The future of Australian property prices

sptrawler · 17 February 2014

sydboy007 said:
seems like the apartment sector is using the same tricks as the chocolate and breakfast cereal manufacturers. Keep the price the same, just make things smaller.

The Age reported the median size of a new one-bedder in inner Melbourne has dropped from 52 to 44 square metres in five years. The smallest apartment was 11.2 square metres plus a closet bathroom at 268 Flinders Street.

http://theage.domain.com.au/small-apartments-big-headaches-20140216-32tlb.html

No more chicken coops, we'll be packed in like sardines shortly.

That really is a small apartment, do you think they will be tommorrows slums?

sydboy007 · 17 February 2014

sptrawler said:
That really is a small apartment, do you think they will be tommorrows slums?

I can't really see it ending well. If the apartments beng built had a decent range from studios to 3BR then I could see things working out not too badly, especially as more and more people don't really want the hassle of looking after a garden.

Family sized apartments are quite rare and cost as much, if not more as a house, and with strata fees probably more than a house.

Too much product designed for investors and not enough for the people who will live in it.

YAY constipated housing supply.

Value Collector · 17 February 2014

beachlife said:
A business owner has control over their business. I'm sure you own shares in a bank. That does not make you an owner. I would like to see you try and call a management meeting so you can instruct the managers that you supposedly employ. I would like to see you remove one of your assets from a branch. Go into one and ask them to give you a calculator - its your asset right?

As a shareholder you are not a business owner, you are a shareholder with limited entitlements. The assets are owned by the company which is a legal entity in its own right.

If you own shares in a bank, then you along with all the rest of the shareholders are owners of that bank. The management running it are employees, hired by the board of directors who were selected by the shareholders. Shareholders can fire the board and install new management or even shut the operation down if the wanted.

Ownership is not dependant on having control.

I think we are probably dealing with semantics here though,

Value Collector · 17 February 2014

Bill M said:
The Sydneyites are coming up to the Central Coast in droves, selling their properties there and buying one for half the price up here and pocketing the difference. I think this will go on a bit longer yet, I might put my IP up for sale towards the end of the year who knows. I can tell you everything that comes on to the market here is gone within 2 weeks at firm prices.

I was up there on the weekend looking at a few suburbs, It is certainly a lot cheaper than Sydney. Because I work from home now and I have family up there, I think its a real alternative to the Sydney rat race. Its an hour commute though if you have to work in Sydney.

beachlife · 17 February 2014

Value Collector said:
If you own shares in a bank, then you along with all the rest of the shareholders are owners of that bank. The management running it are employees, hired by the board of directors who were selected by the shareholders. Shareholders can fire the board and install new management or even shut the operation down if the wanted.

Ownership is not dependant on having control.

I think we are probably dealing with semantics here though,

No you said that a share holder was more a business owner when compared to someone that just sits on a block of land or a holding of gold. These were your words

I was thinking of a more general usage of the word business ie, business - the activity of making, buying, or selling goods or providing services in exchange for money.

At an individual level, owning shares does not make you a business owner in the way that you have decribed what constitutes a business. There is no control of assets, no input into how the business is run, no activity, just sitting doing nothing waiting for a return, the same as a land banker or gold holder, which is why ATO treats shareholders differently to business owners.

Value Collector · 17 February 2014

beachlife said:
No you said that a share holder was more a business owner when compared to someone that just sits on a block of land or a holding of gold. These were your words

I was thinking of a more general usage of the word business ie, business - the activity of making, buying, or selling goods or providing services in exchange for money.

At an individual level, owning shares does not make you a business owner in the way that you have decribed what constitutes a business. There is no control of assets, no input into how the business is run, no activity, just sitting doing nothing waiting for a return, the same as a land banker or gold holder, which is why ATO treats shareholders differently to business owners.

exactly I said "more of a business owner" than someone holding land or gold.

Because when you own shares there is a real business in which you have an ownership interest in, compared with vacant land which there is not an underlying business.

Vacant land and gold just sit there, there is no activity or business going on.

when you own shares however there is a real business which you are part owner in, Making you a business owner. Now I am not saying that the shareholder plays an active part in the business other than voting in directors and other things, just saying that they are the owner, I really can't see why you don't think shareholders are owners.

Smurf1976 · 17 February 2014

beachlife said:
At an individual level, owning shares does not make you a business owner in the way that you have decribed what constitutes a business. There is no control of assets, no input into how the business is run, no activity, just sitting doing nothing waiting for a return, the same as a land banker or gold holder, which is why ATO treats shareholders differently to business owners.

+1

"Land banking" is the thing I have an issue with from a broader perspective. It's buying up a finite resource and sitting on it for no reason other than to force prices up and eventually profit from doing so. It adds nothing of value to the economy, and simply diverts money from production into the non-productive hoarding of land.

