The future of Australian property prices

Be interesting to see what happens and if indeed there will be a trigger event that leads the crash (possible under this current govt). And while I was a bit of a D&G in the past, I don't see it playing out to the 'crash and burn then run for the hills' that some here are preaching. If anything we should be looking at the countries that actually have something to do with us in this area, Asia pacific not at the US or Euro. Also those countries we are developing trade with.

There has been much discussion over a number of years about whether Australia’s house prices are too high, and indeed whether there is a house price ‘bubble’. This notion is typified by the Economist magazine’s regular update suggesting that Australia’s house prices are up to 50 per cent overvalued against standard naive measures.

Our view is that these metrics are indeed too naive to be useful. Typically they take a measure of housing prices to income or to rents and compare the current level to a 15- or 20-year average. This ignores a large structural adjustment that occurred in the Australian housing market between 1997 and 2003. This transition involved lower interest rates, better-anchored inflation expectations, and increased availability of housing credit. Without some reversal of these structural changes – which is a virtual impossibility – we do not expect Australian housing prices to fall.

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Indeed, we expect them to track sideways in the short term and then rise in line with household disposable incomes – consistent with recent history. Since late 2003 the dwelling price to income ratio has been broadly stable at between 3.5 and 4.5 and has averaged 4 (see chart). As we are forecasting growth in household disposable income per household of around 5 per cent per annum over the next couple of years (as a result of strong employment and wages growth), we also have in mind that house prices will grow at this pace over the next couple of years.


Supply features of the housing market support this assessment. Most forecasters, including official agencies, suggest that Australia has an undersupply of housing. This assessment is most simply made by comparing growth in the number of dwellings to population. As we pointed out above, since 2006, population growth has exceeded new supply of dwellings, which is the first time this has happened in the postwar era. This will put a floor under housing prices and is a key reason why we have little concern about a sharp (or large) house price decline.

More fundamentally, we do agree that housing is fairly expensive in Australia, though we see good reasons for this.

First, the quality of the housing stock is high. Australia has the largest dwellings in the world, and they are of high quality. Estimates suggest that the average Australian dwelling is 214 square metres, and real expenditure on new dwellings is now 60 per cent higher than it was 15 years ago, reflecting the increase in both the size and quality of dwellings.

Second, well-located dwellings are in particularly limited supply. This reflects that most dwellings in Australia are on relatively large blocks of land, there are fewer apartments in Australia than in many other nations (particularly in the suburbs close to city centres), and there is little appetite from local government authorities for significant change in this regard.

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Third, public transport from outer suburbs in most cities is generally of fairly low quality, limiting the distance which people can productively live from the city centres and further enhancing demand for property in the centre of the cities.

Lastly, there is a lack of affordable land at the fringes of major cities. This is due to state governments seeking to front-load infrastructure costs into the land release price and also some issues with land investors holding large swathes of land in anticipation of future capital gains – and not being prepared to sell this land in adequate quantities in the short run to meet demand.

Importantly, despite relatively high levels of household debt in Australia, the households that hold this debt can still service mortgages. Less than 1 per cent of mortgages are in arrears in Australia, which is internationally low. This of course reflects that the Australian economy had a relatively mild downturn, with housing prices falling only 3 per cent in 2008 before rising around 20 per cent over 2009 and early 2010 and levelling out subsequently. It also reflects that the unemployment rate has remained relatively low.

However, there are other reasons why levels of household debt should not be a large concern. The key one is that 75 per cent of all household debt in Australia is held by the top two-fifths of income earners. If we look even deeper, we find that only a small proportion of households are truly in a vulnerable state regarding their ability to continue to service their mortgages. Vulnerable households – in this case, ones that have a loan-to-valuation ratio of 90 per cent or above and also use more than 50 per cent of their disposable income to service their mortgages – constitute less than 2 per cent of all owner-occupied households with debt in Australia.

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Slower housing credit growth in recent years, due partly to lower housing turnover, has also meant that the Australian mortgage book is ageing. This reduces the risk of repayment problems, as households with a longer history of repayment tend to be better risks. The credit foncier model of repayments suggests that these households are now repaying a greater amount of principal and less interest, so that households have built up equity in their homes and could run this down in a crisis.

