Any bigger concerns for you than housing affordability

VYBerlinaV8_is_back said :

Tetranitrate said :

Rental incomes have been steadily increasing

Yeah, steadily increasing with CPI… it really depends on the city though. Canberra is a landlords paradise (but the cost of capital is still well above even gross rental yields), Melbourne? ha ha. 4% vacancies, rents stagnant or falling across most of the city.

That’s exactly what makes it work, though. When I borrow for a property, the price is set at the time of settlement is locked in (interest rate changes can vary it up and down a bit), whereas everything else marches upward with inflation. Of course, the relationship is not linear, but the trend is there.

Shame the RBA has an inflation target of 2-3% though.

Anyway the proof is in the pudding,
http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0
The bubble is bursting, property doesn’t ‘always go up’ anymore – and now the plebs have caught on.
The falls we’ve seen in the past year or so are just as bad as those seen in Japan during their lost lost decade.

The government isn’t in a position to bail the bubble out again like they did in 08/09 with those obscene grants, they’re utterly committed to a surplus, not just for domestic political purposes, but also because they’re effectively underwriting the big 4 banks.

The RBA is too autistic to even consider using inflation to engineer a softer landing, I mean hell, they’re too autistic to consider intervening in the forex market despite the absurd, carry-trade driven strength of the dollar. Even then though, close to zero interest rates elsewhere hasn’t succeeded in reflating bubbles once de-leveraging has already begun.

Nobody is coming to save the monster this time, at long long last this sorry saga is coming to it’s inevitable conclusion.

There was a lovely little affordable housing display village built on the lawns at Parliament House using cardboard houses last Thursday, with people talking about the difficulty of finding affordable private rental housing, especially women with children to house as well as themselves. There is a growing homelessness problem among older women who have no superannuation, people with disabilities need suitable housing, and people with children need housing they can afford so they’re not cutting back on food, clothing and other necessities to pay high rent.

It suits the Property Council’s developer members to talk up the problems of capital gains tax when selling a house, but what about the one third of Australian households paying rent, mostly in the private market, and mostly for the long term? What are we doing to ensure there are plenty of houses coming onto the market at the low end of the price range? What are doing to increase the diversity of housing being developed so it’s not just high-end inner-city apartments?

Tetranitrate said :

Rental incomes have been steadily increasing

Yeah, steadily increasing with CPI… it really depends on the city though. Canberra is a landlords paradise (but the cost of capital is still well above even gross rental yields), Melbourne? ha ha. 4% vacancies, rents stagnant or falling across most of the city.

That’s exactly what makes it work, though. When I borrow for a property, the price is set at the time of settlement is locked in (interest rate changes can vary it up and down a bit), whereas everything else marches upward with inflation. Of course, the relationship is not linear, but the trend is there.

devils_advocate said :

Tetranitrate said :

I’d like to see how long all the negatively geared boomers stay in the market if capital gains are close to zero or negative for several years running (and Australia wide, we’ve had a year of sliding house prices so far now with no end in sight.).
At some point it’s going to sink in that they’re hemorrhaging cash, particularly as many of them approach retirement. Paying 7.5% for what, 5% GROSS yields at best? (in Canberra, nothing near for say, Melbourne) without any capital gains is just p*ssing away your money, those properties are bound to be trickling onto the market over the next few years which is only going to make things worse.

The suggestion that baby boomers are recieving little or no capital growth on their investments and will therefore sell out en masse, crashing the market, seems predicated on some presumption that they are buying into the market at current prices and current yeilds.

Those who bought even as late at 2005 would have seen significant capital growth. Many would have had their properties well before this.

However, the more important point is, most of these properties would be well and truly positively geared and earning good income. And as with all such property investments, the yeild curve becomes very steep at the end, once the property is paid off. Rental incomes have been steadily increasing and I think for baby boomers (and, indeed, sensible property investors generally) this would be the driver of what is a long-term investment decision, rather than any movements in the paper valuation.

You’ve deliberately misread what I posted.

I was *specifically* talking about negatively geared properties, of which there are about 1 and a quarter million Australia wide. You’ve deliberately tried to make out that I was talking about all boomers, which I was clearly not. And in case you’re that thick: by definition, a negatively geared investment property is not “mostly paid off”.

Rental incomes have been steadily increasing

Yeah, steadily increasing with CPI… it really depends on the city though. Canberra is a landlords paradise (but the cost of capital is still well above even gross rental yields), Melbourne? ha ha. 4% vacancies, rents stagnant or falling across most of the city.

As was mentioned above, the market generally has already been in a downward cycle for probably 18 months now. Higher end property has fallen off significantly, and some areas have also had reductions. I don’t expect well located ACT properties priced under about $650k to fall at all, in fact some will still increase in value.

