House Prices
An article in yesterday's Courier Mail gave details of the movement in some of our house prices.
Sydney prices fell 6.1% in the last 12 months, and Melbourne 3.1%.
Brisbane recorded a small rise of 0.8%.
All these cities are increasing in population, which usually suggests price growth, but the increases in the last few years have been crazy.
Also, many people are struggling to pay, because of rising living costs and stagnant wages.
Both situations suggest a further fall in prices.
But, could there be a price crash, with all the devastation that comes with it?
Let's hope not.
HOUSING here in south/port melbourne, is at an all time high, re sales, even though it is one of the priceier suburbs, people like it here as close to the city, beach, it has the grande prix [i wish it hadnt,] a great aquatic center, plenty of supermarkets, has some good people living here,
Qld
For some time, investors AND home owners have been experiencing difficulty renewing loans (and servicing the new loan if approved). That will become a harsh reality for many more where the value of their home is affected by any low price sale within cooee of their address. Many first home owners do not have a sufficient margin from their deposit to protect them.
Immigration numbers drive prices and many new immigrants have ways of affording higher prices.
We are already seeing developers, a sizeable rump of whom are builders who develop to get work and have tight margins, pulling out of future prospects. That will affect the supply of competitively priced homes and units.
Taking units for an example, there have already been compromises in building that, while they cheapen the final price, markedly reduce the qualkity of the home and increase future running costs and maintenance. Blueboard construction with small or no eaves and single glazed glass require later inatallation of airconditioning to make them liveable. Absence of space for clothes line areas require electric drying. Just a few examples of many and it confirms governments' unspoken plans for Australians to live in high rise unit blocks.
Government has consistently moved out of supplying welfare housing, forcing the responsibility onto the private sector. Bt developers will have gone West to round up cattle. There will be increases in rents and stiff rebound in housing prices - where moneyed migrants and overseas investors will dominate the market.
Expect the larger institutions, banks and insurance companies, to own rental housing and they will be far harder masters than the small investors we have had in the past. Think overseas ownership of rental housing and exporting the profits overseas, while the public is being squeezed into the high rise future slums (and future crime areas), just like overseas.
Shorten's policies to interfere in the market will ensure the inevitability of the above. Hard days coming.
Government should but out of this issue. I am sick and tired of government band aid solutions which only serve to worsen the situation.
House prices are a reflection of demand and supply. Immigration and foreign buyers boost the demand of inner city dwellings to unrealistic levels. Ever since Adam played in a grand final with a broken arm houses have been built where jobs are. Jobs are no longer in the inner city. Jobs are now spreading to the outer suburban areas and producing large cities.
If we look more closely at regional areas where jobs growth is steady, we see a different story on the price of dwellings. Likewise when we drill into domestic holiday destinations, we see prices being reflective of a range of different circumstances.
If the government wants to do something to steady prices of inner city and urban dwellings then get out of the way of progress in regional areas where jobs can be created.
Move public service jobs to regional areas!
One can only wonder why Labor and Greens are so fixated on driving the 'aspirational mums and dads', the traditional investors in budget rental housing, out of that area of investment. And why Labor and Greens also have a mindset against the couples who have finally built up a bit of a stake in their first small home and now want to sell it and upgrade to maybe get a home a bit closer to work and more suitable for adolescent children who are moving on from prep school.
The writing is also on the wall that big spending federal governments will be sweating on reintroducing death taxes and extending capital gains tax for the residential home. Homes are seen by federal governments as the milch cow for taxes. The residential home is already taxed to the hilt with an array of taxes from the three levels of government and owners pay it off with money that has already been taxed. How many times can a home owner be taxed for the same thing, providing necessary shelter for family?
Any wonder young Australian couples put off the children they would like to have and sadly, are likely being forced to terminate pregnancies that could threaten their financial survival.
Without negativ gearing rents will rise significanty as demand for rentals outstrips suppy.
Old Geezer, I'm not sure I'm convinced of that argument any more?
I know that when Labor removed neg gearing rents did rise, but in those days of Labor government the value of neg gearing was substantial as fiscal and monetary policy persued different agendas. Many investors in those days relied heavily on that cash flow from the ATO.
Interest rates were through the roof, as was income tax.
To put that into perspective, assume an investor pays annual interest on a loan of say $200k..
60% of $30,000(interest) = $18,000 (ATO tax forgiveness).
As opposed to todays ATO liability, 45% of $10,000 = $4,500.
