The future of Australian property prices

[Knobby22]

To underpin your and my beliefs, even the experts are getting nervous.

https://www.smh.com.au/business/the...ed-alone-in-an-apartment-20190112-p50qzh.html

That points out the basic problem. A large proportion of the country make their money through building and or infrastructure. As the apartment building slows then this will increase unemployment causing a recession causing further housing price falls and failure of the numerous cafes etc.
Combine this with the disruptive effects on retail through the internet, we could have a few problems coming up.

 

[sptrawler]

That points out the basic problem. A large proportion of the country make their money through building and or infrastructure. As the apartment building slows then this will increase unemployment causing a recession causing further housing price falls and failure of the numerous cafes etc.
Combine this with the disruptive effects on retail through the internet, we could have a few problems coming up.

Well that's what smurph and I think, many think there won't be a problem, others say bring it on as long as it drops prices in Sydney and Melbourne.
I personally think a perfect storm is coming, unless silly Billy does the biggest back flip, in history.

 

[Smurf1976]

I personally think a perfect storm is coming

I’d rather we weren’t in this situation in the first place but reality is that for first home buyers there’s one thing even worse than high prices and that’s being unemployed.

A disorderly collapse which takes down countless businesses and jobs with it isn’t going to help anyone not sitting on a big pile of cash and that’s not your average first home buyer.

A gradual correction is what we need. Slow and steady not a crash.

 

[InsvestoBoy]

A gradual correction is what we need. Slow and steady not a crash.

These are things you have to set up on the way up, not try and manage at the peak. Eventually (at least, IMHO) capital misallocation and fraud and mismanagement are baked into the cake and you can't avoid their consequences.

Blaming policy changes for what was already inevitable is missing the forest for the trees.

The cake is baked and that's all there is to it.

In the 2006-2009 period in the US, there was no accomodative policy they didn't try to keep the whole thing from falling over. It fell over anyway.

 

[SirRumpole]

I’d rather we weren’t in this situation in the first place but reality is that for first home buyers there’s one thing even worse than high prices and that’s being unemployed.

A disorderly collapse which takes down countless businesses and jobs with it isn’t going to help anyone not sitting on a big pile of cash and that’s not your average first home buyer.

A gradual correction is what we need. Slow and steady not a crash.

I can't really see the problem of the proposed ng changes and personally I think panic has been rustled up by a scare campaign from "the other side" without much foundation.

Those who are currently ng'ing can continue to do so, new properties which is where the construction jobs are will continue to be eligible for ng and more housing will be available for owner occupiers.

I can't see the problem really.

 

[InsvestoBoy]

I can't see the problem really.

Only a problem if the reality on the ground is much worse than the picture painted by media and spruikers

 

[Value Collector]

Business employs people. Housing doesn't.

That’s got to be one of the silliest statements I have seen on this forum.

As rumple rightly pointed out, housing creates many layers of business activity, and supports a wide array of primary, manufacturing and trade industries.

 

[sptrawler]

I can't really see the problem of the proposed ng changes and personally I think panic has been rustled up by a scare campaign from "the other side" without much foundation.

Those who are currently ng'ing can continue to do so, new properties which is where the construction jobs are will continue to be eligible for ng and more housing will be available for owner occupiers.

I can't see the problem really.

You may well be right, and I really do hope you are.
The problem I see is, there will be a large drop in the established market, also in the build to rent market, as the CG changes IMO will make the risk too high for the reward received.
I guess time will tell, I certainly hope it is a fairly bumpless transition.

By the way, I'm talking about the W.A market, Sydney and Melbourne have a strong demand, W.A is in the doldrums. Which can only get worse with the changes. IMO
If the rest of Australia goes into recession, Sydney and Melbourne get to join in, I don't think people think about that.

 

[PZ99]

That’s got to be one of the silliest statements I have seen on this forum.

As rumple rightly pointed out, housing creates many layers of business activity, and supports a wide array of primary, manufacturing and trade industries.

Silly is your attempt to selectively quote one sentence and take it out of context in your reply.

Investors who negatively gear empty apartments and leave them empty aren't employing anyone.

They are merely sending me a tax bill every year. I want better value for my money.

 

[Smurf1976]

I can't really see the problem of the proposed ng changes and personally I think panic has been rustled up by a scare campaign from "the other side" without much foundation.

My concern is simply about the scale.

This bubble has been building for a very long time indeed I've commented on it more than a decade ago on this forum so that's not something I've come up with using the power of hindsight.

It has been at the point of being outright dangerous for quite some time now.

There's a danger if it bursts suddenly. What does that do to banks, the stock market and the general economy? The answers there are unlikely to be in any way good.

There's a danger if it doesn't burst at all. How long before we see those who missed out, and that's an entire generation now, say enough's enough? If it comes to that point then we're in a world of pain.

I thus see the most important thing being to act pragmatically not ideologically. It's too late to avoid pain but don't make it any worse than it needs to be.

If I were sufficiently cynical then I'd think the Coalition have deliberately "blown" the upcoming election to avoid the blame for the inevitable. The goose is cooked and they know it.

 

[Value Collector]

Silly is your attempt to selectively quote one sentence and take it out of context in your reply.

Investors who negatively gear empty apartments and leave them empty aren't employing anyone.

