25 November 2010

Up or out. These are your only choices. Decide and follow through.

| johnboy
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[First filed: Nov 24, 2010 @ 12:53]

Option 1 an Inner City where only the very rich can afford to live in block hogging monstrosities.

block hogging monstrosity

Option 2 an inner city looking like this in which normal people might manage to live.

apartments

That’s it as far as the options go.

Accommodating Canberra's expanding population

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Some background for the confused:

    — The Baby Boom generation, the largest demographic in our society, are planning on taking the longest retirement in human history, past or future.

    — To do this they will eat both the past and the future.

    — It is too late to talk of generational warfare, the war has been fought and won by the Baby Boom generation.

    — There is no point getting angry about this. Adapt.

    — To fund their immense retirements the boomers have created two pyramid schemes, compulsory superannuation and real estate.

    — The bottom of the pyramid is the children of the baby boomers. (Do not dwell too long on the monstrosity of this)

    — They did not have enough children to support the pyramid, so they are importing new australians at a phenomenal rate to gouge in the pyramid, and keep wage pressure from their children down which would also upset the pyramid.

    — None of this is within the remit of the ACT Government, or our community, we just have to deal with it.

    — To accommodate all the new Australians, and keep the property pyramid scheme going until the boomers are dead we are going to need a huge number of new dwellings in this town.

    — That can either be:
    — Terrible broadacre tracts over the NSW border while Canberra proper gentrifies (think Sydney’s Western Suburbs).
    — Planned and regulated higher density in the city (think Sydney’s Eastern Suburbs).

    Make your choice. It would have been nice to have more options. But we don’t.

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Thing is, road infrastructure is already at bursting point. And how can it ever be increased if unit blocks line the existing skinny roads.

It would have been smarter for the govt to buy up the old houses along LImestone Ave, and knock them over to widen the road for light rail or more car lanes. Instead they have allowed 2 storey unit blocks. Not really enough to make a dent in housing problems, but making it much harder to do anything useful with Limestone avenue.

Their only solution to clogged roads is that more people should use public transport. Yet they can’t provie enough buses for all the people who want to use them.

Sydney’s most congested road travels at 35km and hour – well Limestone is slower than that I’d say during morning peak.

Time for some imaginative solutions – schools in the civic area should start at 8.30, or at 9.30. Public servants should be encouraged to start work at 9.30. Anything to stop the insane gridlock of 8.30-9.00 on the roads.

Just what Australia needs is another person to engage in generational wedge politics.

Going up is fine especially given many people in Canberra no longer desire a lot of garden space, as long as the road infrastructure can be developed at the same time to cope with an increase in traffic locally at those built UP areas.

Higher density has its problems as I experienced in Europe. Often too many people crammed into a smaller area creating problems with neighbours and petty spats. And what about the pet problem that will ensue with high rise living – unless pets are banned. It is bad enough in Canberra with lack of control over barking dogs in the ‘burbs where there is more space.

I remember dodging numerous dog deposits in the cities (along pavements, roads and pathways) and people not giving a toss about it – but that was some years ago, maybe that mentality has changed OS.

georgesgenitals4:42 pm 30 Nov 10

peterepete said :

I like the analysis – pyramid scheme you say. Where can I get me some.

Easy – find yourself a property where you can borrow 100% of the acquisition costs, and where the yield will cover all the ongoings after tax.

Actually, such properties are pretty rare within Canberra these days. But if you were to look at small NSW towns within a hour or so drive of Canberra you’d almost certainly find a few.

I like the analysis – pyramid scheme you say. Where can I get me some.

georgesgenitals8:51 pm 27 Nov 10

urchin said :

good on you for taking the p&i option. if you are going down that road you will, as you say, be fine regardless of any short/medium term trends in the market as you will end up owning the properties free and clear. IO loans are a mugs game in my book b/c if prices drop you are just left with negative equity. if you keep pulling equity out in a rising market to buy more properties on io loans that just leaves you with more negative equity.

you’re a lot more risk tolerant than me, though. i’ve lived in places that have seen long and extended crashes (in japan housing is a depreciating asset, rather than the opposite) and i see absolutely no reason why it couldn’t happen here. perhaps it won’t, perhaps australia is somehow magically different, but i think not.

still, if you are paying down principle and you picked your properties strategically and they are largely self-supporting i imagine your plan will probably work out ok in the long run.

best of luck.

Cheers.

I think my strategy is probably less risky than some, but I pay a price for that (which is fine). IO loans are a great strategy while the market is rising, but nothing rises forever.

I think we just have to agree to disagree about a crash coming. And that’s ok. There will definitely be some bargains to be had in the years ahead. Hopefully just not mine!

good on you for taking the p&i option. if you are going down that road you will, as you say, be fine regardless of any short/medium term trends in the market as you will end up owning the properties free and clear. IO loans are a mugs game in my book b/c if prices drop you are just left with negative equity. if you keep pulling equity out in a rising market to buy more properties on io loans that just leaves you with more negative equity.

you’re a lot more risk tolerant than me, though. i’ve lived in places that have seen long and extended crashes (in japan housing is a depreciating asset, rather than the opposite) and i see absolutely no reason why it couldn’t happen here. perhaps it won’t, perhaps australia is somehow magically different, but i think not.

still, if you are paying down principle and you picked your properties strategically and they are largely self-supporting i imagine your plan will probably work out ok in the long run.

best of luck.

georgesgenitals8:14 am 27 Nov 10

2604 said :

Hi George. Lots of stuff to address.

#113 – I’m not sure why the government would single out superannuantion investors as being “rich” and try to discriminate against them as opposed to other wealthy groups (like share or property investors or those with large bank deposits). Indeed, given that every self-funded retiree is a person who doesn’t need to access the aged pension, I would expect superannuation to continue to be incentivised. This seems like a small risk to me and is certainly not enough to avoid using something with such obvious tax benefits over.

Although I agree with your focus on positive cash flow I think that you (we) are in the minority in focussing on this and not on tax – certainly most people I know are interested in the tax benefits of investment property. I don’t think that 70% of investors would tolerate losing money if negative gearing wasn’t available to recoup some of their losses. I agree that this is wrong-headed.

PSS/CSS were available to Commonwealth and ACT public servants, ACT school teachers, AFP officers and so on, so I think they are quite pertinent to a discussion on the RiotACT. State gov’t public servants and teachers have or had access to similar schemes, so they are more widespread than you think. Don’t really care about whether they are an artificial investment or not – I think they are a fantastic way to make money and any consideration of moral or theoretical correctness is irrelevant – and I just hope that your wife is maximising her contributions as the opportunity costs of not doing so are huge and get worse with time.

As for risk, you don’t need to take big risks to get good returns. For example, share investors putting all their money in only 2-3 companies are taking a risk (bankruptcy, poor management, entry of larger competitors into the market). Share investors putting their money into an index fund only face a risk that the entire market will go bust, which is miniscule. As for cash, savings for short-term goals (money you want to spend in the next 1-20 years, like for house extensions or upgrades, kids’ education expenses, family holidays etc) should always be in cash and never in speculative investments like shares or real estate. This is standard investment advice.

georgesgenitals said :

What this means, then, is that the income from the properties is now paying for all the holding costs (even including the principal component on the loan repayments). As such, I am now having someone else pay these assets off for me. I am getting them for free. Several of these properties were even bought with loans covering 100% of the property costs PLUS the acquisition costs.

You aren’t quite getting them for free George…don’t forget that you had several years of negative cashflow. Anyone understanding the time value of money (as I’m sure you do) would acknowledge that this cash could have been invested elsewhere and compounding away in the meantime.

georgesgenitals said :

That 6.2% the bank gives you for your savings, which you then pay tax on, is fine. But in 15 years I’ll own a property portfolio worth several million dollars that I didn’t have to pay for.

Capital value is one thing, but yield is far more important. If you are barely breaking even now there will need to be some serious growth in the rents you’re charging before you can replace two full-time adult incomes. Don’t forget that you’ll also be paying income tax at your full marginal rate (just like a bank depositor) on any positive cash flow.

Super is one of those subjects where my opinion is a bit out there, and definitely not shared by many. My main issue with it is that I don’t want to wait until my 60’s (or later) to retire. I don’t think the current level of incentives will continue, although there’ll always be some. I completely understand that most people won’t agree with this opinion. As for govt super being artificial, I’m not really concerned, expect that it’s not available to me, so I don’t think a lot about it. My better half is, of course, maximising her contributions.

I completely agree with your comments about share investing, and only use funds myself. Long term, with compounding, the results have been very good. I also have a margin loan facility which has worked really well, even through the last few years its been OK.

As for the getting them for free… As I’ve developed the portfolio, I’ve definitely put some of my own cash in, probably a couple of hundred thousand. However, I’ve ALWAYS bought properties with good initial yield (for property), which means once the initial capital is in, the actual holding costs after tax have been almost zero (across the whole portfolio I’ve had to put in a few thousand before tax). After tax, things look pretty good – we haven’t had a tax return of less than $25k in years. I’ve only been investing for 6 years, and in that time the net return in cash to my pocket has been positive. But here’s the kicker: unlike most investors, I pay principal and interest on a large part of the loans, not just interest. I have hardly anything left on the loan for my own home, and have zero other debt. Other investors think I’m strange (hey, they’re probably right). But because the rent is paying down the principal, in about 15 years the portfolio will be owned outright with zero loans (even with only very moderate rent increases). Then, I’ll simply receive the rents from these properties (and because of the lack of holding costs there’s quite a few), and add to this the yield from my shares. The end result is that put in a couple of hundred thousand bucks, with the end result being 20 years later I’ll have the rent from all the properties (at current rental rates, without loans and in todays dollar terms this will be an income of significantly more than $100k per year), to which I will add half again from the shares yield. With no home loan and no other debts, that will be a pretty dam good retirement before 50. If and when super comes in later, great.

I guess what I’ve tried to explain here is that property can be much more than simply buy, negative gear, wait for growth. Although a lot of people do just that, that doesn’t mean there’s a problem with the underlying asset class, simply that people haven’t figured out hwo to make it work for them. Also, I don’t expect others to do what I do. Financially I’ve always seen the world a bit differently to others, and that’s fine.

Hi George. Lots of stuff to address.

#113 – I’m not sure why the government would single out superannuantion investors as being “rich” and try to discriminate against them as opposed to other wealthy groups (like share or property investors or those with large bank deposits). Indeed, given that every self-funded retiree is a person who doesn’t need to access the aged pension, I would expect superannuation to continue to be incentivised. This seems like a small risk to me and is certainly not enough to avoid using something with such obvious tax benefits over.

Although I agree with your focus on positive cash flow I think that you (we) are in the minority in focussing on this and not on tax – certainly most people I know are interested in the tax benefits of investment property. I don’t think that 70% of investors would tolerate losing money if negative gearing wasn’t available to recoup some of their losses. I agree that this is wrong-headed.

PSS/CSS were available to Commonwealth and ACT public servants, ACT school teachers, AFP officers and so on, so I think they are quite pertinent to a discussion on the RiotACT. State gov’t public servants and teachers have or had access to similar schemes, so they are more widespread than you think. Don’t really care about whether they are an artificial investment or not – I think they are a fantastic way to make money and any consideration of moral or theoretical correctness is irrelevant – and I just hope that your wife is maximising her contributions as the opportunity costs of not doing so are huge and get worse with time.

As for risk, you don’t need to take big risks to get good returns. For example, share investors putting all their money in only 2-3 companies are taking a risk (bankruptcy, poor management, entry of larger competitors into the market). Share investors putting their money into an index fund only face a risk that the entire market will go bust, which is miniscule. As for cash, savings for short-term goals (money you want to spend in the next 1-20 years, like for house extensions or upgrades, kids’ education expenses, family holidays etc) should always be in cash and never in speculative investments like shares or real estate. This is standard investment advice.

georgesgenitals said :

What this means, then, is that the income from the properties is now paying for all the holding costs (even including the principal component on the loan repayments). As such, I am now having someone else pay these assets off for me. I am getting them for free. Several of these properties were even bought with loans covering 100% of the property costs PLUS the acquisition costs.

You aren’t quite getting them for free George…don’t forget that you had several years of negative cashflow. Anyone understanding the time value of money (as I’m sure you do) would acknowledge that this cash could have been invested elsewhere and compounding away in the meantime.

georgesgenitals said :

That 6.2% the bank gives you for your savings, which you then pay tax on, is fine. But in 15 years I’ll own a property portfolio worth several million dollars that I didn’t have to pay for.

Capital value is one thing, but yield is far more important. If you are barely breaking even now there will need to be some serious growth in the rents you’re charging before you can replace two full-time adult incomes. Don’t forget that you’ll also be paying income tax at your full marginal rate (just like a bank depositor) on any positive cash flow.

georgesgenitals6:37 pm 26 Nov 10

urchin said :

sorry george – missed your earlier response answering my question about yields… pls ignore that bit of my post

No worries at all. It’s just a discussion between people of differing viewpoints anyway. 🙂

The reason property can be made to work is leverage, which significantly magnifies gains or losses. Provided you can hold for the longer term, and your yield is OK, there shouldn’t be an issue. I don’t see sagging property prices, if that happens, hurting my long term plan much.

The housing crash in the US was an interesting thing, caused in large part by banks writing loans to people who couldn’t possibly repay them. In Australia, we have much higher standards. Even at it’s peak Australian property loans only comprised about 4% sub-prime loans (also called lo-doc and no-doc). In the US it was more than 4 times this amount, and the requirements for borrowers was less even if they could prove they could repay. As such, we have a far smaller exposure.

The point about holding cash in a mortgage offset account is that a mortgage is required. If you have one of these, the actual result is far better. Banks generally charge the same minimum repayment regardless of whether the interest incurred is lower, so the real effect is that the cash is there whenever you want, and removing it doesn’t change your repayments at all.

As for your point about making more shares, well, I buy shares on a monthly basis, partly using borrowed funds. My shares portfolio is pretty substantial for someone of my age, and I expect it to be a major contributor to my (early) retirement. Of course, you can’t leverage shares as safely as property, hence having lots more property than shares…

sorry george – missed your earlier response answering my question about yields… pls ignore that bit of my post

“There’s no risk to holding cash in an offset account either, but the real return is at least double the savings account.”

Well sure there is! The money in the offset account is tied to an asset which you have borrowed money to buy. Your offset account reduces interest you have to *pay*. Savings accounts give you interest which you *get*. You can take all the money out of your savings account and do what you like with it. You take all the money out of your offset account and you have to pay more…. they are actually pretty different things. If you have a mortgage anyway, then yes, it makes more sense to put your money in an offset account than a savings account, but there is no comparing a savings acct+no mortgage with offset account…

“* Canberra has the highest, and most stable, incomes in the country
* There’s one big even known to crash markets, and that’s a big jump in unemployment. If that happens again you’ll most likely see a repeast of the 1990’s”

Sorry but that is just blatantly wrong. The housing crash in the US caused the unemployment, not the other way around. In australia it will be the same thing.

“* Prices have tripled in 10 years, but they did nothing in the 10 years before.
Comparing now with 2000 is less valid than comparing with 1990.”

