The future of Australian property prices

satanoperca · 1 March 2014

banco said:
I wait with bated breath for him to blame the lack of Government regulation when this all goes pear shape.

Sorry to jump in mid conversion but just thought I would give some on the ground feedback from China, as I travel through the country.

1. If you thought Australia was unaffordable for the average working, come to China, it is far worse.
2. Had several conversations with business owners who are starting to get concerned that China's property is reaching epic bubble proportions and cannot be sustained.
3. Many areas are showing declines over the last two years, major commercial centres.
4. The wealth in this country is incredible and the wealthy all are and have bought properties in Australia, NZ, Canada and the US.
5. The air pollution is incredible from one end of the country to the other. Even Shanghai is getting dirty
6. The rate of lung cancer in Beijing is increasing by 4% a year and is being reported as getting to epidemic proportions over the next decade. This will also happen in all other major cities in the country.

Based on point 4-6, the Chinese will continue to buy in Australia but whatever means is available to them for one reason, clean air and I cannot blame them at all.

Conclusion, Australian property prices will remain high for an extended period of time, we have a great, clean, low population country and they will continue to buy, regardless of our own IR's and economic situation. The great middle and lower class squeeze is on.

Cheers

China and it's people are inspiring, just a shame they have sacrificed their country for economic gain, but are we doing anything different.

Mrmagoo · 2 March 2014

Value Collector said:
Makes sense to me, I wouldn't recommend older people keeping their homes till they die, as a minimum I would do some sort of reverse mortgage.

You have to be careful how early you start using it though, expenses can go through the roof later in life, But if you can trade down into something with less maintenance and end up with an extra few dollars in your pocket each week you should go for it.

I use my property portfolio for income now, but you can bet later in life when I need to I will be selling it off for the lump sums I need. its one of the benefits that people that own their own home have over those that never buy.

If you never buy you will live a life of misery. THat much is true. That is why affordability is such a big problem.

How is it that a person on the average wage could only afford to buy a studio on the outskirts of a city after years of saving ?

Tyler Durden · 2 March 2014

satanoperca said:
Sorry to jump in mid conversion but just thought I would give some on the ground feedback from China, as I travel through the country.

1. If you thought Australia was unaffordable for the average working, come to China, it is far worse.
2. Had several conversations with business owners who are starting to get concerned that China's property is reaching epic bubble proportions and cannot be sustained.
3. Many areas are showing declines over the last two years, major commercial centres.
4. The wealth in this country is incredible and the wealthy all are and have bought properties in Australia, NZ, Canada and the US.
5. The air pollution is incredible from one end of the country to the other. Even Shanghai is getting dirty
6. The rate of lung cancer in Beijing is increasing by 4% a year and is being reported as getting to epidemic proportions over the next decade. This will also happen in all other major cities in the country.

Based on point 4-6, the Chinese will continue to buy in Australia but whatever means is available to them for one reason, clean air and I cannot blame them at all.

Conclusion, Australian property prices will remain high for an extended period of time, we have a great, clean, low population country and they will continue to buy, regardless of our own IR's and economic situation. The great middle and lower class squeeze is on.

Cheers

China and it's people are inspiring, just a shame they have sacrificed their country for economic gain, but are we doing anything different.

Thanks for this, I've been looking for this type of "on the ground" information for a while.

I wonder though, is it only the wealthy Chinese who have bought overseas properties? Or is there a "way" for the average Joe in China to do the same?

sydboy007 · 2 March 2014

Tyler Durden said:
Thanks for this, I've been looking for this type of "on the ground" information for a while.

I wonder though, is it only the wealthy Chinese who have bought overseas properties? Or is there a "way" for the average Joe in China to do the same?

Probably not for the majority of the middle class individually - many are still on < $20K USD a year - but if you get an extended family pooling their resources then I think it's a possibility. Even on that kind of pooling the potential investors is probably larger than the Australian population so it could be a significant issue moving forward.

On 1 hand if they are buying newly built properties they're at least increasing supply, but on the other hand they are also limiting access to the kinds of properties FHBs are looking at too. Not sure if it's of benefit to the country or not. Suppose at least when the bubble pops we're sharing the pain to a degree.

