30 April 2010

Gen Y able to afford land in the ACT? Think again.

| MarcusJ
Join the conversation
58

Hi all,

I have today been told by Colliers International, the multinational corporation handling the release, that they are under orders from the ACT Government to tell people that house block prices start between $300,000 and $400,000 in the new Molonglo land development.

Canberra has a young population. Given that most land in Canberra to be released over the next 30 years will be in this district, how will anyone from the younger generations afford those prices without getting themselves into too much debt?

Land in new outer suburbs is barely affordable now. This is an early indication to me that there will be no more affordable land in the ACT – leaving me with the impression that the powers that be care very little about land supply and affordability.

Adding insult to injury, the ACT Government’s 2010 homebuyer concession applies to land valued at $194,800 or less; $100,000-200,000 short of starting block prices in Molonglo.

It now seems that the 60,000-70,000 future residents of Molonglo all be cashed-up baby boomers – renting out their older properties to younger folks caught in the rent trap. I am not opposed to wealthy enclaves – but future land should be available to the common man, not just aristocrats.

If these early price indications are true, then it will only deepen the current intergenerational cost disadvantage flagged in the Government’s Intergenerational Report.

Agreed?

Join the conversation

58
All Comments
  • All Comments
  • Website Comments
LatestOldest

pete74au said :

Cashed up baby boomers started out with three mortgages to buy their first home for under $20,000 and had to work – YES BLOODY WORK – three jobs to pay the mortgages while the wife stayed at home and looked after the kids. There was none of this cotton wool wrapped work life balance. So if the new generation want to buy a property actually costing relatively the same amount as way back then they should get off there backsides and work instead of complaining. Low unemployment means more jobs for them to occupy to buy there house. Stop whining and start working.
So called cashed up Baby Boomer – I’ll be working till I’m 70.

Funny.
My grandparents bought a 7 bedroom mansion in inner Melbourne for about 4x my grandfathers wage (average job). They had 7 kids. My grandmother never worked a day in her life and retired fairly well off.
My parents bought a house in inner south Canberra for about three times my fathers wage (fair to middling job), with a loan from the ACT government. The same house is now worth about 12 times the average wage. My mother didn’t work until she was over 40.

What’s all this about hard work?

I’m quite happy to pay a fair whack of my money for a house (most likely in a shit location) but the stranglehold on land being released by the ACT government and the prices are ridiculous.

trevar said :

While a government may be able to set a lower price on blocks, this would also upset the balance of the market, leading to a reduction in the asset value of landowners and a financial crisis, which would in turn increase unemployment, lower incomes, and mean that Gen Y could still not afford the housing you want them to have.

Bring it on.

Far from precipitating a financial crisis it would fuel a building boom and pave the way for vast future prosperity for young people who’d be able to afford to buy instead of facing a life on the rental treadmill. For existing owner-occupiers it’d make no difference whatsoever; the value of the family house is entirely irrelevant – what matters is the changeover value. If I sell my house I still need somewhere to live – if I get half the previous value for the sale but only have to pay half the previous value for the purchase, I’ve lost nothing.

People with investment properties would have a problem, but that’s the nature of investment – it carries risks. The immense future benefits would outweigh any disadvantage many times over.

Thanks Pete74au – maybe you know something none of us do? Baby boomers worked three jobs to get a mortgage. Really, did they need to do that when you could buy a house for $30,000? My father (a BB) earned? $22,000 a year (the average income at that stage was probably around $30,000) a year when I was growing up. My mother didn’t work, she stayed home. And they were able to buy a house.

Oh, and if you think we’re all just sitting around, drinking beer, watching the world go by and crying about how we can’t afford a house think again. I work, I earn about $90,000 a year and have some savings. I applied for a bank loan – do you know what the bank said.My credit limit was $247,000. Do you know where I can buy a house for $247,000 in Canberra? You don’t, neither do I.

So, shut – up. Stop slamming Gen Ys / Xs. Because we do work hard and we can’t raise a family on one average income alone. My parents are luck enough to own their own home.

prajapati said :

I’ve only lived here a year, but it feels like all the huge tracts of land around the ACT are released for development at a dribble’s pace, despite a bursting population. Nearly every property that I’ve looked at is owned by some baby boomer trying to profit off of the dysfunctional renter’s market, while development is stalled by the same baby boomers in order to preserve the pristine bush around the city, mostly so that they can have a lovely bike ride past the roos. My impression has surely been spoiled by my frustrating experience as a renter, but Canberra seems far too small to justify Sydney and Melbourne home prices when the land is sitting there all around us.

