The future of Australian property prices

[Smurf1976]

$1m homes were called homes of the very rich then,

Just one generation ago someone having $1 million was quite something, a notable achievement, no matter what assets it consisted of. At that time the actual definition of high income in Australia as per the applied Income Tax rates was $35k a year.

Today $1 million won't even buy an average suburban house in Sydney and $35k is below the minimum wage for full time employment.

Such is the extent of inflation that in the space of a single generation the same $ amount has gone from bona fide high income to below the minimum wage and from truly rich to inadequate to buy a basic house.

Always remember this when someone says inflation is low.

 

[Warr87]

Just one generation ago someone having $1 million was quite something, a notable achievement, no matter what assets it consisted of. At that time the actual definition of high income in Australia as per the applied Income Tax rates was $35k a year.

Today $1 million won't even buy an average suburban house in Sydney and $35k is below the minimum wage for full time employment.

Such is the extent of inflation that in the space of a single generation the same $ amount has gone from bona fide high income to below the minimum wage and from truly rich to inadequate to buy a basic house.

Always remember this when someone says inflation is low.

true. but isn't part of the point that house prices have risen far steeper and quicker than other metrics as well. inflation for a number of years was technically low, but in comparison to those timelines you mention, it is a stark contrast.

i look at houses around 5 x my annual salary as a guide. that was feasible before. hardly the case now even with the grow in the 'typical' wage.

 

[sptrawler]

true. but isn't part of the point that house prices have risen far steeper and quicker than other metrics as well. inflation for a number of years was technically low, but in comparison to those timelines you mention, it is a stark contrast.

i look at houses around 5 x my annual salary as a guide. that was feasible before. hardly the case now even with the grow in the 'typical' wage.

The problem is, it isnt Australia wide, it is an issue that has really centralised on Sydney and Melbourne and that is what makes it hard to tackle it really requires a Sydney Melbourne answer.
Which probably goes back to interest rates, hiking them up puts a lot of financial stress on those with the biggest loans, but maybe it is the only way to bring the ponzi scheme to an end?

 

[Warr87]

The problem is, it isnt Australia wide, it is an issue that has really centralised on Sydney and Melbourne and that is what makes it hard to tackle it really requires a Sydney Melbourne answer.
Which probably goes back to interest rates, hiking them up puts a lot of financial stress on those with the biggest loans, but maybe it is the only way to bring the ponzi scheme to an end?

I would say that it is concentrated around Sydney and Melbourne. I think other cities feel the effects to some extent. Though the problem is as you stated, how do you tackle a problem that is primarily around 2 cities? I'm not sure local governments want to take that on though. I mean, don't they get more income the higher those house prices are? Better to let the federal government look like the bad guy.

I'm not opposed to raising interest rates though.

 

[qldfrog]

Just one generation ago someone having $1 million was quite something, a notable achievement, no matter what assets it consisted of. At that time the actual definition of high income in Australia as per the applied Income Tax rates was $35k a year.

Today $1 million won't even buy an average suburban house in Sydney and $35k is below the minimum wage for full time employment.

Such is the extent of inflation that in the space of a single generation the same $ amount has gone from bona fide high income to below the minimum wage and from truly rich to inadequate to buy a basic house.

Always remember this when someone says inflation is low.

And always remember this when doing the sums when retiring...Seems my timing is always wrong

 

[gartley]

IR pattern continues to build, expect IR to be back to 2019 levels within 1-2 years. Greedy bulls that don't liquidate soon will be in for a surprising dissapointment

 

[sptrawler]

Social housing flats, wasn't this done in the 1960's and they became multistory slums and hives of crime? I know I lived in one in my early days in Perth, it had that bad a name, the council ended up changing it. Which is a shame, it was aptly named Battle Street. ?

National Affordable Housing Alliance: New coalition calls for $20bn to address social housing shortfall - realestate.com.au

A newly formed coalition of powerful Australian industry groups is calling for a $20bn federal government intervention to help fight a widening social housing crisis around the nation.

www.realestate.com.au

Mirvac getting into the build to rent scene.

New concept could end big rental gripes – but there’s a catch

It’s one of the biggest frustrations from roiled renters: the hefty bond that sits in limbo and then has all or part of it withheld by the agent to pay for a cleaner, despite you spending days scrubbing every dusty crevice. One in three renters don’t get their full bond back.

www.news.com.au

 

[SirRumpole]

Workers on average incomes can't afford to either buy or rent, so they sleep in their cars.

Shows what happens when we have governments that smile when the rich get richer.

'Never thought I'd be homeless': Garry sleeps in his van because his pay doesn't cover rent and food

Instead of driving home from work, Garry Wallis sets up his van in a suburban car park and settles in for the night. The 59-year-old says despite working all his life, he's homeless.

www.abc.net.au

 

[againsthegrain]

Workers on average incomes can't afford to either buy or rent, so they sleep in their cars.