With unemployment on the up I'm starting to wonder how smart it is to continue with a 160K worth of population growth mainly grought about my immigration. Most skills shortages are long gone so there seems to be little benefit to the economy except to repress wage and juice the housing market with increased demand.

satanoperca · 2 March 2014

Tyler Durden said:
Thanks for this, I've been looking for this type of "on the ground" information for a while.

I wonder though, is it only the wealthy Chinese who have bought overseas properties? Or is there a "way" for the average Joe in China to do the same?

It is only the wealthy Chinese that are buying, but even so, there is a lot of them. In Shanghai at the moment and prices are crazy, so are the roads and the shops. With 20 million in the city, you only need a small percentage of them to have the ability and desire to buy in Australia to effect prices. They all talk about buying with cash.

The average Joe in China and Australia are no different, they are just wanting to be able to buy and pay off one property in a life time. Had dinner with a property investor last night who is flipping properties in America. The big difference he saw in the two countries was that Americans want to purchase everything on 100% credit, where as the Chinese have 20% or greater deposits.

When I asked if he thought Chinese property was in a bubble, the answer was no. The desire to own property and become wealthy through property in China was to strong in the minds and emotions of the Chinese people. They want everything the western countries have and more.

If there is a bubble in China and it goes pop, the US melt down will look like a drop in the ocean.

Cheers

Value Collector · 2 March 2014

Mrmagoo said:
How is it that a person on the average wage could only afford to buy a studio on the outskirts of a city after years of saving ?

I don't believe that is the case,

Can you break down the numbers for me?

Eg, what is their wage?
How many years was the " years of saving"
What is their savings rate?
And what exactly is this studio on the outskirts of a city, can you link a similar advertised property?

sydboy007 · 4 March 2014

I'm surprised we get any new land releases if it takes this long. Nearly 10 years in NSW. I really can't understand how we let ourselves get into such a position.

trainspotter · 4 March 2014

sydboy007 said:
I'm surprised we get any new land releases if it takes this long. Nearly 10 years in NSW. I really can't understand how we let ourselves get into such a position.

2 words - Government inefficiency

sydboy007 · 4 March 2014

trainspotter said:
2 words - Government inefficiency

Only partly

More like greed by the various Government land agencies that have be charged with maximising profit over social benefits of cheap land.

Combined with NIMBYs and BANANAs who basically live in a land of double rainbows where population growth is somehow compaitble with UGBs and low density housing

Value Collector · 4 March 2014

sydboy007 said:
Only partly

More like greed by the various Government land agencies that have be charged with maximising profit over social benefits of cheap land.

Combined with NIMBYs and BANANAs who basically live in a land of double rainbows where population growth is somehow compaitble with UGBs and low density housing

I know nimby, But what's a banana

trainspotter · 4 March 2014

sydboy007 said:
Only partly

More like greed by the various Government land agencies that have be charged with maximising profit over social benefits of cheap land.

Combined with NIMBYs and BANANAs who basically live in a land of double rainbows where population growth is somehow compaitble with UGBs and low density housing

Errrrrrrrrrmmmmmmmmm NO !! They are paid by the hour so they work to rule. If they cranked at their job and actually had a performance clause in their job description then you would find approvals would be forthcoming a lot quicker.

Planning approval from Planning Commission to take 3 months whilst it sits in someones IN TRAY is a joke. Development Approval to take 6 months at a local council level is a bigger joke. Titles Office to take 6 months to issue a title is a F@CKING big joke but the moment they receive the application they immediately start charging you rates and taxes as if they had already given approval.

Services Departments (Electricity & Water etc) takes a further 3 - 6 months, then they want five to six thousand PER application for pending block of land as HEADWORKS FEES is where the money goes as to why it is so expensive. DON'T GET ME STARTED ON ROADS AND STORMWATER ISSUES !!!!!!!!!!!!!!

Have you done any developments before or are you musing again sydboy ?

Julia · 4 March 2014

Further to my earlier post about a friend who has bought into some property development in Calliope, Qld, as a result of being cold called by phone, I've just had a look for the organisation on the ASIC website, where I found the following:

Business name: ZENITH PROPERTY CONSULTING AUSTRALIA
Status: Cancelled
Registration date: 2/02/2009
Renewal date: 2/02/2013
Cancelled date: 15/02/2014
Cancellation under review:
Address for service of documents:
Principal place of business:
Holder(s) details:
Debtor representative(s): not applicable
Notified successor(s): not applicable
Regulator: Australian Securities and Investments Commission

Former State/Territory registration details
Former identifier: BN21052608
Former State/Territory: QLD

This appears to suggest the company is no more or am I misunderstanding the above?