Also, there have been changes to the way Australians operate financially over the past 20 years. Although I expect property to not increase much over the next few years, nor do I expect falls beyond those created by inflation. In perhaps 6 or 7 years I’ll getting ready for another boom (although it probably won’t be as big as the one we’ve just had).

Also, many property investors (and they’re not just baby boomers) have held property for a long time, and are cashflow positive. Much of the ‘negative geared’ tax breaks come about due to depreciation which is not a real loss of cash. If you buy property today, yield may not be very good, but if you bought a few years or more ago, yield can be very good compared to the real cost of holding the property.

That’s the thing. The ageing baby boomers bought into the market back when housing WAS affordable. So the current norm of carrying hundreds of grand in debt on a home is an alien concept to them. Why would they unload property that they own outright? Unless they wanted to.

It’s amusing to read comments like houses in Turner are cheaper than soem apartments, as though that somehow makes them affordable. It doesn’t. Canberra doesn’t have a Bankstown or a Shire, and that’s why housing affordability is such a problem here. We have high/middle, and no lower.

Stamp Duty is the killer. $20k + what a wasted tax.

Tetranitrate said :

I’d like to see how long all the negatively geared boomers stay in the market if capital gains are close to zero or negative for several years running (and Australia wide, we’ve had a year of sliding house prices so far now with no end in sight.).
At some point it’s going to sink in that they’re hemorrhaging cash, particularly as many of them approach retirement. Paying 7.5% for what, 5% GROSS yields at best? (in Canberra, nothing near for say, Melbourne) without any capital gains is just p*ssing away your money, those properties are bound to be trickling onto the market over the next few years which is only going to make things worse.

The suggestion that baby boomers are recieving little or no capital growth on their investments and will therefore sell out en masse, crashing the market, seems predicated on some presumption that they are buying into the market at current prices and current yeilds.

Those who bought even as late at 2005 would have seen significant capital growth. Many would have had their properties well before this.

However, the more important point is, most of these properties would be well and truly positively geared and earning good income. And as with all such property investments, the yeild curve becomes very steep at the end, once the property is paid off. Rental incomes have been steadily increasing and I think for baby boomers (and, indeed, sensible property investors generally) this would be the driver of what is a long-term investment decision, rather than any movements in the paper valuation.

Here is my molehill…tremble in it’s almighty shadow…

Wow, really? The property council wants to make an issues out of;
• Making housing more affordable;
• Setting a fair level of taxation when people buy or sell properties;
• Supplying infrastructure to keep up with demand; and
• Managing urban growth.

Do you think PETA could do a survey that finds out that 97% of Canberrans are anti-culling?

Savanna100 said :

Affordability would improve if more multiunit development was allowed

Currently, there are some 3 bedroom houses in Turner on allhomes that are less expensive than some 2 bedroom apartments, so don’t assume more apartments (which have been rising in price even as supply has increased) will solve anything in regards to affordability.

Although it will be interesting to see if the bucketloads of the (mainly one bedroom) apartments about to come on to the market in Dickson, Braddon and Turner will finally have some effect on prices. There also seems to be a lot for rent at the moment, so maybe even the investor market will take a cold shower.

Felix the Cat said :

House prices may be stagnating or decreasing slightly in some areas but

It’s not ‘some areas’, it’s every Australian capital city, and in Melbourne and Brisbane it could hardly be called slightly.

Felix the Cat said :

history shows that house prices double every ten years

Not in real terms they don’t. If you mean ‘they doubled in the last 10 years’ sure, but unless we have breakneck inflation (which the RBA would kill in the cradle with interest rates) it’s not exactly plausible to believe that they’d double in the next 10.

House prices may be stagnating or decreasing slightly in some areas but history shows that house prices double every ten years.

Tetranitrate said :

I’d like to see how long all the negatively geared boomers stay in the market if capital gains are close to zero or negative for several years running (and Australia wide, we’ve had a year of sliding house prices so far now with no end in sight.).
At some point it’s going to sink in that they’re hemorrhaging cash, particularly as many of them approach retirement. Paying 7.5% for what, 5% GROSS yields at best? (in Canberra, nothing near for say, Melbourne) without any capital gains is just p*ssing away your money, those properties are bound to be trickling onto the market over the next few years which is only going to make things worse.

I don’t pity them. Owner occupiers should be given priority over property “portfolio” investors in every way. Ooh, but they put more rental properties on the market – sure, at massively inflated prices while make purchasing even more unaffordable for many. A real win-win for non-home owners, not.

