortage of land where you can build a new house for around $400k. If you want an older house, you can get them way cheaper than that.
If you dont want to move to somewhere regional, then be prepared to keep fighting with 20 other buyers for the same block of metro land.
Cause people like to hoard houses, there should be greater tax implications on those who own more than one property for investment purposes. This is not just targetting boomers as I know a few young people who live at home but own/rent out several investment properties whilst those that actually need a place to live aren't getting one.
tax is already high - you wouldn't know since you don't own any investment but ok
Tax on what?
Not everyone can afford/need to own a house/apartment. Less investors -> less rental properties -> increased competition for rentals -> higher rent. This has happened in the past.
Give tenants proper tenancy rights so they cannot be evicted ever will help housing shortages. People who can't get housing are not just poor people who cannot afford rent, it's families with one income, kids and pets who are disadvantaged. Just like everyone else they get kicked out when the owner wants to sell the home, move in or renovate, but those families can't easily find anything else plus have to pay higher market dictated rents.
SOLUTION: If we have tenancy rights rented homes will be cheaper for investors to buy because tenants will come with sale hence reducing house value (you can't move in yourself!). Landlords cannot increase rent more than CPI ensuring rents remain within budget and don't go up because of ay the Olympic games coming to town or covid rush to rural areas… it gives people incentives to look after and improve properties because they expect to live there for a long time. It means they won't be plunged into a desperate rental market looking for another home close to their kids school etc….
Vote 1 Wally :)
A problem in Australia is that as a renter you are seen as inferior and live as a second class citizen. I don't necessarily care about owning my own home - especially if owning means its a crappy house in a crappy location. But renting means an invasion of your privacy, lack of stability and lack of freedoms. This alone is enough to drive people to want to own. In Europe their rental system is a lot better with long term leases, freedom to do minor renos etc. I think improving rental laws would be something far easier to implement than the fiscal policies that probably should happen but wont. The only people who might object to stronger tenancy laws are the serial investors with 10+ properties who want as much liquidity as possible.
I tell you its a joke to see houses worth 3.5m in my area and people still negotiating on marketplace lol. We still have the poor mentality
All we have to do is get home owners to sell their house for a lower price they paid for .
I’ll be the only one to say it but if the jab works, as planned, then in a couple of years I’ll get a place to live for a fraction of the current asking price! Cents in the dollar, so to speak! Just have to survive the blessed Chinese solution first…
Yes the future generation is screwed and current politicians have made it clear they are not interested in doing anything about it. For that matter neither are the majority of Australians who are riding very very high off the rising value of their real estate portfolios.The ALP put forward 'modest' changes to negative gearing during the last election and got hammered for it. Long story short, expect Australia to become a very divided society between the renting and owning classes.
the future gens will have bitcoin and if they didn't invest in it then they don't even deserve to have a house, stupid generation that one
The house prices are moving faster than how a person can improve his/her income. I used to look at house prices in Meadowbank (2012). Now there are no houses to buy. West ryde , Concord west are selling at $3+mil for a decent 5br house. To afford that you need to have $600k deposit and $400k income. Only business people can afford it. You will never be able to buy a nice house in good suburb while working for someone else.
West ryde , Concord west are selling at $3+mil for a decent 5br house
Why are you looking for 5br houses? For the last 10 years, Concord has been expensive. It's not even that good of a suburb. So massive and food is pretty overpriced and the usual Mediterranean stuff with the odd Thai and INdian place.
Move out to western sydney (The rest west) if you want a giant house.
Why 5 bedrooms? You can get away with a 2 bed room house when you are just starting your life. 5 will be the minimum requirement by the time you reach 40. If you have two teenagers there goes 2. One office room, one master bed room and one as a guest room.
If you are privileged enough to have a guest room, then you are in no position to be complaining about expensive property prices.
5 will be the minimum requirement by the time you reach 40
Man you sound like a yuppy from the eastern suburbs.
@Orico: Sorry I sounded that way. I was just venting my frustration. If you have in laws who live abroad but visit you twice a year for few weeks, you will know the need for the guest rooms. And, most of my friends have upgraded to 5 bed rooms houses in the west (Cumberland Council). Those houses go for around $1.2 million there. I used to live in Meadowbank and liked that area a lot (used to walk to the wharf and take a ferry to city, cycle to North Ryde station in a dedicated beautiful road, Walk around the river in the evenings and watch cinema at Rhodes shopping center if I felt like). Buying a house there was a dream :).
@amazonaddict: Meadowbank is a nice area, and I like the weekend markets there.
But like anywhere in Sydney that is nice and has good amenities, it would attract a high price.