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The structure of the mortgage market and tax system in Australia is also such that most households are ahead of schedule in their mortgage repayments. This would provide a buffer in the case of a negative income shock to households, such as increased unemployment.

In the event of a large negative shock to the Australian economy, there are also a number of contingencies built into the system that would somewhat protect the housing market. These were vividly displayed during the GFC. The RBA would cut interest rates, the fiscal authorities would boost spending, and the exchange rate would depreciate. As we discussed above, with most of the mortgages at variable rates, the monetary transmission mechanism is very powerful, and very low net government debt – it is forecast to peak at 6 per cent of GDP in 2012/13 – means the government also has significant capacity to spend.

Overall, with strong prospects for the Australian economy, on the back of high commodity prices driving a mining investment boom and rising incomes, we expect that housing prices will continue to grow at a modest pace over the next few years. We view the risk of a sharp fall in housing prices as very low.

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http://www.businessspectator.com.au/bs.nsf/Article/Australian-property-prices-housing-bubble-pd20110317-F24WP?OpenDocument

I'm sure we could all be lectured to by the '1 percenters' ad infinitum, but, reality prevails for the rest of us -

SEVENTY per cent of under 35s in Sydney will be excluded from the housing market, a UK housing expert says. The figure makes up part of a new report, Homes for All, which found that Australia's housing market is in crisis, with only half of the supply needed to meet demand.

Co-author Dr Tim Williams says governments need to reconsider tax incentives and policies that encourage investors to push house prices higher.

"Seventy per cent of 35-year-olds and younger cannot afford to buy any kind of home at this point in time, on average," Dr Williams told AAP.

"At the same time we find 22 per cent of Australians own 55 per cent of residential development."

It recommends that negative gearing and untaxed capital gains be reconsidered by the government in an effort to drive down house pricing for first-time buyers.
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He said that about 30 years ago it took three times the median salary to buy a house in Sydney, whereas it now took nine times.

This is a higher ratio than London or New York, the report said.

Story

It's pretty obvious to all, to even our resident "white shoe brigade", that negative gearing results in higher prices.

So what we need is a politician or party to be brave enough to realise that the tax perks, like negative gearing, have failed miserably to stimulate new building activity, and that the incentives should be there for those who build new dwellings, not buy old ones. Along with the problem of developers 'encouraging' the limited release of land from the government & the ineptitude of the various relevant government departments in planning for the limited land releases that do get to market?

RP Data rejects 'housing bubble' claims

Oct 2011

Claims that Australia is in the midst of a property price bubble have been dismissed by RP Data.

Controversial pundit Professor Steve Keen has for years been forecasting an Australian property bubble, warning that values will fall by 40 per cent over the next decade, however few share Mr Kean's radical views.

Speaking to The Adviser, RP Data’s chief executive Graham Mirabito said what Australia was currently experiencing was a property price correction rather than a “collapse”.

According to Mr Mirabito, a housing bubble suggests housing values increased too rapidly and are set to experience a rapid decline, a fate not likely to come to fruition in Australia.

“Investors often ask us whether or not we are in a property price bubble. Given that 60 per cent of the balance sheets of the major banks are residential mortgages, investors obviously want to know whether or not Australian banks are a sound investment,” Mr Mirabito said.

“Our response is that we are not in a bubble, but a housing correction.

“While Australians definitely like debt, more than 40 per cent of mortgage holders are more than three payments in front, so we are very good payers. In addition to this, we are currently in the middle of a population boom, so there will always be demand for property.”

Mr Mirabito said Australian property prices grew 12 per cent after the GFC, now prices have fallen by approximately 3 per cent.

“This isn’t a bubble, it is a soft landing – much softer than we have seen in other countries. Over the longer term, demand will continue to be there, which means property prices will eventually rise again.”

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http://www.theadviser.com.au/breaking-news/6112-rp-data-rejects-housing-bubble-claims

moXJO said:

If anything we should be looking at the countries that actually have something to do with us in this area, Asia pacific not at the US or Euro.

