The future of Australian property prices

Quincy · 5 April 2010

THE Rudd government has sought to hose down concerns that foreigners are buying up Australian homes and pricing locals out of the market, but has conceded it is investigating an emerging trend.

Real Estate Institute of Victoria research manager Robert Larocca said there was an urgent need to compile figures on foreign investment in the resident property market in Melbourne. The suburbs that were attracting the biggest investment from overseas were suburbs in the inner east that had a high concentration of private schools.

http://www.theaustralian.com.au/pol...-property-buyers/story-e6frgczf-1225849640862

This trend is also happening in Sydney, particularly in the north western metropolitan area. Whole suburbs in the north west of Sydney have become predominantly Chinese occupied now (eg. Ryde, Eastwood, Epping, Carlingford). Many shops and businesses in the area now display Chinese signage (English translation is shown in smaller type below the predominant Chinese type) and it is obvious that they are marketing their businesses to the increasing number of Chinese speaking customers in the area.

Paulo30 · 5 April 2010

Yeah this has been happening for some time.. and not just NW.. even areas in the South, such as Hurstville are now largely Chinese owned (HK, and mainland), although it doesn't take a genius to work that out when walking down the street there.

Foreign ownership of land, esp. in Sydney where there is a housing shortage, has to be the most irresponsible thing any government has ever done.. when there is an over supply of migrants, a baby-boom, adding foreign investment into the demand not only forces prices up, but forces locals and CITIZENS to then have to move 2 hours out of Sydney into the sticks in order to afford a place to live.

I know of at least 2 friends, originally from HK, who came here, liked it, bought a place in Flemington outright (another foreign ownership hot spot), and now are applying for PR. If this is just a few that I personally know about.. then how many times is this happening?

I don't want to be negative, but I don't hold much optimism for the kids of today in this country owning a property..

Quincy said:
http://www.theaustralian.com.au/pol...-property-buyers/story-e6frgczf-1225849640862

This trend is also happening in Sydney, particularly in the north western metropolitan area. Whole suburbs in the north west of Sydney have become predominantly Chinese occupied now (eg. Ryde, Eastwood, Epping, Carlingford). Many shops and businesses in the area now display Chinese signage (English translation is shown in smaller type below the predominant Chinese type) and it is obvious that they are marketing their businesses to the increasing number of Chinese speaking customers in the area.

MR. · 5 April 2010

drsmith said:
That article makes the common sense suggestion of capping the deductions associated with negative gearing.

I wonder though whether the government now fears that this in itself could prick the bubble.

The time to do it was the 90's after interest rates had fallen but before the current long term property boom.

High interest rates could be of benefit to property investment but only after capital values had adjusted (higher yield from longer term expectations of higher interest rate/inflation). If this were to occur it would represent a retraction of that part of the price appreciation that came from the longer term expectation of lower interest rates/inflation.

"Rising house prices and rising interest rates create the perfect climate for negative gearing" stated the article. With rising house prices the yield would certainly have some catching to do!

Not sure how much the governments reallocation of public housing to private investors would have had back in the 90's. But somewhere along the way definitely.

Go Nuke · 5 April 2010

Paulo30 said:
Yeah this has been happening for some time.. and not just NW.. even areas in the South, such as Hurstville are now largely Chinese owned (HK, and mainland), although it doesn't take a genius to work that out when walking down the street there.

Foreign ownership of land, esp. in Sydney where there is a housing shortage, has to be the most irresponsible thing any government has ever done.. when there is an over supply of migrants, a baby-boom, adding foreign investment into the demand not only forces prices up, but forces locals and CITIZENS to then have to move 2 hours out of Sydney into the sticks in order to afford a place to live.

I know of at least 2 friends, originally from HK, who came here, liked it, bought a place in Flemington outright (another foreign ownership hot spot), and now are applying for PR. If this is just a few that I personally know about.. then how many times is this happening?

I don't want to be negative, but I don't hold much optimism for the kids of today in this country owning a property..

+1 to all you have said!:iagree:

Put a stop to foreign investment so Aussies can afford houses!

