House prices to keep rising for years

[robots]

hello,

might be some tweaking of those supply numbers over the next few weeks (ie. some reductions, people accepting offers)

yes who knows what may happen in the future hopefully the gains are locked in so we can keep the economy rollin on (equity mate)

thankyou
professor robots

Robots,

The next few weeks will give a better picture of the demand supply situation with a dramatic increase in volume of properties offered at auction.

The next few months will be interesting with the FHBG being reduced and a more than likely increase in IR rates. Just a small increase will get people thinking.

I personally are looking forward to heavily loading up on debt in the new year for property purchases, just waiting for interest rates to go up.

Cheers

For those that we up early in Melbourne this morning, it was one of the most stunning sun rises I have seen in a long time.

 

[satanoperca]

Mofra,

I am not aware of the full details of government assistance to families, I have a single child and our family does not recieve anything from the goverment except childcare rebate. I accept that the scenerio I painted it is necessary to add further income from the government to the family.

But I find it a bit had to believe that a family on 60K with 2 kids could recieve 26K from the goverment. Had a look at the government website, to much to absorb but a mate is a single father with a child in day care full time, earns 65K a year and recieves about 14-16K back on his take.

If anyone knows what a 60K family income with two kids under 18 years old receive from the goverment in benefits each year?

Cheers

 

[MACCA350]

If investment incentives were reduced, wouldn't that reduce demand by the investment crowed and in effect reduce prices which will allow many of those current renters who have been locked out due to price to free up rentals and buy their own property.

It just seems that the pricing over the last 10 years has been pushed up by those investors with deeper pockets than the average household..........if they kept their hands in their pockets due to lower investment incentives, surely this would reduce prices allowing lower earning groups to leave the rental market and purchase their own home(and if the govt wiped the FHBG on existing properties completely and only had a reasonable(not excessive) FHBG on new builds much of those buyers would build........and in doing so increase available properties)


Step back and have a look for a minute on a large scale. Over the last 10 years or so the prices have increased exceptionally and pushed ownership further up the earnings ladder. Now what happens to those who now cannot afford to purchase, they must rent of course which puts pressure on rents.

Now put this in reverse, take some of the investment incentives away and demand drops, prices drop...........low and behold those who were locked out of the market are now able to purchase and free up rental properties.

Ask yourself, where are the majority of Australians on the income ladder?
Push prices up high enough and they cannot buy and must rent, which pushes up rental prices and makes housing "investment" look attractive for investors (who are higher up the earnings ladder) who can afford more for properties and are gagging to buy more due to the incentives.

I saw something on TV where this lady mentioned she had purchased 70 IP's in a short period of time IIRC.........mind you the bank probably owned 99% of them...........I mean seriously the balance seems wrong, there seems to be too much investment incentive.

Have a look at the past 6 months or so and you'll see there is a large FHB group that would jump at the chance for affordable new housing...........surely no one could ignore the flood of FHB due to the lower rates and FHBG boost..............reduce the investment incentives, allow housing to become more affordable and I'd bet this "property shortage" would be sorted pretty quick.

cheers

 

[Tysonboss1]

If investment incentives were reduced, wouldn't that reduce demand by the investment crowed and in effect reduce prices which will allow many of those current renters who have been locked out due to price to free up rentals and buy their own property.

The only thing that will lower prices and rents is increased supply, Renter simply buying his own home doesn't really free up a rental property because the one he is buying is probally an ex rental.

Increase supply and you are going to put downward pressure on rents, reduce supply of dwellings and you are going to put upward pressure on rents.

Developers build dwellings, Investors then buy these dwellings freeing up the developers cashflow to build his next poject. without investors buying the dwellings less dwellings will be built, less dwelling being built = less available rentals and increased rents.

simply turning renters into property owners doesn't increase supply so you are still stuck with higher rents.

 

[Tysonboss1]

Step back and have a look for a minute on a large scale. Over the last 10 years or so the prices have increased exceptionally and pushed ownership further up the earnings ladder. Now what happens to those who now cannot afford to purchase, they must rent of course which puts pressure on rents.

If someone can't afford to buy a place to live it is because of their failure to save and invest, or their standards are to high.