Actually I think price growth vastly outstripping wage growth is very valid…

“Investors only own about a third of the market. They don’t all act as a group, and many of them have seen enough up and down cycles to hang on. I wouldn’t hold my breath waiting for that crash.”

I think 1/3rd of the market is a pretty huge figure. it wouldn’t take anything like all of them to move a market like canberra. in oct 2008 we had a peak of about 2800 listings on allhomes and prices started to drop. we are at 2600 now…

Earlier you said that you don’t expect prices to rise faster than inflation, if so why do you stay in houses–that was my main point. it’s a lousy price to earnings ratio if you don’t expect capital gains… you’d be lucky to get 2% net. you make more in a savings account and if you are willing to accept a risk threshold equivalent to houses today you could make significantly more in shares…

mathematically, investing in houses right now doesn’t make sense. when you buy shares you watch the price and if a company is severely overvalued, you sell (well if you are a fundamental investor you do, if your a technical investor you have other priorities). i understand that houses are more expensive to buy/sell than shares but if you don’t see prices going anywhere in the near future it just seems reasonable to put your money elsewhere…

I can’t believe that up or out are our only choices. How depressing.

Holden Caulfield2:00 pm 26 Nov 10

Ryoma said :

…I am glad to hear that you and Mrs HC managed to get in before the boom, and good luck to you (by the way, Mrs HC sounds like quite a catch!…

That she is and while she’s moved well above the APS1 level she started at, I still need to work, so, y’know, she has some improving to do, haha.

georgesgenitals1:57 pm 26 Nov 10

Ryoma said :

@ Georges genitals (post #107). I agree with much of what you say, I think we had a very regulated economy before the 1990’s, and many of the basics of life were much more expensive relative to the average wage.

I also agree that Gen X (and maybe gen Y) do think that their 20’s is all about living it up. I can recognise that within myself, but it does me little good now (grins ruefully). In part, i think it was because when I was younger, I simply thought that it would just “happen’…other people seemed to manage OK, and I thought I was reasonably smart, so I figured when I was ready for settling down, buying houses,etc, that I could do it too.

There’s nothing wrong with some healthy balance. Even I managed to have some. 🙂

Ryoma said :

Having said that, that’s only me, and I think that my point about financial education still stands. We have a culture that is very much impulse driven, and a lot of stuff we do reflects this, from our politics and housing through to our communication styles. So I’m not surprised that people younger than me also seem to think that they have forever to get on board :). For many people, they will learn the hard way just like me because there is nothing much in society generally that will correct their assumptions that things will “just happen”.

This is SPOT ON. Financial literacy is a huge problem, worse than ever now people have access to very easy credit. It goves them enormous buying power, and directing that at the wrong stuff (ie stuff that’s worthless or loses value quickly once bought) can be a recipe for disaster.

Ryoma said :

@Holden Caulfield (post #109). Thankyou for your point of view on what I said. I don’t think I am actually complaining per se, just reflecting that the world has indeed changed.
If you look further down my post I refer to my immaturity at that point in time.

I am glad to hear that you and Mrs HC managed to get in before the boom, and good luck to you (by the way, Mrs HC sounds like quite a catch! :D)

I agree with many of your points about location, and that people should start with what they can afford, even if it’s not their dream home. I also agree that many people have inflated expectations these days, and in large part I think that’s because many younger people haven’t been through a recession. I am old enough to have come out of high school into the last one, so I do recognise that things come and go in cycles.

But I also think that so much has changed societally since then that it’s quite hard to compare apples with apples. We now live in a very open economy, with much greater extremes of wealth and poverty – and those extremes are concentrating geographically. That’s part of the issue with housing. People are willing to pay a premium for access to certain schools, health care, and public transport that while prices soar everywhere for housing, they do so more in the inner suburbs of our capital cities.

As pointed out by #121, I believe you are missing the point of the original post. What I’m commenting upon generally is that services and urban planning needs to adapt to changes in our society and economy, in Canberra as much as anywhere else.

While I still do not intend to buy housing for a while, I would not be averse to buying a smaller (read: live within my means) apartment in a good location. In short, I’d be happy to trade off living space and a garden for the convenience of a more urban lifestyle. While I am now saving hard towards al of those goals I mentioned in my earlier post, I am not looking to buy at present because many of the existing apartments are full of top-of-the-line appliances, marble benchtops, etc. All I’m after is something basic that is energy-efficient.

Buying something simple in a good location gives to a terrific upgrade path if you decide you want some of the luxuries later.

georgesgenitals1:52 pm 26 Nov 10

urchin said :

1. there are many savings accounts that offer 6%+
2. there is no risk to the principle in a savings account.

There’s no risk to holding cash in an offset account either, but the real return is at least double the savings account.

urchin said :

you assume that house prices never go down. if that were true you would be correct. when the aussie bubble bursts canberra will be slaughtered for a few reasons that i can think of…

*the location doesn’t justify the prices (don’t get me wrong, i like canberra but its not like the location of the city adds tremendous value. it’s not hawaii)
*the market is small and the rapid exit of a segment of the investors will drown the market in listings
*if there is a massive hole in the federal budget the PS will get slashed, disproportionately affecting canberra.
*prices have tripled in 10 years. the bigger they are, the harder they fall

* Canberra has the highest, and most stable, incomes in the country
* There’s one big even known to crash markets, and that’s a big jump in unemployment. If that happens again you’ll most likely see a repeast of the 1990’s
* Prices have tripled in 10 years, but they did nothing in the 10 years before.
Comparing now with 2000 is less valid than comparing with 1990.

urchin said :

people whose investments have only been marginally profitable (or not at all profitable) when prices are charging up will not be so keen to accept lousy returns on investment when prices are stable or dropping. we can look forward to investors bringing the market crashing down.

Investors only own about a third of the market. They don’t all act as a group, and many of them have seen enough up and down cycles to hang on. I wouldn’t hold my breath waiting for that crash.

georgesgenitals1:44 pm 26 Nov 10

urchin said :

That’s certainly the case if we expect prices to continue to rise above the rate of inflation. But realistically, I don’t think we do. Just be aware, though, that this rule applies to the property market as a whole. Don’t forget that the ex-govvie house that our parents bought in 1970-something for a few thousand was on the outskirts of the city. That same property now is in a desirable inner suburb because the city grew. Also, 1970’s inflation was high, and this made property seem to appreciate faster than it did in real terms.

If you really believe that why in the world do you continue to hold property? a house that sells for about 600k these days can probably get around 500/wk in rent income (that’s what its like in my small corner of the world). so that’s a gross return of what..a little over 4%. from that you deduct interest paid on the mortgage, property management fees, water connection fees, rates, insurance, maintenance, etc.. so as a return on capital you are getting little to nothing. even if you are doing everything yourself and have no mortgage, you are still only going to get 4%.

Why would you do that if you didn’t think prices would continue to grow faster than inflation? What possible reason could there be? It would be much wiser to sell up now and stick that money in a savings account earning 6.2%. your principal is guaranteed, your income stream is guaranteed, and its liquid so that when things do fall to pieces you will be in a position to buy an undervalued asset.

what possible reason could there be for holding investment properties in this market if you don’t expect prices to go up faster than inflation?

Great question, and I’m glad you asked.

Firstly, bear in mind that we don’t expect prices to rise above inflation for the next few years, beyond that, I think we’ll have another significant boom. We’re likely to have rental increases during that time also.

Now, when people talk about ‘the property market’, they are referring to the overall thing (even if that’s within an area like Canberra). But when we actually buy a property, we buy only once instance. That instance, if well located, becomes better located *compared with the rest of the market* as time goes by. As new suburbs are built, the overall market average becomes a property located further from the city centre, and on a smaller block of land. That property we bought, therefore, has a greater group of people (within the growing population) competing for it, and as such the value rises above inflation.

For me, though, this isn’t enough. So I’ve taken a slightly different view and approach. I buy properties that have good yields (typically units) in really well located areas (think 5 mins walk from Canberra centre or Woden plaza). I also bought some units in Queanbeyan (at firesale prices). I have bought these properties over the past several years, and bought at what were considered to be low prices at the time. Because I bought over the past several years, the rents are now covering all my costs (and then some) after tax is taken into account. I reckon I’m probably 2-3 years from having the whole thing cashflow positive before tax.

What this means, then, is that the income from the properties is now paying for all the holding costs (even including the principal component on the loan repayments). As such, I am now having someone else pay these assets off for me. I am getting them for free. Several of these properties were even bought with loans covering 100% of the property costs PLUS the acquisition costs.

Bottom line, I have a property portfolio that I am not paying anything out of my pocket for, but in about 15 years I will own outright. I have also had capital growth over the past few years of several hundreds of thousands of dollars (because of how much I paid and growth since). I also have options to increase my rents by renovating or finsing other ways to add value. I now just sit back and wait.

So, if we have a few years of little or no growth (even stagnation), I don’t really care.

That 6.2% the bank gives you for your savings, which you then pay tax on, is fine. But in 15 years I’ll own a property portfolio worth several million dollars that I didn’t have to pay for.

I will agree, though, that if someone is going out now to buy that $600k house that rents for $500 a week you mentioned, hoping negative gearing will make them wealthy, they’re likely to be disappointed.

@ Georges genitals (post #107). I agree with much of what you say, I think we had a very regulated economy before the 1990’s, and many of the basics of life were much more expensive relative to the average wage.

I also agree that Gen X (and maybe gen Y) do think that their 20’s is all about living it up. I can recognise that within myself, but it does me little good now (grins ruefully). In part, i think it was because when I was younger, I simply thought that it would just “happen’…other people seemed to manage OK, and I thought I was reasonably smart, so I figured when I was ready for settling down, buying houses,etc, that I could do it too.

Having said that, that’s only me, and I think that my point about financial education still stands. We have a culture that is very much impulse driven, and a lot of stuff we do reflects this, from our politics and housing through to our communication styles. So I’m not surprised that people younger than me also seem to think that they have forever to get on board :). For many people, they will learn the hard way just like me because there is nothing much in society generally that will correct their assumptions that things will “just happen”.

@Holden Caulfield (post #109). Thankyou for your point of view on what I said. I don’t think I am actually complaining per se, just reflecting that the world has indeed changed.
If you look further down my post I refer to my immaturity at that point in time.

I am glad to hear that you and Mrs HC managed to get in before the boom, and good luck to you (by the way, Mrs HC sounds like quite a catch! :D)

I agree with many of your points about location, and that people should start with what they can afford, even if it’s not their dream home. I also agree that many people have inflated expectations these days, and in large part I think that’s because many younger people haven’t been through a recession. I am old enough to have come out of high school into the last one, so I do recognise that things come and go in cycles.

But I also think that so much has changed societally since then that it’s quite hard to compare apples with apples. We now live in a very open economy, with much greater extremes of wealth and poverty – and those extremes are concentrating geographically. That’s part of the issue with housing. People are willing to pay a premium for access to certain schools, health care, and public transport that while prices soar everywhere for housing, they do so more in the inner suburbs of our capital cities.

As pointed out by #121, I believe you are missing the point of the original post. What I’m commenting upon generally is that services and urban planning needs to adapt to changes in our society and economy, in Canberra as much as anywhere else.

While I still do not intend to buy housing for a while, I would not be averse to buying a smaller (read: live within my means) apartment in a good location. In short, I’d be happy to trade off living space and a garden for the convenience of a more urban lifestyle. While I am now saving hard towards al of those goals I mentioned in my earlier post, I am not looking to buy at present because many of the existing apartments are full of top-of-the-line appliances, marble benchtops, etc. All I’m after is something basic that is energy-efficient.

“Holding cash in a 100% offset account against a loan is better than a bank account, because your real rate of return is the same as the loan interest rate, but there’s no tax liability (against your 5% savings there is tax).”

1. there are many savings accounts that offer 6%+
2. there is no risk to the principle in a savings account.

you assume that house prices never go down. if that were true you would be correct. when the aussie bubble bursts canberra will be slaughtered for a few reasons that i can think of…

*the location doesn’t justify the prices (don’t get me wrong, i like canberra but its not like the location of the city adds tremendous value. it’s not hawaii)
*the market is small and the rapid exit of a segment of the investors will drown the market in listings
*if there is a massive hole in the federal budget the PS will get slashed, disproportionately affecting canberra.
*prices have tripled in 10 years. the bigger they are, the harder they fall

people whose investments have only been marginally profitable (or not at all profitable) when prices are charging up will not be so keen to accept lousy returns on investment when prices are stable or dropping. we can look forward to investors bringing the market crashing down.

That’s certainly the case if we expect prices to continue to rise above the rate of inflation. But realistically, I don’t think we do. Just be aware, though, that this rule applies to the property market as a whole. Don’t forget that the ex-govvie house that our parents bought in 1970-something for a few thousand was on the outskirts of the city. That same property now is in a desirable inner suburb because the city grew. Also, 1970’s inflation was high, and this made property seem to appreciate faster than it did in real terms.

If you really believe that why in the world do you continue to hold property? a house that sells for about 600k these days can probably get around 500/wk in rent income (that’s what its like in my small corner of the world). so that’s a gross return of what..a little over 4%. from that you deduct interest paid on the mortgage, property management fees, water connection fees, rates, insurance, maintenance, etc.. so as a return on capital you are getting little to nothing. even if you are doing everything yourself and have no mortgage, you are still only going to get 4%.

Why would you do that if you didn’t think prices would continue to grow faster than inflation? What possible reason could there be? It would be much wiser to sell up now and stick that money in a savings account earning 6.2%. your principal is guaranteed, your income stream is guaranteed, and its liquid so that when things do fall to pieces you will be in a position to buy an undervalued asset.

what possible reason could there be for holding investment properties in this market if you don’t expect prices to go up faster than inflation?

Holden Caulfield8:23 am 26 Nov 10

Jethro said :

‘Holden Caulfield whinges that the youth of today have too much of a sense of entitlement.’

That just made my day. Solid gold.

Haha, yeah, I guess there is a delicious irony there. 😉

georgesgenitals6:49 am 26 Nov 10

arescarti42 said :

The statistics seem to suggest the majority thinks otherwise, in 07/08 69% of property investors were declaring net losses in their investments (i.e. their investments were negatively geared). This represented a loss of $2.6 billion in tax revenue (for 07/08)

To each their own. In my opinion, holding an investment which costs you a lot of money in the interim, in the hope that it will increase in value so much that all your loses will be offset seems like a pretty poor option. This is what 69% of property investors are counting on.

If 69% of investors are declaring a loss, then I guess my approach is in the minority. The only thing that really skews it I guess is the depreciation you can claim, which isn’t actually money you spend.

Holding cash in a 100% offset account against a loan is better than a bank account, because your real rate of return is the same as the loan interest rate, but there’s no tax liability (against your 5% savings there is tax).

historyofmodernity2:32 am 26 Nov 10

Holden Caufield said:
“How about taking a hit on your pride and knuckling down to genuinely work for what you want? Even the Baby Boomers had to do that!”

