The future of Australian property prices

[matty77]

What ever happened to Robots?

I miss Robots!!

 

[Izabarack]

How's the next 12 - 24 months looking for the first home buyer?
From what I can see/read if things continue to go as they are prices should continue to drop...

I'm preparing a house for sale at the moment and have been doing some research and thinking in this area. The recent activity has cleaned out the lowest priced houses in the market and the next level up is what is now being sold to the first home buyers. First home buyers are paying what they believe to be a fair price for what they are getting, in the current market. Essentially, I convinced the market has bottomed and has taken the first step up. I do not believe there will be any huge recovery inside 3-4 years but the current move is a slight rise. I want to use the value of the house for a couple of purposes and am not going to wait for a large up movement because I can do better in other areas. I also notice stories about it being cheaper to buy than rent, at the moment. I agree with the general sentiment although the comparison is somewhat over stated. In Western Brissy, a typical house going for 250k is renting for just over 300 a week, suggesting rent return is better than capital gain in a property strategy. In the end, it's a buyers market now and the time to pay off your own home couldn't be better, in my view.

Iza

 

[sptrawler]

My guess is negative gearing is going to be hit.
Reason for this, the government doesn't want to keep forking out on loss making investments.
The government has to prick the property bubble, or leave it to the reserve bank to keep dropping interest rates.
The problem with that is it increases the retirees dependence on pensions as their deposits fail, therefore costs the government more.
I don't think it will happen before the election, but I think it will happen. The one thing this government is showing is, unpopular and even disasterous decissions seem to go through o.k.

 

[Julia]

My guess is negative gearing is going to be hit.

I don't think so, sptrawler. They cannot risk losing that amount of political capital imo.

The government has to prick the property bubble, or leave it to the reserve bank to keep dropping interest rates.

They love the RBA dropping rates. Swannie claims (god knows on what basis) that interest rates are falling due to the government's magnificent fiscal management.
Some of the electorate may swallow the line that their mortgages are becoming cheaper due to government policy.

In reality, of course, the RBA drop rates in order to stimulate a flagging economy.

The problem with that is it increases the retirees dependence on pensions as their deposits fail, therefore costs the government more.

When did you hear any politician show the slightest concern for how falling rates hit savers?
Almost never. Any increase in claims on the age pension is far enough away for the present government to be quite unconcerned.

I don't think it will happen before the election, but I think it will happen.

You might be quite right. We'll see.

 

[DB008]

Didn't negative gearing get dissolved (briefly) back in the 80's?
What happened then?

If there are less people investing in property (ie, developers, investors) = more (or same level of) demand, less supply, will prices increase even further?

 

[white_goodman]

Didn't negative gearing get dissolved (briefly) back in the 80's?
What happened then?

If there are less people investing in property (ie, developers, investors) = more (or same level of) demand, less supply, will prices increase even further?

this would be true if investors were purchasing new homes in high number, 95%+ of investment properties are in second hand stock and do not add supply to the market

 

[white_goodman]

I don't think so, sptrawler. They cannot risk losing that amount of political capital imo.


They love the RBA dropping rates. Swannie claims (god knows on what basis) that interest rates are falling due to the government's magnificent fiscal management.
Some of the electorate may swallow the line that their mortgages are becoming cheaper due to government policy.

there is an economic reason behind this, tighter govt budget policy and even expectations for tighter fiscal policy (surplus) gives the CB more wiggle room on the downside with the cash rate as inflation isnt as much of a concern.. [insert ISLM model]

if Swanny actually knew this id be highly surprised

 

[Julia]

there is an economic reason behind this, tighter govt budget policy and even expectations for tighter fiscal policy (surplus) gives the CB more wiggle room on the downside with the cash rate as inflation isnt as much of a concern.. [insert ISLM model]

if Swanny actually knew this id be highly surprised

I think even Swanny probably gets that.
Perhaps you'd like to comment about WHY inflation isn't as much of a concern? i.e. why it's so low.

 

[moXJO]

Didn't negative gearing get dissolved (briefly) back in the 80's?
What happened then?

If there are less people investing in property (ie, developers, investors) = more (or same level of) demand, less supply, will prices increase even further?

Rents went up and the public housing list blew out so bad they brought negative gearing back from memory. There was a huge uproar about it.

 

[DB008]

Rents went up and the public housing list blew out so bad they brought negative gearing back from memory. There was a huge uproar about it.

Would similar out comes happen again, if they did it now?

 

[moXJO]

Would similar out comes happen again, if they did it now?

I'm not sure of the effect if any it would have now. The building industry is already in trouble so it could cause a massive shortfall of new homes being built and creating further price pressures later on similar to the hawk/keating era.

I did skim an article about ditching negative gearing a while back that was fairly balanced (I will have a look for it). Most of the time it seems articles are written with extreme bias to one side or the other.

The one thing I remember clearly was the howling from landlords and renters alike. It was a pretty fast back flip as well.

I know a few people out there are saying rents didn't rise and supply was fine. Not to sure if these people were even around back then.