I am sick hearing people who go through their late teens and twenties living the life of hyper consumers and arrive at age 30 and complain they can't afford their dream home.

I am also sick of low and middle income people looking at the price of 3 bedroom house and land within 15 kms of sydney and complaining that they could never afford to own one. Get with the programme people your not supposed to be able to afford a 3bedroom home on a decent block of land 15kms from sydney.

Our big capital cities are getting over crowded and there is simply not enough land for every family to own a house and land near the city, So someone has to miss out, and it's not going to be the high incomes.

If you can't settle for what your budjet provides for then you must live the life of a renter.

 

[Tysonboss1]

Have a look at the past 6 months or so and you'll see there is a large FHB group that would jump at the chance for affordable new housing...........surely no one could ignore the flood of FHB due to the lower rates and FHBG boost..............reduce the investment incentives, allow housing to become more affordable and I'd bet this "property shortage" would be sorted pretty quick.

cheers

The fHBG is one of the key factors that has caused price increases, It does nothing to increase supply of housing it just gives people more money in which to pay for it.

Picture a table with 5 people at it and in the centre is 4 banana's, The supply is not enough for everybody, but all 5 people want a banana so the person with the least to spend is going to miss out because the bidding will increase till the poorest person drops out. However giving the poor guy more money will just increase the price higher, someone still must miss out.

The only thing that will reduce the price is increasing the supply of the banana's.

 

[explod]

The only thing that will reduce the price is increasing the supply of the banana's.

Good analogy, but if they borrowed to buy the banana's and the interest rates were to rise and they cant afford to pay it then they will want to unload those banana's and the price will drop. Or if costs of food, school fees go up and jobs start to be lost, again not able to afford to support the holding of banana's price will drop

 

[gooner]

c. Family Benefits for a 2 child family equate to $186.20 per fn for Part B (unless they're younger, in which it's higher). The lowest rate for Part A on ave salary is $313.88 per fn. That's $26,000 pa extra income not factored into your scenario, which makes quite a difference. If either child is under 5, the amount of Part B increases and if either child is over 13, the amount of Part A increases.
.

These numbers are grossly overstated.

Firstly the fortnightly amounts have been multiplied by 52 - last time I looked there were only 26 fortnights in a year. So that halves the amount straight away.

Secondly, the amount of $313 per fortnight only applies up to family income of $45,000. On the average income quoted of $60k, you would lose 20% of the difference, so that is another $3,000 off the total.

Thirdly Family Tax benefit B is paid by family, not per child, so this number is also overstated by a factor of 2.

Overall, you would get about $7,500 a year in these circumstances, not $26,000

I get the maximum amount of A and B due to estimated family income below $45k. I have THREE kids. Total assistance from FTB A and FTB B is about $18k a year

 

[Tysonboss1]

Good analogy, but if they borrowed to buy the banana's and the interest rates were to rise and they cant afford to pay it then they will want to unload those banana's and the price will drop. Or if costs of food, school fees go up and jobs start to be lost, again not able to afford to support the holding of banana's price will drop

Yes, But people have to live some where, In such situations you can see some crazy things happening.

The first thing you notice is both rents and prices of top end homes fall as people try and save by trading down, the property classes at the lower end have increasing demand as these people start trading down which supports both rents and prices.

So in a recession rents of lower end properties can rise and prices hold firm.

Thats why I always invest in property that suits people at the bottom of the middle class bracket and the top of the low income bracket. this style of property delivers a higher rental yeild and is always in demand regardless of the economic cycle.

I do own one topend home, however it has not performed as well ( as far as rental yeild is concerned) and I only keep it because I wish to move into it one day.

 

[MACCA350]

simply turning renters into property owners doesn't increase supply so you are still stuck with higher rents.

It will if there is incentive to build instead of buying existing.

I think you missed my point though........Hypothetically do you think there would be a supply shortage if the median price was $250k instead of nearly $450k?

Picture a table with 5 people at it and in the centre is 4 banana's, The supply is not enough for everybody, but all 5 people want a banana so the person with the least to spend is going to miss out because the bidding will increase till the poorest person drops out. However giving the poor guy more money will just increase the price higher, someone still must miss out.

