The future of Australian property prices

[sydboy007]

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.

At least it stops land values increasing so much. I'd be quite happy to have progressive land taxes help replace all the badly implemented stamp duties and a cut in income taxes.

 

[sydboy007]

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 ...

I don't understand your point. Are you saying we have nothing to learn from the USA or UK? Are you saying that Govt policy has no affect on house prices?

There is plenty we could do to help reduce the cost of housing in this country, but most of the effort appears to be going in to protecting those who are already in teh market at the expense of FHBs.

Considering the level of LMI risk concentration I'm not sure it'll be worth much in a downturn. Either the banks insure themselves, or they get it from Genworth or QBE LMI. Moodys has already downgraded both last year.

We have a constipated housing supply like California. I'd prefer to see us emulate the policies of Texas and free up land for development. urban growth boundaries and across the board heigh restrictions for apartments just fuel land price inflation. it doesn't really benefit anyone, unless you're willing to sell up and move somewhere that has far less land inflation, but high land values choke the competitiveness of every business.

 

[trainspotter]

At least it stops land values increasing so much. I'd be quite happy to have progressive land taxes help replace all the badly implemented stamp duties and a cut in income taxes.

And it really helped them now didn't it !

 

[trainspotter]

I don't understand your point. Are you saying we have nothing to learn from the USA or UK? Are you saying that Govt policy has no affect on house prices?

There is plenty we could do to help reduce the cost of housing in this country, but most of the effort appears to be going in to protecting those who are already in teh market at the expense of FHBs.

Considering the level of LMI risk concentration I'm not sure it'll be worth much in a downturn. Either the banks insure themselves, or they get it from Genworth or QBE LMI. Moodys has already downgraded both last year.

We have a constipated housing supply like California. I'd prefer to see us emulate the policies of Texas and free up land for development. urban growth boundaries and across the board heigh restrictions for apartments just fuel land price inflation. it doesn't really benefit anyone, unless you're willing to sell up and move somewhere that has far less land inflation, but high land values choke the competitiveness of every business.

U.K., U.S.A.. Portugal, Spain ad infinitum have totally different development policies. LARGE corporations borrowed money from financiers and used this money to develop vast housing estates which were onsold to nupties on 100% LVR. Unemployment kicks in due to GFC and *HEY PRESTO* Mr. Housing Bubble is here to stay.

Which part of this are you not understanding? Does this happen in Australia? On a MUCH smaller scale it does but the majority of buyers who build are "singular" players. Ipswich had mortgage stress as a LOT of the players were 95% and FHB shoe horned into a debt they could not afford. MANY reasons as to WHY and I have written volumes as to WHY this occurred.

Of course government policy effects buying patterns in the housing market. FHOG ... Originally introduced in 2000, the grant was doubled to $14,000 during 2008 and 2009 to support new homebuyers through the global financial crisis. While the grant has returned to its original figure of $7,000, there are still a range of extra state-specific incentives available for first homebuyers which can significantly assist in putting the debt noose around their necks.

So the banks making 27 billion dollar profits last year and you are saying we have a funding crisis? There is plenty of land available to develop. BUT the populace does not want to live out the back of bumf@ck and THUSLY driving up inner city and coastal valuations on property which in turn drives up the median house prices in the burbs.

Please explain to me how high land values choke the competitiveness of every business? *intrigued*

 

[McLovin]

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

California is a high tax state generally. I'm sure you've realised that. Isn't the top marginal rate on imcome 12% or something?

The other thing with these comparisons is that they always pick random cities in the Midwest or the south. Go to the major centres on either coast, ie in places you actually want to live, and the gap really shrinks.

 

[McLovin]

At least it stops land values increasing so much. I'd be quite happy to have progressive land taxes help replace all the badly implemented stamp duties and a cut in income taxes.

I must have been dreaming about a recent property crash in the US.

 

[sydboy007]

And it really helped them now didn't it !

View attachment 56857

My point exactly. Constipated land supply like in California causes bigger booms and busts.

Compare that to the strong right of use in Texas and there was barely a rise in real house prices.

I know which state went through the recession in the USA better, and it wasn't California.

 

[trainspotter]

My point exactly. Constipated land supply like in California causes bigger booms and busts.

Compare that to the strong right of use in Texas and there was barely a rise in real house prices.

I know which state went through the recession in the USA better, and it wasn't California.

Speculators and large corporations building whole suburbs did not infiltrate Texas. It's growth was due to "singular" domestic migration who purchased established properties. The original owners of the established properties in turn bought land and built homes. A much more orderly supply chain.

Once again we are NOT the U.S.A. There is plenty of land to develop BUT the banks are not lending to property developers and making it very hard to obtain finance atm. AND the punters do not want to live in the "outer" burbs. Sounding like a broken record here !!

