The future of Australian property prices

[sptrawler]

What do you mean housing returns nothing after its built, it generates a weekly rental return.

What I was meaning was mining investment results in production, we sell a product offshore.
While a house is being built it generates productive debt i.e bricks, cement, tiles etc which support industry that employs people and pays wages.

When the house is completed, it sits there and sucks rent out of someone, it doesn't promote any more jobs growth.

Let's say that house is carrying $400,000 debt and is costing someone $400/wk to rent it, what is it producing?

Now let's say a factory unit is carrying $400,000 debt, but employs six people, that get paid $40k/yr each and they each can afford to buy their own house. Big difference.

 

[Mrmagoo]

"Used to", that's the key to the answer.

Sydney CBD "used to" be in the middle of no where. But now it's not. The population has grown exponentially in the last 200 years.

It's all supply and demand.

Didn't even used to be part of Sydney. Middle of nowhere to me means something different to an inner city yuppy.

In europe you can live happily on 20k euro a year. In Australia, you mgiht be able to pay the rent with that.

That is why we're losing jobs.

It will only get worse.

- - - Updated - - -

The fact is the Australia I knew and loved is gone. The leaving of Holden and Ford is a symbolic death kneel. What rules Australia now is rampant inequality and cronyism. Those who have it all and those who can't even afford the basics. It is not about had work, but about getting access to fiat currency.

 

[trainspotter]

A baby boomer is a person who was born during the demographic Post–World War II baby boom between the years 1946 and 1964. Ummm not even close .... bit younger than that. Instead of whinging how hard you have it why don't you get off your ar*e and do something about it. Oh but you have it so haaaaaard now don't you !

Mrmagoo - Go and live in Europe, I prefer Monte Estoril in Portugal myself or Tarifa in Spain. You can get accosted by 20 homeless beggars asking for 1 euro. And here you are advocating how Australia is heading the same way.

sptrawler - When a house is finished there are things that require maintenance ie plumbing, painting, electrical ad infinitum. The house is now on the grid ie water, electricity, sewer ad infinitum. These services believe it or not actually employ people to keep the infrastructure running. The rent money being "sucked" out of someone is being paid back to a bank who EMPLOYS people or if there is no bank involved the money goes to an investor who will use that money to BUILD or BUY some more houses.

The system we have is here to stay. Get used to it or LEARN how to take advantage of it to make money

$378,500 house and land package in Ipswich http://www.realestate.com.au/property-house-qld-ipswich-115944659 ..... Yep it's all too hard now isn't it !

 

[Value Collector]

1, Didn't even used to be part of Sydney. Middle of nowhere to me means something different to an inner city yuppy.

2, In europe you can live happily on 20k euro a year. In Australia, you mgiht be able to pay the rent with that.

.

1, Sydney "used to" not even be part of the industrialised world, Things change,

2, have you seen the unemployment rates in some European countries?

 

[Value Collector]

What I was meaning was mining investment results in production, we sell a product offshore.
While a house is being built it generates productive debt i.e bricks, cement, tiles etc which support industry that employs people and pays wages.

When the house is completed, it sits there and sucks rent out of someone, it doesn't promote any more jobs growth.

Let's say that house is carrying $400,000 debt and is costing someone $400/wk to rent it, what is it producing?

Now let's say a factory unit is carrying $400,000 debt, but employs six people, that get paid $40k/yr each and they each can afford to buy their own house. Big difference.

Remove all the housing from the country and see how productive it is, Houses provide shelter which as you pointed out is a basic need for life, that seems pretty productive to me.

One of the first thing mining companies build is accommodation for workers without it, you wouldn't have productive workers.

A house is not sucking rent from someone any more than any other product or service that they pay for,

 

[Value Collector]

Let's say that house is carrying $400,000 debt and is costing someone $400/wk to rent it, what is it producing?

Now let's say a factory unit is carrying $400,000 debt, but employs six people, that get paid $40k/yr each and they each can afford to buy their own house. Big difference.

The house is producing a living space for a worker to live in, that factory that employs 6 people will have trouble finding reliable workers if there is no accommodation in the area for them to rent or buy. So how is taking away property investment going to be good for the factory or the workers.

Not to mention the factory itself is probably a rented property investment.

 

[sydboy007]

1, Why wouldn't it be an asset? an asset is defined as a "a useful or valuable thing or person" Food is a basic need, are you saying we shouldn't consider farmland an asset, Water is a basic need, are you saying we shouldn't consider dams, desalination plants and water pipes assets.

We've caused house prices to be too high due to speculation. The tax system in this country encourages over "investment" in housing compared to more productive endeavors. You seem to think overpriced housing is not a bad thing. It's a productivity killer and burdens the country with hundreds of billions of dollars in excess debt.

