The future of Australian property prices

[UBIQUITOUS]

Some intersting reading.

Rentals showing poor yield

''You can put money in the bank and get 5.5 per cent without any maintenance costs, insurance and repairs.''

but investors aren't in this business for yields/income. They are in it for the hope of capital gains. What a business model!!!

 

[cutz]

A far cheaper alternative to government-funded housing is privately-funded and investors are incentivised to fund housing through negative gearing. This way governments can actually gain revenue through CGT, stamp duty etc and pay for other government services.

Incorrect,

The vast majority of interest and maintenance deductions comes from investors that have purchased existing homes, how does this help with increasing housing stock?

The revenues gained via stamp duty/CGT is far outweighted by deductions from expenses.

Negative gearing is an increasing load on society that needs to be scrapped ASAP.

 

[cutz]

If investors who can negative gear arrive at sale time they are able to out compete people who are using the house as a place of residence thus forcing up house & land cost and pushing would be owners into forever renters.

This has created a new underclass where the mother and father both need to work extreme hours just to keep afloat if they choose to outbid/overcommit and buy,surely this does not have a positive impact on their children.

 

[satanoperca]

This has created a new underclass where the mother and father both need to work extreme hours just to keep afloat if they choose to outbid/overcommit and buy,surely this does not have a positive impact on their children.

This is the most relevant issue to housing affordability and the effect on NG.

Children are shipped of to daycare, then before and after school care, then in high school, allowed to roam the streets during school holidays because both parents have to work to afford even a basic mortgage.

The stress this is putting on relationships is incredible with the children in between.

Cheers

 

[UBIQUITOUS]

This is the most relevant issue to housing affordability and the effect on NG.

Children are shipped of to daycare, then before and after school care, then in high school, allowed to roam the streets during school holidays because both parents have to work to afford even a basic mortgage.

The stress this is putting on relationships is incredible with the children in between.

Cheers

Yes, and what is the end financial cost on society when an increasing lack of guidance from parents results in a fall in Aussies gaining the required skills for the workplace. Property speculators blaming migrants for creating unaffordable housing is just silly. If we spent more time educating our young rather than letting them do whatever, then maybe we wouldn't have so much of a skills shortage. We are our own worst enemies

 

[MR.]

I doubt it. The cost of building public housing is just too great and there are too many competing public services that require huge investments (such as health and transport). All of this with a massive budget deficit!

A far cheaper alternative to government-funded housing is privately-funded and investors are incentivised to fund housing through negative gearing. This way governments can actually gain revenue through CGT, stamp duty etc and pay for other government services.

Whether we like it or not, negative gearing is the best idea we've got to increase housing stock.

In Australia in 2007, 9 out of 10 negatively geared properties are for existing dwellings, so the creation of rental supply comes almost entirely at the expense of displacing potential owner-occupiers. Thus, if negative gearing is to exist, it should only be applied to newly constructed properties.

http://en.wikipedia.org/wiki/Negative_gearing_(Australia)

Landlords
2005 = net loss -$4.1bn .......... % of all landlords making a loss 65.4%
2006 = net loss -$5.088bn ....... % of all landlords making a loss 66.5%
2007 = net loss -$6.372bn ....... % of all landlords making a loss 67.9%
2008 = net loss -$8.63bn ......... % of all landlords making a loss 69.4%

http://www.prosper.org.au/2010/04/0...o-negative-equity-someones-going-to-get-hurt/

 

[TOBAB]

This is the most relevant issue to housing affordability and the effect on NG.

Children are shipped of to daycare, then before and after school care, then in high school, allowed to roam the streets during school holidays because both parents have to work to afford even a basic mortgage.

The stress this is putting on relationships is incredible with the children in between.

Cheers

I am all for affordable housing but altering the NG rules aint it! I have put my argument before, many times and have yet to get a response that will change my opinion.

Your argument seems to be that by allowing NG on future builds it will somehow encourage property investors to focus on this end of the mkt only. These people are not stupid and as correctly pointed out they consider capital growth when purchasing. CG will be greatly limited by no investors purchasing when the original investor sells. Result a huge fall off in property investors not just in exiting but in future properties as well. Effect of this will be reduced builds, effect of this will be increasing rental yields due to lack of supply and maintained demand. Effect of this will be both parents working to pay the rent etc etc etc.

Guys I don't think you have considered all the implications.