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Yes, China is slowing - just have to see if it's a hard or soft landing? Which leads to this erroneous assumption from the authors of the 'report' -

In the event of a large negative shock to the Australian economy, there are also a number of contingencies built into the system that would somewhat protect the housing market. These were vividly displayed during the GFC. The RBA would cut interest rates, the fiscal authorities would boost spending, and the exchange rate would depreciate. As we discussed above, with most of the mortgages at variable rates, the monetary transmission mechanism is very powerful, and very low net government debt – it is forecast to peak at 6 per cent of GDP in 2012/13 – means the government also has significant capacity to spend.

Overall, with strong prospects for the Australian economy, on the back of high commodity prices driving a mining investment boom and rising incomes, we expect that housing prices will continue to grow at a modest pace over the next few years. We view the risk of a sharp fall in housing prices as very low.

Cut rates - check
Boost spending - get into more debt?? I'f got my ceiling batts, solar panels, & all the schools have new halls etc - what next??
Exchange rate - falling - comparing to which other country in recession? Imports will be dearer.
high commodity prices - and falling with China slow down & Euro recession

Depending on who's figures you believe, China is already in contraction mode.....exhibit A, Australias $500B trade deficit last month....less coal = less electricity generation shown by latest data....

young-gun said:

So you think prices are to stay stagnant for.. 20 years? I'm not going to read over your property posts as 50% of them are attacks on SCM and your noticeable issue with engineers, and I have some water skiing to do;-)

It's just a forum.

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Once again you are failing to understand the written missive. There are CERTAIN areas that are rising/falling. Pick the eyes out of the market. I have been bleating this for 3 years and 2000 posts thus far. Go and read some of these posts and you will see my position has not changed.

Yes yes yes it is not free and easy and no FLIPPING allowed in a depressed market or you will get burnt.

Why are the doomsayers wanting so many stats and figures??? The way that I do it is if I see an opportunity I strike. Also perform due dilligence. You do know what this is right? I presold 6 of the 10 units in the last development I did and three sold in less than 2 weeks on completion leaving me with one Unit which I have rented out. The profit I made meant that I now own this unit outright. The total development end game was 3.6 million. Valuation of said Unit a mere 360k. You do the math. Now before everyone starts blabbing on about holding costs and interest component and contingincies ...... this has already been factored in. You will figure it out eventually

SCM gets what he deserves ....... nothing more and nothing less. SCM professed to be an engineer. I could be a propulsion theorist (one above a rocket scientist) for all he knows !! I have been doing this for 23 years and he has just graduated and crapped on he was smarter than 99% of all engineers whoever has graduated. He attacked first and I responded accordingly.

I have a plane to catch to Portugal.

Remember ..... it's only a forum

trainspotter said:

Here we go again. ...... ZzzzzzzzzzzzzzZZZZ. ... Dont feed the trolls tech/a

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DB008 said:

(Loving this ignore feature!)

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Oh yeah, that's just typical. The only property bull with credibility, tech, comes back and suddenly all the bulls start coming out of the woodwork, running to defend their master.

I speak about the Melbourne market....You can be blinded to the facts and choose to ignore them but they're still going to be there when you open your eyes.
Victoria is on the brink of recession, the government is broke, shops are closing, people are saving, oversupply in housing plus the RE market dropped 5% last year while building approvals are at an all time low....
Press ignore, turn off the news, stop reading the paper, disconnect your internet, don't look outside your window and maybe things might be better.

Julia said:

Dowdy, if you've been following the last several pages, it's pretty obvious to whom Tech's post was directed.

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Yeah I know. But he said <30 armchair economist who can't afford a deposit on a car (somewhere along those lines).
I had to take a swipe at that since i'm an exception

DB008 said:

RP Data rejects 'housing bubble' claims

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Keyword: RP Data

Dowdy said:

Victoria is on the brink of recession, the government is broke, shops are closing, people are saving, oversupply in housing plus the RE market dropped 5% last year while building approvals are at an all time low....

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That surely can't be - isn't the Liberal Party in office?

Reserve Bank figures show average growth per head of population in Victoria has been running at only 1.5 per cent - about half the rate of inflation - over the past 10 years.

It the weakest growth rate barring only New South Wales, the state's half-year budget update shows.
Economists and business leaders told BusinessDaily that the state's budget update, released yesterday, signalled that Victoria's performance was likely to deteriorate further.

The update shows Victoria's total financial liabilities ballooned by $10 billion in the six months to December to a record $51.4 billion.