The only thing that will reduce the price is increasing the supply of the banana's.

............And what if that poorest guy was only given the money to build his own banana tree.........I do understand that the FHBG have upward effect on prices, but they can be used to direct FHB to a particular sector, that's why I said:
"if the govt wiped the FHBG on existing properties completely and only had a reasonable(not excessive) FHBG on new builds much of those buyers would build"

I think you may have missed my point........prices have become too high for the average punter..........they cannot buy so they have to rent..........lower prices and they can build a new home which adds one more house to the supply.

cheers

 

[satanoperca]

These numbers are grossly overstated.

I get the maximum amount of A and B due to estimated family income below $45k. I have THREE kids. Total assistance from FTB A and FTB B is about $18k a year

Thanks Gooner. It would seem quite difficult to manage a morgage of x7 average income and raise three children on these figures. This was all I was trying to show, that affordability is out the door in this country due to excessive credit and NG.

Cheers

 

[gooner]

Thanks Gooner. It would seem quite difficult to manage a morgage of x7 average income and raise three children on these figures. This was all I was trying to show, that affordability is out the door in this country due to excessive credit and NG.

Cheers

Satanoperca

Completely agree with you. I own my house but this is because I was previously earning good money. Earning $60k a year with three kids, and a mortgage of $430k, pffffffft.

I was nervous about taking on a mortgage of that much when I was earning over $200k a year.

 

[Mc Gusto]

Melbourne's property market is out of control and i wonder what it means for the long term.

Went to two auctions on the weekend. Caulfield north, semi detached, renovated. Quoted 700 - 800. On the market at 780. sold for 916k

St Kilda East, semi detatched, semi-renovated. Quoted 680 - 740. On the market at 730k sold for 925k.

Both would have struggled to get past 700 in december i kid you not...are people really that confident in this countries economic outlook? it seems so...

I am not going to argue or 'fight' the market but i am not going to participate either.

thanks

Gusto

 

[Mc Gusto]

ONE-THIRD of the country -- including battlers' suburbs and some of the wealthiest urban areas -- has entered the danger zone for financial distress, despite signs that economic conditions are improving.

Dunn & Bradstreet found that 33 per cent of postcodes had fallen into the "high-risk" category of financial distress, with Victorian suburbs facing the highest risk of defaulting on debts. This is up 30per cent on the same time last year.

http://www.theaustralian.news.com.au/story/0,25197,26036211-2702,00.html

 

[Beej]

If someone can't afford to buy a place to live it is because of their failure to save and invest, or their standards are to high.

I am sick hearing people who go through their late teens and twenties living the life of hyper consumers and arrive at age 30 and complain they can't afford their dream home.

I am also sick of low and middle income people looking at the price of 3 bedroom house and land within 15 kms of sydney and complaining that they could never afford to own one. Get with the programme people your not supposed to be able to afford a 3bedroom home on a decent block of land 15kms from sydney.

Our big capital cities are getting over crowded and there is simply not enough land for every family to own a house and land near the city, So someone has to miss out, and it's not going to be the high incomes.

If you can't settle for what your budjet provides for then you must live the life of a renter.

+1 - Well stated Tysonboss!

When I was in my early twenties I saved money, deferred travel, drove a second hand car etc (self maintained) etc, and bought a house in 1992. At this time, although prices were cheaper in income/price ratio terms (although Sydney median house price was 7x average full time wage), interest rates were way higher at over 10% - so affordability was actually about the same as today, possibly even lower actually. Many of my friends/colleagues/peers at the same age were spending nearly every cent and traveling the world, buying new cars (on credit) etc having a ball, but with no eye to the future. Having just seen the great Sydney house price boom of 1988-1989, they should have been as aware as I was that securing home ownership as soon as possible was going to be a life defining decision (financially at least).

