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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that is an unrealistic view, if they have own their own home say for 20 years, they should have enough equity they can refinance and loan/give the extra dollars for the kids to get their foot in the door.
You assume parents who have paid off mortgages aren’t hesitant to hand over their deed back to the bank. I know family guarantors are a thing but it’s not very very popular. Most parents that aren’t property investors and bought a long time ago don’t care what their house value is worth. They only care what it’s worth relative to other properties, so if the entire market corrects 20% they don’t really lose.
@lowlifesphere: I assume majority of parents who would have bought thier homes, with adult kids entering the property market now…
Using the average in Victoria in 2000, $195k, to $891k… so without doing anything their home would have grown over 300%, to unlock they can either refinance, or sell and downsize, move out and rent somewhere smaller and use the rent income to co-sign loans, etc…
so without even buying any other property they would have made $600k in equity if they bought around average price back then. Not rocket science, the ones that do it tough are the ones who have to essentially only use their own incomes & assets to get the loan.
you can check out the figures here, they have interactive graphs plotting house price from 1971…
https://www.savings.com.au/home-loans/australian-house-price…latest release of property prices on ABS
https://www.abs.gov.au/statistics/economy/price-indexes-and-…@Chong: Parents with decent sized mortgages then sure, but I doubt there are many with paid off houses in the later end of their careers or near retirement that are willing to refinance adding more debt.
Equity doesn’t mean much to parents who own a single home and have children. Equity is only of concern to purchases in the last 10 years still with decent lvr, those wanting to enter the market or investors. As a parent with a paid off or a close to paid off mortgage for my children’s sake I would rather have house prices fall than go backwards and add more leverage.
Recent fhb guarantor statistics from banks are cba 20% westpac 15% and nab 1% use guarantors, not sure why nab is so low, might be because they offer the cheapest lmi out of the big 4.
@lowlifesphere: @lowlifesphere saw this article last night, if even mentions parents gifting to their adult children.
https://www.domain.com.au/news/guarantor-loans-jump-71-per-c…
Do you own a house OP?
Ban immigration, negative gearing, investment purchase, 2nd purchase, introduce political instability, etc, all if which can help bring prices down.
Sometimes people just need to watch out what they wish for.
Just build more houses.
Im assuming by adding "here" to the title your not from "here" originally. Feel free to go back and buy one "there".
I have said this in another recent thread and i'll say it again for those that want to listen.
Besides the obvious low interest rates and loosening of lending criterias by the banks which has allow more people to borrow more, there is also a supply issue driving up demand.
There is also $60Bn of trapped cash because people are not traveling or spending it on holidays, making the average household feel a bit more wealthy.
Currently, everything has gone up. its not just property - equity markets are up, cars are up, luxury watches are up. The other thing to consider is all this printing of money, its gotta go somewhere. Yep, you guess it, its in various asset classes.
If you think COVID has hurt the populace, I got news for you. Majority of white collar workers made a killing in the last 18 months….the gap between wealthy and poor just got even larger. Sorry.
We live in a mostly capitalist society where there are two different mindsets, one side is to consume, one side is to generate wealth. Unfortunately, those who are not privileged enough will lean towards consuming and survive than to have the privilege to climb out of it and generate wealth and invest in assets that will yield profit long term.
It's expensive to be poor.
I truly believe that all humans are inherently greedy and if they could lift themselves out of poverty, they would. So its not choosing to consume or to generate wealth. Its actually whether you can or cannot generate wealth. Hardly a choice I would argue.
Over the last 18 months of COVID, two scenarios could have played out.
1) government doesn't intervene, economy goes into recession. People lose their jobs, lose their homes. The market kind of resets. Property likely to have gone down due to oversupply. The wealthier class likely undisturbed but the lower class really struggle. This didn't happen.
2) government intervenes by printing money and providing stimulus, economy remains buoyant to fairly strong. Less people lose their jobs. The market maintains its strength. The wealthier classes made more money due to equity going up, assets going up but the lower class don't struggle as much. This kinda happened.
In both scenarios, your choice to generate wealth if you below average wealth is limited. You either didn't have much to begin with so got no benefit from the equity market or property market under 2) and if it was 1) you would have really struggled.
Bottom line is it is indeed expensive to be poor but you live in a land of the free and you have the ability to move up in and down that wealth ladder. Whether you choose to or not is actually a choice but don't blame capitalism if you choose not to take the route.
