The future of Australian property prices

Bigukraine · 8 September 2011

Tysonboss1 said:
Just because an investor is not purchasing a new rental property doesn't mean he is not contributing to society,

That's like saying saying only investors that by shares at ipo's as contributing,

Who would buy a new property if they were not confident there was a strong resale market, the fact is if I buy a property whether new or old and make it available for rent, I am providing a service.

The fhbg on the other hand is where you need to direct your frustration, the billions wasted there have created almost no new homes, but put massive upward pressure on prices, these funds should have gone to encouraging developers to build low to middle income dwellings.

The only reason you can supply this "service" is due to govt moving away from providing trust homes (housing for lower income groups) and the affordability factor for the average joe to do this by neg. gear.

All you are doing is being the govt's lap dog(fits your avatar) and you and the other IP mob will be left holding the baby when the unemployment fig. starts to rise and tennants through frustration will miss rent payments and may even damage your "investment"

Tennants are a protected mob and having been a land lord in the past overall you can keep it......

it worked well for me for quite a number of years but could see the writing on the wall re private debt being too high and as of Aug this year only have ppor.....

good luck with your invest strategy ,none is right or wrong if you get the result you aim for but not for me (IP's) at this point in time,happy to be on the side lines

also hello to Robots from me the skies are now cloudy and the sweet store has gone into liquidation is now empty with a "for lease" sign in the window.

medicowallet · 8 September 2011

Tysonboss1 said:
Just because an investor is not purchasing a new rental property doesn't mean he is not contributing to society,

That's like saying saying only investors that by shares at ipo's as contributing,

Who would buy a new property if they were not confident there was a strong resale market, the fact is if I buy a property whether new or old and make it available for rent, I am providing a service.

The fhbg on the other hand is where you need to direct your frustration, the billions wasted there have created almost no new homes, but put massive upward pressure on prices, these funds should have gone to encouraging developers to build low to middle income dwellings.

2 scenarios

1. House build 1998 for $170000, valuation today $560000 (I had this house built for me)

I have no borrowings on this house.

If I sell it to Joe, he borrows $300000 and is plonked into an asset that had zero debt prior.

The thing is that most people who own their home have X apparent equity within this asset that just 12 years ago was "worth" only half, so instead of being only worth say, a realistic amount, they have hundreds of thousands extra in their name (due to a bubble of debt)

What do they do with it? Consume = plasmas, new cars, holidays overseas etc.

2.

BHP Billiton

Purchase $560000 with a $300000 loan = share price increases.

BHP can use its valuation to expand its business operations, bringing money into the country and increasing incomes, and keeping employment levels high.

Which one is better for the economy?

1. Which equals imports and increasing debt
2. Which equals exports and decreasing debt

It surprises me that the govt is so incompetent that they cannot do this simple reasoning to come to the fact that, for the country, propping up the housing market is a bad move, and that encouraging people to invest in Australian companies is a good move.

And for morons such as Bob Brown, THIS is what would ensure that BHP remained mainly Australian owned, and that the $22 billion in profits went to Australians who invested in it.

Because sure as heck, a house worth $560000 on the ground is not generating any more exports than a house worth $3000000 on the ground.

Tysonboss1 · 8 September 2011

Bigukraine said:
The only reason you can supply this "service" is due to govt moving away from providing trust homes (housing for lower income groups) and the affordability factor for the average joe to do this by neg. gear.

All you are doing is being the govt's lap dog(fits your avatar) and you and the other IP mob will be left holding the baby when the unemployment fig. starts to rise and tennants through frustration will miss rent payments and may even damage your "investment"

Tennants are a protected mob and having been a land lord in the past overall you can keep it......

it worked well for me for quite a number of years but could see the writing on the wall re private debt being too high and as of Aug this year only have ppor.....

good luck with your invest strategy ,none is right or wrong if you get the result you aim for but not for me (IP's) at this point in time,happy to be on the side lines

also hello to Robots from me the skies are now cloudy and the sweet store has gone into liquidation is now empty with a "for lease" sign in the window.

Couple off points,

1, I am not neg geared

2, It is cheaper for the government to subsidise a landlord for the first 5 years than a housing commision tenant for life.

3, Tennant issues, well $150 of landlords insurance covers that.

medicowallet · 8 September 2011

The Falcon said:
as you always have all the answers MW, please tell me why I could not possibly know.... I've been following this banter for a long time

Are you Robots? Where is Robots? What is the clearance rate going to be? What does this mean?

Keeping it real for the true believers

MW

PS I think that the only way to get rid of negative gearing is over a period of time.

ie until 2016 = no change
2016-2021 = 80% deductable
2021-2026 = 60% deductable

etc for all properties, including newly purchased, but there has to be an exit at some stage as the tax concessions are so huge that we will not be able to fund the BB in the future.

