The future of Australian property prices

Value Collector said:

It certainly adds to the cost, have you seen how deep they dig the holes under most new apartment buildings to add all those car spaces.

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Yea I've parked below ground

True that it does add to the cost, but there's always been parking space requirement and property prices hasn't gone up this much due to that.

There's this guy that own most of the commercial properties in Canley Vale. Heard that he was going to knock those typical single storey shops down to build some complex but haven't because parking space requirements would cost him too much. So in that case, it doesn't cost consumers anything extra

Fairfield Council is getting pretty enterprising lately I am very upset yet have to admire: They pass the costs of practically everything on to the homeowner/developer or ratepayers, and then some.

When I was in HS, they put a fee to park in Cabra's then one major car park. Saying the fee is to upgrade that and then build a bigger one next door then remove the fees.

They collect for some 10 odd years then a few years ago turn that promised carpark space into a ground level shopping complex with only two or so storey parking on top. The old car park get a fresh coat of paint and I think the fees are still on.

luutzu said:

Yea I've parked below ground

True that it does add to the cost, but there's always been parking space requirement and property prices hasn't gone up this much due to that.

There's this guy that own most of the commercial properties in Canley Vale. Heard that he was going to knock those typical single storey shops down to build some complex but haven't because parking space requirements would cost him too much. So in that case, it doesn't cost consumers anything extra

Fairfield Council is getting pretty enterprising lately I am very upset yet have to admire: They pass the costs of practically everything on to the homeowner/developer or ratepayers, and then some.

When I was in HS, they put a fee to park in Cabra's then one major car park. Saying the fee is to upgrade that and then build a bigger one next door then remove the fees.

They collect for some 10 odd years then a few years ago turn that promised carpark space into a ground level shopping complex with only two or so storey parking on top. The old car park get a fresh coat of paint and I think the fees are still on.

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More of the new supply is apartments and town houses, where adding parking is necessary

Value Collector said:

More of the new supply is apartments and town houses, where adding parking is necessary

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Town Houses definitely need more than the single garage with one visitor's space. My folks' place is right opposite a few units and there's hardly any parking on the street. I have a feeling that they've turned their garage into a liveable room.

A bit strange that for a continent this big with only some 24 million people, Australia somehow have a housing shortage and affordability issue.

luutzu said:

A bit strange that for a continent this big with only some 24 million people, Australia somehow have a housing shortage and affordability issue.

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I have read a lot of bull**** about this topic, but your single sentence sums up the situation perfectly.

I know the reasons why it has happened, my question is why have we allowed it to happen?

satanoperca said:

I have read a lot of bull**** about this topic, but your single sentence sums up the situation perfectly.

I know the reasons why it has happened, my question is why have we allowed it to happen?

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By "we" you mean the population or the government carrying out the will of the people?

Strange but people, probably myself included, like to buy stuff then watch the neighbour's stuff sells for higher thinking that when we goes to sell, we too will sell for at least that and then some.
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For most people, a rapidly rising property market is actually a bad thing if they stop and think about it. For one, it'll costs that average Joe and Jane more to buy; and buy in a real hurry, without too much consideration about location or proper inspection.

There's the increased taxes and council rates...

There's that feeling of being rich so you refinance your mortgage, splurge and if you lose your job or interest rise etc., you'd be screwed.

Then there's the macro stuff... too much financial debt mean stress and no spending beside the absolute essential. Bad for business....

Anyway, it makes no economic sense. Makes political sense though... that and it helps with controlling the population, use that invisible hand to push their heads to the grindstone so they'll work hard and won't question much about safety or raises.

luutzu said:

Town Houses definitely need more than the single garage with one visitor's space. My folks' place is right opposite a few units and there's hardly any parking on the street. I have a feeling that they've turned their garage into a liveable room.

A bit strange that for a continent this big with only some 24 million people, Australia somehow have a housing shortage and affordability issue.

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Empty desert doesn't help when everyone wants to live with a handful of capital cities.

I mean if you suggest that people move to the other side of the blue mountains to find cheaper housing they freak out.