Racist, protectionism...call it what you like..I don't care.
Its more about the chance my kids (which i don't have yet), have of affording a home in Australia.

utthedoor:

Go Nuke · 5 April 2010

robots said:
hello,

good evening, good evening

gives me great pleasure to post up the auction results for todays proceedings:

http://www.reiv.com.au/home/inside.asp?ID=162&nav1=1226&nav2=162

huge 72%, just fantastic, gee the auctioneers do a great job

goes out to you largesse,

thankyou
robots

Hi Robots,

Although i find you to be a very hard person to read....I'd like to know what you think about Brisbanes auction clearence rates?

Why are they so low etc?

Thx in advance.

UBIQUITOUS · 5 April 2010

Go Nuke said:
Hi Robots,

Although i find you to be a very hard person to read....I'd like to know what you think about Brisbanes auction clearence rates?

Why are they so low etc?

Thx in advance.

I'm not so sure that Robots realizes that there is a world outside of Melbourne. I will therefore answer your question:

Brisbane has low auction clearance rates because sellers are setting reserves at futuristic guaranteed house price levels. Buyers need to start the bidding at 30% above the expected price to have a chance of joining the escalator to never-ending easy wealth generation.

UBIQUITOUS · 5 April 2010

Go Nuke said:
+1 to all you have said!:iagree:

Put a stop to foreign investment so Aussies can afford houses!

Racist, protectionism...call it what you like..I don't care.
Its more about the chance my kids (which i don't have yet), have of affording a home in Australia.

utthedoor:

"Forin investmunt...it's dem migrunts...blah blah blah". I'm hearing this quite a bit recently. It certainly flavour of the month. Yes, they're not helping matters, but the problems were around well before this latest bit of finger pointing. I prefer to blame the root cause which is the never ending willingness of lenders to push (and borrowers to take) debt. Everything else is just a sideshow.

drsmith · 5 April 2010

MR. said:
"Rising house prices and rising interest rates create the perfect climate for negative gearing" stated the article. With rising house prices the yield would certainly have some catching to do!

Or alternatively the value of the property falling.

MR. said:
"
Not sure how much the governments reallocation of public housing to private investors would have had back in the 90's. But somewhere along the way definitely.

My reference was not to that but to the capping negative gearing. This would obviously reduce the allocation of government funds to private housing investment.

I think back to Paul Keating's experience in the mid 80's when he went the whole hog and abolished negative gearing only to retract that decision a relatively short time later. He combined going too far at a time when interest rates were high and so the impact on residential investors was too large.

If he (or Howard/Costello) acted in the 90's instead when interest rates had fallen and applied a cap (say, deductions to a maximum of 150% the property's income for example) then the impact would have been much less and it may have worked. This would have then reduced one element on the supply side fuelling the current boom. Costello actually made things worse by introducing the 50% CGT discount for investments held for more than one year fuelling shorter term speculation.

Dowdy · 5 April 2010

There's nothing wrong with Asians owning property IF they live in it.

The problem is the Chinese buying property and leaving them empty.

MR. · 5 April 2010

drsmith said:
My reference was not to that but to the capping negative gearing.

Yes, I did realize that and do agree.

Three friends very recently purchased investment properties. Not surprisingly their purchases were all about the negative gearing while they waited for their properties to increase in value. With one (age 40), I wasn’t surprised, but I just found out that the second (age 52) still has a hefty mortgage on their own home as well! The third (age 53) is now looking at buying a second highly leveraged investment property with his reasons mainly being the negative gearing.

Capping negative gearing certainly will have an impact. Too much of an impact? We will have to wait and see....

drsmith · 5 April 2010

One thing about a cap is it is more flexible than complete removal. It can be set a level to achieve a particular outcome like discouraging investment decisions driven largely by tax. Another possibility that comes to mind is different tax treatment for negative gearing between the construction of residential property and investing in established property.

I can't see a cap (or any other tangable restriction to negative gearing) being applied prior to the completion of the current boom/bust cycle. Governments themselves are too addicted to the punch in the residential property bowl.

tech/a · 5 April 2010

MR. said:
Yes, I did realize that and do agree.

Three friends very recently purchased investment properties. Not surprisingly their purchases were all about the negative gearing while they waited for their properties to increase in value. With one (age 40), I wasn’t surprised, but I just found out that the second (age 52) still has a hefty mortgage on their own home as well! The third (age 53) is now looking at buying a second highly leveraged investment property with his reasons mainly being the negative gearing.