I am not sure if I want to see any benefits for newly built homes. I think supply and demand should prevail. I am against lining the pockets of builders and developers. They will just have to work for margins set by non-artificial supply and demand for a change.

A gradual decline, where people know what is going to happen will soften the landing over the life of all existing loans, and stop the stampede to get an investment property on grandfathered basis, and the inevitable massive crash that would immediately follow this.

Tysonboss1 · 8 September 2011

medicowallet said:
2 scenarios

1. House build 1998 for $170000, valuation today $560000 (I had this house built for me)

I have no borrowings on this house.

If I sell it to Joe, he borrows $300000 and is plonked into an asset that had zero debt prior.

The thing is that most people who own their home have X apparent equity within this asset that just 12 years ago was "worth" only half, so instead of being only worth say, a realistic amount, they have hundreds of thousands extra in their name (due to a bubble of debt)

What do they do with it? Consume = plasmas, new cars, holidays overseas etc.

2.

BHP Billiton

Purchase $560000 with a $300000 loan = share price increases.

BHP can use its valuation to expand its business operations, bringing money into the country and increasing incomes, and keeping employment levels high.

Which one is better for the economy?

1. Which equals imports and increasing debt
2. Which equals exports and decreasing debt

It surprises me that the govt is so incompetent that they cannot do this simple reasoning to come to the fact that, for the country, propping up the housing market is a bad move, and that encouraging people to invest in Australian companies is a good move.

And for morons such as Bob Brown, THIS is what would ensure that BHP remained mainly Australian owned, and that the $22 billion in profits went to Australians who invested in it.

Because sure as heck, a house worth $560000 on the ground is not generating any more exports than a house worth $3000000 on the ground.

And BHP can do that while their workers families sleep in tents?

It takes all parts to make up the economy.

I think the FHBG combined with high barriers to development has caused more of a bubble than anything else.

Just my opinion,

medicowallet · 8 September 2011

Tysonboss1 said:
And BHP can do that while their workers families sleep in tents?

It takes all parts to make up the economy.

I think the FHBG combined with high barriers to development has caused more of a bubble than anything else.

Just my opinion,

No, they sleep in a house, worth $300k, not $560k

I agree with you.

I think the FHBG should be scrapped

and that massive land releases are made on a use it or lose it basis.

So that land prices fall back to reasonable levels. For example, in the property described, back when I purchased the land it was $50k, now the same area for land is $200k. That is crazy, (and it is not as if it is in a particularly desirable city, with a shortage of land).

Developers and builders have been ripping off the mainstream person, armed with their geared up govt handouts, for 10 years, and the only thing to stop them is to stop the govt handouts.

By the way, I acknowledge that the tax cuts over the past 10 years have also contributed, and that if bracket creep was not so disgusting during the 90s, that house prices graph would look a bit more steady too. But this does not explain the bubble by itself.

Tysonboss1 · 8 September 2011

medicowallet said:
. But this does not explain the bubble by itself.

Don't underestimate the effect of the fhbg,

Picture a 5 people on a life raft, with 4 banana's,

4 people have $1 each and 1 guy only has 80c.

Offcourse if the bananas are auctioned off, the guy with 80c will miss out, because there is only 4.

Giving the guy with 80c and 3 other of the other people who have never had banana before an extra 30c just means some one else misses out. and the median price of banana goes up 25% to $1.25.

The only real soloution is, to figure out a way of increasing supply, so that their is 8 banana's that get auctioned.

Negative geraing is a bit of a scape goat, the land lord are in business and deserve the same rules as any other business.

medicowallet · 8 September 2011

Tysonboss1 said:
Don't underestimate the effect of the fhbg,

Picture a 5 people on a life raft, with 4 banana's,

4 people have $1 each and 1 guy only has 80c.

Offcourse if the bananas are auctioned off, the guy with 80c will miss out, because there is only 4.

Giving the guy with 80c and 3 other of the other people who have never had banana before an extra 30c just means some one else misses out. and the median price of banana goes up 25% to $1.25.

The only real soloution is, to figure out a way of increasing supply, so that their is 8 banana's that get auctioned.

Negative geraing is a bit of a scape goat, the land lord are in business and deserve the same rules as any other business.

You are assuming that in Australia there are not enough bananas (in real terms yes, but in housing no)

There ARE in reality FOUR bananas, 4 slightly different sizes though.

Your person who gets the 30c then goes to the bank who says, heck, if you buy that banana, you are going to have to pay us back over 30 years, so here is 300c more so that you can make sure that you can get that banana..

so the banana sells for $4, and all the people who want the banana get their banana for $4, 3.95, 3.90 and $3.50.

However, my Banana tree farmer goes to the bank and wants to borrow some money to plant banana trees, he is from Tully, a nice guy, he likes the rain.