Debt levels are tipped to grow despite the government's pledge to deliver consistent surpluses, rein in debt and fund much-needed infrastructure projects without more borrowing.

The Baillieu Government is forecasting debt levels will peak at $56 billion in 2015.

just to reiterate a few points I have made over the years....
each year your dollar buys less, it is now worth only 5% of its value, it has lost 95%..in the last 80 odd years...
cash is not king...you need to be able to invest in assets that keep their value, and keep pace with inflation..
if you look at houses in the opposite context, ie instead of being overpriced, they have retained their value against the dollar, then a house is a good investment...
or you could view it slightly differently, when you sit back waiting and watching house prices with their overall, average 10% rise in value each year.....you should not wonder why...

you should think to yourself, there is the proof my dollar has lost 10%, in the past year, or 2, or 3 years...and for some people here, they have been waiting 10 years or more...
the figures the govnuts use to calculate the CPI, is one of the biggest fudges ever...they tell you the CPI is in the range of 3%, in fact the figures are closer to 10%, but so many welfare payments, super, wage rises are attached to, and rely on the CPI for their annual increases each year....the govnuts do not want to pay the higher real costs of the CPI....so they fudge, adjust, screw the figures to always only reflect the 3% figure.....
the other argument, why is Australia different, well we dont have 300 little cities like the US, we only have 3 decent sized cities, along the east coast which are the heaviest populated, then we have the emerging growth in the mining states...

.... and we dont have the violence, guns, and ethnic problems plaguing the US and UK, nor do we have the huge spending on war and terrorism...

we do have state and local govnuts dependent on stamp duty, and costs in developing new land releases, the money is taken up front in lump sums, to pay for the schools, roads and other minimum requirements....I have seen figures of $50,000 to $75,000 per block of land, going straight to local councils...those costs alone would double the price of some blocks of land, compared to the good old days...

have a look here, all the countries are included, see the rhs graph of growth in the past 10 years...start with canada, it is very similar with mining to Aus.
http://www.globalpropertyguide.com/real-estate-house-prices/C

ps I have read the same stories since I started reading blogs in the late 90's, especially so after the tech wreck, some bragged they sold their houses, and would wait for the crash, some are still out there waiting, now they are priced out of their market, their suburb...
I realise this post will fall on the deaf ears, I just like to remind some, every now and again, how wishing and reality are poles apart...

Actually I dont see myself as a property Bull.

Yet many here see my posts as such.
The point I am attempting to make---obviously poorly---is that opportunity is there even in a depressed property environment.

AND.

Not all property holders are starting now.

AND

You can also travel a similar road to some of us here you only need to find YOUR opportunity and go for it.

I've made some suggestions which fall on many deaf ears.

But we must all travel our own road.
I certainly did and in the 80s lost pretty well everything.
I remember paying my 2 employees at the time off of job deposits and losing 1.2 million of property along with my own home---and marriage----with $5k in the bank and not all that happy with my lot!

So I really DO understand your trepidation and in some cases fear.

Dowdy said:

Oh yeah, that's just typical. The only property bull with credibility, tech, comes back and suddenly all the bulls start coming out of the woodwork, running to defend their master.

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I did not know he had been away? Had you noticed I had been away as well? Maybe I am a sock puppet from tech/a's twisted and warped mind? So I have no credibility? Nice one Dowdy

Dowdy said:

I speak about the Melbourne market....You can be blinded to the facts and choose to ignore them but they're still going to be there when you open your eyes. Victoria is on the brink of recession, the government is broke, shops are closing, people are saving, oversupply in housing plus the RE market dropped 5% last year while building approvals are at an all time low....
Press ignore, turn off the news, stop reading the paper, disconnect your internet, don't look outside your window and maybe things might be better.

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Whoop whoop for Melbourne. Get out of Dodge then if you don't like it. There is more to Australia then ego eccentric Melbournians.

Dowdy said:

Yeah I know. But he said <30 armchair economist who can't afford a deposit on a car (somewhere along those lines).
I had to take a swipe at that since i'm an exception

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Do you understand what tech/a was actually driving at? He was talking about their age and their lack of experience or firepower to back up their outlandish statements.