Yep, Prajapati has the right idea – just bulldoze all that pesky bushland and build, build, build… that’ll solve the problem. Not.

georgesgenitals10:21 am 14 Jan 11

Jim Jones said :

pete74au said :

Cashed up baby boomers started out with three mortgages to buy their first home for under $20,000 and had to work – YES BLOODY WORK – three jobs to pay the mortgages while the wife stayed at home and looked after the kids. There was none of this cotton wool wrapped work life balance. So if the new generation want to buy a property actually costing relatively the same amount as way back then they should get off there backsides and work instead of complaining. Low unemployment means more jobs for them to occupy to buy there house. Stop whining and start working.
So called cashed up Baby Boomer – I’ll be working till I’m 70.

So you expect a generation living in completely different social and economic circumstances to act exactly the way you did when you were young? That’s a recipe for disaster.

The current crop of youngsters get benefits and advantages that didn’t exist in times gone by. One of the things they don’t have, though, is cheap housing. There are still affordable properties, but after 10 years of no property stagnation followed by 10 years of boom, people aren’t thinking about it the same way.

I think we need to stop getting all stressed about owning property, and think more seriously about longer term renting. I’d be quite happy to offer multiple year leases on my investment properties, if someone actually asked for one.

pete74au said :

Cashed up baby boomers started out with three mortgages to buy their first home for under $20,000 and had to work – YES BLOODY WORK – three jobs to pay the mortgages while the wife stayed at home and looked after the kids. There was none of this cotton wool wrapped work life balance. So if the new generation want to buy a property actually costing relatively the same amount as way back then they should get off there backsides and work instead of complaining. Low unemployment means more jobs for them to occupy to buy there house. Stop whining and start working.
So called cashed up Baby Boomer – I’ll be working till I’m 70.

So you expect a generation living in completely different social and economic circumstances to act exactly the way you did when you were young? That’s a recipe for disaster.

Cashed up baby boomers started out with three mortgages to buy their first home for under $20,000 and had to work – YES BLOODY WORK – three jobs to pay the mortgages while the wife stayed at home and looked after the kids. There was none of this cotton wool wrapped work life balance. So if the new generation want to buy a property actually costing relatively the same amount as way back then they should get off there backsides and work instead of complaining. Low unemployment means more jobs for them to occupy to buy there house. Stop whining and start working.
So called cashed up Baby Boomer – I’ll be working till I’m 70.

It seems that what some older people here fail to realise, is that they just couldn’t make it in today’s market.

As in, you had it good, things are just a bit shit now, it’s a little harder, and, well if you tried, you’d fuck it up, trust me. This isn’t the 1970’s any longer. Mortgages can’t be done in under 20 years, they can’t be done with your savings intact, and they sure can’t be done on a single income.

Now, mind you, that doesn’t mean that it cannot be done at all. I know quite a few people who are used to living on $90.00 pw who aren’t fazed about mortgages. However, although this does not bother them, at the same time, I am aware that a lot of people would gawk at the prospect. Strange thing is, those same people who would gawk are the ones whining about generation y.

So, shut up pussies. You would never cut it in my world.

WonderfulWorld10:21 pm 11 May 10

Heaps of people can’t afford to purchase homes but live and survive quite well and comfortably renting in decent locations.
Sometimes because they don’t manage money well, get into the market at the “right” time for them (not the market) or want only places with locations that are unrealistic to their budgets.

this monlonglo valley looks like it’s in a prime location near the city. So why is it so surprising that the average Joe wont be able to afford a house there?

As a member of Gen Y I am sick of everyone assuming we are all partying and wasting money. I am well aware that until I finish studying I will have no chance of saving for a house and actually I would prefer a small house as I have an aversion to housecleaning. Although I would like a tiny back garden so I can grow veges a bit like the garden of the granny flat I rent now. I would also like to live on a public transport route as I hate driving in traffic.
I don’t smoke, drink or have a plasma screen tv and so I would have to find other ways to economise if I wanted to buy a house. As it is I am supporting myself while studying.
However I think that I will be stuck in the rental market for many years to come, until perhaps the baby boomers and others move into retirement homes and we can knock down the huge houses they live in and create smaller townhouses that accommodate more people in a smaller area.
I am also surprised that no one has brought up one of the reasons that I in particular hate renting, that you can only have a contract for a year or so and then if the owner wants they can move you on. From no fault of my own I had to move 3 times in 2 years and now crave the security of my own home. It would be nice if you could have contracts for 3-4years then at least you would have some security.