Sorry Mr farmer, says the bank, we are short of money, our lenders are running short, and we loaned our money to 4 people just yesterday, bananas are in huge demand you know!!

But, Mr Banker, I sell bananas, and I also sell them to people across the seas, if you cannot lend me my money, my workers, who just yesterday purchased bananas, well I won't be able to keep them on.

By the way, who lends you the money Mr Banker.

Why, the banks overseas, they make their money from selling the apples that your banana workers roll to work in every day.

Oh I see, so who is running this racket... sounds like a duck to me!!

No, Mr Farmer, he's a Swan, and quite smart too.

medicowallet · 8 September 2011

Tysonboss1 said:
The only real soloution is, to figure out a way of increasing supply, so that their is 8 banana's that get auctioned.

Negative geraing is a bit of a scape goat, the land lord are in business and deserve the same rules as any other business.

I have no problem with people claiming tax deductions, but claiming losses vs personal income is ridiculous. It doesn't matter, if the rule is consistent for all, the returns will reflect incomes, which is what we want for society. Good consistent returns reflecting wages, and AFFORDABLE housing for all. Housing is a necessity, and policy can make it great for investors and all australians at the same time.

Also note, that one of the drivers for increasing prices, was probably the fact that the average person per household was decreasing.

Even with an ageing population, I note that this has just recently reversed and the average people per household is increasing again.

Kids staying at home longer, shared accommodation etc, are reflections of a bubble in pricing compared to yesteryear.

Prices will be down 20% from their peaks, and will stagnate for years.

I have also convinced my partner to let the kids rent. Thank goodness

MW

PS Where is Robots?

Tysonboss1 · 8 September 2011

medicowallet said:
I have no problem with people claiming tax deductions, but claiming losses vs personal income is ridiculous.

Any future profit will be added to their personal income, so why not be able to deduct the early on losses.

The losses need to be claimed, Maybe they should be accumulated and only offset against future profits directly related to that investment, I guess that could work, But you would have to apply the same to any business venture a person starts and that could have unwanted impacts.

At the end of the day, One mans deductable loss is anothers (the banks) taxable profit, so the net affect on taxation is zero.

Plus the government have less housing commission to subsidise, which would create a bigger tax burden and restrict the ability to lower tax rates etc (thats the creep in the 90's you spoke of)

medicowallet · 8 September 2011

Tysonboss1 said:
Any future profit will be added to their personal income, so why not be able to deduct the early on losses.

The losses need to be claimed, Maybe they should be accumulated and only offset against future profits directly related to that investment, I guess that could work, But you would have to apply the same to any business venture a person starts and that could have unwanted impacts.

At the end of the day, One mans deductable loss is anothers (the banks) taxable profit, so the net affect on taxation is zero.

Plus the government have less housing commission to subsidise, which would create a bigger tax burden and restrict the ability to lower tax rates etc (thats the creep in the 90's you spoke of)

Both bracket creep and housing commission is a positive for affordable housing.

Net effect on taxation is more complex than that, as a personal taxation is at personal rates, whereas a bank's is at company rates, and both have different avenues for minimisation.

The problem with housing having negative gearing, is that with a business entity, the aim is to obtain a profit, whereas with neg gearing the aim is to make a loss.

If negative gearing was to be removed in housing, it would still be an attractive investment, and would allow housing to be more affordable as it would be more closely linked to wages and inflation as opposed to gearing. This kind of social security network for one of the essentials of life is something that is easy to do, was once the thing that was done, is done in many countries around the world, BUT would lose an election.

MW
PS Where is Robots?

satanoperca · 8 September 2011

We are different in Australia.

Deduction of negative gearing losses on property against income from other sources for the purpose of reducing income tax is illegal in the vast majority of countries, the exceptions being Canada, Australia, and New Zealand.

So the rest of the world has got it wrong in providing public housing by not having negative gearing.

Negative gearing on existing dwellings does not provide any social good, it does not add to the supply, it only lines the pockets of the banks while removing money from the taxpayer.

Cheers

FxTrader · 8 September 2011

medicowallet said:
Both bracket creep and housing commission is a positive for affordable housing.

Net effect on taxation is more complex than that, as a personal taxation is at personal rates, whereas a bank's is at company rates, and both have different avenues for minimisation.

The problem with housing having negative gearing, is that with a business entity, the aim is to obtain a profit, whereas with neg gearing the aim is to make a loss.

If negative gearing was to be removed in housing, it would still be an attractive investment, and would allow housing to be more affordable as it would be more closely linked to wages and inflation as opposed to gearing. This kind of social security network for one of the essentials of life is something that is easy to do, was once the thing that was done, is done in many countries around the world, BUT would lose an election.

