Housing crisis call for help

2604 said :

@George – sorry, I meant look at 4-500 on allhomes. I reckon the number of true “bargains” out there (ie houses priced for sale below their true market value, the kind I would be interested in :-)) is probably only 1 in 4-500.

Ah, gotcha. That makes more sense, and yes, I look at LOTS on allhomes before making a move. The number of real bargains at the moment in Canberra? Very few, I reckon.

Most landords with a recent mortgage don’t make any cash profit from their properties and rely on the promise of getting a capital gain far in the future to make the whole buying/renting/selling game to be worth while. Tenancy laws in the ACT are very specific on how land lords and tenants must behave and don’t really give either party licence to be oppresive. If you’re complaining about the price then that’s pretty much set by the market and you can’t do anything about it. If your landlord won’t fix stuff then take them to the tribunal and get a refund, but don’t stay in a place that you don’t like with a landlord who you hate. Take charge of your life.

@George – sorry, I meant look at 4-500 on allhomes. I reckon the number of true “bargains” out there (ie houses priced for sale below their true market value, the kind I would be interested in :-)) is probably only 1 in 4-500.

@JC – the fact that ppl might lose money is no reason not to phase out negative gearing or increase the supply of land to the market IMO. Every type of investment has an element of regulatory risk.

Fair call 2604. But looking at 4-500 properties? Wow – I looked at 4-5 initially, and then have looked only at properties I’ve thought were good value (and generally bought without looking at others). I buy more than half the properties I actually view.

You’re right about the Rich Dad Poor Dad bit though – it trivialises the work required quite dramatically.

georgesgenitals said :

Not sure why people think it’s investors pushing the price up so much. Investors aren’t generally the group that pays top dollar – that would be upgraders. Investors typically buy what they perceive to be well priced properties, definitely not properties that set new price records. Further, only about a third of properties are owned by investors (I think the breakdown is about a third rent, a third paying down a mortgage, and a third own outright).

It’s also worth noting that investors ‘expecting double digit capital gains year after year’ is nothing more than an expectation. It doesn’t impact the market at all.

If you want to look for reasons as to why property here is expensive, I’d be looking more at reasons such as:
1) Land is scarce, and sold at high prices
2) Builders and tradies are expensive, especially when compared with 10 years ago
3) Average dwelling size is 50% larger than 30 years ago
4) Fixtures and fittings in dwellings are better and more expensive than ever before.

What this adds up to is that it is very expensive to build a new home. As such, the price of existing stock gets pulled upward. Add to this Canberra’s high average income, and property is expensive.

Of course, this explanation doesn’t make it any easier or nicer for first home buyers, who have a big hill to climb to buy a home.

There was an article in one of the papers about this the other day, in particular the expectation that people will get double digit capital returns every year. Now sure normal people realise that isn’t or shouldn’t be the expectation, BUT when it has been happening for the last 10 years it HAS become the expectation rightly or wrongly, which leads to more investors in property which HELPS push the prices to levels that are far too high. Of course the other reasons you gave are also very valid, BUT it comes back to the will of the government to do something that will adversly effect the thousands that have paid too muc and who will loose money if they were to do that.

I agree with your four points, GG.

But I do think that you’re ascribing waay too much rationality and sophistication to the average property investor. For every discerning, sophisticated property investor who looks at 4-500 properties before selecting one to purchase as an investment, there’s at least one who is a speculator – someone who’s read “Rich Dad Poor Dad”, believes that property doubles in value every 7 years without fail, and thinks that anything he or she purchases will increase in value. Such people have no idea about what constitutes “well priced property”.

Also, the bit about expecting double digit capital gains year after year does impact the market – this kind of expectation encourages investors to purchase property, which increases demand.

I should also add that credit has become far easier to get, and at better rates, over the past decade.

Not sure why people think it’s investors pushing the price up so much. Investors aren’t generally the group that pays top dollar – that would be upgraders. Investors typically buy what they perceive to be well priced properties, definitely not properties that set new price records. Further, only about a third of properties are owned by investors (I think the breakdown is about a third rent, a third paying down a mortgage, and a third own outright).

It’s also worth noting that investors ‘expecting double digit capital gains year after year’ is nothing more than an expectation. It doesn’t impact the market at all.

If you want to look for reasons as to why property here is expensive, I’d be looking more at reasons such as:
1) Land is scarce, and sold at high prices
2) Builders and tradies are expensive, especially when compared with 10 years ago
3) Average dwelling size is 50% larger than 30 years ago
4) Fixtures and fittings in dwellings are better and more expensive than ever before.

What this adds up to is that it is very expensive to build a new home. As such, the price of existing stock gets pulled upward. Add to this Canberra’s high average income, and property is expensive.

Of course, this explanation doesn’t make it any easier or nicer for first home buyers, who have a big hill to climb to buy a home.

enrique said :

For this state of affairs to change at least two things will need to happen – more land gets released (thus lowering the price to purchase your own place) and incentives for investing in property will need to be reduced/removed (i.e. negative gearing). I don’t see what government would have the balls to remove negative gearing, and the current ACT government makes too much from stamp duty to want to reduce property prices. Paradoxically, reducing investement incentives may have the effect of reducing the supply of rental accommodation in the short-term and thus raising the rental price.

A third possibility is that house prices will stagnate for a while, due to higher interest rates and already sky-high prices impacting on affordability. There are currently more houses for sale on allhomes (~2200) than I remember for quite some time.

A fourth is that people will come to their senses and stop buying investment property, which makes zero economic sense at the moment. House prices are so high relative to rents, if we rented our own house out as an IP we’d be looking at a net loss of nearly $600 per fortnight. The rent would need to increase by close to 50% for it to be a postively-geared investment.

“I moved to Canberra expecting..” Maybe you should have visited before you settled here and checked situation here re property/ boulevards etc. Of course that does not excuse greedy corrupt landlords but that is capitalism; extract what you can. Situation is being caused by population boom today and migration not some hippy or yuppy so called baby boomer smoking a joint or taking acid 30 years ago.. Unless the population stabilises situation will get worse not better. Canberra is fast loosing it’s bush capital image and they are rolling new suburbs out and ruining by degree the environment but can’t keep pace obviously with a population that doubles each 30 to 40 years. It is unsustainable – like the mess they have made of the Darling river Basin, but then people push for more of the same.. We ca’t live lightly on the land it seems WE ARE TOO DUMB. What size will Canberra be. What population, and when? I don’t think our politicians have the faintest idea, or care. Perhaps it will grow all the way to Goulburn before we collectively wake up, and drought sets in? Up in Asia it is worse, far worse, they are choking to death.
Sorry it does not help your accommodation needs right now. If he is breaking some tenancy law then hold him to account. How about finding a lawyer who is not a post-acid babyboomer and will work pro bono, or employ one, or do it yourself in tribunal.