 

[ChilliBlue]

There will always be a section of the population that should never their own home and unfortunately these people do not get the message.

You cannot have it all. People want to live in a large property within 5-10km from their main city, have 2 new cars, and continue eating out and going on holidays.

The furniture has to be new and the electronics updated every 2-3 years.

If you want to buy property then you need to spend less than you earn and set your expectations lower.

There is affordable property 20km outside of city limits but there is a reason why they are affordable - no one wants an older style home away from their restaurants and lifestyle.

I work as a commercial agent and time and time again have friends whinge and moan about interest rates and how they cant afford to buy a property similar to that they are renting.

In the inner and eastern suburbs of Sydney, you are better off renting and buying an investment property that has capital growth as well as income.

My parents and many of their generation paid off homes at 10-15% interest rates on one income.

They did it with hand me downs, smaller properties and less lifestyle choices not spending more than what they earnt.

Property is affordable and attainable and like shares, you need to set reasonable expectations, do your research and buy in the dips.

 

[Trembling Hand]

Guys I don't think you have considered all the implications.

lol.

You make it like investors are THE demand. They are the EXTRA demand due to on going tax breaks and government intervention.

The real demand for houses is from occupiers. If NG is removed investor nic off and put money where it should be - PRODUCTIVE ASSESTS/ business not speculation in the non productive greater fool game. (see all financial crisis since the beginning of time for his outcome)

No NG investors - prices fall, marginal renters can buy easily, very quickly taking up the slack.

Its not rocket science. The cheaper the product the more people purchase it. thats where demand comes from not higher prices due to tax concession to a few.

 

[UBIQUITOUS]

I am all for affordable housing but altering the NG rules aint it! I have put my argument before, many times and have yet to get a response that will change my opinion.

Your argument seems to be that by allowing NG on future builds it will somehow encourage property investors to focus on this end of the mkt only. These people are not stupid and as correctly pointed out they consider capital growth when purchasing. CG will be greatly limited by no investors purchasing when the original investor sells. Result a huge fall off in property investors not just in exiting but in future properties as well. Effect of this will be reduced builds, effect of this will be increasing rental yields due to lack of supply and maintained demand. Effect of this will be both parents working to pay the rent etc etc etc.

Guys I don't think you have considered all the implications.

Negative gearing should be abolished entirely at the same time as foreign purchases of residential real estate. If the government really want to tamper with a free market, then they should not release land to developers (who end up land banking) and should instead have a nationalized organization for land developments. They wouldn't have to make any profit as they would be recouping plenty of tax revenue from the negative gearers.

At the same time this would bring forward construction and provide employment in areas where the government decide development is required, and not where the Stocklands of this world wish to purchase land.

We have seen what negative gearing has 'contributed' to affordability. Now it's time to scrap this radical idea.

 

[ChilliBlue]

then they should not release land to developers (who end up land banking) and should instead have a nationalized organization for land developments.

Just so that everyone is aware, Westfields will often landbank for a period of 30-50 years.

Stocklands anything between 10-40 years.

Woolworths will land bank greenfield sites 10-30 years.

I personally have no problem with governments releasing land but is should be the government owned Landcom and controlled in the interest of the population not profit.

However, developers pay substantial donations to all parties and until that is removed, profits by non government organisations will occur.

 

[todster]

Who on here using NG would want it removed,maybe with comments people could disclose if they are using it.
PS not me

 

[Calliope]

The prices of luxury houses, luxury cars and boats have received a big boost from the $4 billion creamed off the BER by the building industry.

 

[Ruincity]

I read and have read this thread (and it's peers) for quite some time now.
In this period I have succumbed and actually bought my own property just recently.. Within this period I have also witnessed prices just continue to go up and up with a small dip amidst the GFC.

What the GFC taught me is that the government will do it's utmost best to ensure that property prices DO NOT FALL in too radical a fashion.. The government and especially THE BANKS - have far too much to lose and society as we know it will suffer dramatically.

Have I paid too much for my first home - ALMOST CERTAINLY!
Will it be worth more in 10 years - I believe so.
Do I want to rent all my life be unable to make changes and live at the beck and call of a landlord while paying his or her bills - No I have had enough...