Clown Killer5:10 pm 02 May 10

A couple of observations. Make of them if you will.

My parents built the home I grew up in 1969. They borrowed $18,000. They were able to do that because they had a 20% deposit – which they borrowed as a separate loan and combined with their savings of around 5%. The loan was based solely on my father’s income because despite my mum being a high school teacher the banks wouldn’t consider her income because she was a woman (who naturally would be expected to leave the work force and become a stay at home mum as soon as she got pregnant). They didn’t buy in the neighbourhood that they grew up in, or even in a neighbourhood that they would have been their first preference – it was a neighbourhood that they could afford.

My partner and I bought our first house in Canberra in 2001. We saved for around two years to get the 20% deposit. Not to avoid loan insurance, but because the banks wanted to see a track record of saving before they would consider lending to us.

I have no doubt that for first home buyers today it’s a daunting task to consider a mortgage of $450,000 or $500,000 for a home of their own. But it’s always been a big thing. It’s always been a big ask and required a big sacrifice for most ordinary people.

urchin said :

I call bullshit.

average wage = $73580 (according to http://www.treasury.act.gov.au/snapshot/AWOTE.pdf as of nov. 2009 – latest figures i could find).
taxes/super etc. on that you can probably expect to take home 55,000 depending on how many kiddies you have.

It’s much worse than that; 70% of employees earn less than the average, because the curve is heavily distorted by the top few percent. The median is more like $55,000-$60,000.

The day I posted my original message on RiotACT I also emailed Zed Seselja about the same issue.

He released a presser that afternoon:
http://canberraliberals.org.au/html/s02_article/article_view.asp?art_id=1241&nav_cat_id=156&nav_top_id=55

Does anyone else have more evidence of “ACT Labor’s policy of strangling supply”???

CoffinRX2, how much did you pay (estimated)?

I think there’s truth on both sides of this. As a Gen X who did who have a lot of fun when younger, at times I regret not having put my head down when I was younger – because I often feel that I’ve missed the boat housing-wise.

I agree with Jim Jones when he says there are other valid types of investment, but our population as a whole is so poorly educated when it comes to financial matters (among other things – I don’t think having a Uni degree necessarily makes people educated) that most of us take the same course of action on this as our parents did.

I don’t agree that many Gen Y or Gen X expect 4bed, 2 bathroom houses on a silver platter. In fact, I think many would jump at the chance to either live in or fix up the old “renovators delights”. But the regulations around housing offered these days are stricter than they were 25-30 years ago. In some cases it’s a good thing (e.g energy efficiency) but every time we lift that bar, we price up the bottom end of the market in terms of what can be used to build with, and how it can be done.

But in a very turbulent world, I’m beginning to wonder if staying mobile might be a good thing in the long run – if you are a home-owner, it is a helluva lot harder to move on if your local economy gets hit by a recession or the like, because you are trying to sell out at the same time as many others (the Latrobe Valley in Victoria is a good example).
Here’s a Canadian point of view on this that is arguably just as relevant to us:

http://www.creativeclass.com/creative_class/2010/05/01/canada-and-the-great-reset/

On the plus side, I think that Johnboy has a very strong point too. For many Baby Boomers, the family home IS their superannuation, many (especially women) do not have much else put aside. What is going to happen to housing values in many areas when these properties have to be sold in order to pay for nursing home beds and the like?

And one final thing. There appears to be a delusion in Australia that just because we have had a good economic run, the good times will flow on forever. Tied in with this is an idea that we will continue to be able to attract large numbers of skilled migrants. Both attitudes rest on the assumptions that these trends will continue ad infinitum.

When either of these things happen (ie nursing home payments and/or a proper downturn, we will see a market correction where prices come back down towards the long-term average that people can afford to pay.

CoffinRX2 said :

God im sick of people complaining about not being able to afford a house! .. you can do it you just need to make sacrifices … if you cant do that, then stop your whinging and rent for the rest of your life or move to goulburn or yass?

