House prices to keep rising for years

[Wysiwyg]

I put the blame/credit squarely at the hands of the private banks that are soley responsible for increasing the size of the money supply.

So the banks make lending more accessible and an increased number of consumers are able to buy houses. This additional demand for housing from the increased number of consumers pushes the average house price up.

Pretty simple but I didn't think it was that simple. Like I bet the Real Estate Agents throw a pretty penny on top of the price when valuing.

 

[Macquack]

So the banks make lending more accessible and an increased number of consumers are able to buy houses. This additional demand for housing from the increased number of consumers pushes the average house price up.

Pretty simple but I didn't think it was that simple. Like I bet the Real Estate Agents throw a pretty penny on top of the price when valuing.

I agree with this Wysiwyg. I must add that the "increased number of consumers" also have an increased pool of funds to draw on (money supply) only limited by the applicable interest rate.

Money is the only infinite resource 'known' or 'unknown' to man.

 

[joeyr46]

They (we!) do. I can claim any interest deductions from margin or other loans and claim that against income earned from investment or trading activity. Deductability of interest is not asset class specific as far as I am aware.
Any acquisition costs (be it stamp duty for homes or brokerage for equities) can be used to increase the cost base for CGT purposes as well. Again, not asset class specific.

Obviously it is more noticeable for property because the amounts claimed are generally much higher.

Interest against property can be claimed against personal income but not sure in fact I don't think interest against shares can, has to be claimed against profit from shares which means you have to sell them to get the tax break, (Not certain about this will stand corrected if I'm wrong but have never leveraged shares so a non issue for me.

 

[Quincy]

Home buyers must be prudent - Rudd

From: AAP November 07, 2009 1:27PM

http://www.theaustralian.com.au/bus...-be-prudent-rudd/story-e6frg90f-1225795283161


FISCAL and monetary policy can only do so much to assist home buyers who, in the end, must make their own prudent decisions, Prime Minister Kevin Rudd says.

The Reserve Bank raised interest rates by 25 basis points on Tuesday, the second such rise since October.

The federal government also began scaling down its first home buyer grants scheme from September.

Mr Rudd was questioned in Sydney on Saturday about the concerns of prospective home buyers about the shift in monetary and fiscal policy measures.

He said the government and the Reserve Bank can only do so much, and that prudence from home buyers must take over.

”Everyone's got to make their own decisions on this for the future,” Mr Rudd told reporters.

The prime minister urged buyers to check their bank balances, their long-term affordability and how interest rates behave over time.

”But at the end of the day, individual home buyers still have to make their own decisions,” he said.

Don't worry about our meddling with the market and don't worry about our decison to enable foreign investors to more easily enter the market, "PRUDENCE FROM HOME BUYERS MUST TAKE OVER"

oh yeah . . . and don't forget to check your bank balance if you have bought a property or are considering buying one !

 

[condog]

Im the last to back anything Kevin Rudd has done economically. In fact Id be more likely to let my 8 year old run the economy then Rudd. But fact is he doesnt control interest rates, stam duty, investor sentiment and the other major factors that cuase property bubbles.....

If you want to blame anyone, the state governements are far more to blame for pathetic planning forsight, holding back develelopment of land, allowing ownership of large chunks of prime development land to fall into developers clutches that then control the release of it to suit price structures they desire.

In terms of banks being to blame, thats complete nonsense ... The major cause is supply / demand factors, of which the banks and RE agents are minor players.

Whileever our disposable incomes keep rising, the money supply (via federal and state deficits ) keeps rising and whilever supply is hampered by poor planning and land allocation prices will keep climbing. Governments trying to recoup infrastructure costs from developers only exacerbates the problem....

Hence the reason NSW has the biggest supply issues, because the Government has absolutely no idea.

 

[Taltan]

Interest against property can be claimed against personal income but not sure in fact I don't think interest against shares can, has to be claimed against profit from shares which means you have to sell them to get the tax break, (Not certain about this will stand corrected if I'm wrong but have never leveraged shares so a non issue for me.

Interest against shares can also be claimed against personal income exactly the same way as property can. You don't need to sell the shares to get the tax break.