I am sorry but you are just not getting the conversation. If we are to maintain our standard of living, our society and cities must modernise and regenerate. Never before in our history has housing been so expensive on so many measures. This is unsustainable. Also, I would like to see what would happen to your superannuation if gen x and gen y took your advice and knuckled down (stopped spending). Hello economic depression.

As for the generational differences, please read some economic history books to see how the baby boomers started their careers with trade protectionism. You are right with market liberalisation in the 1980s this changed. But hold on, I don’t think there was any work for the dole back then either. Anyway, my point is that it is not the generation that determines the economic circumstances. It is the economic circumstances that determines the quality of our life.

johnboy said :

Diggety, I-filed, you’re not getting the enormity of the crisis we are already in.

This isn’t a train wreck down the line, the wheels are already leaving the track.

Casting around for other options is just a choice for an awful donut city for most.

I’d rather a donut city where there’s a good centre, than see bad housing in the inner suburbs. Think about the value of Parkes and the collecting institutions. No-one is clamoring to live in the Parliamentary Triangle: it’s precious, because it’s shared open space.

Face it: good design is expensive. Well designed townhouses and apartments will still be expensive. A friend lives in a great flat in Turner that is worth nearly as much as my detached house in the inner suburbs. Crap housing will just make life miserable for everybody. People are fantasising, if they think they’ll get nice bohemian style under a Barr regime.

If I were starting out now, I’d opt for good medium density outside the inner city over crud flimsy chipboard high-rise within. It is sounding as though people are demanding the very lifestyle that in every city is uber-expensive, for next to nothing. Try demanding to live in a a cheap place in St Kilda! Cities thrive on a bit of elitism and something to strive for. A miserable “if I can’t have it they can’t” approach would be a death knell for Canberra’s way of life.

Once again, I refer you to Kingston for a case study in just how filling an inner Canberra suburb with high-density housing will kill it. Kingston is a misery of bad planning, bad housing, and residents sucked in by advertising spin.

arescarti42 said :

I would argue that it is a ponzi scheme that is essentially driven by cheap credit. The increase in average prices from $150k-$200k in the mid 1990s to $500k 15 years later is not the result of people having incomes that are twice as high, the banks are just willing to lend them more money.

$200k to $500k in 15 years is only 6.4% growth per year (compound). Nice but its not an incredible return/rate of increase.

Having said that, average CPI inflation over that time is just under 3%, so its double the inflation rate. Of course, inflation has been drastically reduced by cheaper electricals etc; I’m sure that some individual items have also seen inflation rates of 6-7%.

georgesgenitals9:24 pm 25 Nov 10

My quoting clearly didn’t work on that last post. Maybe a friendly mod will help me out…

georgesgenitals9:23 pm 25 Nov 10

arescarti42 said :

It’s true that prices have increased since 2008, but let’s not forget that it took
a doubling of the first home vendors, whoops, I mean buyer’s grant, a 400+ basis point drop in the RBA cash rate, and the effective bailout of the Australian financial system to get the beast moving again.

Lets see if they do it again.

arescarti42 said :

That’s a fair point. I’d argue that the economy was in way more trouble then than now, and those measures were all performed to stimulate the overall economy, not to increase house prices. House price increases were more a side effect. The RBA isn’t going to cut the hell out of the cash rate just to prop up the housing market. Given that the economy is in much better shape now (hence the interest rate rises since), there’s a lot more supporting the current price levels.

I would argue that it is a ponzi scheme that is essentially driven by cheap credit. The increase in average prices from $150k-$200k in the mid 1990s to $500k 15 years later is not the result of people having incomes that are twice as high, the banks are just willing to lend them more money. The only way prices can continue to rise is if people can continue to take out bigger and bigger loans (which is pretty much a ponzi scheme).

arescarti42 said :

Other than use of the term ‘ponzi’, I think we’re actually in agreement here. Higher incomes and cheap credit absolutely drove the boom. I’d be careful comparing now to the mid/late 90’s though, because that’s comparing the bottom of the last cycle with the top of this one. Comparing in real terms 1989/90 to now would be a fairer, although you’d need to take into account things like larger dwelling sizes, higher incidents of both parents in a family working, far cheaper credit, etc. I’ve read elsewhere, and agree with, that measuring disposable income against the cost of servicing the debt needed to support a property purchase is a good way to consider prices. If people are able to afford it, and interest rates don’t rise, then providing unemployment doesn’t jump greatly there isn’t much to cause a crash.

The huge problem with this system is that it works OK so long as the banks can hold of unending amounts of cheap credit. Australian banks get 1/3rd of their credit from overseas investors, who after seeing property values crash in much of the developed world, aren’t so keen on lending out money anymore.

That’s certainly the case if we expect prices to continue to rise above the rate of inflation. But realistically, I don’t think we do. Just be aware, though, that this rule applies to the property market as a whole. Don’t forget that the ex-govvie house that our parents bought in 1970-something for a few thousand was on the outskirts of the city. That same property now is in a desirable inner suburb because the city grew. Also, 1970’s inflation was high, and this made property seem to appreciate faster than it did in real terms.

georgesgenitals said :

To suggest that people buy residential real estate because of the tax benefits is not really accurate. Buying a investment purely because of tax benefits is crazy. The tax benefits are only one aspect. I’m 35, have been investing in property for only 6 years, and yet have a cashflow positive portfolio (and it’s becoming more and more positive as time progresses). Property is a far more powerful asset than the simplistic negative geared growth vehicle many portray it as, provided you learn how to use it as such. It is possible to get good capital growth while still maintaining decent yield.

The statistics seem to suggest the majority thinks otherwise, in 07/08 69% of property investors were declaring net losses in their investments (i.e. their investments were negatively geared). This represented a loss of $2.6 billion in tax revenue (for 07/08)

georgesgenitals said :

It’s also worth thinking about where to store cash – sitting in the bank earning 5% is a pretty poor option, in my opinion.

To each their own. In my opinion, holding an investment which costs you a lot of money in the interim, in the hope that it will increase in value so much that all your loses will be offset seems like a pretty poor option. This is what 69% of property investors are counting on.

georgesgenitals said :

The number of listings on allhomes has definitely increased, and we are seeing a slowdown in the market for sure. I don’t think, though, that this necessarily means there’s an excess of housing for people to live in. Also, prices didn’t crash in 2008 (they’ve actually risen since then).

It’s true that prices have increased since 2008, but let’s not forget that it took
a doubling of the first home vendors, whoops, I mean buyer’s grant, a 400+ basis point drop in the RBA cash rate, and the effective bailout of the Australian financial system to get the beast moving again.

Lets see if they do it again.

georgesgenitals said :

I have to disagree with you that property is a ponzi scheme, though. It’s really more of a symptom of a free market a work, where lots of the individuals have a high capacity to purchase (through good incomes and low cost of credit).

I would argue that it is a ponzi scheme that is essentially driven by cheap credit. The increase in average prices from $150k-$200k in the mid 1990s to $500k 15 years later is not the result of people having incomes that are twice as high, the banks are just willing to lend them more money. The only way prices can continue to rise is if people can continue to take out bigger and bigger loans (which is pretty much a ponzi scheme).

The huge problem with this system is that it works OK so long as the banks can hold of unending amounts of cheap credit. Australian banks get 1/3rd of their credit from overseas investors, who after seeing property values crash in much of the developed world, aren’t so keen on lending out money anymore.

georgesgenitals8:39 pm 25 Nov 10

Clown Killer said :

Housing price appreciation is not a new phenomenon … meaning that lots of people who are now mid thirties or older could easily have bought in when relatively cheap.

When I tell people that my partner and I paid $170K for a three bedroom house in Lyneham just up the hill fromm Tilleys in April 2000 they cant believe how cheap inner north real estate was back then – but in reality we had to save really hard for the deposit – and still ended up having to pony for mortgage insurance because we didn’t have a 20%.

My wife and I lived very simply and saved like crazy for 4 years so we could build our first home, which we started in 2001. We payed $290k for a very nice 4 bedroom place on a large block in a good suburb. It seemed like a huge mountain to climb at the time.

georgesgenitals8:37 pm 25 Nov 10

2604 said :

No offence George, but this is pretty facile stuff.

It isn’t “slated” that the super preservation age will increase to 67 “within a decade” (nor beyond, to 72). This was an idea floated in the Henry tax review, but like many other ideas in that review (such as a $25,000 tax-free threshold and a flat taxation rate above that) it doesn’t form a part of any policy platform for any major party. Any investment carries a political risk but I’d suggest that this one is at least as remote as the removal of negative gearing on investment property.

I’ve seen the idea floated in several different places, although none are really what you’d call official. It would be a fair bet, though, that as life expectancy continues to grow that the government reduces its outgoings by gradually increasing working age. It will happen slowly, but I see it as a real risk.

2604 said :

I’m not sure why you think that investing in super because of tax advantages is a bad thing, either. It is better than sticking all of your extra cash into residential real estate because of the tax benefits, for a number of reasons – super is a far better tax shelter, has low transaction costs, and unlike property, you can choose a low-risk investment option like cash which will increase in value no matter what. Property investment strategies, by contrast, tend to rely upon market-wide appreciation to be viable, which is something that no-one can predict.

Your super will look good, but I am concerned about future governments deciding that people with lots of super are ‘rich’ and should be subject to more tax. Also, I really dislike the idea of the government telling me when I can get my money out.

To suggest that people buy residential real estate because of the tax benefits is not really accurate. Buying a investment purely because of tax benefits is crazy. The tax benefits are only one aspect. I’m 35, have been investing in property for only 6 years, and yet have a cashflow positive portfolio (and it’s becoming more and more positive as time progresses). Property is a far more powerful asset than the simplistic negative geared growth vehicle many portray it as, provided you learn how to use it as such. It is possible to get good capital growth while still maintaining decent yield.

2604 said :

I’d also add that the PSS and CSS super schemes – which many Rioters are in – are a totally risk-free way to make money. Someone in my position (early 30s and contributing the max of ~$350 per fortnight, increasing at 3% per annum in line with minimum salary increases) will have an account balance of over $1m by age 50, and nearly $1.8m by age 60, which is not subject to the vicissitudes of the stock market.

Government provided super schemes are nothing like what the vast majority of Australians use. They are an artificial investment. Good on you if you’re in a good one. Fortunately, my wife is in one of the older schemes. Our plan is to be retired around 15 years before she access any benefits, though.

2604 said :

Any thinking investor will spread his or her investments – some money in super, some in shares, some in cash and some in (positively geared!) property and do things in the most tax-effective and lowest risk way.

Sort of. Smart investors determine the risk they can withstand, and use this to tune their investments accordingly. Diversification is one way to reduce risk. Investors certainly don’t automatically choose the ‘lowest risk way’, as this will often preclude strong returns. It’s also worth thinking about where to store cash – sitting in the bank earning 5% is a pretty poor option, in my opinion.

Clown Killer7:46 pm 25 Nov 10

Housing price appreciation is not a new phenomenon … meaning that lots of people who are now mid thirties or older could easily have bought in when relatively cheap.

When I tell people that my partner and I paid $170K for a three bedroom house in Lyneham just up the hill fromm Tilleys in April 2000 they cant believe how cheap inner north real estate was back then – but in reality we had to save really hard for the deposit – and still ended up having to pony for mortgage insurance because we didn’t have a 20%.

Just to stir the pot a bit… the Heckler article in the link below appeared in the SMH a few weeks back, arguing that the Boomers were the ‘forgotten generation.’

http://www.smh.com.au/opinion/society-and-culture/generation-of-forgotten-people-still-20101104-17fvg.html

Holden Caulfield said :

Clown Killer said :

I honestly believe there’s a real issue here.

In a lot of respects this really is staring to smack of a Gen Y sense of entitlement. There’s a lot of trout-mouthing about the need for affordable housing in inner city areas that’s cloaked in the sort of predictable bullshit we’ve come to expect: sustainability, small foot-print, renewable (I’ve got to stop myself before I choke on all that fluffy, touchy-feeling smugness…). The reality is that it isn’t about any of those things at all. The core of it is: I’m entitled to have society to underwrite my desire to live in a trendy cosmopolitain area with cool bars and shit.

I think there is definitely a degree of accuracy here. We can debate how accurate, but the basic point is very sound IMO.

‘Holden Caulfield whinges that the youth of today have too much of a sense of entitlement.’

That just made my day. Solid gold.

Holden Caulfield7:15 pm 25 Nov 10

Ryoma said :

…My point? If I am a “typical” Generation X (and I may not be, so I’d be interested to hear other people’s views) with all of the above things to try to save for in future, I am simply not going to have enough left over to contribute to another housing boom in 15-20 years time. And as mentioned, if house prices do not fall relative to my income, I am unlikely to think buying a house is a good investment.

I am not going to have a crack at Baby Boomers – all of us are born without much choice on the date, and we do the est we can with what we’re given. I enjoyed my 20’s but did not think much about the future…

Living off the benefits provided to you by the Boomers possibly? Don’t you think it’s a bit much to acknowledge that you didn’t think about the future then, only to complain now that it’s getting a bit hard!

Speaking more generally now… Mrs Caulfield and I are early 70s vintage Xers. We’ve managed to buy two homes and one investment property since 1999. Buying in 1999 (our late 20s) meant we got in ahead of the boom, which we acknowledge has made things much better/easier for us since then.

Our first place was a new build in Gungahlin and we sold and moved to the inner north a few years ago. I have a Gen Yer in my circle of friends and following 12 months of whinging it’s too expensive to buy real estate he’s only just cottoned on that prices are cheaper when you start looking outside the inner north! Plus, when we built our first home we raely bought new clothes, didn’t go out that much and lived a frugal but comfortable lifestyle. Mr Gen Y, on the other hand, doesn’t think it’s fair that he should have to give up things like that just so he can afford to buy a house, so makes do with complaining about it instead. And, for a Gen Yer, this bloke is relatively sensible.

It’s pretty simple really – unless you’re fortunate enough to start life cashed up – if you want to get into real estate then something else will have to give. As far as I can see this has been the case for at least four generations (using my family as a reference) and probably more. I do acknowledge the “affordability” of housing has risen, but if you’re prepared to do the hard yards, it is much easier to get a mortgage now than it was when we first considered buying a home in the mid-late 90s. Sure, one might have to start with a “crappy” two bed apartment or whatever, but the point is you can’t have everything when you’re starting out!

On a similar tangent you see and hear of many Gen Yers coming out of uni, especially in this town, expecting to start work at APS5, or higher. So, their first job will likely be at, or above, the country’s average wage. I’m not in the APS, and so have more modest wage for the work I do as a result. Oh, I’m not complaining about it, I think I get paid well for my role, but I accept that I would get more in the APSand the decision to change that, if I wish, rests with me and me alone.

Mrs C, however, is in the APS. She has two degrees and after a few years working unfulfilled in private enterprise she realised she would have to make a change. Her first job in the APS was as a level 1 on a bit over half the average wage at the time (it was at this point we bought our first home too). Tell a Gen Yer today with two degrees that they can have a full-time job in the APS, but it’s right at the bottom of the pile, and they’d probably sue you for mental assault, haha.