I’m single income, pretty much average ACT wage, just bought a renovated 4br ensuite house in Belco. 900m2+ block around the 1/2 mill mark. 10% deposit, .. whereas I see double income couples of the gen Y demographic saying they cant afford a house? … fuck that, I’m a gen Y too, I’m 30

I call bullshit.

average wage = $73580 (according to http://www.treasury.act.gov.au/snapshot/AWOTE.pdf as of nov. 2009 – latest figures i could find).
taxes/super etc. on that you can probably expect to take home 55,000 depending on how many kiddies you have.

lets take your ostensible purchase prices at the low end of the spectrum – 500k. you put down 10% – 50k. you borrowed 50k.

imb (one of the lowest non-bank lenders around) gives somewhere around 6.4% on a var. rate I+P loan.

that comes out to about $650 per week according to ye olde mortgage calculator. add in insurance, rates, maintanence and its and easy $725 per week.

55,000 per annum (your take home) comes to 1057 per week. minus 725 (a very conservative estimate at a time when interest rates are very low and rising fast) equals $332 per week to cover everything. car breaks down, kids get sick, food, clothes, medicine, internet, computer – everything on $332 per week.

hey, what happens if interest rates go up by 1%? your base repayment goes to $720 per week, your total expenses go to about $800 per week. now you’re down to 260 or so to live on. if interest rates go up by 2%? well now your mortgage repayments alone are nearly $800 per week. can you live on $180 per week? probably, if you don’t have any kids, if you don’t get sick, if you don’t lose your job and are unemployed for more than 3 days at a go.

let’s face it. you are heavily leveraging yourself into a market that has tripled in price in the past 10 years. you are, whether you acknowledge or not, taking on an enormous amount of risk. you may turn out ok in the end. but i guess that if you don’t and everything goes to shit you will be first in line blaming the gov’t and demanding measures to support house prices simply because you made a shitty choice.

if you only have a 50k deposit you have no business buying a 500k house. sorry bub. you deserve to lose your shirt.

CoffinRX2 said :

I’m single income, pretty much average ACT wage, just bought a renovated 4br ensuite house in Belco. 900m2+ block around the 1/2 mill mark. 10% deposit, .. whereas I see double income couples of the gen Y demographic saying they cant afford a house? … fuck that, I’m a gen Y too, I’m 30

Well gee, too bad for people who are on less than the average wage. I suppose they don’t deserve to get into the property market and can all go to hell can they? By the way, if you’re now 30, you’re probably more accurately described as Generation X than Generation Y. I’d also like to point out that when you were first able to enter the market, you were pretty well positioned towards the beginning of the bubble, giving you a pretty considerable advantage over people entering the market now.

arescarti42 said :

if you actually look at the numbers pertaining to housing affordability (income, inflation, house prices and interest rates to name a few), people in the property market 15+ years ago had it considerably better than we do now.

Economic analysis supports your point – the inflation of the market has greatly outstripped wage and cost of living inflation.

But no one here is interested in ‘facts’, they get in the way of whining about how all young people are crap, and how much harder it was back when I was young, pull yourself up by the bootstraps, blah blah blah.

Grail said :

part of the reason that house prices are so “high” is that first home buyers want houses with home theatre rooms, air conditioning, double garage attached, in decent locations.

There’s no evidence that Gen Y have unrealistic expectations, and as has been said earlier, there’s a decent body of evidence that shows that Gen Y are actually involved in greater levels of personal saving and investment than previous generations.

But prejudice and ignorance are so much easier than independent thought. And it’s just so satisfying to blame things on young people, isn’t it.

God im sick of people complaining about not being able to afford a house! .. you can do it you just need to make sacrifices … if you cant do that, then stop your whinging and rent for the rest of your life or move to goulburn or yass?

I’m single income, pretty much average ACT wage, just bought a renovated 4br ensuite house in Belco. 900m2+ block around the 1/2 mill mark. 10% deposit, .. whereas I see double income couples of the gen Y demographic saying they cant afford a house? … fuck that, I’m a gen Y too, I’m 30

A bunch of whinges, all kinda related: first, part of the reason that house prices are so “high” is that first home buyers want houses with home theatre rooms, air conditioning, double garage attached, in decent locations.