Dowdy said:

Keyword: RP Data

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So who do we listen to ??? Steven Keen???? Bwaahahahhaahahhahhaaaa

Ummmmmmmmm BTW ....... prices have dropped over 20% in CERTAIN areas so therefore all the doomsayers and bell ringers are CORRECT ... well done guys and gals. YAY for the negative team.

Uncle Festivus said:

That surely can't be - isn't the Liberal Party in office?

Reserve Bank figures show average growth per head of population in Victoria has been running at only 1.5 per cent - about half the rate of inflation - over the past 10 years.

It the weakest growth rate barring only New South Wales, the state's half-year budget update shows.
Economists and business leaders told BusinessDaily that the state's budget update, released yesterday, signalled that Victoria's performance was likely to deteriorate further.

The update shows Victoria's total financial liabilities ballooned by $10 billion in the six months to December to a record $51.4 billion.

Debt levels are tipped to grow despite the government's pledge to deliver consistent surpluses, rein in debt and fund much-needed infrastructure projects without more borrowing.

The Baillieu Government is forecasting debt levels will peak at $56 billion in 2015.

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The Baileau Govt is trying to balance the books after Labor clubfooted it's way through the states finances for a few years.

We have a desalination plant we don't need , we cant get out of the contract and it's costing so much we cant afford to give pay rise to police or nurses.

UPDATE 4.30pm: MELBURNIANS will face rocketing water bills over the next 30 years to pay for the state's desalination plant.
Victoria's desalination plant could cost a maximum $23.9 billion. Source: Herald Sun
Premier Ted Baillieu admitted today the contract signed by the former Labor Government couldn't be broken and the "white elephant'' desalination plant could cost a maximum $23.9 billion

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Yes lovely bunch of dim wits we had at State level, Gillard will out do them of course and the Libs will have the task of cleaning up there too.

kincella said:

or you could view it slightly differently, when you sit back waiting and watching house prices with their overall, average 10% rise in value each year.....you should not wonder why...

you should think to yourself, there is the proof my dollar has lost 10%, in the past year, or 2, or 3 years...and for some people here, they have been waiting 10 years or more...
the figures the govnuts use to calculate the CPI, is one of the biggest fudges ever...they tell you the CPI is in the range of 3%, in fact the figures are closer to 10%

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Hmmmm......

I dont see myself as a bull either, but there appears to be only 2 classes, on these blogs, you are either a bull or bear....
and Dowdy, we dont need to support tech, or any other posters who suggest a crash in prices is not on the cards....or has an alternative view, to the majority on this forum..

the forum has been really, really boring, with no posts on some days in the past couple of years....I keep expecting it to die....just as many other, house price crash forums have died in the past...

as for the liberal govt, until they find out all the hidden costs, and committments the labor govt had rung up...and sort that out, only then can you expect that liberal recovery... I suggest it has given confidence to the community in general, hence the stablizing affect.....as for businesses closing down etc....blame swan and glen stevens, for pretending OZ was exempt from the GFC, and for raising rates, instead of lowering them...then add the increased taxes from the feds, and no assistance from banks or fed labor to help small business...
small business are the biggest employers in this country....the unemployment numbers are fudged to make it look good....
only the mining states, with income from royalties are holding up , sustaining what is left...
we have no manufacturing left, and a mob of very incompetent people pulling our strings...

funny about choosing Melb and the Vic liberals...I feel sorry for the Qlders, 86 billion in debt, that they are aware of, who knows what else is hidden....massive floods last year, and people still waiting for assistance, all that donated money ,,,where did it go...houses built on proven flood plains, then they released Wivenhoe dam on top of it, in the middle of the flooding...how many business went broke there....
or NSW, another basket case, but the boats keep coming, the immigrants keep coming, and they all need housing...
thank goodness, on average 60,000 move out of the little dog boxes of inner Melb, out to the suburbs each year...
on abc 24 this morning, they showed about 6 places in WA, where the mining royalties have been fed back in to grow those mining communities...about 1 billion last year...guess what they built...not houses, or roads, but big community centres, or childcare, or white elephants...
in Pilbara an ugly old 2 bdr fibro cottage rents for over $1700 pw....no new houses built, with all that easy money...
sounds like special interest groups got hold of the money, rather than the community...