Housing is expensive, research points to it NEVER being cheap though (in relative terms).. I don't subscribe to me "doubling my money in 10 years time" I feel that the economy, investors and demand has little upside in the near term.. A correction very well be nigh (great timing on my behalf yes).
However I believe within the longer time frame as inflation, demand, population and wages increase I am confident that the price of my inner city HOME will increase - if I'm lucky and have bought right - maybe even significantly..

Moral of the story, timeframes, risk profile and intent of purchase make this discussion or thread a little too broad.

 

[TOBAB]

lol.

Its not rocket science. The cheaper the product the more people purchase it. thats where demand comes from not higher prices due to tax concession to a few.

OK so you elimate the extra demand, prices fall, as prices fall the obvious consequence (perhaps I should not be so presumptuous) is that building reduces (less of a margin for developers/builders, oh and they can not hang on to the property and rent out because they will not be able to claim the interest as a legitimate deduction unlike every other asset class)

It would be a very strange world.

Would you let investors gear up at all? I am assuming you wouldn't. I have asked this before of the NG critics but havn't noticed any response.

 

[TOBAB]

Who on here using NG would want it removed,maybe with comments people could disclose if they are using it.
PS not me

I use it but personally think it is a cash killer. I'll be getting out of my IP as it takes way too large a % of my portfolio. I believe in NG as a notion because of the std accounting principal: if taxing on the sell side you must be able to receive deductions whilst holding.

Personally I think we should increase CGT to whatever the individual's marginal rate happens to be. Seems a lot fairer to me.

Also I think property as an investment is over-rated prelu from the headache of it all: you've got tenants, estate agents and a very illiquid product. Why not just buy ANZ shares, take your 5% fully franked and be happy about it. Plenty of Capital Growth, easy in, easy out, paid on time, don't have to repaint, change security alarms etc etc.

 

[Trembling Hand]

Would you let investors gear up at all? I am assuming you wouldn't. I have asked this before of the NG critics but havn't noticed any response.

Absolutely. Let them gear up to their nutz. Nothing wrong with idiots risking there own cash.

Trouble is in a true market you wouldn't have the government also spending tax dollars on gearing up the same punters via the sellers grant & then a tax that encourages "investment" in a non productive asset.

There is no benifit to the economy by having punters get business like deductions on dwellings.

I just don't buy the added supply line, its added demand that results. Supply comes from the end user. Whether they rent or own outside of pure speculation there is no other demand. Supply will always match demand. No need to worry about reduced development. If it drops prices rise untill they match.

 

[TOBAB]

Absolutely. Let them gear up to their nutz. Nothing wrong with idiots risking there own cash.

Trouble is in a true market you wouldn't have the government also spending tax dollars on gearing up the same punters via the sellers grant & then a tax that encourages "investment" in a non productive asset.

There is no benifit to the economy by having punters get business like deductions on dwellings.

I just don't buy the added supply line, its added demand that results. Supply comes from the end user. Whether they rent or own outside of pure speculation there is no other demand. Supply will always match demand. No need to worry about reduced development. If it drops prices rise untill they match.

I may not have been clear. So you let people gear up but do not allow the deduction? Is that the plan? Or is it just negative gearing which irks you, in which case you can borrow up to the point where income equals outgoings. Gee changes in the ROI will cause a few problems for people with this model.

What about deductions on margin loans? There not business. Do we have a go at them next?

BTW if only supply always matched demand. I do agree that prices may ultimately rise, however, this may be on the back of fast increasing rental yields. Investors would most likely do this en masse to cover. Either way I believe we'll end up back in the same spot and those less fortunate will get screwed.

 

[Trembling Hand]

What about deductions on margin loans? There not business. Do we have a go at them next?

Before we go there could you tell me if you think that there is a benifit to the economy by having punters get business like deductions on dwellings.

 

[MR.]

What was it ? ... 6 weeks ago? The change to 40% for the Chinese property speculators to come up with as a downpayment to buy a second home.

Guess what! they now need 50%. Our pollies haven't even goten outa bed yet...

http://news.xinhuanet.com/english2010/china/2010-04/15/c_13253001.htm

BEIJING, April 15 (Xinhua) -- The Chinese government has raised the down payment for second-home buyers to a minimum 50 percent of the value from 40 percent, in a bid to curb property speculation.

The decision was announced in a statement released Thursday after conclusion of an executive meeting of the State Council, the Cabinet, presided over by Premier Wen Jiabao, on Wednesday.

First-home buyers must pay no less than 30 percent of the the property price if the area is above 90 square meters, the statement said.