Shows what happens when we have governments that smile when the rich get richer.

'Never thought I'd be homeless': Garry sleeps in his van because his pay doesn't cover rent and food

Instead of driving home from work, Garry Wallis sets up his van in a suburban car park and settles in for the night. The 59-year-old says despite working all his life, he's homeless.

www.abc.net.au

Im sure those people in the article, its somehow their fault. Yeah thats right some politician will find a perfectly good explanation why they are solely at blame for the situation they are in.... get a better job eh?

 

[Smurf1976]

Shows what happens when we have governments that smile when the rich get richer.

As a technicality it's not the rich getting richer that's the problem, it's the many who are becoming poorer in real terms that's the problem. A few people being rich isn't a problem if the rest are also doing OK.

Real terms being what you can afford to buy physically, as distinct from $ in an account or on a screen.

Go back 50 years and one adult, with nothing more than a high school education, could obtain full time work the income from which was adequate to buy a house, run at least one car and support a wife and children. Make that two cars for those with a better education and job.

Today two adults, both with a university education and both working full time, struggle to afford a house, car and kids.

That's an epic decline in real terms but bizarrely, most seem rather blind to it.

Why? Well in short we offshored most of our value adding industry that formed the basis of that situation 50 years ago and kept the game going by running up debt and debasing the the currency. That's not creating real wealth and the effects are now all too apparent.

There's a few who saw what was coming and were concerned about it back in the 1980's or 90's but they failed to get the message through to the public. It's not that they didn't try but that the public and government just didn't want to hear it.

 

[wayneL]

Im sure those people in the article, its somehow their fault. Yeah thats right some politician will find a perfectly good explanation why they are solely at blame for the situation they are in.... get a better job eh?

It's all those smashed avocados

 

[SirRumpole]

As a technicality it's not the rich getting richer that's the problem, it's the many who are becoming poorer in real terms that's the problem. A few people being rich isn't a problem if the rest are also doing OK.

While I agree with the general thrust of your post, in the specific case of property prices where negative gearing benefits those who have money to invest in rental property at the expense of those looking to buy their first home, I think you can say that the (relatively) rich are getting richer while the majority in the home buying market certainly are not.

 

[sptrawler]

While I agree with the general thrust of your post, in the specific case of property prices where negative gearing benefits those who have money to invest in rental property at the expense of those looking to buy their first home, I think you can say that the (relatively) rich are getting richer while the majority in the home buying market certainly are not.

I have said it numerous times over the years, houses are really non productive investment IMO, if you want to help first home buyers let them have a tax deduction on their interest to a certain value.
Also with negative gearing, it should only be allowed to a certain value, the whole point in an investment is for it to become positive geared, that seems to have been lost somewhere in the journey. IMO an investment shouldn't stack up, just as a tax reduction strategy.

 

[againsthegrain]

 

[SirRumpole]

I have said it numerous times over the years, houses are really non productive investment IMO, if you want to help first home buyers let them have a tax deduction on their interest to a certain value.
Also with negative gearing, it should only be allowed to a certain value, the whole point in an investment is for it to become positive geared, that seems to have been lost somewhere in the journey. IMO an investment shouldn't stack up, just as a tax reduction strategy.

Exactly.

Go back to the previous system where deductions are only allowed against the income that the investment produces, then it's up to the investor to decide whether the investment is profitable.

 

[qldfrog]

While I agree with the general thrust of your post, in the specific case of property prices where negative gearing benefits those who have money to invest in rental property at the expense of those looking to buy their first home, I think you can say that the (relatively) rich are getting richer while the majority in the home buying market certainly are not.

@SirRumpole , i invite you to reread what you have just written and try to find your logic:
I summarise for you and let's try to break the old record
So negative gearing is favoring the rich bastards who buy investment properties for rental ,preventing people to buy their own house, and that is why this 60y old can not find a rental.....got it?
You see the issue
I now understand why 50% of people can believe that crap news of their ABC and News ltd
i would even go further
a 3bedroom house purchased by its owner will house a family
The same house on rental will probably be shared and so accomodate more people..
basically the complete opposite of your point.and labour has been saying that crap for decades.
Here in Noosa shire, there is a critical shortage of rental..and guess what is the reason? IP being sold to new owners who live there..
NOT enough IP is the issue
You know , IP, 2% return , laws after laws preventing you from expelling bad tenants, forcing you to accept pets, adding regulations after regulation,higher rates and when covid comes well , tenants do not pay but obviously the horrible landlords still pay rates,BC and maintenance...
If anyone is genuinely trying to solve that issue, either the gov build social housing and bear the costs or you release the private sector: less tenant rights,easier building processes. Which requires the removal of most of the council rackets :zonings, certification etcwould also lower corruption in this country which is starting to get worrying