It is well known to all Australians that in July 1985 the Hawke/Keating
government changed negative gearing so that losses or expenses could not
be claimed against rental or other income. The immediate result was a
dampening of investment in rental accommodation and significant increases
in average rents. The Hawke/Keating government quickly restored the
negative gearing rules in September 1987.
According to the Australian Bureau of statistics between 1985 and 1988 the
number of private sector dwellings completed dropped from 129,100 per year
to 107,700. At the same time the waiting list for public housing had a dramatic
increase from 144,600 to 198,100 which was a 37% increase.
Source:http://www.abs.gov.au/ausstats/abs@.nsf/2f762f95845417aeca25706
c00834efa/f93a40ff13f209dfca2570ec007877a1!OpenDocument

http://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/2012/Business%20tax%20reform/Submissions/PDF/BMT_Submission.ashx

 

[white_goodman]

I think even Swanny probably gets that.
Perhaps you'd like to comment about WHY inflation isn't as much of a concern? i.e. why it's so low.

thats going down the rabbit hole a bit, define inflation; CPI or some deflator... then theres new theory suggesting inflation is mainly caused by govt budgets and expectations of govt budgets (into perpetuity) more so then monetary excesses... PM me i can link you to a few papers if you're interested

a simple answer however is that IS curve dropped so much that we are nearing the Aussie version of ZIRP ie deleveraging and declines in growth isnt being offset/exceeded by the reduction in the cash rate

 

[Uncle Festivus]

Didn't negative gearing get dissolved (briefly) back in the 80's?
What happened then?

If there are less people investing in property (ie, developers, investors) = more (or same level of) demand, less supply, will prices increase even further?

Abolition/reduction by itself would only exacerbate the current problems I would think?

They would need to make it vastly more attractive to build new dwellings, both private and developers, in conjunction with neg gearing/capital gains tax reform? I would even include the family home to be CGT applicable if sold within a time period eg 3 years etc, but nil after that?

Not much chance of any of that happening though.......it would put accountants out of business.....which wouldn't be a bad thing!

 

[Mrmagoo]

Would similar out comes happen again, if they did it now?

HILARIOUS ! Compared to the current shortage of rental properties !

NEGATIVE GEARING - Keep it to increase the number of rental properties.

NEGATIVE GEARING - It isn't increasing them, but keep it anyway.

If what these property scammers were saying was true we'd have ample rental accomodation Australia wide due to the 5.5 BILLION invested in it each year.

How many FREAKING HOUSES COULD YOU BUILD FOR 5.5 BILLION EACH YEAR !!!!

Negative gearing is a scam, get rid of it.

 

[Mrmagoo]

Easy. Abolish negative gearing. Give a boost/incentive to build new for investment purposes.

1) Make it so debts due to property bankruptcy cannot be removed during a bankruptcy. i.e those scammers will have to pay it off for LIFE !!

2) Imprison all real estate agents and property agents for human rights abuses due to depriving an entire generation of adequate housing, i.e a human right.

 

[Mrmagoo]

Rents went up and the public housing list blew out so bad they brought negative gearing back from memory. There was a huge uproar about it.

Bullocks. Landlords charge every single cent they can regardless of their costs. What a larf.

 

[Mr Z]

Remove negative gearing and you will, at least in the short term, reduce the rental stock. When the price of property falls and the ROI equation makes sense again investors will return, until then there will be a shortage of rentals. Ultimately it should lead to lower property values and lower rent BUT it will take time.

Ask Bob Hawk, he tried it and the predicable result happened, the backlash was so sharp and immediate that they reversed course QUICKLY.

If it is to go, they need to phase it out, as in stop negative gearing on any new finance and allow the old stuff to be resolved over time. It is not exactly fair to chop investors off who have complied with a long standing law, they will be battling capital losses in the short term as it is should negative gearing for domestic investment property be removed.

Don't forget that negative gearing also applies to any entity making an investment in income producing assets, it is not a rule singularly applied to property investors. In fact you would need to specifically exempt them from the rule as apposed to removing the rule to avoid doing damage elsewhere.

 

[Mr Z]

Easy. Abolish negative gearing. Give a boost/incentive to build new for investment purposes.

1) Make it so debts due to property bankruptcy cannot be removed during a bankruptcy. i.e those scammers will have to pay it off for LIFE !!

2) Imprison all real estate agents and property agents for human rights abuses due to depriving an entire generation of adequate housing, i.e a human right.

LOL... yeah that would get me right back into the domestic market! The returns are ****e as it is.... you really don't want more rentals available do you? Maybe mommy government should provide them all?

 

[Miss Hale]

Heard the property talkback segment we have on the radio here on a Saturday morning and the property expert (real esate agent) said that you should not expect good returns from property and you should only expect to make capital gain. Is this what most property investors think? To me, if I can make good returns and capital gain elsewhere (shares) why would I bother with property? (other than for diversification maybe).

 

[DB008]

2) Imprison all real estate agents and property agents for human rights abuses due to depriving an entire generation of adequate housing, i.e a human right.

Riiiiight-e-o....trying to maximise a return on investment is a bad thing?

Did you scammed in property and/or have a property investment turn sour?