If you’re prepared to put up with the kind of thing my grandparents lived in for 20 years, you can get a place to live for a whole lot less than $300k.

So first home buyers – lower your sights a little. Your Mummies and Daddies can afford five bedroom four garage and thirteen ensuite mansions because they’ve been working at it for 30 years. Which reminds me, you’re competing in the market with investors and married couples. If you’re single and trying to buy a place for yourself, you have to lower your sights even more.

UrbanAdventure.org

I suggest living in Bali when you retire, one can live on the old age pension comfortably, I would love to do that, the people are so friendly, just loved the place.

Felix the Cat8:52 pm 30 Apr 10

arescarti42 – your maths seems ok. But if Unskilled Office Johnny (or Jane) really wants a house bad enough they can do a number of things. Get a flatmate (extra ~$150 per week tax free), give up smokes (at least $50 per week, probably closer to $100 if they are heavy smoker), get a second or third job (always see jobs advertised for delivering Canberra Chronicle – would save money by not needing to go to the gym anymore).

They could also ride a bike to work (saving ~$50 per week until the govt does away with Northbourne Ave bike lanes) and make their own lunch and take it to work instead of spending ~$50 per week on takeaway crap.

There are endless ways to (legally) earn a bit more money or save money by doing stuff different if people put their mind to it and really want something.

Life doesn’t get handed to you on a silver platter, you have to make it work for you.

sexynotsmart8:05 pm 30 Apr 10

Mid-thirties and home owner. I got my first mortgage age 22. Paying it back was tough. I didn’t go out, and paid off the loan instead.

And sometimes I wish I hadn’t. I traded my twenties for a house. I wish I had partied more.

Gen Y-ers, respect your youth. If you’re the settle-down-and-buy type, do it. If you want a different lifestyle, go for it. But whatever you do, go hard. To thine own self be true. Whatever thy hand find to do, do it with all thy might.

P.S. I think my writing is better with Drambuie than without.

I just find it really annoying that a lot of older existing home owners make sweeping generalisations about how all Gen Y’s have unrealistically high expectations and party till they’re in their 30s, and that’s why they can’t afford to buy a house. This wouldn’t be the first time that sentiment has come up on RA.

In my experience, if you actually look at the numbers pertaining to housing affordability (income, inflation, house prices and interest rates to name a few), people in the property market 15+ years ago had it considerably better than we do now.

I would, however, ask that members of this generation pull their damn pants up and start listening to proper music instead of all that sooky lah lah crap.

hahahahahahaha choke, good one

arescarti42 said :

Mike Crowther said :

And it wasn’t that it was easier back then, I was an unskilled office johnny, banks didn’t like lending to ‘kids’ and I was wiped out by Keating’s recession in ’88, but recovered. If you really want to own a home, give up the fags and nights out on the town.

You give an interesting example, but i feel that your particular experience is impossible to replicate in today’s world. Consider the following hypothetical example:

-Today’s Unskilled Office Johnny makes $40k before tax income.
-The cheapest 2 bedroom house on allclassifieds (lets say representative of the bottom of the housing market) is $342K.

From that yearly income deduct
-$6000 in income tax
-$22800 in mortgage repayments (assume $1900 a month).
-$2000 in rates and land taxes.

That leaves $9200 a year in disposable income, which is $180 a week to spend on everything other than housing. I seriously doubt that would cover the bare minimums of food, utilities and relatively high transport costs (due to living in a comparatively poorly located house). Plus all of this assumes that Mr. Office Johnny has $45k in savings in the first place to cover a 10% deposit and stamp duty.

I don’t claim to be an expert at this, if anyone thinks my assumptions are unreasonable please point it out, they’re just what i thought were good ballpark figures.

now arescart, don’t go introducing maths in the equation. remember its just because young ‘uns want to live in 38 bedroom mansions and because they buy a plasma tv a week that they can’t afford houses. the fact that house price have increased out of all proportion with income growth has *absolutely nothing* to do with it.

as far as people thinking the gov’t is just letting the free market operate, that would be an incredibly naive view of the situation. if the gov’t dropped a buttload of lots on the market at once prices would fall. if they sold directly to individuals instead of allowing developers to gather up the most of their drip feeds (at which point the developers drip feed…) in order to prop up prices, prices would drop.

the lda determines prices for new lots in most new suburbs. if they wanted to drop the price they could. they obviously don’t want to.

ultimately this party is going to end, there is a limit to how much people can borrow and the fact that FHBs have dropped out of the market seems to show that that point has been reached by many. investors are still piling in, anxious to leverage to the eyeballs.

to all those blaming gen y for not being able to buy, don’t come crying for bailouts when the price of your ips plummets and the bank is repossessing your ppor.