Sorry I sounded that way. I was just venting my frustration. If you have in laws who live abroad but visit you twice a year for few weeks, you will know the need for the guest rooms.
I have a lot of sympathy for people who genuinely cannot afford housing, particularly young families looking to move out.
I do believe that, as a society, we should have more affordable housing stock for younger people. Yes, with compromises (e.g. smaller houses, smaller blocks), but more affordable and a good place to start.
However, beyond some certain point, we are no longer talking about housing, but about luxuries. If you are in a financial position to want a 5BR house and a guest room and can afford to have your in-laws flying in for a few weeks twice every year, then you're not exactly in the category of people that I think need any sort of support or broader sympathy.
Clearly you can afford extremely comfortable housing, you just need to make some choices (as we all do) because you're not the top 0.01% of filthy rich. Maybe you can live closer to work in a 3BR house, but the in-laws have to stay at an AirBNB when they're down, or maybe you can have your 5BR mansion, but you're going to have to live on the outskirts. I think those are all fair trade-offs once you reach that point.
@p1 ama: I agree. I certainly am suffering from the hedonic treadmill effect. :) I should be grateful for what I have already got. Or I should target my frustration to work towards becoming that 0.01%. :D Thank for your replies.
Combination of the huge Chinese bubble housing market spilling over to Australia, Canada and New Zealand. Poor tax system that encourages speculation and not taxing the economic burden of rent. A LVT can the tax burden across many renters that can fit on a small piece of land in Sydney then the current system where you pay stamp duty once and let a crappy fibro house sit as long you can (x30 for rich property investors). Zoning laws & NIMBY culture in Australia. Developers making houses/apartments that attract rich investors. Social housing gutted in Australia.
Instead we build out making gigantic suburbs, instead we should be cramming as many people in Sydney to turn Sydney, Brisbane and Melbourne a 15 minute city and encourage people to use their legs more and to give Australian environment some breathing space. Give people an option to allow small dogs or cats in their apartments.
From wiki
The 15-minute city is a residential urban concept in which all city residents can meet most of their needs within a short walk or bicycle ride from their homes.
Australians want to live in houses over units. The unit market is dominated by wealthy foreigners. Houses can be more environmentally friendly than units e.g. people have their own vegetable gardens.
This problem is not unique to Australia. It's the same in nicer areas of the USA, Canada, Europe, and repeated all over China.
Is there a solution? Sure. Start an economic depression. That is guaranteed to lower house prices, but it also means you've lost your job or earn less, and now cannot borrow enough money even for the cheaper house.
Housing prices will always trend up while the worlds population increases but the desirable areas to live in remain fairly small and fixed.
However I do think we have seen house price growth increase a lot more than what its trend line should be. To add to the already great points already mentioned I have a concern about lending standards.
I've seen people able to purchase properties that I thought unaffordable to them. It seems a lot of people don't have much of a deposit and are taking the LMI insurance hit and going in with 10-15% deposit. This is for properties 800k plus. No doubt they are taking on a 30 year loan and with the interest rates at say 2.99% repayments are pretty manageable and perhaps slightly less than the cost of renting (excluding the other costs of owning). However if those interest rates hit 5% things get tight and I imagine that they wont be able to put in extra repayments to pay off their loan quicker. If rates hit 7.5% things get pretty scary. 7.5% might seem far fetched for now, but 30 years is a long time. So unless you have a very high combined salary and can pay off your mortgage quick I think its not unreasonable to say that in our lifetime we will see a period where people will come under significant mortgage stress.
Rates won't go that high because the economy would be screwed well before they got there. The govt is dependent on strong housing prices to maintain the illusion that they are great economic managers.
I agree that they will want to avoid rates going high and will do everything they can to avoid it, but its not fully in their control.
The RBA has indicated that in 2024 there will probably be a small increase. What's not to stop another increase in 2027 and so forth. These loans won't be paid off until 2051. Would you really wager that interests rates will stay under say 5% for that entire duration of time? When looking at the graph of interest rates since the 1950's its a brave person to assume its now going to just flatline at all time lows.
The govt will sacrifice basically everything to keep that from happening though imho.
It would bankrupt the majority of the country if interest rates rose that much.
@lowlifesphere: The inflation rate is already a pretty manipulated figure as it is, they will probably just make it more so.
@trapper: So if the average weekly grocery bill costs $500 and filling up a car with fuel costs $200 they’ll just fudge the numbers? People will be under mortgage stress indirectly from the increases to cost of living even with low rates.
@lowlifesphere: Food prices have gone up dramatically in the last ten years, yet apparently inflation has been basically zero the whole time. Explain that.
