The future of Australian property prices

[satanoperca]

Still in correction mode only, nothing to fear just yet.

 

[Smurf1976]

the Sydney/Melbourne boom, commenced recently negative gearing commenced 30 odd years ago.

I don’t know when it commenced but it was getting out of hand by 2003 that I recall most definitely. The other states likewise about that time were getting more expensive and that’s also when the boom in TV property shows was getting going.

 

[sptrawler]

I don’t know when it commenced but it was getting out of hand by 2003 that I recall most definitely. The other states likewise about that time were getting more expensive and that’s also when the boom in TV property shows was getting going.

The point I was making was, the Sydney/Melbourne house price rise can't be laid solely at the feet of negative gearing, as it happened over such a short period.
Greed and the ability to buy and flip at a profit, to another buyer in a short period, caused the prices to skyrocket as happens in the stock market, bit coin etc.
The ease of getting a loan helped, but I'm sure you nor I jumped on board, when it would have been quite easy to do so.
Probably because we are conservative investors, not because we couldn't have got a negative geared loan.
But now I'm expected to believe, it was the ability to get a loan that was the motive behind the purchase, not the expectation of making money.
Negative gearing should have been tightened up years ago, I had that debate with Sydboy a long time ago.
But it has its place, however what Labor is suggesting, is going from the sublime to the ridiculous. IMO

 

[jbocker]

Yea, especially apartments.

Sad to see but the poor people buying apartments and are hoping to hang on through this cycle to hopefully have something for retirement... I think they'll be in for a big disappointment.

The built quality and lowering of standards mean they'll be lucky to not have major rework after a few years. Hanging onto them longer and they'll realise that buildings do deteriorate and the cost to renovate ain't cheap. And that's if the original builder did a proper job with the foundation and structural stuff.

Judging by Opal and other stories I've heard... these aren't built to last.

Add to that the costs of Strata fees there is a huge variance, seen some in Perth $1100 a quarter, no pool, no lift elevator. Relatively new build. Must be a scam ongoing collection system set up.
I am currently looking for a place to buy and live, a buyers market but I haven't found anything that meets all requirements yet.

 

[satanoperca]

Negative gearing is a failed policy, with over 80% of investors purchasing established properties, it is hardly adding to the rental stock, cannot blame investors, as the growth has been and always will be in established areas.

This recent boom can be attributed to 3 things :
1. Cheap or very cheap money and IO loans
2. Foreign investors being able to purchase established property, how does that benefit the population
A) like to add, the massive growth in apartment developments funded by foreign money might be of pure luck an advantage down the track.
3. High immigration to offset that we have being going backwards as an economy, something had to replace the mining boom.

 

[sptrawler]

Negative gearing is a failed policy, with over 80% of investors purchasing established properties, it is hardly adding to the rental stock, cannot blame investors, as the growth has been and always will be in established areas.

If you can only negative gear new build properties, and capital gains is going to be about 38%.
Who would build a rental property for a return of 3% after costs?
I may be wrong, but anybody who has the money to build a new home, is highly unlikely to want to rent it out. Unless it is their first foray into the rental market. IMO
The other thing with negative gearing, there is already a rule in place, that states that the investment should have a likely hood of becoming positive geared, the ATO is in control of that.

 

[satanoperca]

If you can only negative gear new build properties, and capital gains is going to be about 38%.
Who would build a rental property for a return of 3% after costs?
I may be wrong, but anybody who has the money to build a new home, is highly unlikely to want to rent it out. Unless it is their first foray into the rental market. IMO

Interesting, don't understand the 38% CG (over what period of time), however, why do investor buy established properties and rent them out for 3% (current best market return in the major cities).

" I may be wrong, but anybody who has the money to build a new home, is highly unlikely to want to rent it out. Unless it is their first foray into the rental market."
You are wrong, you assumed houses, why do you think there has been a boom in apartments, they are new and are properties.

Regardless, housing is for shelter, until we as a nation look towards other endeavors to build wealth say through innovation, nothing will change, except our standard of living will decline.

I don't blame investors for the current situation, it fairly sits with our gutless pollies who provide no other alternative but to invest in established properties.

 

[Skate]

Add to that the costs of Strata fees there is a huge variance, seen some in Perth $1100 a quarter, no pool, no lift elevator. Relatively new build. Must be a scam ongoing collection system set up.
I am currently looking for a place to buy and live, a buyers market but I haven't found anything that meets all requirements yet.

jbocker, best of luck on your house hunting.

I'm a bit over it, constantly being told "it's a buyers market"

Well, it is a buyers market, till you want to buy one.

Skate.

 

[Smurf1976]

Regardless, housing is for shelter, until we as a nation look towards other endeavors to build wealth say through innovation, nothing will change, except our standard of living will decline.