Go to countries where you cannot get home loans and you'll see houses are ~$100k
e.g. developing countries, South America, SE Asia, Eastern Europe, poorer parts of US like Detroit etc where people can't get loans
Go hand everyone $500k loans and you'll see house prices boom
Go to countries where you cannot get home loans and you'll see houses are ~$100k
Yes, and nobody can actually afford them.
FWIW, I know people who live in the countries you are referring to. Without a huge investment from mum and dad, most people there are actually royally screwed.
The issue is not the cost of housing (partly a reflection of incomes and interest rates) it's the cost of new housing. For instance on the fringe of the capital cities or in apartments. Due to lack of population growth in recent times, new housing may become cheaper soon as developers won't have enough people to sell to. As work reduces for residential construction it may become a bit cheaper to construct houses too. It might take another couple of years for this to happen or sooner.
Part of the reason this hasn't happened already is because the new migrants we are missing don't immediately buy houses anyway. They rent for a period then buy. So the impact of their absence on the market for new housing will be delayed. Furthermore because of gov incentives and low interest rates the housing market for new housing has actually been doing ok, but this is unlikely to be the case In a couple of years. That is just my read of it not a guarantee.
How can we get property prices down?
Wait. Once renters significantly outnumber owners, the politics will flip and prices will collapse. What goes up must come down. I feel sorry for recent FOMO buyers who've been sold the lie of never-ending price rises (and interest rate drops) by those with an established foothold in the market.
Once renters significantly out number owners, rent would be bid up.
Rental yield goes up, house price goes up.
Maybe lower your expectations. You can lend x7 your annual salary. So if you earn 70k, which is below average still, you can comfortably own a 500k apartment.
I've been living in Asia for the last 12 months and I've gotta say the housing market in Asia makes Australian property look cheap, I can see why there's so much interest from overseas buyers.
Currently staying in a 1bedroom apartment apparently worth $1.5million and the average income here is less than half of what Australia's is, it's insanity.
Where is this? Bangkok?
Asia in general has much higher population density and the rich are usually very rich…
Definitely not in KL. The market here has plateaued. Singapore maybe?
Where?
HK?
China will be my guess? Shanghai maybe? expensive property and very little basic pay
South Korea is like that, especially Seoul.
Having said that Japan isn't that expensive.
How can we get property prices down?
Reduce demand and Increase Supply.
- Reduce immigration.
- Have less kids.
- Build more houses.
How do you counter the effect of speculation driving demand? You could argue that speculation is a stronger driver for demand than population growth.
How do you counter the effect of speculation driving demand?
By :
- Reducing immigration.
- Having less kids.
- Building more houses.
One of the factors of speculation is what is happening in the market.
Wouldn't one house per adult be the solution?
No, what if you want a holiday house?
Having less kids.
What if you want more kids?
Reduce immigration.
Foreigners can buy real estate via proxy.
Have less kids.
The government can't stop people from having sex without protection.
Build more houses.
Inflating the supply of an asset doesn't necessarily mean that the price will go down. The price will follow the trend and go up to the right as long people use the asset as a store of value.
Reduce immigration.
Foreigners can buy real estate via proxy.Will still reduce demand
The government can't stop people from having sex without protection.
They can do what China did…
Lose all govt benefits for second child.Inflating the supply of an asset doesn't necessarily mean that the price will go down.
It will if demand stays the same or drops.
Houses are not expensive here.
Desirable houses are expensive. But that goes for all around the world. There are many affordable options that cater for all situations, in any part of Australia including all our capital cities.
The problem is the Australian attitude of self entitlement. People expect a great quality of life with all the trimmings, without necessarily the desire or need to earn it.
That, coupled with another ingrained part of the aussie culture is our need to 'keep up with the joneses' but also mixed with an unhealthy dose of 'tall poppy syndrome'
This is the crux of the problem at the end of the day.
Mate here is a dose of reality for ya.
https://www.commbank.com.au/digital/home-loans/calculator/ho…
160k / year
0 expenses1,198,900 borrowing at 80% LVR that's 1,498,625 and I'm pretending stamp duty doesn't exist.