They are merely sending me a tax bill every year. I want better value for my money.

So building that apartment didn’t employ anyone? I bet it employed more people than if that person bought a bar of gold.

They aren’t sending you a tax bill, they are just sending a smaller tax check than they otherwise would have to.

 

[Darc Knight]

So building that apartment didn’t employ anyone? I bet it employed more people than if that person bought a bar of gold.

They aren’t sending you a tax bill, they are just sending a smaller tax check than they otherwise would have to.

I think what he's getting at is the lost tax revenue due to negative gearing. Tax revenue which will have to be made up/gained elsewhere.

 

[Value Collector]

I think what he's getting at is the lost tax revenue due to negative gearing. Tax revenue which will have to be made up/gained elsewhere.

If an investor “loses” some revenue, that revenue will be earned by some some one else.

Eg, any loss an investor has due to interest charges, will create a taxable gain to a bank via profits or bank employee via wages or depositor via earns interest etc etc.

If some one is actually buying a property and literally holding it empty, are taking a property off the market, so are increasing demand for property which will
Either increase the price other investors can earn for their properties on the market, or increases the demand for new properties to be built.

 

[Humid]

Well that's what smurph and I think, many think there won't be a problem, others say bring it on as long as it drops prices in Sydney and Melbourne.
I personally think a perfect storm is coming, unless silly Billy does the biggest back flip, in history.

Plenty of rentals vacant in WA at the moment even more for sale
Do we blame Scomo for this or are you waiting for an election.

 

[sptrawler]

Plenty of rentals vacant in WA at the moment even more for sale
Do we blame Scomo for this or are you waiting for an election.

I would have thought, it is because of the pending changes to CG, I know I would be selling if I was sitting on a decent capital gain.
Labor are a shoe in the win the election, and it will be too late once that happens.
Just my opinion.
But you are right there are a lot coming onto the market, I ride a push bike around and there are a lot of signs going up, on my normal route.

 

[Humid]

So building that apartment didn’t employ anyone? I bet it employed more people than if that person bought a bar of gold.

They aren’t sending you a tax bill, they are just sending a smaller tax check than they otherwise would have to.

You’ve never worked in a gold mine!

 

[Value Collector]

You’ve never worked in a gold mine!

No I haven’t worked in a gold mine, but building a house or apartment requires a lot of mining also eg steel, copper, clay, cement etc etc, not to mention the multiple layers of manufacturers making all components and then the trades assembling it all.

But if you want to talk waste, mining gold has to be at the top of the list.

 

[jbocker]

The way I see it, in Perth wrt Property prices. There was a large spike in approvals to build a lot of apartments late in the mining boom to cover the growing shortage of housing. The boom ending and people started to leave the state, causing a downward pressure on pricing as homes became more and more available. Add to this jobs were lost and wages decreased (less hours worked and hourly rates deflated). Banking royal commission had started, have spooked the banks and they reacted in making applications FAR more stringent. Now we have the Interest Only loans converting to Principle and Interest, causing repayments to rise significantly and causing stress. Rents have reduced significantly, but have stabilised and have had a very mild recovery.
That plethora of building approvals have been in construction and now many are hitting the market putting a lot of pressure on the roughly 700-800,000 market, which is falling and consequently pressuring the lesser valued homes. Yet the big end of town, the western suburbs (west is more desirable in Perth), have had some significant drops but sell very quickly, typically there is not the same issues for those with big bucks.
Some relief in that banks will make more Interest Only loans? Hmm not so sure, as I think (by the end of the commission findings) the initial approval process will need the banks to show due diligence that the mortgage holder can accommodate the Principal and Interest loans when it becomes due. This is going to be difficult for those who may not be able to explain their income growth potential or mortgage reduction capacity.
So for the year it is going to be tough and getting tougher for sellers. The new builds, the offloads and stress sales will take some time to be absorbed by the market. No need to rush, you might leave a lot of money on the table.
Yet I feel that magic median price value I think may fall on a number that marginally higher than it is now. And as usual that solitary number wont be telling the whole story.
The govt decisions on NG etc whatever that might be, is going to be secondary in Perth, till the market sorts itself out, but is unlikely to help or ease the situation.

 

[PZ99]

So building that apartment didn’t employ anyone? I bet it employed more people than if that person bought a bar of gold.

They aren’t sending you a tax bill, they are just sending a smaller tax check than they otherwise would have to.

No they are sending me a tax bill because they are using NG to artificially lower their tax liability.

And I bet that apartment building would've been built with or without NG.

As for the bar of gold.. you show me yours I'll show you mine

BTW your bank profits being directed to employees/depositors theory has one major obstacle - greed.

Last time I checked - the NAB are axing 6000 jobs.

 

[Value Collector]

No they are sending me a tax bill because they are using NG to artificially lower their tax liability.

And I bet that apartment building would've been built with or without NG.

As for the bar of gold.. you show me yours I'll show you mine

BTW your bank profits being directed to employees/depositors theory has one major obstacle - greed.

Last time I checked - the NAB are axing 6000 jobs.

They would have purchased it from a developer, who will then go and build another apartment, because that’s what they do.

If the bank saves money by firing staff, they will pay more tax and pay higher dividends.