and all the bears predicted Sydney's south west housing would be the first to crumble, fall 40% plus, they may need to have a look at the facts, now and again, in hindsight...

the banks have been reluctant to finance property, and developers, so dont look surprised when there are almost no new houses, or units being built in the middle of the congested cities

Uncle Festivus said:

I'm sure we could all be lectured to by the '1 percenters' ad infinitum, but, reality prevails for the rest of us -

SEVENTY per cent of under 35s in Sydney will be excluded from the housing market, a UK housing expert says. The figure makes up part of a new report, Homes for All, which found that Australia's housing market is in crisis, with only half of the supply needed to meet demand.

Co-author Dr Tim Williams says governments need to reconsider tax incentives and policies that encourage investors to push house prices higher.

"Seventy per cent of 35-year-olds and younger cannot afford to buy any kind of home at this point in time, on average," Dr Williams told AAP.

"At the same time we find 22 per cent of Australians own 55 per cent of residential development."

It recommends that negative gearing and untaxed capital gains be reconsidered by the government in an effort to drive down house pricing for first-time buyers.
--------
He said that about 30 years ago it took three times the median salary to buy a house in Sydney, whereas it now took nine times.

This is a higher ratio than London or New York, the report said.

Story

It's pretty obvious to all, to even our resident "white shoe brigade", that negative gearing results in higher prices.

So what we need is a politician or party to be brave enough to realise that the tax perks, like negative gearing, have failed miserably to stimulate new building activity, and that the incentives should be there for those who build new dwellings, not buy old ones. Along with the problem of developers 'encouraging' the limited release of land from the government & the ineptitude of the various relevant government departments in planning for the limited land releases that do get to market?

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One of the more sensible posts in this thread.

I think thou it is highlly unlikely that we will find any politicians prepared to risk taking on this one.

i would add further that the whole system is fundamentally flawed and has been extremely detrimental to the Australian economy as a whole.

Generations of Australians have build their nest eggs on property speculation but ulitimately someone has to pay if the merry go round is to continue to go around.

trainspotter said:

I did not know he had been away? Had you noticed I had been away as well? Maybe I am a sock puppet from tech/a's twisted and warped mind? So I have no credibility? Nice one Dowdy

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Alright you got me. I didn't mean that at you or at the forum veterans but I do take offense at being called a troll

Whoop whoop for Melbourne. Get out of Dodge then if you don't like it. There is more to Australia then ego eccentric Melbournians.

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But I love Melbourne!
I just go with my experience and what I hear on the news - Sydney West - all I hear is about the shootings. QLD is in shambles. The other state don't interest me....

Do you understand what tech/a was actually driving at? He was talking about their age and their lack of experience or firepower to back up their outlandish statements.

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Yeah but I'm 27 so he was (unintentionally) referring to me too

So who do we listen to ??? Steven Keen???? Bwaahahahhaahahhahhaaaa

Ummmmmmmmm BTW ....... prices have dropped over 20% in CERTAIN areas so therefore all the doomsayers and bell ringers are CORRECT ... well done guys and gals. YAY for the negative team.

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I like prosper http://www.prosper.org.au/
But then some would claim they are biased to the bears

If you want unbiased then you have to go international commentators - which Marc Faber who I consider the best who believes that AU property is overpriced (his latest prediction - markets are overbought and should be a sell off which will rally later in the year)

for those going on about negative gearing...you may need a history lesson, firstly going back 40 years ago, then another lesson just recently..since 2007
prior to early 1970's, the federal and state govnuts allocated a large amount of money for public housing....you might recognise them, little boxes on top of each other called units, and then whole suburbs of them...
so people on the public teat, or low income earners could rent those affordable places..they charged you 25% of your income...with limits on your income, to be eligible