The median (middle) house price in Sydney is 1,410,133
https://www.domain.com.au/news/sydney-house-prices-reach-rec…Lets go with Median Income
https://www.abs.gov.au/statistics/labour/earnings-and-work-h…$49,805 and pretend again 0 expenses.
$418,200 borrowing at 80% LVR that's $522,750 and I'm pretending stamp duty doesn't exist.
Once again the median house price in Sydney is $1,410,133So don’t buy in Sydney…
Do you expect people just to get up and move. Forget their life/friends/job?
There is no state in the country with a median house price that is lower than what a median income can afford.
https://www.domain.com.au/news/sydney-house-prices-reach-rec…
@deme: No. Median house price is never a good indication of what's actually affordable. Like I said, plenty of affordable options in Sydney for all income earners and first home buyers. They might be further out, but there's nothing wrong with that except for the notion that you are living in a "less desirable" location.
@bobolo: so you have to work in syndey, plenty of people commute from newcastle to sydney on the train every day … it's much cheaper there!
as you save more money, sell & buy closer
There are plenty of suburbs in Sydney that you can buy a house for well under $1.5m.
Then there are apartments - even in more affluent suburbs for well below $1m
The question is - what are young people's expectations? What are they willing to compromise on to get started?
The assumption here is that everyone has to own a freestanding house in the most expensive city in Australia.
Some of those median incomes will go towards apartments.
Some of those median incomes will be joined with a partners income.You've selected statistics pretty poorly. I don't disagree with your broader point, but you're a terrible spokesman for those points:
(i) Comparing the median income of a single person to a median property price is bonkers. The median property has over 3 bedrooms - why does an individual person need or want 3 bedrooms. If you want to talk about median properties, you have to talk about family incomes because houses are built for families.
(ii) Your $49,805 median income figure is highly questionable because it also includes people who work part time, superannuation income and many others that are not what regular people would consider to be a regular full time job.
(iii) If you want a better indication of how much people actually earn - https://www.abs.gov.au/statistics/labour/earnings-and-work-h… - full time men $1500 p.w., women $1342 p.w., so average of $1421 p.w., which is $74K per year.
(iv) So in an average dual-income household, where both parties make $74K per year, using your CBA calculator, with average expenses of $3,000 p.m., you will get $1,133,800, so at an 80% LVR, that will be $1.4m property price. Perhaps not so much of a coincidence that the median house price in Sydney is $1.4m as well after all right?
(v) If you want to make the case that a single person earning $50K should also be able to afford a place to live, I actually completely agree with you. Here is an example of a 2BR unit / apartment in a decent suburb close to the CBD in Sydney for < $450,000 which by your calculations they can afford - https://www.realestate.com.au/sold/property-unit-nsw-burwood…. Is it super spacious? No, but you have two bedrooms, ample living and dining spaces and in a good location. At some point you have to clarify what exactly is a luxury and what is a necessity.
The thing is that I genuinely think affordable housing out there actually exists, even in Sydney. However, you have to make some sacrifices at the end of the day as with anything, right?
How dare you use facts in an internet argument?!
"Why are houses so expensive?" is the wrong question. A better question is "Why is the purchasing power of the dollar so weak?"
Have you stopped to consider that perhaps the problem is not that houses are going up but that the dollar is going down?Agreed but rather I'd go further and say the purchasing power of someone's time has gone down. ie. Wages have not grown inline with productivity or inflation.
This is in part because of technology.
Jobs in high technology have generally grown at least in line with productivity and inflation.
It is also in part because of money printing, and "spray and pray" distribution.
Finally someone who understands the real problem rather then being wrapped up in media driven BS. Most people don't realise this. Devaluation of the currency due to fractional reserve banking system is inevitable and we will continue to see real asset prices go up (with corrections from time to time of course) over long term.
If the purchasing power of the dollar real is that "weak", wouldn't you expect a large Big Mac meal to cost something like $20 or $25? At the moment I think they're something like $14 or $15. Why don't cartons of milk cost $7? Why don't base trim Toyota Corollas cost $40k?
This data is before your time but the data hasn't changed.