As is usual in Australia, we follow the bad examples of 20y ago Europe and are surprised to have the same results.
In my humble opinion, buying an IP house to put it on rental in 2022 in Australia is not a very bright idea and as it get worse, slowly rentals will disappear

 

[qldfrog]

@SirRumpole , i invite you to reread what you have just written and try to find your logic:
I summarise for you and let's try to break the old record
So negative gearing is favoring the rich bastards who buy investment properties for rental ,preventing people to buy their own house, and that is why this 60y old can not find a rental.....got it?
You see the issue
I now understand why 50% of people can believe that crap news of their ABC and News ltd
i would even go further
a 3bedroom house purchased by its owner will house a family
The same house on rental will probably be shared and so accomodate more people..
basically the complete opposite of your point.and labour has been saying that crap for decades.
Here in Noosa shire, there is a critical shortage of rental..and guess what is the reason? IP being sold to new owners who live there..
NOT enough IP is the issue
You know , IP, 2% return , laws after laws preventing you from expelling bad tenants, forcing you to accept pets, adding regulations after regulation,higher rates and when covid comes well , tenants do not pay but obviously the horrible landlords still pay rates,BC and maintenance...
If anyone is genuinely trying to solve that issue, either the gov build social housing and bear the costs or you release the private sector: less tenant rights,easier building processes. Which requires the removal of most of the council rackets :zonings, certification etcwould also lower corruption in this country which is starting to get worrying

As is usual in Australia, we follow the bad examples of 20y ago Europe and are surprised to have the same results.
In my humble opinion, buying an IP house to put it on rental in 2022 in Australia is not a very bright idea and as it get worse, slowly rentals will disappear

And in French:

Laisser un logement vacant va devenir une infraction en Belgique

Dès le 1er septembre, des mesures seront prises en Wallonie, région belge, pour lutter contre les logements vides et permettre aux ménages de se loger.

immobilier.lefigaro.fr

Google translate but in Belgium and france, leaving a house unit empty is now unlawful..owners prefer leaving units empty than risking a tenant..
Give 1 more labour/green gov..and we will have to do similar...as noone will dare renting..but sure negative gearing.....

 

[SirRumpole]

@SirRumpole , i invite you to reread what you have just written and try to find your logic:
I summarise for you and let's try to break the old record
So negative gearing is favoring the rich bastards who buy investment properties for rental ,preventing people to buy their own house, and that is why this 60y old can not find a rental.....got it?
You see the issue
I now understand why 50% of people can believe that crap news of their ABC and News ltd
i would even go further
a 3bedroom house purchased by its owner will house a family
The same house on rental will probably be shared and so accomodate more people..
basically the complete opposite of your point.and labour has been saying that crap for decades.
Here in Noosa shire, there is a critical shortage of rental..and guess what is the reason? IP being sold to new owners who live there..
NOT enough IP is the issue
You know , IP, 2% return , laws after laws preventing you from expelling bad tenants, forcing you to accept pets, adding regulations after regulation,higher rates and when covid comes well , tenants do not pay but obviously the horrible landlords still pay rates,BC and maintenance...
If anyone is genuinely trying to solve that issue, either the gov build social housing and bear the costs or you release the private sector: less tenant rights,easier building processes. Which requires the removal of most of the council rackets :zonings, certification etcwould also lower corruption in this country which is starting to get worrying

As is usual in Australia, we follow the bad examples of 20y ago Europe and are surprised to have the same results.
In my humble opinion, buying an IP house to put it on rental in 2022 in Australia is not a very bright idea and as it get worse, slowly rentals will disappear

The basis of retirement security is home ownership. If people are still renting at retirement age they are in big trouble financially. One of the reasons people can't afford houses is that investors have taken over the market . There needs to be a swing in the other direction towards home ownership or there will be a lot more people living on the streets.

 

[Smurf1976]

If the situation is to be fixed then as with anything it’s the disease which needs to be cured not simply the symptoms.

Shift the focus back to productive industry creating real wealth with houses just something for living in and the rest of the problems ultimately go away.

Anything else is akin to taking Panadol to cure cancer. At best it might dull the symptoms for a while.

 

[qldfrog]

The basis of retirement security is home ownership. If people are still renting at retirement age they are in big trouble financially. One of the reasons people can't afford houses is that investors have taken over the market . There needs to be a swing in the other direction towards home ownership or there will be a lot more people living on the streets.

Sp you expect everyone ar retirement age to own his her home?
I looked for a socialist Scandinavian heaven:
Sweden: where less than 40pc of people own their houses
Australian situation of very high ownership is an anomaly and the Reset coming is making sure we will go back in rank...

https://www.statista.com/statistics...ority of,were rented multi-dwelling buildings.