The point of all this is that it’s never been beer and skittles for any generation to get into the property market. It might be harder now, yes, but the real issue is the harder it gets, it seems the easier the current generation wants it.

How about taking a hit on your pride and knuckling down to genuinely work for what you want? Even the Baby Boomers had to do that!

Yes, the rich must be hated by the ‘I can’t get off my ass’ brigade

georgesgenitals6:36 pm 25 Nov 10

Hey Ryoma – some very good points there.

Gen Xers have managed to be quite different to the baby boomers, I think. Of course, the baby boomers got things like free uni (but how many actually went?), free health care (we still have a pretty good public system compared to many other places), and started their financial journey younger than us (an option which is still available). They also paid more income tax than us, I think, and yet earned lower real wages. They also paid a LOT more for consumer items than we do now (cars, appliances, furniture, etc), and overseas travel was a pipe dream for most.

It seems to me that the biggest problem most Gen Xers have is that they seem to think ages 18-30 are for traveling, partying and generally having fun with no thought for the future. Unfortunately, this is the BEST time to have some balance and sense, because you have the most time to invest for. Couple this with a culture of consumerism (I NEED that brand name thingo, I DESERVE a holday to Europe, I HAVE to rent that inner city unit so I can go to overpriced bars and walk home), and you have a recipe for financial disaster. I am not saying ALL people under 45 do or have done this, but the behaviour is far more common than it used to be. The baby boomers tended to be a lot more careful than this, and as such reaped the rewards. They had more of a culture of thrift, rather than today’s culture of credit.

Housing price appreciation is not a new phenomenon – this last boom really only got underway in about 2002 or so, meaning that lots of people who are now mid thirties or older could easily have bought in when relatively cheap. People who are now in their 20’s will have to do what people have done ever since we’ve had peaks and troughs in the market: live within their means and save until the market cools.

Don’t get me wrong – I’m not saying the boomers were hard done by. What I’m saying is that with a bit less consumerism and a willingness to let time do its thing, multiplied by several decades, it’s easy to see that the baby boomers have done very well. Australia is still going through a time of huge prosperity, and it doesn’t really look like stopping. There’s nothing stopping any one of us from evaluating our situation and reducing cost where we can (although I will concede this is hard omce you’ve got a family and hocked up for a house and/or car(s), and credit cards, etc).

Finally, I want to repeat that the property boom we’ve just had is not something that has been orchestrated – it’s simply the result of people with money to spend and low credit cost.

georgesgenitals said :

Age at which you can access your super is already slated to be 67 within another decade, and this will likely increase out to 72. Personally I think super is a good idea for those who can’t save/invest themselves. But convincing people that sticking all your extra cash into super because of the tax benefits will, I suspect, end up being very bad advice.

No offence George, but this is pretty facile stuff.

It isn’t “slated” that the super preservation age will increase to 67 “within a decade” (nor beyond, to 72). This was an idea floated in the Henry tax review, but like many other ideas in that review (such as a $25,000 tax-free threshold and a flat taxation rate above that) it doesn’t form a part of any policy platform for any major party. Any investment carries a political risk but I’d suggest that this one is at least as remote as the removal of negative gearing on investment property.

I’m not sure why you think that investing in super because of tax advantages is a bad thing, either. It is better than sticking all of your extra cash into residential real estate because of the tax benefits, for a number of reasons – super is a far better tax shelter, has low transaction costs, and unlike property, you can choose a low-risk investment option like cash which will increase in value no matter what. Property investment strategies, by contrast, tend to rely upon market-wide appreciation to be viable, which is something that no-one can predict.

I’d also add that the PSS and CSS super schemes – which many Rioters are in – are a totally risk-free way to make money. Someone in my position (early 30s and contributing the max of ~$350 per fortnight, increasing at 3% per annum in line with minimum salary increases) will have an account balance of over $1m by age 50, and nearly $1.8m by age 60, which is not subject to the vicissitudes of the stock market.

Any thinking investor will spread his or her investments – some money in super, some in shares, some in cash and some in (positively geared!) property and do things in the most tax-effective and lowest risk way.

georgesgenitals said in post #97:

“Harry Dent wrote some interesting stuff on demographic based economics (you can google it it you’re interested), that dealt with the age at which chorts such as the baby boomers reach their ‘peak spend’. This happened in the last few years. His modeling shows that we’re likely to have subdued times until Gen X reaches its peak spend (in about 12-15 year), and then we’re due for another big boom. Of course, inflation will erode real values along the way until this happens, but when it does, those who hold property will see an effect similar to what the baby boomers have just seen.

Just some food for thought. I don’t have a crystal ball!”

I am also aware of Harry Dent’s work, but I think the difference is that when the Baby Boomers reached their “peak spend”, they had the benefit of years of housing inflation, and (as outlined by one poster above) the ability for one person’s full-time wage to pay off a house. As a result, when they now arrive at retirement age, some of them (not all, I know many took a nasty hit to their super in the GFC,along with the rest of us) have oodles of cash to spend travelling around Australia or beyond.
The Baby Boomers generally benefitted from free university education, and policies such as negative gearing.

By the time I (as a member of Gen X) hit my “peak spend”, I will face the following issues:

– the need to pay higher taxes to support the health care needed by Baby Boomers, including the many who either did not benefit from the property boom, and (especially in the case of Boomer women) have not saved much outside of property at all.

– the need to look at health care and housing for my own parents (now in their mid 60’s with deteriorating health) and those of my wife (in their 50’s, in better shape).

– the need to fund my own retirement. I do not think investing in a complusory government scheme is the way to great welath (or even a modest lifestyle) in retirement, especially when so many of the super funds seem to simply invest in the ASX200. Not to mention I can easily see it becoming a plaything for politicians to bugger around with instead of them taking harder options. I’ve worked out that to keep my current standard of living, I need to be saving 23% of my income – but for now I am only achieving around 15%.

– I may (perhaps) have paid off my HECS debt by then.

– If I have kids, there will be all of the costs associated with them as well.

I earn around the median (individual) wage. At present I rent because I think property is wildly overvalued and due for a crash along the lines of the USA and UK. It is also because it is taking me a while to save a deposit. But even then, I think I’d rather wait than join the treadmill.

My point? If I am a “typical” Generation X (and I may not be, so I’d be interested to hear other people’s views) with all of the above things to try to save for in future, I am simply not going to have enough left over to contribute to another housing boom in 15-20 years time. And as mentioned, if house prices do not fall relative to my income, I am unlikely to think buying a house is a good investment.

I am not going to have a crack at Baby Boomers – all of us are born without much choice on the date, and we do the est we can with what we’re given. I enjoyed my 20’s but did not think much about the future.

Along with many others, I did not get married at age 18 or 20 and start building wealth from that age as many Boomers did. So, I had the chance to get into the market, but in my immaturity, didn’t realise how things would change.

Having said that, I think there is a dangerous lack of financial literacy among our population. If an asset is rising rapidly in value, that’s not the time to get into any market…as sooner or later it will run out of suckers.
Apart from providing housing itself, our property boom generates little further prosperity – it does not advance our scientific base, our innovation capabilities, our education system, our arts, or, in many ways, a cohesive society.

We forget these points at our collective peril.

Holden Caulfield4:45 pm 25 Nov 10

TVStar said :

Does anyone who’s 30 yo really think that when they retire there will be pensions, tax concessions for superannuation, free healthcare, etc for them?

Probably not, but the shifting fortunes of different generations is hardly a new thing. Mind, this is another aspect I’ve noticed with a few Gen Yers; bad things only seem to happen to them for the first time. You try and explain that other generations have also had troubles to deal with and they just cry that you don’t understand how bad it is today wihtout any attempt to comprehend what you just said, haha.

Moreover, for all these woe is me things that you may (or may not miss out on) there are many, many improvements to our way of life to offset these possible negative aspects. Go back to the late 1960s and look at how poor access to tertiary education was for the average punter, as just one example. Be thankful that you can forsee the changes you mentioned and have the time to adapt. Or, I suppose you could just keep telling everyone the world only sucks for you and use up some more tissues. That’s, if the BBs haven’t used them all first.

In short, just get on with life, all generations have pitfalls they have to deal with. Conscription anyone, haha, geez, gimme a break with all the sooking about how the Baby Boomers had it so good and have stuffed it up for the rest of us.

Society in general has proven to have great abilities to adapt to changing cirumstances, sure they don’t always get everything right, and the world in 2010 is far form perfect. But this Chicken Little phenomenon that seems to be increasing, especially in regard to housing, gets a bit tiring after a while. We’re hardly the first country to face the prospect that future geenrations might get priced out of real estate ownership.

We all get dealt a hand of cards in life, it’s up to the individual to make best use of what each is given. Complaining to the dealer won’t get you very far.

Seems to me that most of the “poor planning” which happens in the ACT tend to be the politically charged issues which get “called in” or otherwise dictated by government policy, rather then carefully planned by qualified planner, then executed with a realistic budget according to that plan. No removing parks, no only one lane, but as planned.

On of the other thing people go on about is the issues surrounding the way the cities planning falls down. Actually, the planning is brilliant, it is your fault for not living in 1930.

TVStar said :

I’d like to know what’s fair about housing being 10+ times average annual incomes? Sound’s like a pure wealth trasfer to owners of housing rather and away from those who don’t own housing, rather than an optimal social outcome.

Indeed! But, that’s your free market for you, isn’t it?

I think, too, that you ought to have a look around at other places in Australia. Clueless70 (at # 92) has provided a wonderful portrait of Sydney that reminds me of every single reason why I would rather saw my own head off than spend a minute residing in that place. Compared to there, Canberra is a paradise by almost any measure you choose (the same could be said of Brisbane in recent times I might add). In comparison to many other Australian capitals, very little indeed is actually “fu**ed”.

Yes, Canberra HAD a lot of planning imbedded in it. But that hasn’t been the more recent experience (especially since self govvie). I happen to have a reasonable idea as to just how many actual, qualified, proper and real town planners currently work in the amorphous mass that is ‘planning’ in Canberra and, let me tell you, it ain’t that many. Nor has it been that many for a good many years. It is also worth noting that it is not uncommon for town planning students to undertake field trips to Canberra from all over this wide brown land to see, not just the promise of proper town planning, but also the shortfalls of its poor execution. In spite of that, the Productivity Commission’s Report on Government Services tends repeatedly to show that there are, in reality, very few ‘enclaves’ of real disadvantage in the place at all. So, maybe, some of it does work (again, it’s comparative).

Nor do planners in any event engage in social engineering . . . that’s the field for the politicians to play in. Not for them the ‘holy grail’ of white picket fence in the burbs. But, neither is it for them ‘infill’ as it has become understood in more recent times.

Planners — proper, qualified ones — can be prone to regarding themselves as ‘ultimate generalists’ when contemplating the skills their profession demands of them. While I might be happy to argue the toss with them on that over a beer or six, it’s hard not to cut them some slack once you’ve seen them in captivity and performing their role from close proximity. It would be nice if planning — in the form and manner intended of it as a profession — was actually allowed to stretch its legs a bit in the capital. Because it hasn’t been able to for a while, and the prospects of it doing so in the future look pretty bleak.

Amanda Hugankis2:38 pm 25 Nov 10

georgesgenitals said :

Age at which you can access your super is already slated to be 67 within another decade, and this will likely increase out to 72. Personally I think super is a good idea for those who can’t save/invest themselves. But convincing people that sticking all your extra cash into super because of the tax benefits will, I suspect, end up being very bad advice.

I’m with you.

I think the realities and economies of it will be that the super any of us have at that point might be ample to sustain us throughout our retirement without having to rely on a government funded pension (“heeey, I deserve it, I paid tax all my life!” oops, thought I was my dad for a second — pffffft! I’ve paid tax every working day since leaving school so far, and I ain’t going to see a cent of that paid to me in a pension! Methinks current tax is paying for present retirees!!!). Let’s face it – it’ll probably only have to last us 10 years anyway, such will be the average retirement age come 2045 or so.

If my retirement is going to be so short, I say let me access some of my super now so I can knock a portion off the mortgage and enjoy my middle age. Lord knows, old age ain’t gonna be what it is for the current lot.

georgesgenitals2:36 pm 25 Nov 10

Diggety said :

urchin said :

there is no reason why canberra should be so ridiculously priced. none at all, beyond a speculative bubble.

Completely disagree.
Although ‘bubbles’ play a part, the root of high house prices are high wages.

That and cheap credit.

urchin said :

there is no reason why canberra should be so ridiculously priced. none at all, beyond a speculative bubble.

Completely disagree.
Although ‘bubbles’ play a part, the root of high house prices are high wages.

georgesgenitals2:25 pm 25 Nov 10

p1 said :

clueless70 said :

Many retirees of the 2030s will have to pay rent out of their very small government pensions as well as pay for their living costs.

So, at that time, the government will be indirectly paying money that was intended to support non-working old people, to people who own investment properties.

Unless the government of the day wants to provide all that housing themselves, then yes.

georgesgenitals2:23 pm 25 Nov 10

urchin said :

georgesgenitals said :

urchin said :

building has outpaced population increases in the past 6-8 years. we don’t suffer from a shortage we suffer from a speculative bubble. the last thing stanhope and company want to do is to reduce the effects of that bubble–remember it put over 100 million in the gov’t coffers last year and who knows how much developer money into the labor party coffers…

So where in Canberra are all the empty houses? Are they listed on allhomes?

Actually a lot are. we are up to around 2600 listings at the moment. that’s very close to what listings were like when the shtf in 2008.

The gov’t is not going to do anything solve the problem as the gov’t is one of the main culprits. they want prices to stay high and go higher. stamp duty, land tax, land sales–its a huge part of their income. then figure in all the lobbying by the construction and real estate industries, as well as retail and other industries indirectly connected to housing.

it’s all a ponzi scheme that is bound to fall over eventually–the only question is when. when it does go it will probably be the investors who bring it down on top of themselves. with neg gearing they can’t afford for property to stagnate–it has to continue to go up at an unrealistic and unsustainable rate. and the boomer generation, facing retirement, ought to have a very low risk tolerance. they will all run for the exit at the same time. the smart people got out during the feeding frenzy of rudd’s fhog boost.

there is no reason why canberra should be so ridiculously priced. none at all, beyond a speculative bubble.

A few points to consider, I think.

The number of listings on allhomes has definitely increased, and we are seeing a slowdown in the market for sure. I don’t think, though, that this necessarily means there’s an excess of housing for people to live in. Also, prices didn’t crash in 2008 (they’ve actually risen since then).

Your point about governments being hooked on property related income is spot on. If we removed a lot of these costs, property could be developed more quickly and for lower cost.

I have to disagree with you that property is a ponzi scheme, though. It’s really more of a symptom of a free market a work, where lots of the individuals have a high capacity to purchase (through good incomes and low cost of credit). Investors, as much as they would love to, don’t actually influence the market as much as people think (at least that’s my view). Investors own about a third of property (in round figures) – the rest is owned (either outright or under mortgage) by owner occupiers. If you want to see an example of prices for an area being pushed up, go and watch a couple of 40-somethings bidding at auction on their ‘dream house’. The investor will usually walk away when its no longer a good price.