Value Collector said:

Empty desert doesn't help when everyone wants to live with a handful of capital cities.

I mean if you suggest that people move to the other side of the blue mountains to find cheaper housing they freak out.

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Heard a few months ago some Canadian expert was saying that Supply/Demand, i.e. population growth, aspect doesn't holds up for their Vancouver and Toronto markets. That the net population growth for those two was something like 2% versus their runaway property market rising in the 20% p.a. past few years. Then there's those empty houses/apartments.

I haven't looked up the stats for Australia, but given our deserts and habitable areas within those congested roads... I mean, 40 minutes drive from the CBD and it's pretty empty. No need to go beyond the wrong side of the mountains.

Population density: Wikipedia

Australia ranked 235th with 8.5 per km². Sydney at 400/km² (2015).
Hong Kong ranked 4th with 16,444 people per km². In Kwun Tong it goes to 57,250 [HK gov.]

Sydney [Australia?] was the 2nd most expensive property market behind Hong Kong a couple of years running right?

The maths and economics just doesn't add up.

The other explanation would be that we Sydnese [] are all doing financially well, our economy is great and all that. But... but most of us are struggling to make ends meet. I mean, that ABC stats just showed that about 1 in 4 Aussies cannot pay their bills [and mortgages] at the current low interest rate.

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The thing about property prices is that trading volume isn't very high so all you need is a few thousand idiots [or cashed up investors with a broken calculator] to make the prices look like we ought to go out and get into debt over our pay packages.

From memory, that ABC report show Fairfield has only some 3,500 mortgagees. Probably need more accurate and detailed transaction data to make a proper conclusion... but most houses aren't for sale or just sold.

But yea, the current market is beyond my maths.

I mean, a typical master builder's McMansion wouldn't costs the builder more than $200k to build. If a person become an owner-builder, they definitely could build a massive 5 bedroom, 2 storey, some 450m2 brick-veneer for about $300k... say $350k for the fancy (solid) timber flooring and marble tiles....

So it's not the cost of construction that's driving up the prices either. That and most properties selling for $1M in Western Sydney need a proper demolition just to be safe.

I think the dynamics (leading to similar income to price ratios) in NZ, Canada and Australia are pretty similar.

A few questions about the technicalities of real estate transactions since I’ve only ever bought one house and never sold.

I’m just going through some initial thoughts, working out costs and so on at the moment. It’s not a given that I’m moving but I just want to work out all the costs and cash flows.

First question - if selling then at what point in the process do real estate agents want payment of their fees?

From a cashflow perspective can I use the proceeds of the sale to pay those costs? Or do I need to pay them before the $ from the property sale is received?

Second question - I see various statistics relating to the average gap between asking prices and actual selling price. Eg in one particular city I see that the average selling price is a 6% discount on the asking price. What I want to know is how this is calculated given that listing prices are typically a range not a single figure?

Eg a house is listed for sale at $500 to $550K. What figure is considered to be the price when those average vendor discount figures are calculated? Are they basing it on $500K? On $550K? Half way so $525K? Something else?

Someone here will know I’m sure.

Agents may want the advertising up front but the commission is deducted from the deposit at settlement.
The asking price in a private sale is more than they expect naturally.
With an auction in this market the agents quote low to generate interest, it's illegal to underquote but it happens all the time.

MrBurns said:

With an auction in this market the agents quote low to generate interest, it's illegal to underquote but it happens all the time.

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This happens all the time where I am. Goes for $100k plus above asking.

MrBurns said:

Agents may want the advertising up front but the commission is deducted from the deposit at settlement.

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Thanks for that.

Not something I've done before so just trying to get my mind around it all at this stage.

As for the prices bit, that's a question less specific to me personally. I'm referring to various reports I've seen that "selling prices last month were x% of asking prices" and trying to understand how that's calculated given that asking prices, around here at least, are typically a range rather than a precise figure. Someone must be converting a price range, eg $420K to $460K, into a firm number in order to be able to do such a calculation.