What other avenues exist to check the legitimacy of a company? It's an area with which I'm completely unfamiliar, would be most appreciative of any help here.

sydboy007 · 4 March 2014

trainspotter said:
Errrrrrrrrrmmmmmmmmm NO !! They are paid by the hour so they work to rule. If they cranked at their job and actually had a performance clause in their job description then you would find approvals would be forthcoming a lot quicker.

Planning approval from Planning Commission to take 3 months whilst it sits in someones IN TRAY is a joke. Development Approval to take 6 months at a local council level is a bigger joke. Titles Office to take 6 months to issue a title is a F@CKING big joke but the moment they receive the application they immediately start charging you rates and taxes as if they had already given approval.

Services Departments (Electricity & Water etc) takes a further 3 - 6 months, then they want five to six thousand PER application for pending block of land as HEADWORKS FEES is where the money goes as to why it is so expensive. DON'T GET ME STARTED ON ROADS AND STORMWATER ISSUES !!!!!!!!!!!!!!

Have you done any developments before or are you musing again sydboy ?

Can't find the post I made a month or two ago but it showed an example where the land supply for Adelaide had changed from one of meeting demand to maximising the income from land sales for the Government.

The whole land supply system is dysfunctional, and it will unlikley ever change because the wealth transfer from home owners and investors to renters would be in the hundreds of billions. Once you remove artificial land scarcity, once we get a strong right of use for land owners things might start to improve prices would plumet.

We voted for all the corporatisation of the public utilities over the years. Long gone are the days where getting things done was a public service. Now it's how much money can we rip off the developers. It's crazy to have to pay for everything upfront. Much better to have a land tax that allows all this infrastructure to be paid off, and more importantly stops the economic rent of public infrastructure being kept by the lucky few landowners.

Nearly all the increase in housing costs has been land.

http://www.macrobusiness.com.au/2014/03/deflating-australias-land-bubble/

Land is the largest tangible market in Australia… Our housing bubble is actually a residential land bubble, as the total land values to GDP ratio doubled between 1996 and 2010, when it reached a record high of 298 per cent ($4.1 trillion). In real terms, residential land values rose from $895 billion in 1996 to a peak of $3.2 trillion in 2010, a relative increase of 262 per cent. This ratio is closely matched by a similar rise in the value of the residential housing stock. The rise in residential land values, rather than structures, is responsible for almost all of the increase in the value of the housing stock…

- - - Updated - - -

Value Collector said:
I know nimby, But what's a banana

Build Absolutely Nothing Near Anything

trainspotter · 4 March 2014

Julia said:
Further to my earlier post about a friend who has bought into some property development in Calliope, Qld, as a result of being cold called by phone, I've just had a look for the organisation on the ASIC website, where I found the following:

This appears to suggest the company is no more or am I misunderstanding the above?

What other avenues exist to check the legitimacy of a company? It's an area with which I'm completely unfamiliar, would be most appreciative of any help here.

Could be something as simple as not paying their ASIC fees Julia? By the look of it there is a plethora of ZENITH PROPERTY CONSULTING (groups etc) Also could be that they have cancelled the company tagged with "AUSTRALIA" for when I searched it came up with this:-

Name: ZENITH PROPERTY CONSULTING PTY LTD
ACN: 165730861
Registration date: 10/09/2013
Next review date: 10/09/2014
Former name(s): GETHIN HOLDINGS PTY LTD

Status: Registered
Type: Australian Proprietary Company, Limited By Shares
Locality of registered office: WEST END QLD 4101
Regulator: Australian Securities & Investments Commission

http://www.zenithpropertyconsulting.com.au/

Fancy website and they are still taking calls to the main office?

Anyhooo .... cold calls, cancelling company structures, changing names of companies, no profiles of the people involved nor the experience they have on their website, offering incredulous rates of return (DOUBLE YOUR MONEY IN 7 YEARS according to the website) rings alarm bells for mine.

Seems as if your friend has been suckerpunched by a spruiker.

ASIC is the only corporate body for the registration of companies in Australia. Hope this helps Julia

MR. · 4 March 2014

Bill M said:
---
Axel and Bernadette Steele bought their first home at Narraweena in Sydney's northern beaches for a cool $1,006,000. And it was all about location.