I think property is going to stagnate for some time now, much like in the 1990s. Sure, some parts of the market will drop, but lots won’t. Median priced, family housing stock will always be in demand. In the article that was linked to earlier in this thread there’s some interesting charts, including one showing frequency of population by age. Gen X outnumbers the baby boomers easily (http://www.abs.gov.au/Ausstats/abs@.nsf/mf/3201.0), and their buying power will be greater than the boomers was, because of strong incomes and higher lifestyle expectations. Of course, retirement of the baby boomers will exert a downward pressure on property prices, but will it be enough to overcome the massive demand from the wealthy Gen Xers? Time will tell.

Harry Dent wrote some interesting stuff on demographic based economics (you can google it it you’re interested), that dealt with the age at which chorts such as the baby boomers reach their ‘peak spend’. This happened in the last few years. His modeling shows that we’re likely to have subdued times until Gen X reaches its peak spend (in about 12-15 year), and then we’re due for another big boom. Of course, inflation will erode real values along the way until this happens, but when it does, those who hold property will see an effect similar to what the baby boomers have just seen.

Just some food for thought. I don’t have a crystal ball!

clueless70 said :

Many retirees of the 2030s will have to pay rent out of their very small government pensions as well as pay for their living costs.

So, at that time, the government will be indirectly paying money that was intended to support non-working old people, to people who own investment properties.

georgesgenitals said :

urchin said :

building has outpaced population increases in the past 6-8 years. we don’t suffer from a shortage we suffer from a speculative bubble. the last thing stanhope and company want to do is to reduce the effects of that bubble–remember it put over 100 million in the gov’t coffers last year and who knows how much developer money into the labor party coffers…

So where in Canberra are all the empty houses? Are they listed on allhomes?

Actually a lot are. we are up to around 2600 listings at the moment. that’s very close to what listings were like when the shtf in 2008.

The gov’t is not going to do anything solve the problem as the gov’t is one of the main culprits. they want prices to stay high and go higher. stamp duty, land tax, land sales–its a huge part of their income. then figure in all the lobbying by the construction and real estate industries, as well as retail and other industries indirectly connected to housing.

it’s all a ponzi scheme that is bound to fall over eventually–the only question is when. when it does go it will probably be the investors who bring it down on top of themselves. with neg gearing they can’t afford for property to stagnate–it has to continue to go up at an unrealistic and unsustainable rate. and the boomer generation, facing retirement, ought to have a very low risk tolerance. they will all run for the exit at the same time. the smart people got out during the feeding frenzy of rudd’s fhog boost.

there is no reason why canberra should be so ridiculously priced. none at all, beyond a speculative bubble.

triffid said :


Town planning, by my understanding, is supposed to be as much about social planning and amenity as it is about economic factors. In fact, the social aspect has been, in many respects, an omnipresent or ubiquitous factor in any good planning efforts that have enjoyed optimal outcomes. Replace ‘social’ with ‘me’ or “Hand’s up, who has the money and will pay?”, and you get a social distortion that polarises communities. Just how ‘polarised’ and disparate are communities in Scandanavia then, ey?

If Canberra is such a well planned city then, why are there such inequities? No city in Australia has had more ‘planning’ embedded in it: however, housing is f*^ked, public transport is f*&ked.

I suggest we would be better off without the ‘omnipresent or ubiquitous’ attempts to achieve optimal social outcomes. Imagine if urban planners did not attempt to socially engineer people’s lives with ‘idealic suburbs’ flung across the ACT making public transport impossible, or abandoned the “white picket fence house in suburbia” and allowed urban infill.

If this is an optimal social outcome, I’ll try free market chaos for a while.

I’d like to know what’s fair about housing being 10+ times average annual incomes? Sound’s like a pure wealth trasfer to owners of housing rather and away from those who don’t own housing, rather than an optimal social outcome.

I reckon that for Gen X women things are improved.

Baby boomer women often have no super at all. Some had to leave their jobs when they got married, many others had only the choice of becoming a teacher or a nurse. Getting a house loan as a single woman was difficult even on a good income.

No use to complain
If you’re caught out in the rain;
Your mother’s quite insane.
Cat food, cat food, cat food… again.
–King Crimson

I’ve divided my comments into three sections because this thread interests me for at least three reasons.

1: Baby Boomers

My mother and her present male partner just entered the downhill side of their sixties, so they are within the demographic group being discussed. Both were raised in a world I struggle to comprehend ideologically and culturally: nuns; boarding schools; corporal punishment; poverty; country properties and farm animals; alcoholism; despotic, emotionally and physically absent fathers; church-going and domestic abuse of spouses feature prominently in both biographies. For all that, neither of them are short of a quid and both have owned and lived in a rich assortment of real estate over the years.

My parents bought their first house in 1972 and had an architect design and site it from a popular kit home plan. It still stands in a suburb near Farrer. I forget the price but recall being told it was only of four figures. My family moved interstate for some years before returning to another house which was bought outright in a suburb near Mount Taylor. It was a large, split-level house with an above-ground pool, and at the time my parents purchased it in 1981, it was probably worth a fraction of the ‘unimproved value’ of the land on which it stands – now assessed by AllHomes.com.au at $492,000.

My parents divorced. After divorcing my father, my mother was able to buy a house in Tuggeranong on a single-parent income from her work in a primary school in the mid 1980s for $78,000. It had an in-ground swimming pool, three bedrooms and two bathrooms.

My father is now dead. When my father died he left nothing to me or my siblings despite having worked as a business manager for many years and owning outright a house located not far from the one mentioned above, whose current ‘unimproved land value’ is $407,000. It may be illustrative of his attitude to money and parenthood that, years ago, he sought every legal means to avoid paying child support after the divorce; any money he gave to assist my mother, he gave with great reluctance.

My mother, siblings and I have long since gone our separate ways, of course. She has traded houses numerous times on the proceeds of a small business that she sold to a multinational corporation about 15 years ago. She continues to work in a consultancy role and operates her life as a business for tax purposes, leasing rather than owning her vehicles and claiming business expenses at tax time. At least two of her properties were purchased in order to make use of negative gearing. Her financial dealings otherwise are opaque to me but her present house should sell for at least $900,000. She and her retired partner are looking to realise this capital gain as soon as possible and move to smaller premises in Sydney.

Presently my mother and her partner are spending their wealth as quickly as they can on frequent tourism in Europe and other countries. (This behaviour I understand to be ‘grey nomadism’.)

The most likely form of my mother’s and her partner’s estate after their deaths at an unknown time in the future will be a small two-bedroom property somewhere in Sydney, and a few household effects such as sideboards and sofas. The property will be willed jointly to me, my siblings and her partner’s five adult children; I expect the proceeds of its sale will be divided into eight equal parts.

‘Pyramid scheme’ is not the term I would have chosen to describe this story of oddly ever-diminishing family fortunes, but I think something about the term captures the apparently desperate selfishness of Baby Boomer behaviour.

2: Superannuation

Most people of my generation (‘X’) are contributing to compulsory superannuation. If they retire at age 65 their superannuation savings will yield, on average, enough to allow ten years of retirement on an income of about two-thirds the present median salary in Australia. (My own personal superannuity will be somewhere in the region of $250,000, according to projections from my present situation.) This forecast discounts the possibility of shocks or crashes in the world financial system occurring between now and retirement some 20-25 years from now. After our superannuation money is gone we will need to rely on other sources of income. For most this will mean a very small government pension.

No special clairvoyance is needed to foresee any of this. But what disturbs me most about this scenario is that, if real estate markets ‘remain flat’, grow at present rates of growth or do anything other than plunge in value very soon, most of us will not own any real property when we are ready to retire. Many retirees of the 2030s will have to pay rent out of their very small government pensions as well as pay for their living costs.

Does anyone on near-to-median salaries believe their superannuation payout will sustain them for the duration of their retirement? I’d be interested in people’s views/calculations.

3. Urban density in Canberra

I am of the age that, on my rare trips to Canberra from the city of my exile, strains its eyesight looking for something familiar from its childhood – a dry, weedy stormwater drain, a certain tree or grove of trees on Mount Taylor, a 1960s-era concrete lamppost, a certain house on a certain street. Little of the city of my childhood and teen years remains in human terms although its geophysical outlines are still comfortingly visible. Years after they first appeared I am still irritated to see pastel-coloured brick veneer houses climbing the denuded slopes of Isaacs Ridge, to say nothing of multistorey apartment blocks in the town centres. So I sympathise with locals who grimace angrily at McMansions.

For a glimpse of an ‘up’ and ‘out’ future, look east. If ‘up’ and ‘out’ come to mean in Canberra what they have meant in Sydney, this is an unpleasant propect. Here a certain general panic has set in as quality of life erodes under millions of commuter feet and car tires. It is now a matter for serious consideration whether to go out at all in Sydney, because of its round-the-clock traffic congestion. Shopping I do on foot whenever possible, at local shops. Leisure outings are harder to work up the stamina for. The commute to my nearest 50-metre swimming pool is an horrid experience whether undertaken by car through CBD traffic to expensive underground parking, or by noisy, teeth-grindingly slow and crowded buses. The sense of congestion and aggression does not abate in the water; hairy-shouldered men plunge up and down the lanes with apparently murderous intent, barging and thrashing past swimmers in shared lanes if they don’t satisfy unwritten speed ratings. As to seeing friends who live on the other side of town, it’s best to take drinking water and a packed lunch. There is no avoiding travel in order to earn a living, of course. My own commute is presently about an hour’s worth each way of rowing the car down the vehicle-packed concrete canals of freeways (they are, in fact, pay ways) and traffic-light-festooned secondary roads so that I arrive at work each morning in a mental state similar to that of a medieval soldier who has just crossed a swathe of enemy territory wielding his shield and sword.

No Canberran in their right mind could possibly wish an outcome like this for their own city and I think all Canberrans should be preparing to fight with political action all further urban infill of the ‘up’, ‘out’, ‘sideways’ and any other variety that is proposed. There may really be no other options than the ones Johnboy proposes, but to believe there are none will only make it so the sooner.

TVStar said :

Scandanavian model!?! How about a free market user pays model. We could immediately raise the superannuation and pension age to 67, stop concessionally taxing superannuation, limit Medicare to those on under $50,000 per annum and make everyone else get priavte health insurance, rezone inner city areas to increase housing supply… The list goes on. The problem is that everyone is looking for a free ride, and the electorally sensitive people that are already the beneficaries of that free ride cannot be touched.

Ahh . . . as consistent with Adam Smith’s invisible hand. The notion developed back in the 1770’s and still slavishly adhered to by right thinking (yer . . . that’s a pun) people everywhere.

Let me suggest why not. Because, for it to work, everyone in that system needs to play fair. Everyone needs to be on an equal footing. The problem is, inequalities develop and some people become more ‘equal’ than others. People with differing levels of equality require differing levels of assistance. Yes . . . those that can afford ought to pay. But, what about those in genuine need who can’t afford to pay? Do we leave them by the wayside? Is that to be simply regarded as the colateral cost of a civil society?

What I suggest isn’t about ‘looking for a free ride’, rather it’s about the fair and equitable distribution of wealth. It’s the great conundrum of politics which, as Weber said, is the slow boring of hard boards, or of who gets what when and how. All the ‘free market user pays’ model promotes is selfishness and profit maximisation above all else. Citizens don’t belong to a community in that context, but rather exist as rights bearing ciphers. Wealth aggregrates disproportionately to the few and meritocracy crumbles. Haves and never wills.

To bring it back on subject, the attendant philosophies to that sort of system reflect in other ways as well. Town planning, by my understanding, is supposed to be as much about social planning and amenity as it is about economic factors. In fact, the social aspect has been, in many respects, an omnipresent or ubiquitous factor in any good planning efforts that have enjoyed optimal outcomes. Replace ‘social’ with ‘me’ or “Hand’s up, who has the money and will pay?”, and you get a social distortion that polarises communities. Just how ‘polarised’ and disparate are communities in Scandanavia then, ey?

georgesgenitals12:37 pm 25 Nov 10

Age at which you can access your super is already slated to be 67 within another decade, and this will likely increase out to 72. Personally I think super is a good idea for those who can’t save/invest themselves. But convincing people that sticking all your extra cash into super because of the tax benefits will, I suspect, end up being very bad advice.

triffid said :

How brave a government would it be that legislates away universal health care, or pensions? It’s a bit of a far cry from closing some schools. It’s a bit more of an ask than that. If anything, if productivity gains and other efficiencies fail to provide the required transfers, then taxation reform will. Ahh . . . Dr Henry . . . right on cue. Tell me about this ‘scandanavian model’ your suggested reforms seem to imply.

Scandanavian model!?! How about a free market user pays model. We could immediately raise the superannuation and pension age to 67, stop concessionally taxing superannuation, limit Medicare to those on under $50,000 per annum and make everyone else get priavte health insurance, rezone inner city areas to increase housing supply… The list goes on. The problem is that everyone is looking for a free ride, and the electorally sensitive people that are already the beneficaries of that free ride cannot be touched.

TVStar said :

Solution: tax me to pay for those unfunded costs, while telling me that I should ‘pay my way’ (superannuation, effectively compulsory health insurance etc).

Does anyone who’s 30 yo really think that when they retire there will be pensions, tax concessions for superannuation, free healthcare, etc for them?

Yeah, but, to be fair, that’s not the only policy response that has been undertaken (efforts to increase productivity / workplace reform in terms of retirement ages and the like). And, for what it’s worth, every generation, in recent times, has felt so aggrieved (and, in 20 years time, you, like me now, will see that). It’s just that the ‘intensity’ of it will without dispute be felt by those currently in the ‘sweet spot’ of their working lives (that is. mid-way through).

As for the future of pensions, tax concessions, healthcare . . . I’m near enough in my 50s and have been hearing this for all my working life. It’s always claimed to be on the horizon ten years or so away. The reality, though, is that the genie is out of the bottle. How brave a government would it be that legislates away universal health care, or pensions? It’s a bit of a far cry from closing some schools. It’s a bit more of an ask than that. If anything, if productivity gains and other efficiencies fail to provide the required transfers, then taxation reform will. Ahh . . . Dr Henry . . . right on cue. Tell me about this ‘scandanavian model’ your suggested reforms seem to imply.

Holden Caulfield said :

TVStar said :

…As a single person thirty something person, by last count, I was paying for my parents’ pensions, my parents’ healthcare, my parents’ tax breaks for returning to the workforce, my superannuation, my healthcare, my education, saving for a house deposit while my parents’ house prices escalated, paying for the family tax benefit A and B, paying for the baby bonus, paying for the First Home Owners grant, and (if I ever have any) saving for my children’s education and healthcare…

Shock news, Baby Boomers paid taxes too!

When your parents were thirty something their taxes were paying for your Snow Hydro Scheme, your national road infrastructure and so it goes. Clearly, now they’re paying for that massive chip on your shoulder, too, haha.

Sorry, but up until about 1997 Governments accounted on a cash basis, therefore, the accrued ‘cost’ of healthcare, superannuation, pensions etc were not recognised until they had to be paid for. Since then, Governments have started accounting on an accurals basis, and have discovered that there are huge unfunded costs into the future relating to Baby Boomers.