A lot of people are under significant mortgage stress right now.
Very low interest rates, no return on cash, a media led absolute obsession with property investment, a perception that it is risk free (when it most certainly is not), overly generous tax treatment for property investors, investor ignorance of the real costs involved and actual real returns, government dependence on a strong market for the economy and therefore themselves to look good (therefore won't allow it to fail), developer influence at all levels of government (look how differently that industry was treated to others during covid lockdowns) and greed, lots and lots of greed.
I think that about covers it.
The million dollar question everyone has.
Negative gearing
Low interest rates
Low densityWhy Are Houses So Expensive Here?
Supply and demand of available credit.
How can we get property prices down? Future generations will be screwed.
Limit credit.
Reduce investment property incentives.
Stop investment firms from investing in property.
Encourage people to not buy property to choke the market.There's so much demand to want to live in a capital city, and also Australians with a sense of entitlement.
- From a Gen Y property owner.
Limit credit.
This will just hurt the people that you are purporting to help (i.e. young people looking to break into the market).
Credit is what allows people who don't have much now to get a foot in the door. Without good access to credit, it will just entrench the system with the rich getting whatever they want (for lower cost) and the poor not being able to break in.
Yes and no.
Some believe the housing market to be a ponzi scheme.
Without 'new' money coming into the market in the form of first home buyers, existing owners will have trouble selling off their assets, particularly those who are desperate. If they cannot sell but must sell, they'll have to drop their asking price.
As from past history, whenever there are incentives to increase the ability for FHBs to obtain credit, the market sees this increase at least two fold.
I agree and disagree as well.
The new money is not just coming from first home buyers, but a lot of it is coming from people who wish to upgrade.
It is true that if it becomes difficult to sell, then sellers will have to lower their prices. However, this doesn't really address my question, which is what effect this will actually have on young people looking to break into the market.
It's all well and good to aim for lower housing prices for its own sake, but I think it's important to look at whether this will actually mean people are better off. If house prices are 30% lower, but young people can't borrow as much or many people can't borrow at all, is that actually a good outcome?
Similar to how people who seem to think that higher interest rates will solve all problems - it may make housing prices appear cheaper as the initial price tag is lower, but you will end up paying for it in the long run with your interest payments.
I think it's important we think about these second order effects beyond just whether a specific policy will drive up or down prices.
@p1 ama: I agree that higher interest rates aren't going to solve all problems. The housing market isn't the only market that is affected by interest rates.
There's no easy fix for this and it won't appease every group.
Steps that can be done is for the govt to release more land and allow them to be rezoned for residential purposes, build high speed rail and make it cheap for patrons, reduce the costs of local government areas to transfer/release/sell land titles, utilities, etc
Why Are Houses So Expensive
Because there are people willing to pay.
Yeah like that muppet who spent $2.9 million on a Manly 2 BR apartment even though the apartment down the road only costs $1.5 M (O_o).
sheltering is a crucial human need.
I'm not sure what your point is, baldur. We live in a mostly capitalist society. Many things are not distributed according to need.
sheltering is a crucial human need.
Yes, I agree, sheltering is a crucial human need. Living in a 5BR mansion in a prime suburb is not. This point seems to be lost on some people.
Just like lifestyle creep there is interest rate creep. "Rates are low? Well time to take out that $1 mil mortgage, interest is only 2%!"
It's because the powers that be invited the world to move to Australia and gave them all cheap credit (easy access to big loans).
A 700k loan, at 2.8%, debt slavery for 30 years to live in a brand new 30 square 4/2/2 on 300m2 in the outer edge of a capital city sounds like a horrible deal for an Aussie, but for most of the world it's an incredible deal (along with getting to live in Australia).
This is why it's $800k for a house in Pakenham now, 60km out of Melbourne.
That's the real reason but nobody has the guts to say it - somehow 'it's racist'??
Negative gearing and property investors only have a small effect, but this is what the media will get you to outrage over
Banks ultimately control property prices via lending policy
Easy credit + massive population increase = stupid house prices
Some sense of entitlement here. Australia needs immigration for many reasons, immigration and housing price is not closely correlated, eg. Covid housing price.
Plus imagine if housing tanks, no one wants it, holding a property could lose money, what a nightmare would that be.& No, banks do not control the housing price. Banks cannot do whatever they wanted, how much they can lend, interest rate is set out by government.
Ultimately market sets out price, capitalist rules.Limited resources, go to the people who can afford it.
Take away all government interference and incentives and return interest rates back to "normal" and property prices will become reasonable again
But no hope of that
It's gone too far now… You'll simply see a bigger divide in the future of the haves (property) and the have nots (renters).