Value of $100 from 1923 to 2021
$100 in 1923 is equivalent in purchasing power to about $4,210.71 today, an increase of $4,110.71 over 98 years. The dollar had an average inflation rate of 3.89% per year between 1923 and today, producing a cumulative price increase of 4,110.71%.This means that today's prices are 42.11 times higher than average prices since 1923, according to the Bureau of Statistics consumer price index. A dollar today only buys 2.37% of what it could buy back then.
https://files.ozbargain.com.au/upload/393946/90998/screensho…
Travel out of Sydney and property's worth less then 50,000, but what you'd get in Thailand or Philippines in price is much more in value compared to rural NSW, because in Thailand hell even Bali where my cousin traveled to from Singapore said :" it's very cheap but has its issues"
Can you link to a property outside of Sydney that is less than $50,000?
Probably meant $500k
https://www.homely.com.au/for-sale/broken-hill-nsw-2880/hous…
Please learn to Google geez, or explore Australia, hell I'm Chinese.
Incase your picky or fussy.
https://m.realestate.com.au/buy/property-townhouse-unit+apar…
Well you can always buy a single unit in the city for 500.000
@mewmew Hmmm, where life is also cheap - Philippines where they knock on your door and drag you to gaol if you're an addict. Thailand where you can only own 49% (with a Thai partner) and live under martial law after a coup. Indonesia where they give you 10 days to vacate (the country) because of a pandemic and the economy only works because of corruption. I think Australia's housing ponzi scheme seems much safer.
Well it is a third world country duuh, what else do you expect.(Australia has to many addicts, maybe it's better there for them then on the streets)
And clearly your married to Australia no risk no gain.
But live a life of questioning everything while on drugs will not get you far in life.
" Future generations will be screwed. "
Funny thing is this was what people were saying in 1975 when my fiancee and me bought our first chamferboard home with strictly no mod cons and 50kms from the centre of Sydney. I had a clerical job at a stockbrokers in the city and a long 90 min drive to and from work. My fiancee worked at a Building society of all places. We were 21 & 19. We had to borrow half of the deposit from my parents and that after scrimping and saving for 18 months.
Mum put a notice up on the the church noticeboard to say that any old furniture would be gratefully received. On the Saturday after the wedding I hired a box van and picked up a sofa at one place, a kitchen cabinet at another, and so it went on. My brother gave us an 18" black & white TV with a wonky picture and some nights we had beans on toast as our main meal. Fortunately inflation was high - like the interest rates on loans and our wages increased rapidly so we were after 2-3 years able to buy a colour TV and have a steak.The biggest impost on buyers, as I see it is not the price of property or the repayments but finding/saving a 10% deposit on houses with an inflated price. We have two sons and two daughters. The girls are thrifty and buying, the boys are keen on going out and spending their hard-earned, they rent and always will.
Earlier this year my daughter in her 30's bought a 2 bed apartment near the Broadwater Gold Coast for $395k on her wage alone, she's a technician at an FM station on not much more than the award.
Not wishing to garner sympathy because we actually look back on the austerity and appreciate what we now have. So this story has run for decades and decades.
Whats a mod con?
short for "modern convenience" i.e. air conditioning,
Oh, those cost next to nothing compared to property.
Where are you getting 10% deposit from? Don't you need 20?
Thanks for sharing @philart. You are spot on. Everyone wants everything without any sacrifice or compromise.
Never been cheaper than they are today tomorrow they will not be as cheap.
seems like a favourite line of the property price can only go up crowd - hasn't been wrong for the last 30 years so it will surely continue
Um USA housing market crash? GFC?
If you voted Liberal last election you basically caused this.
I've long moved from Sydney but the last property i owned in Sydney was a 2br apartment across the road from a train station in Leumeah. 2 bed, 2 bath and a car space. Quite a nice place. Yep bring on the slander.. "campbelltown isn't sydney" etc.. Door to door to my job in Mascot was 50min on the train. My wifes job in Surry Hills was under 1 hour 10. I slept most of the time.
it sold earlier this year for $415k. Assuming a 10% deposit and market average interest rates, you're up for $1500 a month in repayments. Funnily enough, the same i was paying and we paid $255k for the same place.
A young couple should be able to afford that without breaking a sweat, the same as we did in 2008. Heck, a young single on a median wage would probably cover it
Well done to you….
Most of the older generation I speak to made similar "sacrifices" for their first home in their early 20's. They bought land and built houses in the Hills area or the shire or inner west (these were the 'less desirable' parts of Sydney back in the day).