In the case of gold etc it's somewhat different since gold isn't required in order to operate practically every business or to simply live. It has some uses for jewellery and in electronics, but jewellery is a luxury item (ie not essential) and it's a very minor part of the cost of electronics. In contrast, land is an essential component of practically all economic activity and is itself a major cost.

It does happen in other industries (including the power industry by the way) but not to the scale that seems to be happening with land.

beachlife · 17 February 2014

Value Collector said:
exactly I said "more of a business owner" than someone holding land or gold.

Because when you own shares there is a real business in which you have an ownership interest in, compared with vacant land which there is not an underlying business.

Vacant land and gold just sit there, there is no activity or business going on.

when you own shares however there is a real business which you are part owner in, Making you a business owner. Now I am not saying that the shareholder plays an active part in the business other than voting in directors and other things, just saying that they are the owner, I really can't see why you don't think shareholders are owners.

It depends on your definitions of ownership and investing.

I see my local mechanic as a business owner. He has control, makes decisions, provides a service, puts in his time, employs people,...he runs the business. In a larger business the owners tell their managers what to do and set the direction of the company. In both cases they play an active role.

I see a shareholder the same as a land banker. Just a passive investor sitting there doing nothing hoping to be rewarded from the efforts of others.

CanOz · 17 February 2014

Smurf1976 said:
"Land banking" is the thing I have an issue with from a broader perspective. It's buying up a finite resource and sitting on it for no reason other than to force prices up and eventually profit from doing so. It adds nothing of value to the economy, and simply diverts money from production into the non-productive hoarding of land.

Thats basically whats going here in China, rich folks buying up all the apartments, that are developed on land. They sit on them, meanwhile the apartments are empty and falling into disrepair in the harsh polluted climate. The buildings will be worthless soon and likely gone by the time the land lease expires... Stupid

No wonder why they're looking to Australia and the US!!

Value Collector · 17 February 2014

beachlife said:
It depends on your definitions of ownership and investing.

I see my local mechanic as a business owner. He has control, makes decisions, provides a service, puts in his time, employs people,...he runs the business. In a larger business the owners tell their managers what to do and set the direction of the company. In both cases they play an active role.

I see a shareholder the same as a land banker. Just a passive investor sitting there doing nothing hoping to be rewarded from the efforts of others.

I would say your mechanic is self employed or an owner operator.

Yes in a larger business the owners tell the managers what to do, and in an even larger business the owners elect a board of directors to instruct the management.

If the land banker is in the business of developing and selling their land in stages! that would be a business, if they are just sitting on their land then its not a business.

But we can agree to disagree, i am not interested in debating the differences between ownership and management, All i will say is that in my opinion if you own something you are an owner if you manage something on behalf of someone else you are a manager, shareholders are the owners of the underlying businesses, so they are business owners which as i said does not require them to be involved in management. You seem to want to not regard a share holder as an owner and thats fine, but you have to understand it goes against pretty much all definitions both practical and legal of the word.

beachlife · 17 February 2014

Value Collector said:
...you have to understand it goes against pretty much all definitions both practical and legal of the word.

Yeah right, tell that to the ATO. They too disagree with you on this one. They say that to be in business there must be some activity on your part.

FxTrader · 17 February 2014

beachlife said:
Yeah right, tell that to the ATO. They too disagree with you on this one. They say that to be in business there must be some activity on your part.

Why the semantic argument about what constitutes a business here? A business is a legal entity with shareholders as owners. The ATO may rule certain types of activity as conducting a business for tax purposes without the existence of a legal business entity and charge tax accordingly.

I don't know what number of land banking transactions over a given period the ATO would deem to be conducting a business but I would be surprised if no measure exists. Land banking does seem to be a significant factor influencing land prices here.

beachlife · 17 February 2014

FxTrader said:
Why the semantic argument about what constitutes a business here?

Good point. It got side tracked because of the suggestion that the tax deductions allowed to property investors is the reason why house prices have gone too far too quick, and then a parallel was drawn between shareholders in westfield and a person with a few IP's. Got off topic but was interesting to see different perspectives.

Back to topic I just heard the head of REIWA on the radio saying that its ok tp pay $50k more than you want because its insignificant over 20 years. A sure sign of a bubble when advice like that is being aired on the radio.

satanoperca · 17 February 2014

beachlife said:
A sure sign of a bubble when advice like that is being aired on the radio.

Are you serious, sounds like good marketing to me. Also agree, if you are buying a home, what is another 10% more, you are going to be there for sometime. If it is an investment, well if you believe the hype - good luck.

But the statement does not constitute the definition of a bubble.