Everyone who got their first mortgage post 2009 don't know anything but low or reducing interest rates. The economy now relies on people borrowing off their houses to buy cars, other vehicles, travel, etc.. therefore if rates go up and this incremental growth / the markets stops, the economy cops it.
The government are addicted to stamp duty, debt is way too cheap, wages are going nowhere, quantitative easing has created a boom when we should be in a recession.
The housing market will keep growing until 2024 when rates start rising, share market will be due for a correction too.
Exempting family home from asset tests means older people can sit tight in desirable suburbs.
(Unexempting would push older ppl to sell, move to smaller houses or over 55s residential; invest what’s left over into a newly created financial class that is asset exempt).
No chance of it happening though.
Wait what is the issue exactly? Are there lots of homeless people in Australia?
We're really just talking about people wanting to buy houses but have to rent right?
Coming from North America, having lived in NYC and LA, then rented in Hong Kong, pricing here seems reasonable for first world first class cities.
Most of my friends either rent or own. Nobody is homeless. Most have a reasonable amount of space as well. In the city they live in apartments. In the burbs, they have a small backyard. Not sure what the issue is… Are we just talking about how people want to invest their money in housing?
Is it just that Australians expect a certain amount of ownership and land based on last generations standards? Essentially anywhere worth living its gotten expensive around the world. There are cheaper cities that you can move to as well….
There's a very big homeless problem in Australia, many cities have as little as 1% vacancy in rentals. all the motels are full, there's genuinely nowhere for people to go.
also, they're our cities we should be able to live in them.
lol check your privileges please
It went up 20-30% in one year that’s the problem.
I feel like we get a post complaining about house prices at least every few days now….. wonder if the Mods are just going to merge them all?
1)Low interest rates,
2) relatively high wages in 2nd tier global cities : Sydney & Melbourne & over centralised public service in Canberra , trickle to minor cities in other states.
3) artificially high cost of building due to number of factors including hopeless skills shortage/ monopolies maintained by closed shop trades.
4) lack of real regional options.
5) state governments addicted to real property duties and land tax.
6) lack of public housing options
7) suburb snobbery, snobbery towards living in regional cities
8) other $#!+It's not expensive at all, you just want to live in the centre of a capital city. Move to Adelaide or a regional area you will find things much cheaper.
I just made more money and bought a house - what's stopping you?
Saw a houses 3 hours from Melbourne CBD, 150k for 4 bedroom and nearly 2000m^2 haha so maybe Australia is a bit of a generalisation
Which suburb?
Wycheproof, I know it's not a desireable location, I was just being sarcastic
Regardless, cheap suburbs will be the next hype!
Edit I can see an airport nearby, maybe buy a private jet with the savings lol
@CandyMan: yeah surprisingly a lot of suburbs are still very affordable without the extremes, warragul or traralgon is an example. If you can work there then you don't need to be in up to neck in debt to own a place. 800k for inner suburbs is insane.
put a cap on rents far below mortgage costs.
nobody's gonna buy 5 houses to rent over the mortgage if they have to actually buy the house themselves.
basically stop propping up the housing market on the backs of renters.
if its a market you should be buying, not just using renters to buy it for you. you can't rent a potato.
don't like it? don't buy investment houses.
Not even future generations, current generations are struggling. I'm in my 30's and the handful of friends I know who have purchased property have either a) moved to the middle of nowhere and are fortunate enough to have found work to sustain them or b) received payment or hand me downs from their parents.
I'm single income on my own in Sydney and will likely leave as soon as this is all over, I've already cleared it with my employer.
Unfortunately singe income households are disadvantaged when compared to double income households.
:(
Build more houses I reckon.
Even whole new cities planned out from scratch, Australia is flipping huge.
My grandmother whose Chinese said, it's because the Australian governments a bunch of morons, and poor infrastructure and delayed planning results in poor outcomes, meaning those with money can buy in where those cannot.
Maybe the pandemics one example I guess, but China's no different from my understanding.
China is 100x worse lol
If you mean Houses on its own piece of land vs strata, there are two main reasons
- development opportunities
- houses is actually cheap because you don't need to pay strata fees, at the current RBA rate of 0.1%, a $1,500 per quarter strata fees is equal to 6 million present value, so houses are 6 million cheaper than apartments.
Greed… an artificially inflated market to convey the notion of worth.
- Debasement of worldwide currencies through QE and super low interest rates.
- Fear of missing out on a detached home, resulting in a lot of desperate and emotional offers just to get in on the property ladder
- Working from home requires more room for office space
- Higher savings for those able to work from home
- Restricting people to their homes all day has changed mindsets, justifying greater purchasing demand and higher willingness to extend themselves to move to their spacious dream home.