The attitude of first home buyers nowadays (by in large) would not be seen dead in Leumeah!! Eeeewwwwwww
I think the attitude is more who'd want to pay over 700K for a decent 3 bedroom house in Leumeah? Eeeewwwww :)
The thing is looking at recently sold properties some ppl are paying that much.
Yes. So clearly plenty of people are. And likely those who can't afford more premium areas. There is nothing wrong with Leumeah. So $700k being a VERY affordable price to buy a decent house within commutable distance to the CBD, on less than average income is a great place to start for many FHB's
I know a mate who purchased for $975k in early 2019 north west sydney
Houses next door of same quality right now are selling for $1.5M
Lucky bstrd!!!
I think it's just population. There's literally just too many people now.
where is Thanos when you need him?
actually the population growth is starting to decline… one of the reasons the number looks big at the moment, is that people are living longer, compared to maybe 50 years ago..
the world population will actually peak in a few years time, plateau for a few more and start declining. as less people are being born on average and more people dying of old age..
most people here wont see it in this lifetime but for some towards the end will actually see the world population number go backwards.
The growth is declining but there are still too many people now. Also this is a bad thing for economics because it means you dont have enough youngins to fund the old bags.
population will actually peak in a few years time, plateau for a few more and start declining. as less people are being born on average and more people dying of old age
don't forget the covid is fake news crowd who think that all vaccines are poison created by Bill Gates
that problem seems to be self-correcting somewhat :)
Pretty simple - Essential items should not be an investment category. Check out Singapore. They've got this problem sorted, but it requires government intervention.. so it's never going to happen. Even the US has rent control.
Vote out the Libs if you want cheaper housing.
Delusional lol
Which party is in power has very little impact on anything. You have been fooledWhich party is in power has very little impact on anything. probably not worth voting in that case :) lol
I understand that it might be hard to undo the housing policy stuff that's been happening since the mid 90s irrespective of who's in power but your comment comes across pretty badly.
I wouldn't if it wasn't compulsory.
@giventofly ALP, NLP, Greens etc are all stacked with MPs that have multiple investment properties
None of them are going to do anything that is going to affect THEIR personal wealth - they might say they will but when push comes to shove they wont
This illusion that the government 'cares' about poor/middle class is bullshit i dont care which party you talk about all of them have been given LARGE under the table donations to push agendas and ALL of the have been found to take said 'donations' without question.
You want to fix Australia disallow MPs to hold investment properties and Shares - they can invest in EFTs pr managed funds but not direct investments which may cause a 'conflict of interest'
They are used to blame overseas buyers, now we see the true story.
Unfortunately, this is the reality of things. Probably be next to impossible for young people to afford something in decent locations in the future. Hopefully, public transportation will be world class then so living further away won't be that big of an issue.
I think the solution is to limit negative gearing to 1 house at a time. This means people will not sit on few of them and first owner will have chance with the investors.
House is not expensive if you work a few jobs and earn some real cash. There are too many bludger in Australia expecting government to provide housing.
True. Money is there to be earned. Just how much you want it.
Barriers and taxes/loss of pension for older Australians down sizing is one of the many reasons
So many 80 y.o in 800sqm block 5 bedroom houses refusing to sell becuz they will lose there pension and be slugged with stamp duty on another property.
One of the least talked about issues is the 'shit' retirement system with have for people that have a 'bit of money' saved from working there whole life
Yea or maybe they shouldn’t be getting Centrelink if they own a 5 bedroom inner city house and don’t work. Because meanwhile, young people are working full time, commuting long hours, paying taxes and don’t own a house.
I think you're missing the point… the reason we have young people are travelling way out is becuz we have a aged generation that is punished to downsize. If we allowed them to downsize without punishment it was take a lot of heat out of the housing market.
Note: I am an millennial
Boomers ‘downsize’ by buying luxury apartments above town centres and then whinge about the noise to shut down all the fun. E.g. Kings Cross.
@Emerald Owl: I dont know what boomers you know but in VIctoria at least most of them head north or somewhere by the beach buy a reasonably priced property and spend there best days going on boat cruises and Trafalgar tours (pre-COVID)
The property price is the reflection of real figure of inflation, especially because it is one of the basic human needs and when demand exceeds supply combined with poor uninsightful town planning and zoning laws..
A lot of home owners (non investors) have been in the market long enough to not care if house prices fall 30% so long as if that means their kids can get into the market.