By the time we were all nearly 30, I had paid off that first house and owned it outright - all my friends were complaining that they could not afford to buy a house, they were too expensive etc etc! I started doing my traveling etc then in my late 20s, and had the time of my life, but when I got back - I still owned a house! In fact the rent I got paid while I was traveling funded my travels

So some words of wisdom: Save, invest, buy property etc when you are young - as soon as you start earning full time income. Defer long travels, consumption etc until just that little bit later in life (you may only have to wait 5 years, it's not that long). This approach can set you up for life, irrespective of easy credit, FHB grants etc etc etc. Maybe not everyone's cup of tea, but if you choose a different path, don't complain when you can't afford an inner city Sydney house at age 30, or even 40. And remember that whatever path you choose, when the time comes to buy your first house some of the people you will be competing with will have chosen a path like the one I describe.

Cheers,

Beej

 

[Tysonboss1]

I think you missed my point though........Hypothetically do you think there would be a supply shortage if the median price was $250k instead of nearly $450k?

Yes there would still be a shortage if you are talking about a house and land package.

Because lowering the price doesn't create more land.

There are properties avaiable even in sydney for $250,000. Offcourse alot of people set their sights on properites that are way above their means, and then complain when they can't afford it.

 

[Tysonboss1]

When I was in my early twenties I saved money, deferred travel, drove a second hand car etc (self maintained) etc, and bought a house in 1992. At this time, although prices were cheaper in income/price ratio terms (although Sydney median house price was 7x average full time wage), interest rates were way higher at over 10% - so affordability was actually about the same as today, possibly even higher actually. Many of my friends/colleagues/peers at the same age were spending nearly every cent and traveling the world, buying new cars (on credit) etc having a ball, but with no eye to the future. Having just seen the great Sydney house price boom of 1988-1989, they should have been as aware as I was that securing home ownership as soon as possible was going to be a life defining decision (financially at least).

Me to, was investing in shares from the age of 14, By 20 I bought my first property, and by 24 I was running my own business. Now I am 27 and My business is firing on all cylinders I have a decent property portfolio and a healthy share portfolio.

It's easy to blame the world but at the end of the day it's your choices that affect the outcome.

 

[Tysonboss1]

I think you may have missed my point........prices have become too high for the average punter..........they cannot buy so they have to rent..........lower prices and they can build a new home which adds one more house to the supply.

cheers

Do you believe that it is possible for every Australian to live in a 4 bedroom home on a 1/4 acre block, with 20 kms of the major cities.

No, it is simply impossible due to phyisical constraints on land, unfortunatly average joe still clings to this dream of living in a house and land close to amenaties, when really the average sydney sider on low to medium income should be livng in an apartment,

If you don't want to live in an apartment, move outside the capital cities. there is plenty of regional areas where you can afford a house on a big block.

As time goes by, The population's of our cities are growing and total number of houses is decreasing as they bulldoze houses to build back apartments, So an ever increasing number of people will be fighting over an ever smaller amout of houses.

 

[kincella]

Jan Sommers books on realestate investing, cites the main excuses, as to why some are not buyers....10 main excuses....waiting for a lower price etc, and its all been covered here...a thousand times over....

I keep on saying there are plenty of affordable properties out there for everyone to choose from....and they are not $500 k for a first home buyer either....

have a look at this...super savers will take over from FHB's...and Sydney prices rising over 28% pa............... for the ones who took a stand years ago.....and for the ones still waiting for the big falls, and who just prefer property to other investments, but who hold other types, but on a lesser scale...
and notice we have so many different views about rates atm....tanner says no rises, nab says yes, blah blah blah...back to 6.5-7 at some stage....not 8-10% though
extract..............

AUSTRALIA could be heading for another rampant house-price boom, fuelled by cashed-up superannuation investors exploiting generous government concessions.
While the Treasury is trying to dampen demand by winding back the First Home Owner Grant at the end of this month, a little-known rule change made before the financial crisis began is enabling thousands of super savers to use funds as a deposit on an investment property.

Finance firms say inquiries about using their super in this way are soaring, while the amount of super savings used for property investment rose by 25 per cent in 2008 to $44 billion - a record high.

Economists say it would only take a fraction of the $300 billion sitting in the country's 400,000 self-managed super funds to boost house prices.

Steve Keen, Professor of Economics at the University of NSW, says just $5 billion of new money entering the market each month would pick up the slack left by the withdrawal of the First Home Owner Grant.

