The future of Australian property prices

DocK said:

I do think that sometimes the younger generations can lose touch with the fact that pensioners are actually real people, who have lived full lives and mostly contributed to our society in one form or another, and are not just a burden on society that we'd be well shot of if given the opportunity.

The security and comfort older people can draw from living in their own homes can be difficult to empathise with if you've never actually owned your own home, or lived in one place for a lengthy period of time. It's probably equally difficult for youngsters to recognise the value older folk place on their independence, or that looking after one's home can provide a purpose in life, as in your late father's case. Like most things in life, it's easy to suggest changes that affect older people if such changes are far-distant from oneself.

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Nah. According to the baby boomers they all worked so hard to get their houses I can't see how any will be depending on the pension as they're all self funded investment geniuses.

And they'll all been soooo wonderful to their kids, their kids will be falling over to help them out in retirement.

Excellent posts Julia and DocK, agree.

Mrmagoo said:

As they're currently doing, flood the market with highrise units. Young people move into these units and out of houses, creating much less demand.

Bet your bottom dollar all the oldies will do whatever they can to stop this happening but it already is basically everywhere apart from Sydney..

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Your attitude disgusts me to the core ole Pal.

Your post put up some 25 hours ago is the last one that hinted at anything to do with the topic of Property Price Direction in my view. Had just thought I would pop in and see how property has been going over the weekend but as has become typical on ASF of late there is little if any content any more. There used to be some mods on the ball.

Apart from the Gobbledygook rubbish I post or stirring wayneL, I think Joe you have some problems.

explod said:

Your attitude disgusts me to the core ole Pal.

Your post put up some 25 hours ago is the last one that hinted at anything to do with the topic of Property Price Direction in my view. Had just thought I would pop in and see how property has been going over the weekend but as has become typical on ASF of late there is little if any content any more. There used to be some mods on the ball.

Apart from the Gobbledygook rubbish I post or stirring wayneL, I think Joe you have some problems.

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I fail to see how the current situation is anything but a generational stand off.

The over whelming majority of oldies have and will benefit enormously from ever increasing house prices. While the young overwhelmingly face disproportionately high levels of debt for the rest of their lives or additional to the unattractive prospect of ever increasing rents.

The alternative is to increase the supply of new high-rise dwellings as these can be located close to city centers. Who do you think might oppose such developments ?

Mrmagoo said:

I fail to see how the current situation is anything but a generational stand off.

The over whelming majority of oldies have and will benefit enormously from ever increasing house prices. While the young overwhelmingly face disproportionately high levels of debt for the rest of their lives or additional to the unattractive prospect of ever increasing rents.

The alternative is to increase the supply of new high-rise dwellings as these can be located close to city centers. Who do you think might oppose such developments ?

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You are still not dealing with the subject of the thread. The solution would be to locate or start a thread on such demographic and or social issues. Take your case elsewhere champ.

Where's Robots with the weekly sales and spring outlook on auctions etc..

explod said:

You are still not dealing with the subject of the thread. The solution would be to locate or start a thread on such demographic and or social issues. Take your case elsewhere champ.

Where's Robots with the weekly sales and spring outlook on auctions etc..

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So you think demographic trends have nothing to do with the future of Australian house prices ?

Mrmagoo said:

So you think demographic trends have nothing to do with the future of Australian house prices ?

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I do not say that at all, I worked in the game for years. What I am saying is that this thread is about immediate property prices so that one can decide whether its a good time buy etc. What may or may not happen as a result of pensions etc. down the track, has little relevance for the general audience here.

Your arguments and views are to be welcomed (not that I agree with them) and the subject has enormous merit, but not on this particular thread in my view.

Agree with explod here....if you want to discuss the old age pension and it's effects on property then take it to another thread.....

CanOz

Joe Blow said:

Please feel free to post your research, analysis, relevant information or opinions on Australian property in this new thread.

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explod said:

What I am saying is that this thread is about immediate property prices so that one can decide whether its a good time buy etc. What may or may not happen as a result of pensions etc. down the track, has little relevance for the general audience here.

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CanOz said:

Agree with explod here....if you want to discuss the old age pension and it's effects on property then take it to another thread.....
CanOz

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???

I dont know why you are picking on the old folk, MrMagoo, plenty of young folk in the CBD and on the outskirts.

I do agree with explod.

craft said:

???