My thinking there is that if the market's turning down then the gap between asking and selling would, if actual selling prices tend to be lower than the asking price as they are at least in many places outside Sydney and Melbourne, would tend to widen and that would be one sign of a deteriorating market. My interest there is more in the overall economics side than any personal consideration - I just want to know how they calculate such a figure?

As an example, I saw in the newspaper recently that the average vendor discount in West Hobart (that's an actual suburb name not a broad area) was 4.2%. Now I'm just wondering exactly how that's calculated given that most vendors list a price range not a specific figure?

At a guess they're using the top of the price range as the basis of that calculation?

Anyone know for sure how they come up with these numbers?

Smurf1976 said:

Thanks for that.

Not something I've done before so just trying to get my mind around it all at this stage.

As for the prices bit, that's a question less specific to me personally. I'm referring to various reports I've seen that "selling prices last month were x% of asking prices" and trying to understand how that's calculated given that asking prices, around here at least, are typically a range rather than a precise figure. Someone must be converting a price range, eg $420K to $460K, into a firm number in order to be able to do such a calculation.

My thinking there is that if the market's turning down then the gap between asking and selling would, if actual selling prices tend to be lower than the asking price as they are at least in many places outside Sydney and Melbourne, would tend to widen and that would be one sign of a deteriorating market. My interest there is more in the overall economics side than any personal consideration - I just want to know how they calculate such a figure?

As an example, I saw in the newspaper recently that the average vendor discount in West Hobart (that's an actual suburb name not a broad area) was 4.2%. Now I'm just wondering exactly how that's calculated given that most vendors list a price range not a specific figure?

At a guess they're using the top of the price range as the basis of that calculation?

Anyone know for sure how they come up with these numbers?

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They will go off lowest price they can get away with. If they can quick flick your house- they still make their profit.

How fast are houses selling in your area?
Are they at all time highs, or slipping down?

Most of the agents I meet try to low ball you for quick profit.

moXJO said:

How fast are houses selling in your area?
Are they at all time highs, or slipping down?

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Where I'm selling = prices are at an all time high, up about 19% over the past 12 months and 8% over the past quarter. I know pretty much what my house is worth within a few % so not too worried about that aspect. There's strong demand in the area, it's one of the highest capital growth areas in the state. Average days on market = about 25.

Where I'm considering buying = prices are about 5% below the peak in early 2017 and the trend is down since then. Info online is that average selling prices are 5 - 6% below asking price hence why I'm trying to understand exactly how that's calculated. Average days on market = just over 70.

It's not a given that I'm moving but I always like to know the answers well before I plunge into anything. I'm just crunching the numbers at this stage and seeing how it all looks.

My reason for possibly moving is unrelated to housing prices although obviously that's a definite issue I need to consider.

Smurf1976 said:

Where I'm selling = prices are at an all time high, up about 19% over the past 12 months and 8% over the past quarter. I know pretty much what my house is worth within a few % so not too worried about that aspect. There's strong demand in the area, it's one of the highest capital growth areas in the state. Average days on market = about 25.

Where I'm considering buying = prices are about 5% below the peak in early 2017 and the trend is down since then. Info online is that average selling prices are 5 - 6% below asking price hence why I'm trying to understand exactly how that's calculated. Average days on market = just over 70.

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Possibly discount due to time on market.

notting said:

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Things are definitely moving slower where I am. Suburbs that were less attractive prior to boom, are not selling for the stupid prices that they were. And a lot are sitting on the market for extended periods.

The Party Is Over for Australia's $5.6 Trillion Housing Frenzy

I don't think the bubble is going to burst, but I think we're going to see an extended period of low interest rates and price stagnation.

Record population growth, 30 years of falling interest rates to a record low and highest debt levels on record. Add to that the high concentration of jobs in our capital cities....

The next few years will be interesting.

moXJO said:

Things are definitely moving slower where I am. Suburbs that were less attractive prior to boom, are not selling for the stupid prices that they were. And a lot are sitting on the market for extended periods.

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I'm seeing the same, the frenzy is over and Agents are ringing me, as an investor, instead of me ringing them!