We are definitely in a boom, but booms don’t last forever. Property will be hot until it’s not and who knows with all the super leveraged borrowers and inflation risks around the world we might have just created the right conditions for the next global economic disaster a few years from now.
3 key possibilities going forward some possibilities in between.
somehow our banking and government overlords got it just right, supply bottlenecks improve, inflation settles and all this debt becomes serviceable and median wages increase over time.
they abandon the dollar letting inflation run rip, this will still result in a debt disaster indirectly, especially for the super leveraged average Australian who just purchased a home. Bills and groceries rise, making ability to service mortgage at even low interest rates impossible. Our economy is looking more like it’s at risk of stagflation which results in high unemployment as rising costs and poor growth potential results in greater uncertainty and risk.
They do the responsible thing and realise they overshot the stimulus and modestly start tapering and raising rates now. This will result in short term asset deflation and economic pain, but will be a return to a much more sustainable economy going forward and better position ourselves to deal with any disasters in the future. This is the most unlikely scenario in my view as politicians and central bank office holders bias short term growth and benefits for their own gain (reelection, reappointments).
Another risk to consider is that working from home does seem beneficial now, but it has allowed a true globalisation of the workforce for a lot of sectors. Businesses are adapting and could easily justify outsourcing large parts of service sector overseas for reduced labour costs.
I truly do worry for future generations (massive debt, climate disaster). Our leaders are driven by greed for the present. We are run by a bunch of professional can kickers, let’s just see when that can falls off a cliff.
Because the fundamental financial system is broken, you can't fix the house problem without fixing the fundamental problem with the system.
The system works so that the purchasing power you get is less and less over time and you don't feel the severe impact of it in your everyday life. The system/rich just leech off the masses over time to benefit the top x% who's already in the game and can play this game effectively.
If the system keeps playing out like this, you will never see the house prices down. Yes the housing market has cycles, it will come down at some point, but the overall trend is up and i don't see how it can go down in dollar value in the long term. NFA, but try to get into things that represent more of the actual economy than cash, e.g. stocks, houses or even crypto.
Best you can do is slow down the rate at which you lose your purchasing power, and then look at investment strategies to build your wealth. If you don't wanna be left behind, you need to play their game.
Edit: that's the fundamental issue from my understanding. Of course, the short to medium term prices can be impacted by a lot of things, speculation, supply & demand etc can hugely affect prices. Long term, if the current cash system doesn't change, there's no way the prices are getting on a downtrend or even staying relatively stable.
I don't understand.. without property developers where would I get my 4th investment property from?
Houses are cheap, and generally poorly designed and built.
Land is expensive because of property culture keeping high demand, which is linked to the fact that property market is probably the best place to invest money with less risk in Australia. The called "bubble" has been here for so long that most people don't think it's a bubble anymore.
Federal and state governments feed the property market. Construction has barely been affected by the pandemic; it might have boomed…
For a sec, I thought it was "why are horses so expensive"
Hay?
Horses are justified why they're expensive. Not houses lol
I’m a single income household with 2 kids I own my house outright.
Invest well outside realestate then buy where you can afford. (for me it was crypto)
Then if you want, work your way back to where you want to live. Moving from Victoria to Tassie at the end of 2019 worked out real well so far.crypto
So gambling?
Depends on your risk tolerance.
True, I’m more risk adverse than you, so I head to the casino and play poker.
As per above crypto is not investing
that's not a fact. It is merely your opinion
Lol, got rekt?
tell that to ATO
It is expensive because stamp duty generates so much makes it so State and Federal Govt is not incentivised to bring it down.
The easiest way to get cheaper housing is to open non/less arable land for development, but that takes investment and policy from State Govt to drive down housing prices.
However, State Govt are voted in every 4th year. A project like that would easily take a decade or two to build out, longer than most State Govt would be able to reasonably commit too. Look what happened to NBN (there are many other smaller examples where projects went too long or cancelled at great costs to the taxpayers)
Australian voters aren't the smartest bunch either, they voted back in a Federal Govt that ran a negative scare campaign. Look at all the big responsibilities they have mucked upped. At the moment enough voters own their own home, so they don't want house prices to drop, so none of the bigger political parties is going to campaign on lowering housing prices.
Development companies are massive in Australia (relative to population the top 3 development companies are truly massive), they don't want lower house prices, they are also big donors, so are alot of the fund managers of REITs.
Hence you will always see politicans from the bigger party say they believe everyone should have a fair go, while making sure the house prices don't stop growing.
Wouldn't be a bad thing if you've built in a somewhat desirable location?