Mike Crowther said :

And it wasn’t that it was easier back then, I was an unskilled office johnny, banks didn’t like lending to ‘kids’ and I was wiped out by Keating’s recession in ’88, but recovered. If you really want to own a home, give up the fags and nights out on the town.

You give an interesting example, but i feel that your particular experience is impossible to replicate in today’s world. Consider the following hypothetical example:

-Today’s Unskilled Office Johnny makes $40k before tax income.
-The cheapest 2 bedroom house on allclassifieds (lets say representative of the bottom of the housing market) is $342K.

From that yearly income deduct
-$6000 in income tax
-$22800 in mortgage repayments (assume $1900 a month).
-$2000 in rates and land taxes.

That leaves $9200 a year in disposable income, which is $180 a week to spend on everything other than housing. I seriously doubt that would cover the bare minimums of food, utilities and relatively high transport costs (due to living in a comparatively poorly located house). Plus all of this assumes that Mr. Office Johnny has $45k in savings in the first place to cover a 10% deposit and stamp duty.

I don’t claim to be an expert at this, if anyone thinks my assumptions are unreasonable please point it out, they’re just what i thought were good ballpark figures.

Jim Jones – I was responding to the headline and general tone of the article. It was making the argument that only BB’s will be able to afford new homes in Canberra. That may be the case but Gen Y’s will still be able to get into the market – just not a shiny new place in a new (Ghetto) suburb.

Mike Crowther4:21 pm 30 Apr 10

I agree with AG. At the risk of sounding like one of Monty Python’s four Yorkshiremen, I bought my first house at age 20. It was a disgusting two bedroom weatherboard place an hour and a half from my work. It was cold in winter and poorly appointed but it got me into the game and I was able to upgrade to ‘the dream home’ after ten years. And it wasn’t that it was easier back then, I was an unskilled office johnny, banks didn’t like lending to ‘kids’ and I was wiped out by Keating’s recession in ’88, but recovered. If you really want to own a home, give up the fags and nights out on the town. Don’t have your kids till your in your thirties and if times get tough take in a boarder (two if your single).

Forget land and building for awhile, the place to start is Real estate.com who have a shitload of small starter homes for $350. Cranky old man rant over…..

DissolutionedHack3:47 pm 30 Apr 10

sloppery said :

Artificially making housing affordable for those who couldn’t afford it was a contributor to the GFC for sure.

Apart from the fed keeping interest rates “low” how did they “artificially” make housing affordable. Housing affordability didn’t change – access to credit – dangerous access to credit did – the Government did not make that call – at worst the securities commision not picking up on the “designed to fail” products and general lack of legislative framework these products was the biggest govt. contribution.

AG Canberra said :

Of course GenY can get into the market – but they have to stop thinking it is their right to own (as a first home) a brand new 4+2 250m2 house. Geez – for 400k they can buy an entire established house that will suit their needs for at least 10 years – and they don’t have to go out to Gungahlin to do it.

There are a great deal of shifting financial, social and cultural factors at play in the housing market. Blaming Gen Y for having unrealistic expectations addresses precisely none of these – there’s no evidence that Gen Y have unrealistic expectations, and (to the contrary), there is decent evidence to demonstrate that the levels of personal savings and investment of Gen Y far outstrip previous generations.

I would, however, ask that members of this generation pull their damn pants up and start listening to proper music instead of all that sooky lah lah crap.

trevar said :

The price of housing is not set by a government, it is manipulated by market forces mostly outside of government control.

Ha ha ha ha ha, that is the second funniest thing I’ve read all day. The funniest being:

sloppery said :

Credit has become steadily more available over the past few decades. It’s still fairly available to home buyers, too, provided you can demonstrate the ability to manage your finances and repay the loan.

Does the acronym NINJA mean anything to you?

I would consider some skepticism of Colliers’ comments is in order.

Could it be that they are paid a commission that is a percentage of the sale value?