Capping negative gearing certainly will have an impact. Too much of an impact? We will have to wait and see....

All well and good if he is making $250K a year or more.
Other than that he's/they are punching above their weight.

MR. · 5 April 2010

drsmith said:
I can't see a cap (or any other tangable restriction to negative gearing) being applied prior to the completion of the current boom/bust cycle. Governments themselves are too addicted to the punch in the residential property bowl.

We realize the fine line the RBA is running and I still don't really see inflation taking too much of a grip either. However, plenty of people continue to speak of high inflation. Latest property sales have identified the majority of the current buyers, so would it be unexpected if something is changed to negative gearing if the RBA fails to pull the speculation in?

CamKawa · 5 April 2010

Cash in the bank looks like the way to go doesn't it?
Tight rental market starting to ease

Oh and more good news from Qld.
Construction industry faces disaster: experts

robots · 5 April 2010

hello,

good evening great day on the planet,

thanks to Ubiquitus for stepping in and answering a question, great effort and reinforces what ASF is about: helping each other out

tough for a few years but before you know it values creep up and loan value creeps down

5 yrs, 10yrs, 15yrs pass and you punching above your weight, and in some cases even easier leaving the joint empty than putting someone in

just fantastic,

thankyou
robots

MR. · 5 April 2010

Go Nuke said:
I'd like to know what you think about Brisbanes auction clearence rates?

Why are they so low

Brisbane and SE Qld don't do alot of auctions because they don't really seem to work well here. I don't know why exactly! I know that some agents go to auction with the intention just to pass the property in at the venders bid and then promote the property as being passed in at $$$ afterwards. That will upset the Qld figures but I have no reason why that isn't practiced Australia wide anyway.

Once as a vendor I instructed the auctioneer to keep dropping the price until he got a bid. I wanted the concept to work. He got a bid eventually but a second bidder still didn't step up to the plate. Another person from that auction ended up paying 50% more than the bid, a week later.

robots said:
tough for a few years but before you know it values creep up and loan value creeps down

5 yrs, 10yrs, 15yrs pass and you punching above your weight, and in some cases even easier leaving the joint empty than putting someone in
robots

Since most people can't save committing to a property makes them commit to save. Can be a good thing.

drsmith · 6 April 2010

Dowdy said:
Anyone see the interview with Glenn Stevens today on Sunrise?

http://au.tv.yahoo.com/sunrise/video/play/-/6994337/em-rba-em-governor-glenn-stevens/

When the man who writes the rules says to not over leverage in real estate then you know there is a bubble. He's of-course not going to admit there is one but you can tell he doesn't like the current situation RE is in.

"I think it is a mistake to assume that a riskless easy guarantee way to prosperity is just to be leverage up into property..." - Glenn Stevens

Up 0.25%.

http://www.rba.gov.au/media-releases/2010/mr-10-06.html

How does "considerable buoyancy" compare with "irrational exuberance" ?

tech/a · 6 April 2010

drsmith said:
Up 0.25%.

http://www.rba.gov.au/media-releases/2010/mr-10-06.html

How does "considerable buoyancy" compare with "irrational exuberance" ?

Taking a ship across the English Chanel or swimming.

Go Nuke · 6 April 2010

UBIQUITOUS said:
I'm not so sure that Robots realizes that there is a world outside of Melbourne. I will therefore answer your question:

Brisbane has low auction clearance rates because sellers are setting reserves at futuristic guaranteed house price levels. Buyers need to start the bidding at 30% above the expected price to have a chance of joining the escalator to never-ending easy wealth generation.

This is what I figured Ubiquitous.

So obviously people are not paying what the sellers want. Because they aren't getting sold after the auction either.

Thank you

It seems strange doesn't it.
We KNOW we need to build more houses...but interest rates just keep going up.
Won't thins hamper efforts to build more houses? Or will it lure investors back with higher rates of return?

robots · 7 April 2010

MR. said:
Since most people can't save committing to a property makes them commit to save. Can be a good thing.

hello,

same thing happens with the leveraged person as well, they jump in and work at to get things in a good position

may take 5yrs but this is nothing in ones life

thankyou
robots

The future of Australian property prices

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drsmith

tech/a

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