Rents rose through desperation, a result of bad government policy, given the economic circumstances of the time. That's not to say history would not repeat istself? Should Labor/Greens return to government, they still have the same ideology, high taxes, more regulation, bigger government, anti business etc. What is different though is the very high home ownership rate. Of the 9 million dwellings 70% are now owner occupied.
Where there is a demand land and homes will always have a price rise, that is why when the mining boom died WA real estate died too. It fluctuates. I do think the generations under 45 are particular with their homes, they want what they cannot afford.
Celia, I really feel for the people in mining towns where prices and rents dramaticaly increase. Often the mining companies make a pre-emptive buy up of residential stock within travelling distance of the site. This is then followed by a sell off when the mine closes. Mining of course is subject to the whims of government, unions and greenies. What we need is long term stable employment.
Adrianus don't you feel we need to be more self sufficient?
Relying on overseas trade we a doomed, we should not totally rely on overseas imports.
Countries manipulate us when we rely on them for so much trade I feel.
The old story is, we have the raw product, we have the gas. Our problem is too higher wage/salaries cost of living.
Of couse the far right loves this, it makes them wealthy. If they are wealthy and we have a down turn in the economy they are all right, it is the man in the street that struggles.
It also affects the professionals. If there are no clients there are no need for professionals, no need for the social worker because nobody can afford to pay them! No need for the engineers because there is no development.
Yes I agree with what you say about the small towns, so many are becoming ghost towns. A seriously responsible Federal Government would have countered this years ago, but alas, we have not had a serioulsy responible Federal Government.
Australia, especially WA needs desperately to decentralize.
In many ways, I can empathise with the mine companies. They buy up residential in the early planning stage. This provides workers a place to live near site, but it also provides some leverage against a Labor/Greens government. The mine companies can be at the mercy of the CFMEU even though their income from "training and safety" is quite substantial. Gosh, that reminds me of the Union corruption inquiry when we heard that a union boss was offered $12m to resign but refused, I suppose it just wasnt enough?
The idea of regular wage rises beyond a CPI increase has always baffled me. It just makes everything cost more as the employer starts the snowballing by finding the money for the pay increase. It costs more to build a house now than it does to buy existing dwellings in many areas.
Celia, I'm afraid our manufacturing is dead now. We cannot blame other countries for this. We are entirely responsible. When I was a kid I saw a lot of manufacturing, many were small businesses which employed a handful of workers. Sure automation has contributed, but so too has the concept that wages should grow faster than inflation.
If you own your own home and prices fall there is no issue unless you want to sell. Likewise if prices rise there is no issue unless you want to sell. Either way it's just a paper loss/gain, much like shares until you cement it by liquidating the assett.
If people took too high a mortgage in the first place, the only issue for them is rising interest rates. But even then they have no-one to blame but themselves. For some years now the warning has been there that interest rates would only go up from the historic lows. Well now they are on the rise. And those who over committed are going to suffer, first because the did not factor in the rise in costs when they took the loan, and second because if they liquidate thier asset it will be worth less than they paid for it in the first place. Welcome to the adult world!
When I took out a mortgage 6 years ago, I factored in a rise to 10%. As it happened, rates went down but I kept paying the higher rate. They are on the rise now (mine went up last month by .25% - more than the banks) yet I can still pay the same higher rate and be in front. You have to think ahead in all dealings with finances and the mortgage is no different.
House prices need to be seen in the context of 'how much have they gone up in the past 3 years'. Tha puts it into perspective.
This discussion is a bit like the climate trolls who look at one summer when temperatures have not set new records and claim the science is flawed. Same deal here.
The property cycle has around 6 years to run. Then the end should come. Until then this small correction is likely noise and nothng more.
If you will include your principal residence in the pension asset test prices will come down in a hurry. The only country in the world where everyone (me included) puts a lot of their assets into real estate because it is the only place exempt from the asset count.
Having a place worth $750'000 (melbourne) and only $50'000 in the bank gives a full pension; a house worth $200'000
where I currently live and $500'000 in cash I would get zilch. Include the house and make the cut off $1 million. That would be fairer. Or, on the other hand, introduce an inheritance tax.
Possibility would also be pay everyone the full pension and claw it back upon death for estates worth more than $1.5 million. Just a thought.
Federal and State Governments need to very carefully consider an asset test inclusion on the PPR. State Governments now own about 400,000 dwellings, housing around 850,000 people under the Housing assistance program. What sense does it make to reduce pensions, increase taxes, then spend that money on buying more dwellings?? At a time when we should be, and are encouraging home ownership?