Solution: tax me to pay for those unfunded costs, while telling me that I should ‘pay my way’ (superannuation, effectively compulsory health insurance etc).

Does anyone who’s 30 yo really think that when they retire there will be pensions, tax concessions for superannuation, free healthcare, etc for them?

“I think there is definitely a degree of accuracy here. We can debate how accurate, but the basic point is very sound IMO.”

I agree, HC. It’s teh subtext that I’ve been pointing to for some time now (and have raised elsewhere on this fine site).

“Shock news, Baby Boomers paid taxes too!

When your parents were thirty something their taxes were paying for your Snow Hydro Scheme, your national road infrastructure and so it goes. Clearly, now they’re paying for that massive chip on your shoulder, too, haha.”

I was thinking the exact same thing. My folks are probably among the last of the BBs (despite me being born early 60s, I don’t consider myself as such . . . Bernard Salt has a lot to answer for in my view). I can remember Dad insisting to me once, “Mate, your mum and I are on an effective tax rate of 84 cents in the dollar (he was middle management for a major bank at the time and mum was working in retail). You go and get as much of that back as you can.”

“In a lot of respects this really is staring to smack of a Gen Y sense of entitlement. There’s a lot of trout-mouthing about the need for affordable housing in inner city areas that’s cloaked in the sort of predictable bullshit we’ve come to expect: sustainability, small foot-print, renewable (I’ve got to stop myself before I choke on all that fluffy, touchy-feeling smugness…). The reality is that it isn’t about any of those things at all. The core of it is: I’m entitled to have society to underwrite my desire to live in a trendy cosmopolitain area with cool bars and shit.”

But, I digress a touch. I think CC and HC are onto something. And, I’m sorry JB, but I can’t be persuaded that the ‘wheels have left the tracks’. Sure, things on the planning / housing / affordability front could be a lot better, but I certainly don’t see circumstances as representing a monsterous disasterous sky falling in market failure. Rather, I see the possibility for the construction of just such a failure on the basis of the discourse from some areas (Minister Barr and his acolytes perhaps?).

Importing new Australians at a phenomenal rate? Ummm . . . I have some fairly detailed information around that regularly come my way and, sorry, but its simply nonsense. That’s a mainstream media sensationalist headline grab that can’t be supported by reality. Neither is much percentage of what influx there is coming to the ACT.

In any event, the appropriate response to the circumstances that are manifesting in the market ought to be as many of the other rioters have suggested. It will be a mixture of densities and types. Neither ‘up’ or ‘out’ but a ‘third way’ amalgum including each of these (with other bits chucked in).

Holden Caulfield10:42 am 25 Nov 10

TVStar said :

…As a single person thirty something person, by last count, I was paying for my parents’ pensions, my parents’ healthcare, my parents’ tax breaks for returning to the workforce, my superannuation, my healthcare, my education, saving for a house deposit while my parents’ house prices escalated, paying for the family tax benefit A and B, paying for the baby bonus, paying for the First Home Owners grant, and (if I ever have any) saving for my children’s education and healthcare…

Shock news, Baby Boomers paid taxes too!

When your parents were thirty something their taxes were paying for your Snow Hydro Scheme, your national road infrastructure and so it goes. Clearly, now they’re paying for that massive chip on your shoulder, too, haha.

Holden Caulfield10:28 am 25 Nov 10

Clown Killer said :

I honestly believe there’s a real issue here.

In a lot of respects this really is staring to smack of a Gen Y sense of entitlement. There’s a lot of trout-mouthing about the need for affordable housing in inner city areas that’s cloaked in the sort of predictable bullshit we’ve come to expect: sustainability, small foot-print, renewable (I’ve got to stop myself before I choke on all that fluffy, touchy-feeling smugness…). The reality is that it isn’t about any of those things at all. The core of it is: I’m entitled to have society to underwrite my desire to live in a trendy cosmopolitain area with cool bars and shit.

I think there is definitely a degree of accuracy here. We can debate how accurate, but the basic point is very sound IMO.

The whinging Baby Boomers will talk to the death about ‘heritage’, Burley Griffin and ‘how Canberra is supposed to be’ as long as their house prices go up, but will be the first on the ‘knock down and redevelop’ bandwagon if they start to fall.

The intergenerational transfers are broader than just Baby Boomers’ house prices. Most Government policy is based on giving free money to these people.

As a single person thirty something person, by last count, I was paying for my parents’ pensions, my parents’ healthcare, my parents’ tax breaks for returning to the workforce, my superannuation, my healthcare, my education, saving for a house deposit while my parents’ house prices escalated, paying for the family tax benefit A and B, paying for the baby bonus, paying for the First Home Owners grant, and (if I ever have any) saving for my children’s education and healthcare.

We wounder why people end up just buying a house in suburbia, having kids, and sitting around until the price of their house goes up. Is there any other choice?

What an amazing, cosmopolitan, dynamic city we have here Mr Stanhope.

georgesgenitals9:54 am 25 Nov 10

Amanda Hugankis said :

georgesgenitals said :

Amanda Hugankis said :

I just hope that I get a few years of retirement. Problem is – will I be too old to enjoy anything? They definitely got the economic cream of the industrial revolution.

There’s no doubt they have lived through hugely prosperous times.

Thinking about it, I’ve probably been wrong to suggest they busted their arses. The worked, but I don’t think they worked as hard or long as the current under 50s.

You’re not wrong about working hours. My dad certainly worked, but my mum didn’t have to in order for us to afford a 3 bedroom home in a nice suburb with decent shops, reputable public schools, two cars and 10mins drive from the City and 5 from Woden. He was a blue collar worker – motor mechanic – and he did 9 to 5pm each day. There was none of this evening/weekend work, 12 hour days, no lunch break, etc. he retired at 55, and at 70 he’s just sold his house here for a motza and moved down into a house down in a coastal village near Nowra where he bought a bigger house for half the price of his sale here. He is shocked by the hours I keep and the cash in my pocket at the end of the bills.

I think it was a very different balance then. People worked less than now, but they also had a lot less in temrs of material ‘stuff’. This didn’t stop them being happy (or not) though.

Amanda Hugankis9:43 am 25 Nov 10

georgesgenitals said :

Amanda Hugankis said :

I just hope that I get a few years of retirement. Problem is – will I be too old to enjoy anything? They definitely got the economic cream of the industrial revolution.

There’s no doubt they have lived through hugely prosperous times.

Thinking about it, I’ve probably been wrong to suggest they busted their arses. The worked, but I don’t think they worked as hard or long as the current under 50s.

You’re not wrong about working hours. My dad certainly worked, but my mum didn’t have to in order for us to afford a 3 bedroom home in a nice suburb with decent shops, reputable public schools, two cars and 10mins drive from the City and 5 from Woden. He was a blue collar worker – motor mechanic – and he did 9 to 5pm each day. There was none of this evening/weekend work, 12 hour days, no lunch break, etc. he retired at 55, and at 70 he’s just sold his house here for a motza and moved down into a house down in a coastal village near Nowra where he bought a bigger house for half the price of his sale here. He is shocked by the hours I keep and the cash in my pocket at the end of the bills.

johnboy said :

Diggety, I-filed, you’re not getting the enormity of the crisis we are already in.

This isn’t a train wreck down the line, the wheels are already leaving the track.

Casting around for other options is just a choice for an awful donut city for most.

Agreed, though the immediate inclusion should be both ‘up and out’. People will just have to suck it up.

However, this is a planning issue. Proper planning hasn’t been done since the ’50’s. The ‘up and out’ proposition/solution will keep popping up and only providing short term solutions until the proverbial ‘train’ services all suburbs and peoples in Canberra and surrounds.

A few long term options to consider:
– Satellite cities; either outside the Canberra area or localised build-up in areas such as Tugg., Woden, Gungh., etc.
– Greater co-operation outside our city, i.e. Quangers, Tharwa, Bungen., etc. Homogenisation of regulations, taxing, shared econ. development, transport and an incentive based system for land release for our neighbours.
– Dealing with the artificially inflated economy of Canberra (bomb shell). Currently avg. rent in CBR is $160/wk higher than avg. Aus cities. CBR is quite unique in that a disconnect is able to propagate between economy and development, some mechanisms of planning take care of themselves, this is not quite true in Canberra.
– Recognising that development goes hand in hand with transport and should be treated as such. Currently the arrangement of these make their progress look like something from The Ministry of Silly Walks.

NCA, Gov, etc. Have failed continuously to recognize the unique features of Canberra’s situation from a planning perspective for too long (that includes Barr).

To manage a situation like this, it is going to have to involve all elements of a ‘city’.

PJ O’Rourke wrote a piece once claiming that if the entire population of the world lived in a city with the density of Manhattan, then the entire world could easily be housed within the borders of Texas.

So we arent really running out of land.

As mentioned, having lived in densely populated areas, there is no doubt that more people means more noise – more cars and buses etc for a start. But it doesnt always mean more crime (see Tokyo, HK etc) – in fact, knowing that when you walk from the bus stop to your apartment at 2am there are likely to be people around makes you feel safer.

Somewhere like Kingston Foreshores should work; if the building competence is crap then thats not the concept.

I think people also need to remember that, outside England and the English ex ‘colonies’, the vast majority of people do not live in detached housing. Hardly anyone in Europe mainland and virtually no one in Asia has a detache house. That is not to say detached hosuing isnt a fantastic thing and something to fight for if you can have it; but the alternatives are pretty acceptable to most of the world, so they aren’t the end of civilisation.

Of course, trying to impose apartments next door to housing – its only going to cause problems.

Clown Killer9:03 am 25 Nov 10

I’m going to add here that living out in the ‘burbs isn’t the end of the world, as some people seem to think. Some of us actually enjoy it.

+1

I honestly believe there’s a real issue here.

In a lot of respects this really is staring to smack of a Gen Y sense of entitlement. There’s a lot of trout-mouthing about the need for affordable housing in inner city areas that’s cloaked in the sort of predictable bullshit we’ve come to expect: sustainability, small foot-print, renewable (I’ve got to stop myself before I choke on all that fluffy, touchy-feeling smugness…). The reality is that it isn’t about any of those things at all. The core of it is: I’m entitled to have society to underwrite my desire to live in a trendy cosmopolitain area with cool bars and shit.

georgesgenitals8:53 am 25 Nov 10

urchin said :

building has outpaced population increases in the past 6-8 years. we don’t suffer from a shortage we suffer from a speculative bubble. the last thing stanhope and company want to do is to reduce the effects of that bubble–remember it put over 100 million in the gov’t coffers last year and who knows how much developer money into the labor party coffers…

So where in Canberra are all the empty houses? Are they listed on allhomes?

georgesgenitals8:41 am 25 Nov 10

johnboy said :

Diggety, I-filed, you’re not getting the enormity of the crisis we are already in.

This isn’t a train wreck down the line, the wheels are already leaving the track.

Casting around for other options is just a choice for an awful donut city for most.

I’m going to add here that living out in the ‘burbs isn’t the end of the world, as some people seem to think. Some of us actually enjoy it.

Diggety, I-filed, you’re not getting the enormity of the crisis we are already in.

This isn’t a train wreck down the line, the wheels are already leaving the track.

Casting around for other options is just a choice for an awful donut city for most.

georgesgenitals8:32 am 25 Nov 10

Diggety said :

Johnboy,

It is not the simple dichotomy as you’ve presented. There are other options.

+1. The real result will be a range of different dwelling types.

It is amazing how many people look to conspiracy rather then cock-up.

In Sydney, I lived in an 80 year old single storey terrace house with thick walls and and a small backyard, about 250 sqm all up. It was great. If I had neighbours, it was by choice. I had a garden, peace and quiet, and privacy.

In Canberra, for some reason that very good lifestyle has been turned into cheapo (to build) slums with paper thin walls and floors. No wonder people are resisting it.

Johnboy,

It is not the simple dichotomy as you’ve presented. There are other options.

Today’s CT reports that Barr has been slapped down by Stanhope for his consultation style!

Clown Killer11:36 pm 24 Nov 10

Suburban life isn’t all that bad. Our place in Kambah is just shy of 1400m2. We get to have a nice (although not ridiculously large house), and plenty of room.

In terms of how we plan for the inner areas, higher density isn’t always all it’s cracked up to be. Buying a place of your own has always been a big ask. I don’t honestly think it’s a ‘sense of entitlement’ issue for Gen Y, I just think they should make a choice of what they want to buy and then knuckle down and get saving for a deposit.

The cat did it11:12 pm 24 Nov 10

Mr Barr is playing some curious games here- trying to misrepresent debate over Canberra’s housing future as solely a generational issue, then trying to polarise it by claiming it’s Boomers vs GenX/Y, then making provocative comments about Boomers, presumably to endear himself to the younger demographic.

Interesting discussion on ABC666 this morning suggested that his behavior had more to do with ALP factionalism, ie enhancing his chances of re-election, and, as a Right faction member, of succeeding J Stanhope, instead of the Left faction’s anointed Katy. If this is so, then it’s despicable that critical issues of ACT planning are becoming collateral damage in ALP factional disputes.

Unfortunately, Mr Barr is making heavy weather of it. Marie Coleman bests him every time their paths cross. He is looking and sounding more and more like some NSW Labor Right apparatchik from Sussex Street. This is a risky tactic- given what the right has done to NSW, and what Messrs Arbib and Bitar have done Federally, the the appearance of a NSW Labor Right presence in the ACT is likely to be about as welcome as a melanoma, and a gift to the other parties.

It’s not a case of up OR out- this is a false dichotomy. It’s going to be a mix of both- the debate is about the appropriate mix, and the location of each. And then there’s issues of aesthetics. The fact that Andrew Barr can’t see anything wrong with the Eastern O’Malley eyesore speaks for itself. He’s out of his depth.

Ryoma said :

What I don’t understand is why the whole proposed Molonglo Valley is not being designated with that type of high density. As previously pointed out, it will be a lot closer to Civic than the other town centres, making it a perfect place for a light rail line.

High-density living is already being trialled in Canberra (think Kingston Foreshore, with mixed results). The problem is that it appeals mostly to young singles or couples and elderly singles or couples. Many other people don’t want to live in a high-density environment and prefer medium-density or suburbia, especially when they have kids. In my experience (five years in Canberra, two o/s), high density living means more noise, more crime, less privacy, less green space and less amenity overall. This all outweighs the convenience of only having to drive 5 mins to work rather than 20 from the ‘burbs.

In Canberra, high-density also means buying an overpriced leaking apartment built by an incompetent builder, sky-high strata fees and being surrounded by early-20s renters with zero respect for the common property.

building has outpaced population increases in the past 6-8 years. we don’t suffer from a shortage we suffer from a speculative bubble. the last thing stanhope and company want to do is to reduce the effects of that bubble–remember it put over 100 million in the gov’t coffers last year and who knows how much developer money into the labor party coffers…

we are the las vegas of australia. no more reason to spend half a million on a hovel here than there was to spend 250k on a hovel there.