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Fair points,

but was being carried a bit far the last day or so in my view.

explod said:

What I am saying is that this thread is about immediate property prices so that one can decide whether its a good time buy etc. What may or may not happen as a result of pensions etc. down the track, has little relevance for the general audience here.

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CanOz said:

Agree with explod here....if you want to discuss the old age pension and it's effects on property then take it to another thread.....

CanOz

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I don't think you decide whether it's a good time to buy on the basis of what will happen with property in the next year, or I hope not. So if changes are made to tax treatment of PPOR (which looks increasingly likely), it seems pretty reasonable to me to consider the implications of that.

Mrmagoo said:

...The over whelming majority of oldies have and will benefit enormously from ever increasing house prices. While the young overwhelmingly face disproportionately high levels of debt for the rest of their lives or additional to the unattractive prospect of ever increasing rents....

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First off, there is absolutely heaps on offer suitable for young couples and families for 3-400k in Brisbane and outlying suburbs serviced by trains. That's a mortgage that's done and dusted by the time the kids are in high school and you're in your mid 30s. I used to feel that the levels of debt were scary, but it's only relative to job security. If you feel like you'll still have a job in 10 years then a mortgage isn't so scary.

EDIT: Just to be clear the only thing written directly in response to waht was quoted is that ^^^^ what is below is directed at the 'keep it on topic' people.

I apologise for the fact that a large part of my earlier post was to do with the pension, retirement and superannuation, but if you can't see how those are massive contributors to the future of Australian property prices in Australia that's on you, not me. I wouldn't call them pivotal, but I believe they're a major foundation.

If that's all a bit too far from the point still, here's something clearer. With plummeting interest rates, capital growth in equity markets still a scary thing to bet on and no certainty that high-yield darlings will maintain their dividends, a lot of self-funded retirees are likely to face rapidly draining super balances. Sitting on a valuable but not income generating asset that becomes a higher and higher percentage of a retirees net wealth will not make sense.

I believe that many will need to, or choose to, sell. If the global economic outlook doesn't get some of the monkeys off its back (Greece, Spain, Chinese growth if it's a slow news day in Europe, American recovery etc etc etc), job security will fall and the buyers will not be able to meet the sellers. I think there will be stagflation in run-of-the-mill suburbs with nothing to differentiate them.

It's my opinion however, that for those WITH job security and within serviceability levels will continue to pay a premium for places with the attributes they want. You can always add another bathroom and fix the kitchen, but you can't always get that house you want in the same suburb as the school you want to send your kids to and a short commute to work.

If that doesn't sound new and exciting Explod, that's because it's not. In a thread about prices you know as well as I do that there are 3 options - up, down or nowhere.

If you don't want to think about the why, just flip a coin.

prawn_86 said:

Quick back of the envelope shows it to be very similar, with the home owner having an assett in the end, and the renter having nothing if they are not saving anything additional.

Interesting

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I have done a bunch of spreadsheets years ago comparing buying vs renting.
Generally in a strict buy vs rent and invest the spare cash flow In stocks scenario buying came out on top.
Rent and invest in stocks using margin loans was a better option again.

Overall there are lots of scenarios and variables to play around with.
I was using historical asset returns in the calculations. Despite stocks having a historically higher return compared to property, the high leverage of property generally result end in higher returns. That is why only when margin loans for the renting scenario were used did it turn out better.

Discipline for most would make the rent and invest option hard. Its easy to upgrade a rental, or spend the spare cash instead of investing.

DocK said:

That's exactly what I thought too!

On a more serious note - although I agree in principle with the PPR being included (or at least over a certain value) in means testing for the age pension - there is also the human/emotional factor to consider.

My mother is 82, receives a small part pension and is mainly self-funded. She is a widow living in the same 4 bedroom house that has been her home for over 30 years. It is too large for her, is surplus to her needs and if sold for a more suitably sized (and easier for her to maintain) home would no doubt result in her becoming ineligible for any age pension. Most of the prior arguments are in favour of just such a course, and in theory I agree that downsizing would make perfect sense. However.... What makes sense intellectually is not always what can actually be considered emotionally. My mother's home was a fairly modest home when built over 30 years ago, in what used to be an outer suburb of Brisbane. Due to no fault of her own, it is now in a sought-after suburb and has increased in value substantially. She is emotionally attached to it - it has been her home for many years, she has lived and loved in it, cared for it, spent way too many hours tending its gardens, and every nook and cranny holds precious memories for her. She has developed excellent relationships with her neighbours (important when you are an elderly lady living on your own) and has been visiting the same medical centre, dentist etc for years. It would be a very brave government that would tell her, and her family, that despite having paid taxes all her (and my father's) working lives and having lived within their means in order to pay off a mortgage, raise future tax-payers, and save enough to be almost fully self-funded, that because she's drawing a part pension she must either sell her home or give up the part pension she receives. There would be an outcry the likes of which I can only imagine. It would be absolute political suicide. And to be honest, although I agree it makes perfectly logical sense to means-test the family home, I don't think it's actually fair in a lot of cases.