"We looked for 18 months, researching different locations," Mr Steele said.

"We would have to live way out west on smaller properties. This is where my family is and where I lived my whole life."

But getting the finances for a million dollar property was not too difficult for the electrician and childcare worker.
"We had money behind us and are in stable jobs," Mr Steele said. "I have been in my job for five years and Bernadette for six or seven."

http://www.news.com.au/finance/real-estate/ing-first-homes-buyers-increasingly-spending-a-million-dollars/story-fncq3era-1226820981579
---

"getting the finances for a million dollar property was not too difficult for the electrician and childcare worker."

Assuming 7-800K would be the loan. It's their first home..... Stable jobs and steady employment for 5 and 7 years. Don't appear to be self employed.....

At anytime their employers could shut up shop. The bank has no way of defining how secure their jobs really are but here's 3/4 of a million smackaroonies!

Not having ago at the investment location or investment decision here, just the banks.

If this couple happened to be employed by a company which they are directors in. Receiving similar and better incomes from the company than the above. Employed for similar and longer periods of time. The bank insists in wanting copies of full company financials in addition to full private financials. Offering for the bank to give the companies financials a once over doesn't cut it. They still want copies of two years full company financials. I bet Mr. and Mrs Steele (above) didn't have to get the financials of their employer's to get their loan!

I've experienced this in the past and abided 15 or so years ago. Offered to only show the bank company financials this time, not copies, which is definitely more information on the source of income than a standard employee situation.

I think the bank's shown me the door.

Have others experienced similar?

trainspotter · 5 March 2014

Yeah MR. Being self employed aint what it is cracked up to be when it comes to proving serviceability for a loan. Your accountant does their best to minimise the tax thusly reducing the profit of the company. GREAT. Go and try to borrow money and not so GREAT as the banks just look at the bottom line. PERIOD.

They also want personal guarantees from the directors as well as requesting to take second mortgages of other assets which are held in personal names and not the companies. Westpac wanted me to sign a personal guarantee for more than what I wanted to borrow which I politely declined to accept. NAB once asked me to place my PPOR and other unencumbered properties up for security for a commercial dealing that had less than a 50% LVR. Thanks but no thanks.

Lord help you if you have several companies as they want 3 years financial on ALL of them even though they are completely separate identities performing entirely different vocations.

sydboy007 · 6 March 2014

Abbot and Hockey claim increase in house prices due to carbon tax. Repeal will bring affordable housing to the masses

/sarcasm - well they've blamed it for just about every other issue the economy is facing, yet the small business lobby has it as number 5 on their list of issues.

trainspotter · 7 March 2014

If Glenn Stevens is unsure as to which way rates are going to go then we are certainly in a period of flux

The bank has said in various communications this year that it plans to keep rates steady for a while until the economy shifts dramatically in one direction or another, and that was a message the RBA governor Glenn Stevens was keen to repeat to the Commonwealth Parliament's House Economics Committee.

"As well as the low level of rates generally, a sense of stability, if we're able to offer that, is something that, at the margins, should be of some help to businesses and households as they make their own plans," he told the committee.

kid hustlr · 7 March 2014

No he said he's unsure when the hike will come. he implied that the next move is up and hes made it clear the stance for now is a neutral one.

http://www.thebull.com.au/articles/a/44619-rba's-stevens-unsure-of-next-rate-move.html

he was also jawboning property prices warning investors not to get carried away.

trainspotter · 7 March 2014

kid hustlr said:
No he said he's unsure when the hike will come. he implied that the next move is up and hes made it clear the stance for now is a neutral one.

http://www.thebull.com.au/articles/a/44619-rba's-stevens-unsure-of-next-rate-move.html

he was also jawboning property prices warning investors not to get carried away.

Aaahhhh I see it now .... he was touting for a possible reduction and is now set for neutral with a possible uptick in the near future.

"As well as the low level of rates generally, a sense of stability, if we're able to offer that, is something that, at the margins, should be of some help to businesses and households as they make their own plans," he told the committee.

"That's a bit of a shift on our part, where we had been saying that there might be scope to go down a bit more if needed; I don't think we do need to, at this point in time."

http://www.abc.net.au/news/2014-03-...bility-despite-upbeat-housing-outlook/5305500

The future of Australian property prices

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