Doesn’t that imply that they have a vested interest in driving up the prices paid?

Isn’t it likely that they might seek to so drive up the prices by relaying some supposed pronouncement about the minimum price that has the air of Governmental authority?

I would suggest that you ignore such obvious salesmanship, and bid what you think the property is worth, so long as it’s within your means.

I’ve only lived here a year, but it feels like all the huge tracts of land around the ACT are released for development at a dribble’s pace, despite a bursting population. Nearly every property that I’ve looked at is owned by some baby boomer trying to profit off of the dysfunctional renter’s market, while development is stalled by the same baby boomers in order to preserve the pristine bush around the city, mostly so that they can have a lovely bike ride past the roos. My impression has surely been spoiled by my frustrating experience as a renter, but Canberra seems far too small to justify Sydney and Melbourne home prices when the land is sitting there all around us.

DissolutionedHack said :

trevar said :

The US government did something to make housing more affordable for the lower classes, and initiated a Global Financial Crisis in the process.

Huh? Do you know something about the GFC that the rest of the world doesn’t – I really just dont know where to start with that?

Artificially making housing affordable for those who couldn’t afford it was a contributor to the GFC for sure.

Completely agree with Jim. The idea that everyone should be able to afford to buy a block of land within 10mins of the city centre is ridiculous. What’s wrong with renting, and/or buying a small apartment until you can afford to upgrade to a block of land in a location you want? I just think people have unrealistic expectations. In other cities in the world people rent, and people (families) live in apartments too. Nothing wrong with that.

Of course GenY can get into the market – but they have to stop thinking it is their right to own (as a first home) a brand new 4+2 250m2 house. Geez – for 400k they can buy an entire established house that will suit their needs for at least 10 years – and they don’t have to go out to Gungahlin to do it.

Effectively, eligibility for the aged pension is based on your level of assets, with a reasonable home being excluded (simplistically, anyway). If you have an investment portfolio but don’t own your home, you don’t get the benefit of having a large part of your asset base excluded from the test.

Other than this, the point Jim Jones made about owning a home being a cultural thing is well made, and something that’s likely to change over the next few decades.

johnboy said :

The GFC has many, many parents, but over-extension of housing loans to those unable to pay them as a matter of US Govt policy is certainly one of them.

Krugman is of the view that this aspect is overblown.

http://krugman.blogs.nytimes.com/2009/11/02/cre-and-the-cra/

At least the stress on “as a matter of US Govt Policy”.

johnboy said :

The aged pension is predicated on home ownership and aged care places on being able to sell the house to afford it.

Without that asset you can live in, the system is brutal.

There’s a lot of assumptions in there that I don’t necessarily agree with (someone could correct me, but I’d be surprised if there weren’t mechanisms in place to compensate pensioners for rental expenditure. But yes, the system is relatively brutal, and you need a decent amount of capital to negotiate it comfortably (that said, there are other sources of capital than property).

But I’d certainly agree that the policy built around these issues is predicated on a lot of socio-cultural assumptions about home-ownership. This is probably going to have to change. The idea that ‘everyone owns their own home’ just doesn’t appear sustainable. We have a rapidly aging population, this occurring in rough conjunction with a system where the property market is less accessible (and rising population levels without concomitant infrastructure development).

The problem is aggravated by the fact that, because everyone believes you have to own your own home (i.e. a belief in the primacy of property), the bulk of personal/family investment occurs in property ownership (rather than other forms of financial investment which are just as valid and often offer superior returns), which reduces the amount of available property and jacks up the market.

johnboy said :

Actually Jim pretty much all retirement policy in this country is predicated on home ownership.

How so?

The aged pension is predicated on home ownership and aged care places on being able to sell the house to afford it.

Without that asset you can live in, the system is brutal.

Wraith said :

I think you’ll find there are lots of parties involved, and the actual market is quite complex.

+1

The best (and most efficient and concise) explanation of the GFC I’ve seen includes 13 “causes” of the GFC: http://economics.com.au/?p=3653

Actually Jim pretty much all retirement policy in this country is predicated on home ownership.

As for DH, the rest of the world doesn’t usually know squat about anything.

The GFC has many, many parents, but over-extension of housing loans to those unable to pay them as a matter of US Govt policy is certainly one of them.