Yes price houses are dropping here in Sydney, my friend around the corner bought an expensive 3 bedroom unit in the inner city off the plan and it's almost completed and she has to pay the balance by the end of November. Trouble is, she put her house on the market a few weeks too late, had to cancel the auction last Saturday and is generally having a panic attack.
Also anyone who bought at the top of the market must be distraught as the value of their property heads south.
The only good news is Wall Street is jumping out of its skin, so no imminent crash forecast.
Its clear our market doesnt like Labor's anti bank ideology. The experts are divided on whether restrictions on lending are already tight or will get tighter and what impact if any it will have on the property market.
I'm surprised margin lending on ASX shares isnt picking up now? Margin loans were gaining popularity during the Howard years when the economy was humming along but they dropped off in 2007 when it looked like Labor could win the election. Then ASIC turned a blind eye to the likes of Storm and other aggressive loan peddlers. Those who didnt get out early lost dearly. The investors are now very nervous.
It's a buyer's market at the moment which is a boon for young first time home buyers. Hopefully many will take the opportunity to get their foot on the first rung of the ladder. The key is not to bite off more than you can chew..buy what you can afford to pay for comfortably.
The Perth property market is likely to bottom out in the next nine months, after more than four years of falling prices according to those in the "know."
The trouble is, it's unlikely first home buyers will get a housing loan from a bank any time soon after the royal commission highlighted how they were grossly underestimating a young family’s living expenses.
It seems there were three ranges of living expenses, high, medium and low and the banks were declaring the couple’s living expenses as being on the lowest scale in order to secure the loan when in fact their TRUE living expenses were probably in the middle to high range.
Those days have now gone and unless a first home buyer has a helping hand from parents, they now have little hope of getting into the market.
Yes the Royal Commission has been disastrous for first home buyers
Trouble with what you can borrow on Mortgages began back in the 90's when prior the Banks and Building societies all took in 100% of his wage plus only 30% of hers because she would be starting a family in the future and therefore their income would fall.
They started taking into account 100% of both, meaning they could borrow more.
This pushed up prices. Also of coure Immigration has been very high and even refugees buy houses - back in the last century often in name of children, rented them out and claimed the FHOG too.
Immigration is still high and worse we have had buyers living say in China and buying investments here but leaving them vacant which has meant less rental available - which then pushed up rental prices as well.
Today too many younger ones want it all. 4 beds 3 baths family, games and entertainment rooms as well as study and garages for min 2 cars. And thats for first home.
We, our generation, went without holidays etc to save for years for first home deposit and paying off the mortgage on one wage usually until all kiddies off to school and she could get a part time job to earn a bit more for a bit of a holiday maybe or just pay down bills.
No FHO grants or handouts back then and yet we are now being targeted if we own a home and live off the age pension as being well off - and we are compared with renters.Who didnt know they would be in the pickle they are in today unless lucky to have a public housing home.
But thats no excuse for what some political parties are planning to do. Put the home into assets for the pension.
Sadly its true some own a million dollar house but they paid around 350 or 400 pounds for it and it is only worth more as the cities have grown outwards away leaving them on prime expensive land close to CBD etc.
Thats also due to Immigration which is the cause of much of the grief today.
But not all as the government owes me and money grows on trees is the idea of many young ones. Who yearn for the big home with it all rather than starting off small.
Yes no starting off with small Fibro homes these days all the young ones want fancy McMansions and 2 cars and all the newest fancy furniture -- no butter boxes to sit on and bon amy on the windows for them --
The 'Big Australia' plan is to push them into hot, small blue board units. They will be crippled by energy costs. Slums in the making and all depreciation and management costs with scant land content to appreciate in value.
If people were to realise that large cities (Melbourne, Sydney) provide only 25% of jobs in Australia then they would soon realise that the inner city dwellings market is more vulnerable to the fluctuating fortunes of supply and demand. Strong demand for dwellings is a reflection of sustained and consistent jobs growth.
Labor's policy of reducing jobs growth in order to satisfy a flawed ideology is nothing short of lunacy. Sure the elite Fabians from Ultimo may be able to aquire more inner city dwellings, but at what cost?
Naaah - not unless there's a recession and massive unemployment
This government has got the economy humming, full employment and a new mining b oom around the corner
Buy now while before the next boom