Anyway a bubble can form,grow and stretch to behind it normal physical parameters and still not pop, it just needs something a small prick to explode, then it was a bubble.

Off to buy some apartments, lucky I am Chinese.

sydboy007 · 18 February 2014

http://www.macrobusiness.com.au/2014/02/debunking-the-housing-banana/

The following are not cherry-picked; they are “representative”. Space prevents the provision of a full data set – for now.

Manchester UK: Population 2.2 million; population density 4,000 per sq km; INRIX congestion score 25.3; House price Median Multiple (M.M.) 5.2
Nottingham UK: Pop. 660,000; density 4,200 per sq. km; INRIX congestion score 21.9; House price M.M. 5.4
Liverpool UK: Pop. 820,000; density 4,400 per sq. km; INRIX congestion score 21.5; House price M.M. 5.2
Birmingham UK: Pop. 2.3 million; density 3,800 per sq. km; INRIX congestion score 20.5 ; House price M.M. 5.3

Versus:

Indianapolis: Pop. 1.5 million; density 800 per sq. km; INRIX congestion score 5.0; House price M.M. 2.3
Salt Lake City: Pop. 1 million; density 1,500 per sq. km; INRIX congestion score 3.1; House price M.M. 3.8
Oklahoma City: Pop. 900,000; density 800 per sq. km; INRIX congestion score 3.1; House price M.M. 2.9
Kansas City: Pop. 1.5 million; density 900 per sq. km; INRIX congestion score 2.8; House price M.M. 2.7
Omaha: Pop. 730,000; density 1,000 per sq. km; INRIX congestion score 1.0; House price M.M. 2.5

House price median multiples in my data set are from pre-crash (2007) data to avoid accusations that US house prices in the data are unrepresentative post-crash lows.

-------------------

I'm trying to imagine what a city is like with house prices averaging 3 times median income (which is even better than 3 times average pay). maybe less Uk approach and more of the better planned US cities could help us.

trainspotter · 18 February 2014

I repeat ... We are NOT the U.K. nor the U.S.A. (or Portugal or Spain or Ireland or Greece) Our system of financing property and governance as well as employment history, manufacturing, tourism, export (mining) blah fricking BLAH is TOTALLY different from their working models as an economy

Even down to our style of housing and lending criteria is TOTALLY different and the risk taken by the bank is minimal exposure as LMI and government guarantees protecting the big 4 banks are in place.

http://en.wikipedia.org/wiki/List_of_countries_by_unemployment_rate

UNEMPLOYMENT is the key ...

McLovin · 18 February 2014

sydboy007 said:
I'm trying to imagine what a city is like with house prices averaging 3 times median income (which is even better than 3 times average pay). maybe less Uk approach and more of the better planned US cities could help us.

What are the property taxes like in those cities? A quick look and Indianapolis is 3%. Median house price in 2006 was $120k and median household income was $40k. 3% property tax means your still handing over 10% of your pre-tax income every year. Certainly changes things a bit.

prawn_86 · 18 February 2014

McLovin said:
What are the property taxes like in those cities? A quick look and Indianapolis is 3%. Median house price in 2006 was $120k and median household income was $40k. 3% property tax means your still handing over 10% of your pre-tax income every year. Certainly changes things a bit.

Yeh i have been looking at buying a property over here in the states and between taxes, insurance and HOA fees a 400k townhouse has about 12-15k worth of costs each year. Obviously it varies state to state

beachlife · 18 February 2014

trainspotter said:
UNEMPLOYMENT is the key ...

Holden, Toyota, Forge and today another 1000 jobs gone
http://www.theaustralian.com.au/bus...1000-out-of-work/story-e6frg8zx-1226830195047

trainspotter · 18 February 2014

beachlife said:
Holden, Toyota, Forge and today another 1000 jobs gone
http://www.theaustralian.com.au/bus...1000-out-of-work/story-e6frg8zx-1226830195047

Looks like my prediction from post #11281 is coming to the fore.

The future of Australian property prices

sptrawler

sydboy007

Value Collector

Have courage, and be kind.

Value Collector

Have courage, and be kind.

beachlife

Value Collector

Have courage, and be kind.

Smurf1976

beachlife

CanOz

Home runs feel good, but base hits pay bills!

Value Collector

Have courage, and be kind.

beachlife

FxTrader

beachlife

satanoperca

sydboy007

trainspotter

McLovin

prawn_86

Mod: Call me Dendrobranchiata

beachlife

trainspotter

Similar threads

The future of Australian property prices

Have courage, and be kind.

Have courage, and be kind.

Have courage, and be kind.

Home runs feel good, but base hits pay bills!

Have courage, and be kind.

Mod: Call me Dendrobranchiata

Similar threads

Privacy & Transparency

Privacy & Transparency