"Given that these funds can borrow up to 80 per cent of the property's value, and they currently contain more than $300 billion, an extra $5 billion a month into the property market would be no sweat,'' he said.

"The capacity for the super industry to boost property prices is enormous.''

Shane Oliver, chief economist at AMP Capital, says the new confidence in the economic recovery could "open the floodgates" for super investors who have been sitting on their hands during the financial crisis.

He says a rush of new investment could force the Reserve Bank to raise interest rates much faster than previously thought.

"The Reserve Bank is already worried about a house-price bubble and this will be the last thing it wants to hear,'' he said.

Property analysts Residex reported last month that Sydney prices were rising at an annualised rate of 28.9 per cent, fuelled by government grants and low interest rates and, if prices continue rising at such a rate, aggressive rate hikes are inevitable.

http://www.news.com.au/business/money/story/0,28323,26032980-5013951,00.html

 

[Uncle Festivus]

In the 80s the Hawke/Keating government tried removing negative gearing for a couple of years - it was an un-mitigated disaster and sparked a rental accommodation crisis and spiralling rents. So past facts/history supports my view.

You need to work through the maths a bit better and try to remove your emotion from the situation, and maybe you would not laugh so much at statements like mine, which actually represent pretty mainstream thinking on the issue around treasury and the political arena etc. $12B a year in tax deductions/refunds for property investors - sounds like a lot? But it is really? Especially given that in 07/08 (the tear being used) interest rates increased to their highest levels since the mid-90s?

There are between 2.5M and 3M renting households in Australia. So $12B/year means that on average landlord costs are subsidised by $4k-$5k per year per rental (ie $75-$100/week). That's really not very much at all, and FAR LESS than it would cost the government to attempt to provide that housing itself if negative gearing were scrapped and 90% of private property investors exited the market.

Also, rents in Australia are CHEAP compared to other countries by any measure - especially the US, UK etc. Part of the reason for that is NG - so postulate and pontificate all you like about the removal of NG and pretend all you like that it has nothing to do with the availability of relatively low cost rental housing in Australia, but it is not going to be going away any time soon.

Cheers,

Beej

That would be the indoctrinated attitude of the population brought up to assume that property (human living buildings) should be an investment, a retirement nest egg etc. and something that makes us wealthy, when we as a community should be viewing it as a fundamental requirement for everyone.

I would even go so far as to suggest that there should be disincentives for any non new residential property investment other than the house you own, as well as abolishing negative gearing. But it should also go hand in hand with generous tax incentives to those who build new dwellings, including substantially more concessions such as claiming interest costs ie neg gear for the new house you live in, and equally generous concessions for developers so they won't have to corrupt local & state government departments. The emphasise being on creating new & affordable housing for all.

There has to be a shift in our collective attitudes about housing from viewing it as a wealth creator, at the expense of those who can't afford it simply because prices have been bid to levels due to the collusion of government (policies), banks and property developers. Our ethical duties should be to make housing as cheap & affordable as possible, and in so doing we would all have far more disposable income.

There simply isn't a case which substantiates the generous tax concessions granted to people who purchase existing dwellings as an investment - it simply does not benefit society at all, in fact makes us all generally much worse off, as Macca350 states clearly below.

What we are seeing right now is the creation of our very own 'sub prime' bubble from the first home owners subsidy & record low interest rates. The banks interest margins are at the lowest in many years, possibly ever, so they are making up the revenue shortfall though government assisted volume - lower margins but higher volumes of home loans. All at a time when the interest rate cycle has bottomed!

It's plain to see the end game here - the population has believed the usual spin fed out from the vested interest RE propaganda machine to buy now or miss out, it has very little to do with demand. If demand was the issue then why wasn't there the same auction clearance rates when house prices were lower? It's the classic RE agent tactic of creating fear of missing out, only on a national level, and will eventually be shown to be unsustainable. The RBA faces the dilemma of a runaway housing bubble with interest rates as their only weapon, and they are already behind the curve.

If investment incentives were reduced, wouldn't that reduce demand by the investment crowed and in effect reduce prices which will allow many of those current renters who have been locked out due to price to free up rentals and buy their own property.

..............................>

cheers