"Entitlement Generation" I think they call it ... Coddled by their parents and the schools, raised with remarkable material wealth and opportunity, laden with self-esteem, technologically connected and routinely promised the world, many young people are ill-prepared for the challenges of real life, let alone the highly competitive, globalized workforce that awaits them upon leaving school. There was a post awhile back for someone demanding 75k a year and wanting to live in Bondi no doubt. Get real ... start at what you can afford.

This is where the problem lies. Everyone is talking about the "median" price and the "average" income ... The "TOP" end of town is skewiffing the nett averages due to the ridiculous prices being paid for the sought after properties. Why can't the FHB purchase a property in the burbs ... live in it for awhile and get used to having a mortgage and the associated costs that go along with it. Sell it in a period of time (hopefully they have purchased SMART) and make enough to place a deposit down on something a bit more substantial or closer to where you really want to live?? You know how us "old fogies" had to do it !! Who says you have to buy the one and only house and pay the mortgage off?? OPEN YOUR EYES !

 

[satanoperca]

There is plenty of land to develop BUT the banks are not lending to property developers and making it very hard to obtain finance atm. AND the punters do not want to live in the "outer" burbs. Sounding like a broken record here !!

demand = price. Surely if land prices were cheap enough (price), people would move to the outer suburbs (demand) and banks would lend.

There is something majorly wrong, if the banks are making huge profits and no new supply is being added to.

Great argument for changes in NG, maybe an incentive on new builds or a disincentive on existing.

TS - while high land prices do not effect every business, they do affect the vast majority and reduce our international competitiveness through higher wages and overheads.

 

[prawn_86]

California is a high tax state generally. I'm sure you've realised that. Isn't the top marginal rate on imcome 12% or something?

Yes, yes, and yes a couple earning more than 1m pa has to pay 12% state tax, on top of federal tax

 

[trainspotter]

demand = price. Surely if land prices were cheap enough (price), people would move to the outer suburbs (demand) and banks would lend.

There is something majorly wrong, if the banks are making huge profits and no new supply is being added to.

Great argument for changes in NG, maybe an incentive on new builds or a disincentive on existing.

TS - while high land prices do not effect every business, they do affect the vast majority and reduce our international competitiveness through higher wages and overheads.

1) No ... herd mentality, everyone wants the white picket fence and walk to work and driven by fear and greed they reduce themselves to paying premium prices in the inner city suburbs. Banks require 110% pre-sale as well a planning and development approvals in place prior to even looking at subdivision potential. Looking at minimum 2 years before a sod turning ceremony

2) Banks are using residential mortgages as collateral to borrow more money. Very low default rates and easy pickings for the banks. Apartments are the new black so there will be plenty of supply, just slightly more density and banks do NOT like density. Too many eggs in the one basket and all that rubbish.

3) No changes to NG necessary. By doing so would cause 40% of the market to fall away. You want a housing "correction" ... you would get one immediately. Try getting the government to assist by partial ownership of properties to help the FHB and capping borrowing capacity outside of banks lending criteria. ie got the house repayment but can't get the $700 a month car loan to go with it !! More stringent criteria on outside lenders like GE Money and Esanda etc etc. Credit Cards at 19% with 40k limits ... get my drift !!!

4) Last time I looked we are a developed nation competing globally and not a 3rd world country like the majority of our trading partners in Asia. Being a high wage, high cost country is not a bad thing. When you pay a high price, you're paying the wages of someone who will go off and buy something that pays the wages of someone else, maybe even yours. And so the economy goes round and round. Pssssssssssttttttt .. look at the Aussie dollar for some of our uncompetitiveness

 

[McLovin]

Yes, yes, and yes a couple earning more than 1m pa has to pay 12% state tax, on top of federal tax

It aint' called Taxifornia for nothing.

 

[Smurf1976]

There was a post awhile back for someone demanding 75k a year and wanting to live in Bondi no doubt. Get real ... start at what you can afford.

I was going to post some facts and figures, actual houses for sale, to shoot down your argument that it's affordable to live in the suburbs on a "normal" wage that a younger person would earn.

Just one problem, the data does not support my argument since a house in the poorer suburbs of Hobart that would have been worth $200 - 250K a few years ago is now listed around the $150K mark and there are plenty of them in several suburbs.

There's the price crash, it's actually happened it would seem at least in Tas. Sure, they're dodgy houses (mostly) in generally bad areas, but the bottom line is that there's been a pretty big decline in their value.

I'm not sure if the same has happened elsewhere, I'm not familiar enough with the suburbs of the major cities to be able to judge, but at the bottom end there's certainly been a price crash in Hobart.

This is where the problem lies. Everyone is talking about the "median" price and the "average" income ... The "TOP" end of town is skewiffing the nett averages due to the ridiculous prices being paid for the sought after properties.

By definition the top or bottom do not skew a median average. A mean average yes, but not a median.

 

[Smurf1976]

A quick look at my own area reveals some interesting figures.

I bought this house 6.5 years ago for about $350,000 after considerable negotiation. It's a normal house in a normal suburb and the price was at the lower end of what was available in this area at the time. The price I paid was typical of the selling price of similar houses in the area at that time.