FedUpWithBogans9:40 pm 24 Nov 10

pete74au said :

Why is there such a debate? The answer is simple when I retire I’ll move out of Canberra sell my overpriced real estate to the next generation, take my super and move to a better climate that suits my needs.

Thus freeing up the space for the obese generation that will live shorter than mine ;-).

Too easy

haha – that’s what we’re planning too!
As for the first house – I like it – I bet it’s a great house to live in – much better than the pokey little things below!

All the comments about baby boomers and investors owning houses miss the point. No matter who owns them, it comes down to the number of housing units available vs the demand. And, the fact that BBs are likely to die or downsize their properties makes no difference either – see above.

As long is there is pent up demand, and average incomes remain high, Canberra property (including rental) prices are not going down significantly anytime soon.

As for increasing housing density, one of the biggest flaws is the slack building standards which make so many apartments instant slums due to poor construction, and especially, inadequate noise insulation. Anyone who has lived in a flat where you can hear everything going on upstairs (and I mean everything – eeew!) knows what I mean.

Well designed medium density living can be very pleasant, but there is not much of it on offer. Even some of the ‘luxury’ apartments on the Kingston Foreshore are causing disputes with builders and developers because of shoddy workmanship and poor design.

If the ACT Government is serious about increasing acceptance of higher densities, they need to alleviate the often justified fears of residents that these developments are slums in waiting. That includes abandoning the anti-car crusade which clogs nearby streets with residents’ and their visitors’ cars, due to stupid limits on on site parking.

it would be nice if there was an option for a free standing home with yard + garage.

why are we packing in like sardines? what’s wrong with a little room

p1 said :

The problem I see in the medium term isn’t the wealthy people needing to sell their big house to someone, it is them living out their retirement will still owning all the cheaper places as investments. Preventing the younger people buying these cheaper houses, while money flows to the top of the pyramid.

Agree +10000000000

Still, these investors will die and then the market might flood with dead people’s investments. Otherwise, we’ll have a new landed and unlanded class, just like the old Dickensian days.

A bit odd, really, hos that’s the ACT Government’s (and Barr’s?) vision for the ACT.

People do Phds in Economic and have less of an understanding of what’s going on than you Johnboy!

Why is there such a debate? The answer is simple when I retire I’ll move out of Canberra sell my overpriced real estate to the next generation, take my super and move to a better climate that suits my needs.

Thus freeing up the space for the obese generation that will live shorter than mine ;-).

Too easy

JB you were part of a forum recently on this issue weren’t you? Have you posted about the experience? Can you do so? Do you think you might have been hijacked just a little on the issue?

Andrew Barr is STILL to commit to excellent design as a way to avoid the pitfalls of bad infill, and that is because he has a massive chip on his shoulder and appears to hate Canberra.

I maintain that the inner city should remain a garden city (good luck to people who can afford it; hoik up their rates) with judicious infill that the people like and embrace, with plenty of open space, and there should be (WELL DESIGNED) denser housing within a good walk or decent cycle of the city – say Hackett, Watson, Macquarie, North Lyneham etc. So that more people can fit into the inner and outer-inner north without wrecking Canberra’s unique character.

BARR needs to commit to respecting what we want for OUR land.

I reiterate: this is not thoughtless elitism: it’s a good approach for our economy – far better than Barr’s short-termism.

old canberran said :

In 1954 the Menzies government established the National Capital Developments Commission, NCDC, to plan design and construct Canberra as the National Capital of Australia. During its 34 year lifetime it controlled the annual population increase by servicing and releasing land in a programmed fashion. Similarly it constructed government housing, schools, shoppings centres and headworks etc at predetermined intervals. It was all done to a plan which was reviewed regularly so that it all went smoothly.
Since 1988, under self government, there has apparently been none of that control and expansion of the population and housing has virtually exploded without a similar increase in the capacity of the infrastructure of roads, water and sewerage headworks.
The amount of land available in the ACT for development has just about run out so there is probably only one way to go and that’s up.
It’s fairly obvious that something has to be done to change the direction Canberra is heading at the moment and I think Roger Pegrum has hit the nail on the head but I fear the people he is referring to won’t take any notice.

And then self government broke the connection between the biggest employer in the area and the government responsible for providing housing.

Holden Caulfield said :

Both, I think.

Snip!

So, to conclude, can’t Option 1 and Option 2 co-exist?

agreed, there is room for both.

old canberran5:20 pm 24 Nov 10

In 1954 the Menzies government established the National Capital Developments Commission, NCDC, to plan design and construct Canberra as the National Capital of Australia. During its 34 year lifetime it controlled the annual population increase by servicing and releasing land in a programmed fashion. Similarly it constructed government housing, schools, shoppings centres and headworks etc at predetermined intervals. It was all done to a plan which was reviewed regularly so that it all went smoothly.
Since 1988, under self government, there has apparently been none of that control and expansion of the population and housing has virtually exploded without a similar increase in the capacity of the infrastructure of roads, water and sewerage headworks.
The amount of land available in the ACT for development has just about run out so there is probably only one way to go and that’s up.
It’s fairly obvious that something has to be done to change the direction Canberra is heading at the moment and I think Roger Pegrum has hit the nail on the head but I fear the people he is referring to won’t take any notice.

+10 to #37 dtc for their post.

I’ve also lived in an aprtment building a fair way up in Japan. There was a subway station within 500 metres, and a pizza shop on the ground fllor, as well as a roof garden for residents to enjoy.

What I don’t understand is why the whole proposed Molonglo Valley is not being designated with that type of high density. As previously pointed out, it will be a lot closer to Civic than the other town centres, making it a perfect place for a light rail line.

If we had a government with any type of vision (hello? hello? cue crickets) we would build it the Japanese way. Specify the need for a high quality light rail system to be built, and thet need for an integrated community with schools/retail/servicves available, and sell the land to one of the Japanese railway firms. That way we’ll get a high quality outcome, 3 decades ahead of anything currently existing in Canberra (with the noble exceptions of new Acton and Nishi).

If people knew there would be servcies available with everything they needed, they could avoid buying cars, and bring new life into City West as well as the Molonglo suburbs.

As for the Baby Boomers, well, sooner or later they will need nursing homes. They’ll either pass these places onto their kids (so that’s some of us getting looked after), or will need to sell up to pay for the healthcare.

Then there is Peak Oil stuff, along with rising prices for power, water and skilled labour. I think many of the suburban castles built will plummet in value in years to come, as will the land under them. The plus side to this is that it will accelerate the demolition of many badly built and designed places and allow for increased density to occur.

Perhaps in many cases this trend will allow the baby Boomers to age in place, but in a modern, energy-efficient 2 bedroom flat or apartment on one level (as stairs become more dangerous to the elderly) rather than a jerry built 4-bedroom dog box built from the 1950’s onwards.

georgesgenitals4:51 pm 24 Nov 10

Amanda Hugankis said :

I just hope that I get a few years of retirement. Problem is – will I be too old to enjoy anything? They definitely got the economic cream of the industrial revolution.

There’s no doubt they have lived through hugely prosperous times.

Thinking about it, I’ve probably been wrong to suggest they busted their arses. The worked, but I don’t think they worked as hard or long as the current under 50s.

Amanda Hugankis4:45 pm 24 Nov 10

Tetranitrate said :

georgesgenitals said :

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Good to see. Why should they pass anything on? They were born post WW2 when most people were lucky to eat three times a day, and their elderly parents typically don’t pass much on to them.

It won’t hurt the rest of us to work for what we want.

That’s just a load of BS. Post war Australia was literally the best place to live in the world.

+10. Free healthcare, free education, jobs boom, assets still in the hands of the community. My nanna is 95 in about 6 months and is sitting on a tidy sum, thankyou very much. She hasn’t worked since she was in her 40s. Her fluffy bank balance is due to the sale of a house in Chapman – and at present she’s sunk some of that sum into a nice extension to her son’s house, who is in his 70s, as is his wife. Nan is just under the allowable level to retain pension, and she gets all her discounts, as do they. His wife quit working about 25 years ago, and while they don’t have oodles of money, at the end of the day, due to the economies of scale between them, each of them have got more disposable income per week than I do!

I’m no economist or demographer … but I’m fascinated by this subject. My prediction is a housing collapse around the time they all start dropping off the perch – like we’ve never seen and the effects will be massive. I think this is a time and a generation we will look back on and say ‘let us never end up in this situation again’, due to the flow on effects that impact subsequent generations.

I just hope that I get a few years of retirement. Problem is – will I be too old to enjoy anything? They definitely got the economic cream of the industrial revolution.

Mr Gillespie4:45 pm 24 Nov 10

johnboy said :

Mr Gillespie said :

Hey instead of deciding which are the worse of the 2 evils, I instead demand to know why Canberra’s population continues to expand, full stop!!!!

Because we can’t stop it.

Slowing down land supply will only push up prices and drive the population over the border.

Why can’t we stop it? Where are all these extra people coming from?

The insta-ghetto approach of building a small suburb of tower blocks is something that has been done around the world before. It has often resulted in slums, the kinda dodgy places used as a backdrop in every episode of the Bill ever made. But those were primarily Government housing, and had many other problems beside that.

*IF* such a idea was used as the core of a new town centre, from inception, with a good (not minimal, or OK but genuinely good) public transport, then I think that it would be a great idea. It is what should have happened at Gunners.

The trick would be to plonk the new town centre (with it’s 40 story towns) somewhere that as few existing residences as possible would be able to see them, yet as close as possible so people can get into town. Cotter Valley maybe? Mt Stromlo & Cooleman Ridge would block sight of it from most of the nearby ‘burbs.

georgesgenitals4:35 pm 24 Nov 10

johnboy said :

georgesgenitals said :

As with a previous comment, this is already starting to happen.

Hence the need to get cracking.

Absolutely. Govco need to get their land releases sorted quickly, and find ways to encourage builders and tradies to come here and get stuck in.

georgesgenitals said :

As with a previous comment, this is already starting to happen.

Hence the need to get cracking.

We’re probably arguing semantics here, though you might be able to argue that the above example is a microghetto.

georgesgenitals4:22 pm 24 Nov 10

johnboy said :

Sure we will, people of limited means will end up bunking six deep in otherwise pleasant areas if there is no other housing they can afford.

As with a previous comment, this is already starting to happen.

I voted up, although I think there’s a place for limited greenfields development, too. I’ve lived in Sydney. I’ve seen those sprawling suburbs!

They are swallowing arable land up there, so that food production in the city is way down (I know that’s not such a major factor here in Canberra). They contribute to the urban heat island effect, heating up the city to almost unbearable levels. The infrastructure can’t keep up with such a spread-out population meaning that the motorways servicing Sydney’s south- and north-west are parking lots for hours on end. I had a friend who bought a house in one of those suburbs. She had no shops, no school, no trains and no buses. And she lived a billion miles from anywhere. Talk about car-dependent!

I would rather see a city where we have higher density, but with public open spaces; a city where public transport can be consolidated as people are concentrated around nodes and corridors; a city that isn’t so reliant on it’s motorways; a city that can still benefit from cooling easterlies!

Sure we will, people of limited means will end up bunking six deep in otherwise pleasant areas if there is no other housing they can afford.

johnboy said :

Erg0 said :

I don’t necessarily think that’s a terrbile way to live, but I could see a dedicated super-high density housing zone in Canberra turning into a ghetto pretty quickly.

Ghetto dwellers need somewhere to live too.

Sure, but I don’t think that was the goal that dtc had in mind.

Anyway, that’s circular logic: anywhere a ghetto dweller lives must, by definition, be a ghetto. If we avoid creating ghettoes then we won’t have any ghetto dwellers to house.

Captain RAAF said :

georgesgenitals said :

johnboy said :

Erg0 said :

I don’t necessarily think that’s a terrbile way to live, but I could see a dedicated super-high density housing zone in Canberra turning into a ghetto pretty quickly.

Ghetto dwellers need somewhere to live too.

Any chance you could define a ghetto dweller for us? Especially one that doesn’t live in a ghetto yet?

Yep, anyone living in Gunghalin, Forde or Crace.

You forgot Queanbeyan, which is apparently very ghetto-chique at the moment. Totally the ghetto-de-jour.

Captain RAAF4:05 pm 24 Nov 10

georgesgenitals said :

johnboy said :

Erg0 said :

I don’t necessarily think that’s a terrbile way to live, but I could see a dedicated super-high density housing zone in Canberra turning into a ghetto pretty quickly.

Ghetto dwellers need somewhere to live too.

Any chance you could define a ghetto dweller for us? Especially one that doesn’t live in a ghetto yet?

Yep, anyone living in Gunghalin, Forde or Crace.

georgesgenitals3:53 pm 24 Nov 10

johnboy said :

Erg0 said :

I don’t necessarily think that’s a terrbile way to live, but I could see a dedicated super-high density housing zone in Canberra turning into a ghetto pretty quickly.

Ghetto dwellers need somewhere to live too.

Any chance you could define a ghetto dweller for us? Especially one that doesn’t live in a ghetto yet?

Erg0 said :

I don’t necessarily think that’s a terrbile way to live, but I could see a dedicated super-high density housing zone in Canberra turning into a ghetto pretty quickly.

Ghetto dwellers need somewhere to live too.

I don’t necessarily think that’s a terrbile way to live, but I could see a dedicated super-high density housing zone in Canberra turning into a ghetto pretty quickly.

georgesgenitals3:47 pm 24 Nov 10

Tetranitrate said :

georgesgenitals said :

Tetranitrate said :

georgesgenitals said :

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Good to see. Why should they pass anything on? They were born post WW2 when most people were lucky to eat three times a day, and their elderly parents typically don’t pass much on to them.

It won’t hurt the rest of us to work for what we want.

That’s just a load of BS. Post war Australia was literally the best place to live in the world.

During the war people often struggled just to eat. Even after the war, Australia might have been a good place to live, but the average Aussie was not wealthy, and many older people have retired on very little income (hence the introduction of compulsory superannuation). When these people pass away, they house they owned is generally split amongst the children (and those families had more children than we do on average today). That doesn’t leave much to pass on.

you said post war, not during. And ‘struggling to eat’ is a hell of a lot truer for Great Britain than an agricultural exporter like Australia. The claim that you made about Australians struggling to eat 3 times a day post war is utterly bogus, the post war years are where terms such as ‘lucky country’ came from in the first place.

georgesgenitals said :

The baby boomers are wealthy because Australia has gone through a long period of prosperity, leaving us very near the top of tree in world terms. Baby boomers have enjoyed booms in both property and shares, and are on average only a few years past their ‘peak spend’. It’s worth remembering that many (if not most) of those baby boomers who we now classify as ‘rich’ started from humble beginnings. Australia is still a prosperous country, and the concept of working hard for several decades is very much available to the rest of us.

Reaping half a million dollars in capital gains on your house that you happened to buy before the government turned the housing market into a gigantic ponzi scheme through negative gearing tax giveaways, deregulated banks and ‘first home owners grants’ that do nothing buy push up the price is hardly what most people would consider ‘working hard’.

I said “those BORN post WW2”. I should have been clearer – during WW2 people struggled. I can see this could easily be read as “it was hard to get 3 meals a day AFTER WW2”. After WW2 Australia had so many jobs going we imported lots of humans.