The big difference recently has been the interest rates at which the banks will lend. The bank will lend at 6% for a unit in sticksville but still charge 8%+ for borrowings to invest in a big 4 bank. On the other hand borrowings for shares are much more flexible

 

[joeyr46]

Interest against shares can also be claimed against personal income exactly the same way as property can. You don't need to sell the shares to get the tax break.

The big difference recently has been the interest rates at which the banks will lend. The bank will lend at 6% for a unit in sticksville but still charge 8%+ for borrowings to invest in a big 4 bank. On the other hand borrowings for shares are much more flexible

Thanks for that was not sure thought it could only be claimed against profits from shares not against income from other things

 

[joeyr46]

Dont know the signicance or if it actually matters as far as prices are concerned but according to the Aust Bureau of Stats only 33% of homes are owner occupied in year 2007/8 down 10% from 1994/5 whilst mortgages doubled to an average $150000

 

[Vizion]

condog - I agree with some of you points. However this country did not have an explosion in house prices till it allowed the inequalities that the tax breaks of negative gearing and reduced CGT enabled. That IS tax law driven and that IS in the hands of the federal government.
Inflation is also controlled by an institution, we have inflation for a reason, to continue our usage of debt. do we all actually think the RBA is totally independent? Ahem... sure... right...
These policies allow people with access to cheap money to kept making money. The money keeps flowing through banks & finance institutions who make profit from interest charged etc.

Joey - it has major significance.

Anyone who thinks our current system is NOT set up to maintain the status quo of people with cash to keep making cash, has rocks in their head. It has NOTHING to do with ensuring we have sufficient rental properties for the population or any of the other reasons given. Zilch... Zero... Nada

The rocks comment is not directed at any one person incidentally.

Questions.
Who did the increased 1st home owners grant help most? Did it enable more people to enter the housing market or did it keep the money flowing through the banks and finance institutions...

More Questions.
Can you create demand & artificially control that through supply? Who drives up the cost really... The people who get the loan or the people who allow you to borrow ever larger amounts.

Answers on a postcard no later than next Tuesday when we will draw for the meat tray.

 

[Quincy]

Im the last to back anything Kevin Rudd has done economically. In fact Id be more likely to let my 8 year old run the economy then Rudd. But fact is he doesnt control interest rates, stam duty, investor sentiment and the other major factors that cuase property bubbles.....

As mentioned any number of times in this thread, supply and demand is a major factor with regard to the direction that property prices take.

Demand to some extent has been influenced by the Rudd Govenment's involment : -

1. Record immigration levels (federal government policy) increases demand ;
2. The First Home Owners Boost introduced in October 2008 (federal government policy) increased demand ;
3. Federal government decision earler this year to enable foreign investors to more easily enter the market because of a relaxation in the rules covering foreign investment in Australia's property market - this has increased demand for property from foreign investors.

If you want to blame anyone, the state governements are far more to blame for pathetic planning forsight, holding back develelopment of land, allowing ownership of large chunks of prime development land to fall into developers clutches that then control the release of it to suit price structures they desire.

Yes, I agree with this point of view. This is the other side of the coin - the "supply" side of the equation.

Given the current circumstances, house prices will keep rising IMO. Unemployement and interest rates may slow the rate of increase but won't stop it. Until the supply issue is properly addressed there is only one way for house prices to go.

 

[Beej]

Dont know the signicance or if it actually matters as far as prices are concerned but according to the Aust Bureau of Stats only 33% of homes are owner occupied in year 2007/8 down 10% from 1994/5 whilst mortgages doubled to an average $150000

I think you will find that 33% figure represents the number of homes in Australia owned outright with no mortgage. In 94/95 it was 42%. About 70% of homes are owner occupied (meaning 37% or so have a mortgage), and about 30% are rented.

PS: Taltan is 100% correct about negative gearing able to be used for interest expenses related to *any* income producing investment, including property, shares etc. And Taltan, as for margin loan rates vs home loan rates, easy, use your home loan to borrow at lower costs for shares - that's one of the many non obvious benefits of PPOR ownership - easy access to lowest cost finance for other purposes.