An

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I imagine that if a government was ever brave enough to include the family home in means testing for the pension, we would see an insurance firm or financial services firm start a sale and lease back product for pensioners.
Sell your house, have a guaranteed rental tenancy for life. You get the lump sum cash, but have to pay rent.

Julia said:

I don't think you decide whether it's a good time to buy on the basis of what will happen with property in the next year, or I hope not. So if changes are made to tax treatment of PPOR (which looks increasingly likely), it seems pretty reasonable to me to consider the implications of that.

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Agree Julia, but we do seem to have moved away from the news around Australia of auction and sale trends which I found of value.

And as much as I disagreed with ole Botty, (someone will call me ole splod one day ) it stimulated very lively debate on the day to day issues at the coal face of real estate.

As property prices were rising there was a lot of enthusiasm, does this mean perhaps property is collapsing and no one wants to push that horror.

explod said:

Agree Julia, but we do seem to have moved away from the news around Australia of auction and sale trends which I found of value.

And as much as I disagreed with ole Botty, (someone will call me ole splod one day ) it stimulated very lively debate on the day to day issues at the coal face of real estate.

As property prices were rising there was a lot of enthusiasm, does this mean perhaps property is collapsing and no one wants to push that horror.

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i find talking about longer term economic trends and drivers much more entertaining and valuable to the discussion as opposed to anecdotal sale evidence.., its a property thread its all applicable, maby follow the same advice and start your own 'Anecdotal sales/auction evidence thread'

property prices are relatively flat in net terms, down slightly in real terms in aggregate. Property could well and truly remain flat for many many years, so weekly auction results arent that pertinent to the discussion as we may not be in boom boom or doom and gloom markets

explod said:

As property prices were rising there was a lot of enthusiasm, does this mean perhaps property is collapsing and no one wants to push that horror.

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Seems to be the case explod. I know 2 RE agents that run their own show. Was talking to one a couple of weeks ago and she said things are terrible. She largely works with repeat investors and foreign investors that don't want to make the trip to sell or purchase. She was saying that investors just simply won't come to grips with the fact they need to reduce prices by 10's of thousands to sell their places. Because of this nothing is moving, everything is just stagnating(in the areas she deals in anyway). She was saying it's getting slower and slower, and doesn't think it will get better any time soon(at least 2-3 years in her opinion).

Perhaps this mentality is a big reason why prices haven't really started to slide hard and fast yet. Investors simply refusing to sell in a depressed market, thinking, hoping, praying that things will head on up again soon.

I wonder what the tipping point would be for the majority. Surely once prices start to fall further investors will want to lock in gains while they can, and get out before things get too outta hand. First home owners heading into negative equity cutting their losses and getting out before they get really stuck.

There seems to be a serious lack of direction with the housing market at the moment. Just sitting in limbo almost.

Property investors don't cut and run easy. They're in for a long haul so a it would take more than a business cycle blip to scare them off.

Where were your RE mates from YG?

CanOz

CanOz said:

Property investors don't cut and run easy. They're in for a long haul so a it would take more than a business cycle blip to scare them off.

Where were your RE mates from YG?

CanOz

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Both Brisbane. And yeah alot of inv. are long haul, but they would only approach her if they were ready/thinking about selling. Needless to say she is starting to stress as she isn't making anywhere near the money she was use to. I guess the point she was making is that if they want to sell, they need to be prepared to discount heavily from their original expectations.

I was also talking to a commercial agent the other day(I don't know him personally) and was chatting about how that area was going. He said in the peak of boom time he was getting about 40 calls a day re industrial/commercial property, now he's lucky to get 4 a day. Prices have plateaued but don't seem to be dropping much. There is so much stock on the market in an area I am looking at for both lease and sale it's crazy. I would have thought that would have had a lot more downward pressure on prices. He said I could expect a brand new 250sq shed to sit for upto 6 months before leasing.