Today, the full asking price for a similar house is around $320,000. Allowing for some haggling and noting the state of the market, you could probably get it for somewhat less.

So whilst I bought it to live in and not to make a profit, as an investment it has very clearly been an outright dud over that time with declining value of at least 10% over that time.

I'm in a fairly middle socio-economic area, 8km by road from the Hobart CBD. No doubt the figures will vary between cities and states, but around here it seems that prices have definitely fallen.

 

[trainspotter]

I was going to post some facts and figures, actual houses for sale, to shoot down your argument that it's affordable to live in the suburbs on a "normal" wage that a younger person would earn.

Just one problem, the data does not support my argument since a house in the poorer suburbs of Hobart that would have been worth $200 - 250K a few years ago is now listed around the $150K mark and there are plenty of them in several suburbs.

There's the price crash, it's actually happened it would seem at least in Tas. Sure, they're dodgy houses (mostly) in generally bad areas, but the bottom line is that there's been a pretty big decline in their value.

I'm not sure if the same has happened elsewhere, I'm not familiar enough with the suburbs of the major cities to be able to judge, but at the bottom end there's certainly been a price crash in Hobart.

By definition the top or bottom do not skew a median average. A mean average yes, but not a median.

Herein lies the problem. Statistics can be manipulated to support any argument depending on which side of the fence you want to sit. I have repeatedly stated that CERTAIN areas have dropped by +- 20% and that CERTAIN areas have risen by +- 20% and the SAME thing will happen in this cycle as well. It depends WHERE you buy and YES there will be winners and losers (just like the stock market eh?)

Note the word "skew" in my sentence? Then YES, the word median is the appropriate adjective in my sentence.

These methods are both used to find a “typical” value from a set of data. The mean is the most commonly used measurement of central tendency, but there are cases where it is not appropriate. For example, the data may be “skewed,” meaning that most of the numbers are toward either the low or the high end of the scale, or that there is one value that is wildly different from all the others ”” this is known as an outlier. Especially in a small set of data, the average value in these cases will not be typical.

http://www.wisegeek.org/what-is-the-difference-between-median-and-mean.htm

Please note I was pertaining that the "TOP" end of town is skewiffing the nett averages due to the ridiculous prices being paid for the sought after property either inner city or for coastal.

 

[wayneL]

TS

I reckon reckon Rangeview could drop 75% and still be overvalued!

Wadayareckon?

 

[sptrawler]

A quick look at my own area reveals some interesting figures.

I bought this house 6.5 years ago for about $350,000 after considerable negotiation. It's a normal house in a normal suburb and the price was at the lower end of what was available in this area at the time. The price I paid was typical of the selling price of similar houses in the area at that time.

Today, the full asking price for a similar house is around $320,000. Allowing for some haggling and noting the state of the market, you could probably get it for somewhat less.

So whilst I bought it to live in and not to make a profit, as an investment it has very clearly been an outright dud over that time with declining value of at least 10% over that time.

I'm in a fairly middle socio-economic area, 8km by road from the Hobart CBD. No doubt the figures will vary between cities and states, but around here it seems that prices have definitely fallen.

Well Smurph, I'll tel you how stupid Perth is.
I bought my house six years ago for $450,000, it like yours is in a middle socio-economic area, 10 km from CBD.
Similar house, in my street, sold six months ago for $700,000.
Last weekend, again in my street, first home open, under offer $799,000.

It has become stupid.

 

[Smurf1976]

Please note I was pertaining that the "TOP" end of town is skewiffing the nett averages due to the ridiculous prices being paid for the sought after property either inner city or for coastal.

High price alone won't change the median unless you mean that there is also a higher volume of sales at the top?

Take 5 houses:

$250K
$350K
$400K
$500K
$800K

The median is $400K. Even if that $800K house somehow sells for $50 million, the median remains unchanged at $400K. But if you sell 10 houses at $800K and only 4 at a lower price, well then that raises the median to $800K. Volume will move the median but an individual high price won't unless it involves a shift from below to above the median OR an increase in volume.

 

[trainspotter]

TS

I reckon reckon Rangeview could drop 75% and still be overvalued!

Wadayareckon?

Aaaaahhhh yes wayneL ... many a black pearl to be found in there

1.2kms to my joint valued at 750k. RE does not make sense now does it? Location, location, location !

 

[trainspotter]

High price alone won't change the median unless you mean that there is also a higher volume of sales at the top?

Take 5 houses:

$250K
$350K
$400K
$500K
$800K

The median is $400K. Even if that $800K house somehow sells for $50 million, the median remains unchanged at $400K. But if you sell 10 houses at $800K and only 4 at a lower price, well then that raises the median to $800K. Volume will move the median but an individual high price won't unless it involves a shift from below to above the median OR an increase in volume.

Yes the high end of town is performing well skewiffing the median average for this set of data. That is the problem ... it is increasing the "mean" average.