Negative gearing for IP is a form of wealth redistribution from the aggregate tax base to property investment speculators - yet another government market distortion. The continued flipping of established property at ever higher prices to investors who create price competition for owner occupiers contributes NOTHING to the economy but does help to create an unsustainable debt and price bubble in property.

As long as the debt bubble keeps expanding the ponzi scheme stays affloat. To many Australians and institutions now have a vested interest in maintaining the negative gearing heroin so equitable change is almost impossible now.

Knobby22 · 8 September 2011

FxTrader said:
As long as the debt bubble keeps expanding the ponzi scheme stays affloat. To many Australians and institutions now have a vested interest in maintaining the negative gearing heroin so equitable change is almost impossible now.

Its good that most educated people agree however.
I think it could be done by just changing the rules for future property buys so that losses could not be offset against income. It won't be this government as the Libs will oppose it but it may be a future Liberal government.

satanoperca · 8 September 2011

THE Australian unemployment rate jumped to a higher than expected 5.3 per cent last month, as employers shed full-time jobs.

Another part of the property prices will fall puzzle coming into play.

Lets see how many people in the future will go into huge amounts of debt to obtain the Australian dream if unemployment gets to 6%.

At todays rate, it is still low but the pyscological impact will be great as the public keep getting informed that it is rising, not everything is sunshine and lollipops out there in Aussie land.

Cheers

greebly24 · 8 September 2011

Anyone thinking of buying RE should check out www.refindhouseprices.com in order to get a clearer picture.

Very interesting site that lists property advertising history, including both discounts and time advertised.

Although it only seems to go up to 500 days

Some properties around my area have been on the market for well over 200 days, despite 10-20% discounts. One ad says "Be quick". Obviously the market didn't listen as its been on the market 500+ days. Hilarious.

If the ad says "Vendor must sell" and its already been discounted 20% and its been on the market for over a year, you know you can definitely pay less. Hopefully this site can save people money and help cut through the RE spin.

medicowallet · 10 September 2011

Good evening brothers,

Another glorious weekend, sunshine, birds singing and bubbles galore.

Clearance rate of 55% this weekend. For the real estate investors, that means over HALF of the houses up for auction sold. That is great news for those sellers.

I wonder how much their reserves were compared to last month. I don't know that much, but in melbourne, the yearly losses, before gearing, must be around 10% by now.

Better than the shonk market, because most of us are in denial hey

Better go and have a cup of tea now (only one sugar now, to cut costs)

Sunshine, lollipops, but only 90% of last years bubbles

MW

PS Where is Robots?

robots · 11 September 2011

Hello,

another great day coming up alright,

anybody got any stats on Ballarat over the past year? hehehehehehehehehe

after all the expert opinions in this forum i didnt think i had a chance for the title again this year but its looking good,

well done Kincella, you been on it all the way man with the regional area call

thankyou

professor robots

Agentm · 11 September 2011

hmm

59,000 unsold properties on the market right now, and spring sales have just commenced

thats up 54% on last years figures!!!

those little hiccups are having a huge effect on the robotic effect of sustaining the bubble, but things are in the pipeline to make the bubble increase.. mark my words..

fudged clearance rates are now pegged at 55% with 80 of the 539 auctions unreported

the cry from the industry to a scrap stamp duty for first home buyers totally, and to double the first home buyers grant!!

lets guess what will happen next??

ummmm... they will get those measures passed and we will see the bubble fly once again!

stay tuned, i think robots is going to have a wonderful time here if they can achieve greatness and generate new life into the bubble...

keep on dreaming out there, the real estate industry needs you!!

lol

medicowallet · 11 September 2011

robots said:
Hello,

another great day coming up alright,

anybody got any stats on Ballarat over the past year? hehehehehehehehehe

after all the expert opinions in this forum i didnt think i had a chance for the title again this year but its looking good,

well done Kincella, you been on it all the way man with the regional area call

thankyou

professor robots

When the ASX dropped 40%, it wasn't much help when a single share went up 50%

Median price in ballarat is low. Median price in melbourne is high

It takes more that a 13% increase in ballarat to cover a 10% loss in melbourne.

How are those losses holding up Robots? More to come for august and september.

No worries, take another job, perhaps hit up the family for another loan, declare bankruptcy.

Sunshine, lollipops and ever decreasing bubbles,

All for you Robots,

Sincerely

MW

PS How is Mr Burns?

The future of Australian property prices

Bigukraine

medicowallet

Tysonboss1

medicowallet

Tysonboss1

medicowallet

Tysonboss1

medicowallet

medicowallet

Tysonboss1

medicowallet

satanoperca

FxTrader

Knobby22

Mmmmmm 2nd breakfast

satanoperca

greebly24

medicowallet

robots

hello

Agentm

medicowallet

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