then various housing people complained, had been for years, about placing so many disadvantaged people together, the public houses were becoming slums...and the cost of upkeep was enormous....some people like to trash their houses for no other reason, than boredom
so the govnuts stopped spending money on public housing, they turned it over to the private market...who had always suggested they could provide better housing for the taxpayers dollar..
to entice the private market into housing, building or renting cheaper houses for the poor, they had to give them something...so they gave them neg gearing and other tax benefits...
in the meantime, more and more immigrants came, and they received first preference to the dwindling public housing available...
now, in the past couple of years, the current govnut thought they would get into building again, building school halls...
then just like the old days, a school hall that should cost $200,000 to build, suddenly costs the taxpayer a million bucks....so go figure it out...
kevin rudd brought in a deal, where only corporates, not individuals could build or buy a house, rent it at 20% discount to the market, and one could claim back $6000 per annum for 10 years...people like myself, as an individual may have been tempted to go for the deal, but it was not available to us...I think they changed it later, but then the whole thing died...
the waiting list in nsw is over 10 years to get into those old units, because most are filled with the most recent immigrants, plus the original immigrants, who stayed on...

property investors need an incentive, with tax breaks, just like any other investor...
it is cheaper for the taxpayer, then the old method from the pre 70's era

I have thoroughly enjoyed reading this thread over the last 6 months or so and think it is about time that I actually contributed something. I'm personally bearish on the outlook of Australian property prices (and the economy as a whole). However, that being said I agree with many of the points made by Tech/A (and others) that there will always be opportunities in any asset class regardless of the direction of the market. They are just few and far between at the moment Australian property I believe.

I'm only recently out of University (18 months) after studying for almost 8 years and I'm 28 years old. Therefore, I have only being able to save properly in the last 18 months. I have about $45,000 in cash and $15,000 in shares (plus a $20,000 HECS debt). In the last 18 months I have lived in various countries/states which has made me realize how expensive it is to live in Australia in terms of housing and the more general cost of living. I have no intention to purchase a property any time soon because I think there is much greater chance of property decreasing in value (or staying stagnate for a number years) than increasing significantly and becoming unaffordable. The proverbial buy now or else you will miss the boat comes to mind. If that occurs I will be happy with the decision that I have made.

I am very fortunate in that I am able to live overseas (not currently) and earn my income in Australian dollars. With the Australian dollar being where it is currently and the fact that I love the travelling/living in other countries it is a very good fit. I also believe there are many others like me who can earn income in $AUD and live overseas so I see this as becoming an increasing trend amongst professionals.

Just thought this might be of interest to some to hear real stories about real people.

Cheers,

kincella said:

the waiting list in nsw is over 10 years to get into those old units, because most are filled with the most recent immigrants, plus the original immigrants, who stayed on...

property investors need an incentive, with tax breaks, just like any other investor...
it is cheaper for the taxpayer, then the old method from the pre 70's era

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kincella - find the Enter key & shift for capital letters - makes it easier to read

Immigrants - the solution would be to only allow immigrants to buy or rent a new dwelling - think about it. Immigration should be matched to infrastructure - if there are no new dwellings to buy or rent then stand in the Q till there is....and ban foreigners (that are not going to live there) from buying property outright! Once the dwelling has been sold or rented for the first time it's status would then be 'used'.

To ensure the above, the negative gearing perk(s) should only apply to new dwelling constructions.

The irony is that if property was affordable ie at least half of what it is now, we would all be able to afford more 'things' and the economy would be much more resilient, and we wouldn't need such a large retirement 'nest egg' of a property portfolio to live off till you kark it?

Uncle Festivus said:

...Immigrants - the solution would be to only allow immigrants to buy or rent a new dwelling - think about it. Immigration should be matched to infrastructure - if there are no new dwellings to buy or rent then stand in the Q till there is....and ban foreigners (that are not going to live there) from buying property outright! Once the dwelling has been sold or rented for the first time it's status would then be 'used'.

To ensure the above, the negative gearing perk(s) should only apply to new dwelling constructions.

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Building new housing should be the primary focus of tax incentives (perks). Building houses actually generates economic activity. There should be little or no tax subsidy to buy and rent established houses given to property investors who artificially inflate prices and squeeze out owner occupiers to receive their small ROI thanks primarily to tax subsidy.

The irony is that if property was affordable ie at least half of what it is now, we would all be able to afford more 'things' and the economy would be much more resilient, and we wouldn't need such a large retirement 'nest egg' of a property portfolio to live off till you kark it?

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How true. This argument seems so sensible to anyone looking at this matter rationally instead of through the prism of receiving tax breaks for unproductive housing investment activity that costs the tax base billions of dollars each year.