As to the capital gains comment, could you explain what mean? When, excatly did the government turn property into a ponzi scheme? It’s not like baby boomers have ever been able to claim tax benefits on their own homes, which is where a large chunk of their wealth has come from.

BTW, the boomers should be the richest, after all they have been saving for the longest. Its not a conspiracy that they own most of the assets.

Also – inheritance tax, its only fair.

How about this ‘left field’ idea – take a green field site, a bit away from existing housing, and make it a ‘high rise zone’ – none of these piddly 3 or 6 story places, but real 40 story apartment blocks. You can fit about 350 – 400 bedrooms in something this size (World Tower in sydney has 110 or so 2 and 3 bedrm places plus penthouses). So assume one person per bedroom (allowing for some sharing and some empty) and 50 buildings fits another 20,000 people. A few high speed travel links to city centres, a few open spaces, some shops and – there you go. No need for much inner city density change. Not much need for daily car use either.

This might sound ridiculous, but most of Asia is built this way. It may strike you as a terrible way to live but doesnt take long to get used to (as someone who has lived in a 46 story apartment block in a street that, conservatively, housed 10,000 people along its 3km length). Once you are inside it doesnt really matter whether your apartment is in a 5 story or a 50 story building.

Tetranitrate3:30 pm 24 Nov 10

georgesgenitals said :

Tetranitrate said :

georgesgenitals said :

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Good to see. Why should they pass anything on? They were born post WW2 when most people were lucky to eat three times a day, and their elderly parents typically don’t pass much on to them.

It won’t hurt the rest of us to work for what we want.

That’s just a load of BS. Post war Australia was literally the best place to live in the world.

During the war people often struggled just to eat. Even after the war, Australia might have been a good place to live, but the average Aussie was not wealthy, and many older people have retired on very little income (hence the introduction of compulsory superannuation). When these people pass away, they house they owned is generally split amongst the children (and those families had more children than we do on average today). That doesn’t leave much to pass on.

you said post war, not during. And ‘struggling to eat’ is a hell of a lot truer for Great Britain than an agricultural exporter like Australia. The claim that you made about Australians struggling to eat 3 times a day post war is utterly bogus, the post war years are where terms such as ‘lucky country’ came from in the first place.

georgesgenitals said :

The baby boomers are wealthy because Australia has gone through a long period of prosperity, leaving us very near the top of tree in world terms. Baby boomers have enjoyed booms in both property and shares, and are on average only a few years past their ‘peak spend’. It’s worth remembering that many (if not most) of those baby boomers who we now classify as ‘rich’ started from humble beginnings. Australia is still a prosperous country, and the concept of working hard for several decades is very much available to the rest of us.

Reaping half a million dollars in capital gains on your house that you happened to buy before the government turned the housing market into a gigantic ponzi scheme through negative gearing tax giveaways, deregulated banks and ‘first home owners grants’ that do nothing buy push up the price is hardly what most people would consider ‘working hard’.

georgesgenitals3:24 pm 24 Nov 10

johnboy said :

Slowing down land supply will only push up prices and drive the population over the border.

It already has. I think land release is one of the keys to more sensible pricing. Local govco is now releasing more land (or at least planning to), but the blocks are small and the prices high. Of course, we’re still left with the issue of having limited access to our high priced tradies…

It will be interesting to see what happens with property prices over the next few years. My best guess is a slight sagging, but generally no real increases or decreases (meaning slow steady decrease in real terms) for a number of years.

Mr Gillespie said :

Hey instead of deciding which are the worse of the 2 evils, I instead demand to know why Canberra’s population continues to expand, full stop!!!!

Because we can’t stop it.

Slowing down land supply will only push up prices and drive the population over the border.

shadow boxer3:16 pm 24 Nov 10

arescarti42 said :

Interesting post JB.

Some might be interested in reading this excellent post from a few days ago which examines in detail the effect retiring boomers will have on asset prices.

In Summary:

-The oldest of the boomers hit 65 next year
-Boomers make up 25% of the population, but own 45% of owner occupied dwellings, and 51% of investment properties and holiday homes.
-The median boomer holds most of their wealth in real estate, and holds a piddling $72000 in non real estate assets.

So basically, the average boomer has no where near enough non housing assets to fund their retirement, and will need either sell off some investment properties or sell their homes and downsize.

It’s not hard to guess what 25% of the population selling their homes and investments en masse over the next 20 years will do to the real estate market.

If the current situation in QLD, TAS and WA is any sign of things to come, retiring boomers wont be the only factor pushing down property values.

Maybe in the rest of Australia, in Canberra most boomers will live comfortably on their fully indexed CSS pension with no mortgage.

georgesgenitals3:15 pm 24 Nov 10

arescarti42 said :

Hmm, looks like i forgot to put the hyperlink in, this: http://www.unconventionaleconomist.com/2010/11/baby-boomers-retirement-and-asset.html is the post I was referring to.

That’s a damn interesting article and well worth a look. Cheers.

Mr Gillespie3:12 pm 24 Nov 10

Hey instead of deciding which are the worse of the 2 evils, I instead demand to know why Canberra’s population continues to expand, full stop!!!!

georgesgenitals3:03 pm 24 Nov 10

Tetranitrate said :

georgesgenitals said :

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Good to see. Why should they pass anything on? They were born post WW2 when most people were lucky to eat three times a day, and their elderly parents typically don’t pass much on to them.

It won’t hurt the rest of us to work for what we want.

That’s just a load of BS. Post war Australia was literally the best place to live in the world.

During the war people often struggled just to eat. Even after the war, Australia might have been a good place to live, but the average Aussie was not wealthy, and many older people have retired on very little income (hence the introduction of compulsory superannuation). When these people pass away, they house they owned is generally split amongst the children (and those families had more children than we do on average today). That doesn’t leave much to pass on.

The baby boomers are wealthy because Australia has gone through a long period of prosperity, leaving us very near the top of tree in world terms. Baby boomers have enjoyed booms in both property and shares, and are on average only a few years past their ‘peak spend’. It’s worth remembering that many (if not most) of those baby boomers who we now classify as ‘rich’ started from humble beginnings. Australia is still a prosperous country, and the concept of working hard for several decades is very much available to the rest of us.

Holden Caulfield said :

deezagood said :

That first picture is just hideous. Hideous. Money obviously does not buy good taste.

Or perhaps, quite obviously, taste is subjective.

I’ve been really interested in the progress of that house, and even snuck in for a bit of a gander not long after frame stage. I wouldn’t call it my cup of tea exactly, but I prefer it to a majority of development that takes place. It looks a fair step up from a lot of the “nice” project homes that sometimes get built after an inner suburb knockdown.

Comes back to co-existence really. Who are any of us to expect our judgment of taste to be the only answer of what is good?

Fair call Holden … okay – in my own humble opinion, (which is purely my own), that house is hideous and an eyesore. I am comparing this to some of the very tasteful houses that are built after a knock-down, where the owners at least attempt to build a home that accords with the ‘flavour’, context and overall style of the extant surroundings.

Hmm, looks like i forgot to put the hyperlink in, this: http://www.unconventionaleconomist.com/2010/11/baby-boomers-retirement-and-asset.html is the post I was referring to.

Interesting post JB.

Some might be interested in reading this excellent post from a few days ago which examines in detail the effect retiring boomers will have on asset prices.

In Summary:

-The oldest of the boomers hit 65 next year
-Boomers make up 25% of the population, but own 45% of owner occupied dwellings, and 51% of investment properties and holiday homes.
-The median boomer holds most of their wealth in real estate, and holds a piddling $72000 in non real estate assets.

So basically, the average boomer has no where near enough non housing assets to fund their retirement, and will need either sell off some investment properties or sell their homes and downsize.

It’s not hard to guess what 25% of the population selling their homes and investments en masse over the next 20 years will do to the real estate market.

If the current situation in QLD, TAS and WA is any sign of things to come, retiring boomers wont be the only factor pushing down property values.

Holden Caulfield2:23 pm 24 Nov 10

deezagood said :

That first picture is just hideous. Hideous. Money obviously does not buy good taste.

Or perhaps, quite obviously, taste is subjective.

I’ve been really interested in the progress of that house, and even snuck in for a bit of a gander not long after frame stage. I wouldn’t call it my cup of tea exactly, but I prefer it to a majority of development that takes place. It looks a fair step up from a lot of the “nice” project homes that sometimes get built after an inner suburb knockdown.

Comes back to co-existence really. Who are any of us to expect our judgment of taste to be the only answer of what is good?

I have a ‘most hated’ list of O’Connor properties.

Whenever I walk past any of them them I death ray it and shake my head vigorously, hoping the owners can sense my overt disdain.

The house in Photo One – even uncompleted – has been at the top of my list for some time now.

Tetranitrate2:15 pm 24 Nov 10

georgesgenitals said :

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Good to see. Why should they pass anything on? They were born post WW2 when most people were lucky to eat three times a day, and their elderly parents typically don’t pass much on to them.

It won’t hurt the rest of us to work for what we want.

That’s just a load of BS. Post war Australia was literally the best place to live in the world.

Tetranitrate2:14 pm 24 Nov 10

Johnboy is of course right, but skilled/educated young people don’t really have to ‘deal with it’- they ‘can’ just leave. Uni, Graduate, go overseas, come back when all the baby boomers are dead.

I was thinking of the endless caravan of grey nomads ringing Australia waiting for their window in Broome.

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Cable Beach? My parent just left for Cuba…

georgesgenitals2:02 pm 24 Nov 10

johnboy said :

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

Good to see. Why should they pass anything on? They were born post WW2 when most people were lucky to eat three times a day, and their elderly parents typically don’t pass much on to them.

It won’t hurt the rest of us to work for what we want.

dtc said :

However, I agree its a bit of a pyramid scheme. Older wealthy people only being able to sell their properties to other older wealthier people – surely at some stage there will be too many properties that hardly anyone can afford. (although I guess at about that time inheritances will kick in)

The problem I see in the medium term isn’t the wealthy people needing to sell their big house to someone, it is them living out their retirement will still owning all the cheaper places as investments. Preventing the younger people buying these cheaper houses, while money flows to the top of the pyramid.

georgesgenitals1:56 pm 24 Nov 10

housebound said :

There wsa a study recently that showed the main people who owned these units are all investors – ie these are not something people buy to live in. And seeing these pics, I can see why!

As an investor, why would you care? As long as it bring the results you are after (growth, yield, development profit, whatever) it doesn’t really matter. You’d also be surprised how many people want to live in something like that.

clp said :

Well they will die eventually.

+1. Not that we assist them in any way…

Other than that they get to an age where they require constant care, in which case their property goes on the market as they move in to a nursing home.

I know some of my neighbours and I’ve seen old couples leave to be replaced by young families. (btw I live in a house in the Inner North)

georgesgenitals said :

If you build up too much the hub centres get way too crowded.

Depends on your perspective. Retailers in Civic think there isn’t enough people (read: customers) to make their business viable.

Don’t think they’ll have anything left in the tank to pass on as an inheritance. But enjoy the postcard from cable beach.

There wsa a study recently that showed the main people who owned these units are all investors – ie these are not something people buy to live in. And seeing these pics, I can see why!

georgesgenitals1:48 pm 24 Nov 10

deezagood said :

That first picture is just hideous. Hideous. Money obviously does not buy good taste.

Spot on. And if you think it looks bad now, wait for 15 years or so as it ages.

georgesgenitals1:47 pm 24 Nov 10

johnboy said :

georgesgenitals said :

I voted go out. The build decent infrastructure to enable efficient transport. If you build up too much the hub centres get way too crowded.

I think you’re dreaming. there won’t be infrastructure over the border.

There won’t need to be. The next 10 years of ACT development is along the western side of the Parkway. They’ve already built Stromlo Villiage (I think that’s what it’s called), which is right next to Wetson, and are now starting the development north which will eventually go right up to western Belconnen. These aren’t far flung locations (in fact most of this new stock will be better located than Tuggers and Gungers), so all that’s really needed is decent roads by the ACT govt. Most of the blocks will be fairly small, which will lead to more of what you see in the newer Gungers areas, which is a strange blend of low and medium density.

I’ll stick with my big, level block across from the reserve, though. I like having 4 bedrooms and room to hang outside.

Someone I know used to live in option 2 (those exact ones). As soon as they had one baby they moved out to the sticks to get a house and garden etc. Not everyone wants to live in a unit. And I thought Andrew Barr was talking of higher rise than those in any case?

That first picture is just hideous. Hideous. Money obviously does not buy good taste.

georgesgenitals said :

I voted go out. The build decent infrastructure to enable efficient transport. If you build up too much the hub centres get way too crowded.

I think you’re dreaming. there won’t be infrastructure over the border.

What about townhouses rather than units? Single story. You can fit 3 or 4 onto the average inner north block. No need for ‘up’

Also, just looking at Canberra, there is an awful lot of empty land. What about all that land as you drive in from Sydney (around Mitchell). That could fit another 50,000 people easily and its not particularly far away. Not to mention the areas that are already for development (Molonglo etc) and the gaps in between the current districts (between Belco and Gungalin or Woden and Tuggers). Being 10 or 15km out of Civic is not exactly ‘out’ – especially if there is the infrastructure to support it (infrastructure being the usually forgotten part of the equation)

However, I agree its a bit of a pyramid scheme. Older wealthy people only being able to sell their properties to other older wealthier people – surely at some stage there will be too many properties that hardly anyone can afford. (although I guess at about that time inheritances will kick in)

Holden Caulfield1:39 pm 24 Nov 10

Both, I think.

That second pic looks like it might be on or near Hartley Street in Turner, which back in the very early 90s was not zoned for that type of medium-high residential housing. Obviously that has now changed as part of the solution to JB’s pyramid conundrum.

As to the other house, also in Turner, I don’t see why people shouldn’t be able to build new homes in inner city suburbs.

Many of us will have noticed that the style of housing in which “normal people might manage to live” has been popping up at an alarming rate in Canberra in the last 10 years or so, especially in the inner north, but all around, really. Probably a fair portion of it funded by the type of people building housing like Option 1, too, I might add.

So, to conclude, can’t Option 1 and Option 2 co-exist?

Imagine the resort like retirement homes they’ll leave behind for us though!

georgesgenitals1:32 pm 24 Nov 10

I voted go out. The build decent infrastructure to enable efficient transport. If you build up too much the hub centres get way too crowded.

Erg0 said :

clp said :

Well they will die eventually.

That’s pretty much my home buying plan in a nutshell.

Chaz said :

people would rather you work for longer and earn a lot less. that’s what’s happening

Who do you reckon these people are?

Reptoids

clp said :

Well they will die eventually.

That’s pretty much my home buying plan in a nutshell.

Chaz said :

people would rather you work for longer and earn a lot less. that’s what’s happening

Who do you reckon these people are?

seems like you’re blaming the baby boomers. it’s not so much as the baby boomers taking an extended retirement. it’s more the fact the everybody else is getting robbed out of theirs.

people would rather you work for longer and earn a lot less. that’s what’s happening

Well they will die eventually.

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