2, Australia does have a lot of land, and the vast majority is very cheap, it's also desert. There is very cheap land and housing available, unfortunately if you are limiting your preferred location to where thousands of others also want to live you will have to out bid them, the fact that we have vast tracts of land that nobody wants will not lower the value of Sydney property.

* There's plenty of land around the major cities. Zoning laws and NIMBYs and BANANAs have pretty much enforced UGBs while fighting higher density housing. Limiting council revenues makes them reluctant to develop land without the ridiculously high service charges, which once again increases mortgage debt.

3, No benefit to housing???? you just described it as a basic need. which one is it, it is a basic need or does it have no benefit.

* I see no benefit in that we are "investing" are far larger amount of scarce capital in non productive housing. It does provide shelter, but we're doing it at significantly higher costs than most countries.

 

[sydboy007]

1, Why wouldn't it be an asset? an asset is defined as a "a useful or valuable thing or person" Food is a basic need, are you saying we shouldn't consider farmland an asset, Water is a basic need, are you saying we shouldn't consider dams, desalination plants and water pipes assets.

We've caused house prices to be too high due to speculation. The tax system in this country encourages over "investment" in housing compared to more productive endeavors. You seem to think overpriced housing is not a bad thing. It's a productivity killer and burdens the country with hundreds of billions of dollars in excess debt.

2, Australia does have a lot of land, and the vast majority is very cheap, it's also desert. There is very cheap land and housing available, unfortunately if you are limiting your preferred location to where thousands of others also want to live you will have to out bid them, the fact that we have vast tracts of land that nobody wants will not lower the value of Sydney property.

* There's plenty of land around the major cities. Zoning laws and NIMBYs and BANANAs have pretty much enforced UGBs while fighting higher density housing. Limiting council revenues makes them reluctant to develop land without the ridiculously high service charges, which once again increases mortgage debt.

3, No benefit to housing???? you just described it as a basic need. which one is it, it is a basic need or does it have no benefit.

* I see no benefit in that we are "investing" are far larger amount of scarce capital in non productive housing. It does provide shelter, but we're doing it at significantly higher costs than most countries. It doesn't bring in export income, but it does cause a blowout in our forgien debt since over 40% of mortgage debt is foreign sourced.

 

[trainspotter]

According to some this is where we are going to end up

 

[trainspotter]

Did someone state that our cost of building is too high compared to Europe?

Europe has five of the top 10 most expensive construction markets with Switzerland, Denmark, Sweden, France and Belgium all featuring in the rankings compiled by global built asset consultancy EC Harris.
Hong Kong is the most expensive, followed by Switzerland, Denmark, Sweden, Macau, Australia, Japan, France, Singapore and Belgium. The cheapest locations to build are India, Indonesia and Vietnam

The report says that as Europe continues to struggle against the headwinds of Eurozone woes, deficit reduction and challenging export markets this represents a major competitive challenge for European markets.

Constructions costs in Belgium, France, Sweden and Denmark have increased by 3 to 4%, cementing their position in the top 10, according to the report which covers building costs in 47 countries around the globe.

Although building costs have fallen in the UK over the past 12 months, the UK has maintained its position lower down the rankings due to a combination of the weaker pound and inflation in some European markets.

http://www.propertywire.com/news/global-news/global-building-costs-study-201308278166.html

By contrast Malaysia, Indonesia and the Philippines have very ambitious investment for economic diversification and social infrastructure programmes and are likely to see significant growth in construction over the next few years.

Which basically means that the construction costs are going to go up in these countries as well.

Sooooooooo there goes that theory !

 

[Value Collector]

* I see no benefit in that we are "investing" are far larger amount of scarce capital in non productive housing. It does provide shelter, but we're doing it at significantly higher costs than most countries.

That's where we will have to disagree, you see no benefit in providing shelter, I see a great benefit in homes that provide shelter, and the average Aussie home provides more than just shelter, Compare what the average family in Tokyo live in to what the average Aussie family live in, the Aussie family home will have a much larger land content, more living and entertaining spaces you have to compare apples with apples.

 

[satanoperca]

Malaysia uses imported labour from Indo to keep their building costs down, millions of workers, many illegals.

Maybe we need to start doing the same thing, don't think the unions would mind.

Interesting report, look who wrote it. Love to see their methodology behind their figures.

Cheers

 

[Value Collector]

1,We've caused house prices to be too high due to speculation. The tax system in this country encourages over "investment" in housing compared to more productive endeavors.

2, You seem to think overpriced housing is not a bad thing. It's a productivity killer and burdens the country with hundreds of billions of dollars in excess debt.