This.

Extracting or making something physical or providing services and intellectual content of actual value builds wealth. Ramping up the price of a pile of bricks that have been sitting there for 50 years doesn’t.

We’ve got 40% of our national population living in two cities both of which have become heavily reliant on money shuffling rather than producing anything of actual value. That’s not a good situation.

 

[SirRumpole]

Extracting or making something physical or providing services and intellectual content of actual value builds wealth. Ramping up the price of a pile of bricks that have been sitting there for 50 years doesn’t.

That's the point of Labor's NG proposal, keep it for new properties only.

 

[sptrawler]

That's the point of Labor's NG proposal, keep it for new properties only.

You mean keep it for the wealthy only.

 

[satanoperca]

Smurf, I am confused, I don't understand what you are discussing.

Removal NG on established is good? YES/NO
Removal of the 50% discount on CG is good? YES/NO

 

[sptrawler]

Well it looks as though the Libs are going to wedge Shorten, on the negative gearing and capital gains changes, it should make for an interesting argument.

https://www.smh.com.au/politics/federal/frydenberg-20190108-p50q67.html

 

[SirRumpole]

You mean keep it for the wealthy only.

Keep it for the productive not the non productive.

 

[sptrawler]

Interesting, don't understand the 38% CG (over what period of time), however, why do investor buy established properties and rent them out for 3% (current best market return in the major cities).

Question 1. If the investor is on the top tax bracket, which is what everyone is saying, is forcing first home buyers out of the market.
(Back of the napkin) top tax rate approx 49%, capital gain 50% reduction at 49% tax rate =approx 25% tax. Change that to 25% reduction = +12.5% on top of the 25% approx 37.5% effective tax.

Question 2. Investors buy established in most cases, because they can buy to suit their pocket and secondly they are ready to go as soon as the property settles, to build can take 12 months.
Also most investment properties are owned by people on $150k or less, they can buy a cheap house or unit in a cheap suburb and rent it out, to the less fortunate. Then build up equity and sell, then buy something better, what is it someone on here said "wash, rinse, repeat".
It is how a lot of working class people get ahead, whether you believe silly Billy or not.

 

[sptrawler]

Keep it for the productive not the non productive.

Well then stop it for all, not just the working class.
Or is it o.k now for Labor to give tax breaks to the rich?

 

[SirRumpole]

Well then stop it for all, not just the working class.
Or is it o.k now for Labor to give tax breaks to the rich?

I wouldn't care if NG disappeared completely but encouraging people to build houses and add to the supply and therefore reducing the price doesn't seem a bad idea to me.

 

[sptrawler]

I wouldn't care if NG disappeared completely but encouraging people to build houses and add to the supply and therefore reducing the price doesn't seem a bad idea to me.

Right, so if James Packer builds a $10m house and Murdoch builds a $10m house, then lease them to each other and claim a $9m loss that's fine?
But as long as someone can't negative gear a $200k 3 x 1 in Tamworth, all is good in the land of milk and honey?
Weird reasoning.IMO
But I guess as long as Labor come up with it, it must be good for you.
Just another brain fart, from Labor. IMO

 

[Smurf1976]

Smurf, I am confused, I don't understand what you are discussing.

I was expanding a bit on your comment that housing is for shelter and the nation needs to look to other things as a means of wealth creation.

I think it's a point that hasn't been well grasped at the political or general public level that simply funneling more and more money into things which already exist isn't going to make the nation prosper.

On the question of negative gearing and so on, my main concern is that property prices are now so far out of alignment with anything else that the primary focus needs to be on bringing about an orderly fix rather than an abrupt one which would have broader economic effects. So my thought is that policy change should be done with a firm eye on the market rather than for purely ideological reasons. A sudden crash won't help first home buyers if it takes the broader economy with it and puts them out of a job.

The housing bubble has grown so large that fixing it is going to take years. Either prices slowly dropping over years or an abrupt fall and then we spend years cleaning up the economic mess that results. There's no good answer but the former sounds better to to me than the latter. Either way it's going to take years though.

 

[sptrawler]

On the question of negative gearing and so on, my main concern is that property prices are now so far out of alignment with anything else that the primary focus needs to be on bringing about an orderly fix rather than an abrupt one which would have broader economic effects. So my thought is that policy change should be done with a firm eye on the market rather than for purely ideological reasons. A sudden crash won't help first home buyers if it takes the broader economy with it and puts them out of a job.

That pretty well nails it Smurph.
Ill thought out vote catching, garbage. IMO
Probably silly Billy will dump it, as is being mentioned in the press, and Bowen will be thrown under the bus. Kills two birds with one stone, gets rid of a stupid idea and also gets rid of the opposition for his job.IMO