Of course, the taxation system makes this kind of market-inflating investment appealing whearas savings are taxed at your highest marginal rate. Still, seeing equity dissolve into thin air for some of these hawks would make me rub my hands together with glee.

You don’t NG anymore once you retire though, so the “boomers” should be selling off properties except those they intend to keep as an extra income stream. Or consolidating all their properties into one big mega-mansion on the hills of Campbell like my nearing retirement relatives did.

Darkfalz said :

Housing crash, housing crash, housing crash. That’s my mantra.

Seriously though, as long as house prices aren’t rising faster than we can save, we’ll wait it out unless the dream property comes up on Allhomes. Another decade of 10% PA growth in house prices would have the median price pushing 1.5 million and I don’t think that’s going to happen, not even here. I predict 1-3% for the forseeable future, even some periods of 0 growth or slight easing. Which gives us a chance to save faster than the appreciation on house values (with a whopping real interest rate of ~1% after taking out tax and inflation – gotta love the savings “incentives” in this country).

I’d like to see how long all the negatively geared boomers stay in the market if capital gains are close to zero or negative for several years running (and Australia wide, we’ve had a year of sliding house prices so far now with no end in sight.).
At some point it’s going to sink in that they’re hemorrhaging cash, particularly as many of them approach retirement. Paying 7.5% for what, 5% GROSS yields at best? (in Canberra, nothing near for say, Melbourne) without any capital gains is just p*ssing away your money, those properties are bound to be trickling onto the market over the next few years which is only going to make things worse.

The ‘housing crash’ has been well underway for at least a year now. South east QLD, the central coast and many parts of Melbourne have already had big falls. Higher priced property in Canberra has also fallen.

Next, we can expect several years of stagnation, with growth rates at or around inflation.

Then, some years down the track, property will rise again. There are bargains in some parts of the ACT market now, and there will be bargains for years yet. No rush if you’re nervous.

Hallelujah Darkfalz I hear you brother and/or sista!

If the governments local and federal would just keep their grubby mitts out of it we should be right – housing affordability here we come.

Will be hard for them though because it is in the nature of Australian governments to constantly come up with ‘black is white’, ‘1984’-inspired sneaky ways (First Home Owner Grants – don’t make me laugh) to support baby boomers’ apparently god given right to be subsidised by Gen X and Y into their 85th investment property. Of course government is also stacked with massive conflicts of interest on this issue – for example how many investment properties does the recent Housing Minister Tanya Plibersek have? (Hint: the answer will bring on nausea)

Maybe just maybe the ALP will get the message from the Qld election that housing affordability is like homosexuality in days gone by – the election issue that dare not speak its name. The grotesque price of housing in this country is the main reason why discretionary spending (aka retail) is in the toilet. We have managed to take the profits of a fat 10 years and waste them on bidding up the cost of the houses we sell each other – all subsidised by the taxpayer.

A good start for the ALP would be not running ads in Canberra next election telling us how Tony Abbott’s election will see house prices fall. A great way to increase the Liberal vote morons!

The Property Council is letting everyone know about their latest surveys on liveability things that make their members money
Overall, Canberrans also rated the performance of the ACT Government quite poorly on a number of aspects. For example, most believe the Government is doing a poor job in terms of:
• Making housing more affordable, so more people are buying and selling producing income for property related industries
• Setting a fair level of taxation when people buy or sell properties, so more people are buying and selling producing income for property related industries
• Supplying infrastructure to keep up with demand, so more people are buying and selling producing income for property related industries
• Managing urban growth, so more people are buying and selling producing income for property related industries
Despite that apparently we’re number 2 for liveability.

Housing crash, housing crash, housing crash. That’s my mantra.

Seriously though, as long as house prices aren’t rising faster than we can save, we’ll wait it out unless the dream property comes up on Allhomes. Another decade of 10% PA growth in house prices would have the median price pushing 1.5 million and I don’t think that’s going to happen, not even here. I predict 1-3% for the forseeable future, even some periods of 0 growth or slight easing. Which gives us a chance to save faster than the appreciation on house values (with a whopping real interest rate of ~1% after taking out tax and inflation – gotta love the savings “incentives” in this country).

Affordability would improve if more multiunit development was allowed, Why is Canberra so precious about it? hehe, I already know the anwer to that, given the NIMBY demographics of this place.
Funny how I could have 5 towenhouses on my block if I were building them under the Supported housing rules but only a single dwelling if if not using those rules. Do you mean to tell me that people would rather have a development of 5 large townhouses full of social drop-kicks next door to you because thats what the gubbermint wants rathernb 5 up market owner-occupied townhouses simply because I would make money out of them (as developers should, its a legitimate business !!)
smart planning? yeah, right.