DissolutionedHack12:19 pm 30 Apr 10

trevar said :

The US government did something to make housing more affordable for the lower classes, and initiated a Global Financial Crisis in the process.

Huh? Do you know something about the GFC that the rest of the world doesn’t – I really just dont know where to start with that?

UrbanAdventure.org said :

It’s not just Gen Y either. I’m 40 and now face the reality that I will never be able to afford a home let alone land. This just makes me frustrated and angry. I guess my retirement plan will now involve migrating to a third world country where my money might buy me some vauge quality of life.

Affordability of housing aside (and yes, I understand your frustration and anger), the idea that you have to buy property in order to have quality of life (or have a retirement plan) is completely absurd. The Australian obsession with owning your own home is so culturally entrenched that people can’t imagine any other way, launching into hysterics whenever their ‘right’ to own their own home appears threatened. Which is stupid, because – economically – there ways to invest money that are just as good (if not better).

Really dude, talk to a financial consultant and deal with the issue rationally. There are any number of developed Western nations where the concept of home ownership is very very different and people manage to live quite well (without moving to ‘third world countries’).

sloppery said :

johnboy said :

They made credit more attainable, not houses more affordable.

If they’d concentrated on affordable supply and not financing escalating prices the result would have been very different.

Who’s they? I think you’ll find there are lots of parties involved, and the actual market is quite complex.

Credit has become steadily more available over the past few decades. It’s still fairly available to home buyers, too, provided you can demonstrate the ability to manage your finances and repay the loan.

“They” would be the US based financial organisations that made credit easy, and didn’t care whether you could pay it back or not, which then triggered the whole GFC mess in the first place.

StrangeAttractor11:55 am 30 Apr 10

If these interest rates keep going up, I won’t be able to afford the repayments on our out in the sticks crime ridden area house with my current salary, but as a 28 yo (is that gen y?) I managed to get into the market at least.

I’m hoping that the baby boomers will have all passed on, leaving their multitude of negatively geared investment properties available so that when my kids come to buy a house, they’re actually affordable.

johnboy said :

They made credit more attainable, not houses more affordable.

If they’d concentrated on affordable supply and not financing escalating prices the result would have been very different.

Who’s they? I think you’ll find there are lots of parties involved, and the actual market is quite complex.

Credit has become steadily more available over the past few decades. It’s still fairly available to home buyers, too, provided you can demonstrate the ability to manage your finances and repay the loan.

UrbanAdventure.org11:30 am 30 Apr 10

It’s not just Gen Y either. I’m 40 and now face the reality that I will never be able to afford a home let alone land. This just makes me frustrated and angry. I guess my retirement plan will now involve migrating to a third world country where my money might buy me some vauge quality of life.

The price of housing is not set by a government, it is manipulated by market forces mostly outside of government control. The US government did something to make housing more affordable for the lower classes, and initiated a Global Financial Crisis in the process.

While a government may be able to set a lower price on blocks, this would also upset the balance of the market, leading to a reduction in the asset value of landowners and a financial crisis, which would in turn increase unemployment, lower incomes, and mean that Gen Y could still not afford the housing you want them to have.

This myth of ‘future land’ that you speak of is absurd. We’re not making more land, and what we’ve got we’re likely to lose some of over the next few decades.

They made credit more attainable, not houses more affordable.

If they’d concentrated on affordable supply and not financing escalating prices the result would have been very different.

DeadlySchnauzer10:48 am 30 Apr 10

It doesn’t surprise me. Molonglo is quite inner to woden *and* civic, with views over the lake and to the brindabellas. I think if the blocks went to auction they would go for a high price anyways.

Essentially its an inner city land release, disguised as a greenfields development.

Recently discussed here…

http://the-riotact.com/?p=20729#comments

The ACT govt is trying to get the most it can, because this is where a large part of its revenue comes from. I don’t think its the right thing to be doing, though.

… under orders from the ACT Government to tell people that house block prices start between $300,000 and $400,000 in the new Molonglo land development.
So much for any ACT Government claims that they are not artificially forcing up the price of housing. Talk about anti-competetive practices.

Daily Digest

Want the best Canberra news delivered daily? Every day we package the most popular Riotact stories and send them straight to your inbox. Sign-up now for trusted local news that will never be behind a paywall.

By submitting your email address you are agreeing to Region Group's terms and conditions and privacy policy.