3, * There's plenty of land around the major cities. Zoning laws and NIMBYs and BANANAs have pretty much enforced UGBs while fighting higher density housing. Limiting council revenues makes them reluctant to develop land without the ridiculously high service charges, which once again increases mortgage debt.



4, It doesn't bring in export income, but it does cause a blowout in our forgien debt since over 40% of mortgage debt is foreign sourced.

1, Any rise caused by speculation will be corrected in time. Which parts of the tax system " encourages over "investment" in housing compared to more productive endeavors"?

2, the only ultimate fix for overpriced things is greater supply, If you took investors out of the market you would have less supply.

3, I wouldn't say there is plenty of land, But red tape certainly does limit potential supply

4, It does help provide production, because as I said before homeless workers would not be productive.

 

[Value Collector]

View attachment 56779

According to some this is where we are going to end up

lol, apparently that's how sydboy wants to house our mine and factory workers, It's just so inefficient to use capital to build houses they say.

 

[cynic]

There's nothing wrong with cardboard boxes.

All the millions of streetpeople worldwide simply cannot be wrong!

However, do please ensure that you only avail yourselves of boxes constructed from premium grade wax sealed cardboard! (We wouldn't want heavy rainfall to trigger the next housing collapse!)

 

[trainspotter]

One day son all of this will be yours ...........

 

[trainspotter]

But what is this? Building houses doesn't assist the economy ....

SHARES in Australia's largest building materials company Boral have shot up to a three-year high after a 73 per cent jump in half year profit, excluding significant items.
The company lifted underlying net profit to $90 million on the back of better housing and road construction markets, cost cutting and dry weather conditions.
However, the company on Wednesday also warned of a slowdown in activity and earnings in the second half.
Boral recorded a net loss of $26 million for the half, but that includes $117 million in one-off accounting charges related to its Gypsum plasterboard joint venture, due to be completed on February 28, that it says will be offset by gains in the second half.
Sales revenue was up four per cent on last year, at $2.87 billion.
Boral shares were up 42 cents, or 8.4 per cent, to $5.42 at 1300 AEDT.
All four of its divisions lifted earnings, although the American sector still recorded a loss.
Chief executive Mike Kane highlighted a $23 million turnaround in the Australian building products division and a 6.0 per cent lift in its largest division, building materials and cement.

http://www.news.com.au/finance/busi...ost-boral-profit/story-e6frfkur-1226824742334

But but but if we build a house we need to have roads and sewer and stuff that is not good for the economy

Let alone the councils required to maintain the ......... oh never mind. Start stocking up on cardboard boxes and tinned food.

 

[Mrmagoo]

lol, apparently that's how sydboy wants to house our mine and factory workers, It's just so inefficient to use capital to build houses they say.

Building houses is bebeficial. Problem is they dont build they speculate on existing stock.

 

[trainspotter]

Building houses is bebeficial. Problem is they dont build they speculate on existing stock.

Ermmmmmmmmm nope.

Building approvals retain gains

Separate Bureau of Statistics figures show the rise in real estate values and fall in interest rates last year is continuing to feed through into increased residential building activity.

The ABS building approvals numbers fell 2.9 per cent in December, with 16,141 homes cleared for construction by local governments.

Despite the drop in the last month of last year, dwelling approvals over the whole of 2013 were up 21.8 per cent on 2012.

Detached houses were up 17.8 per cent over the year, despite an unusually large 3.4 per cent fall in December.

However, the biggest boost came from multi-unit dwellings which were up 29.3 per cent over 2013.

Multi-unit approvals are notoriously volatile, due to the tendency of one or two large apartment developments to skew the numbers in any given month.

That appeared to have happened when approvals in this segment jumped 36.4 per cent in September, however falls in subsequent months have been relatively small, leaving December multi-unit approvals around 20 per cent higher than they were in August.

"The fact that unit approvals have not reversed and the detail, which shows approvals holding up across both high and mid-rise units (including townhouses and terraces) points to robust underlying momentum," wrote Westpac senior economist Matthew Hassan.

UBS economists say the continued strength in building approvals supports its forecast for the construction of around 180,000 new homes being commenced in 2014.

http://www.abc.net.au/news/2014-02-03/home-prices-surge-again-in-january/5233942

 

[Value Collector]

Building houses is bebeficial. Problem is they dont build they speculate on existing stock.

Investors Build, renovate and develop properties. Over 90% of apartments sold off the plan go to investors.

But yes, a lot of investors buy and hold existing real estate, but that's good, without them buying and holding there wouldn't be properties available to rent, and there would be less developments going ahead if developers were not confident that enough buyers existed to buy the finished product.