Cheers,

Beej

 

[Macquack]

In terms of banks being to blame, thats complete nonsense ... The major cause is supply / demand factors, of which the banks and RE agents are minor players.

Real estate agents are minor players, but the banks are major players.

A definition of Demand -

The amount of a particular economic good or service that consumers want to purchase at a given price.

Don't see too many people paying cash for their properties, so saying banks are minor players is nonsense.

 

[condog]

Real estate agents are minor players, but the banks are major players.

A definition of Demand -


Don't see too many people paying cash for their properties, so saying banks are minor players is nonsense.

If you see it this way, thats your opinion and your fully perfectly entitled to it... even if I think your wrong... pointless arguing over this ...

 

[condog]

The flip side is that right now interest rates which would usually pull back house prices may infact exacerbate the issue and force house prices up....in some markets...

EG: Sydney which has chronic and serious supply issues, a rise in interest rates may actually cause less development and actually exacerbate the supply side issues......

Based on this there is a very strong case for interest rates to be pegged to borrowing in particular markets....

Eg Sydney investors at 3.5% base rate while perth might be at 4% ???? Not sure of the costs or mechanics but it makes more sense then the farcical system of hitting everyone with the same club.

 

[Gordon Gekko]

I found this article interesting and wonder how the results will affect most asset classes in particular housing.

Yes I'm still a bear.

http://www.scribd.com/doc/21663635/Debt-Deflation-October-2009


Best

G

 

[robots]

hello,

good afternoon brothers, great day again across Australia

10yrs ago banks were lending, 20yrs ago banks were lending, 30yrs ago banks were lending, and at 90% lvr's across those time frames as well

some of the big4 weren't into CDO's or the creation out of thin air, it is bigger than the four pillars but they are a necessary tool

for the record, it is my BELIEF that prices are doing well because many are living large here in Australia and many realise this and want to secure a piece of that for the years to come,

and if that makes for an investment then so b it

this place is paradise, utopia, the whitelight,

thankyou
Doctor Robots

 

[Mofra]

If you want to blame anyone, the state governements are far more to blame for pathetic planning forsight, holding back develelopment of land, allowing ownership of large chunks of prime development land to fall into developers clutches that then control the release of it to suit price structures they desire.

Not sure if holding back the development of land is really a massive factor in overall house prices; just taking the example of Melbourne, we are already one of the geographically largest cities in the world with a population of litle over 4m. Population density is the factor here - governments don't want to be seen as promoting low density housing as it makes the provision of adequate infrastructure a nightmare.

In terms of banks being to blame, thats complete nonsense ... The major cause is supply / demand factors, of which the banks and RE agents are minor players.

Disagree - if banks overnight tightened their LVR provisions to 80% max, prices in the FHB segment of the market would stagnate for years. Credit is king.

 

[Mc Gusto]

I found this article interesting and wonder how the results will affect most asset classes in particular housing.

Yes I'm still a bear.

http://www.scribd.com/doc/21663635/Debt-Deflation-October-2009


Best

G

Great presentation.

I am with you...bearish on property as an asset class

 

[joeyr46]

I think you will find that 33% figure represents the number of homes in Australia owned outright with no mortgage. In 94/95 it was 42%. About 70% of homes are owner occupied (meaning 37% or so have a mortgage), and about 30% are rented.

PS: Taltan is 100% correct about negative gearing able to be used for interest expenses related to *any* income producing investment, including property, shares etc. And Taltan, as for margin loan rates vs home loan rates, easy, use your home loan to borrow at lower costs for shares - that's one of the many non obvious benefits of PPOR ownership - easy access to lowest cost finance for other purposes.

Cheers,

Beej

yes article was badly written always thought about 2/3rds were buying or owned but even then 10% less owning is not a good sign although figures may be rubbery due to what the money is borrowed for as in investments or pleasure

 

[robots]

hello,

http://www.theage.com.au/opinion/po...-wounded-a-day-20091109-i4gj.html?autostart=1

just posting this up to highlight the situation and the DIFFERENCE between us and many other countries of the world

all reasons why australia is different, paradise around every corner

and yes a race occurs to grab a part of it

thankyou
Doctor Robots