The future of Australian property prices

[againsthegrain]

Living in Sydney this line is getting trotted out all the time...bought for 850k got it valued and now worth 1.2 mill--made $400k in a few years. I find this logic extremely frustrating...if he sold for 1.2 mill tomorrow, guess what he'd be paying that and some for a new house. So reality is most people are buying and selling in the same market and odds are people will make nothing and probably just extend their mortgage further to "up size" to a bigger, better and shinier house. Not having a crack at your statement more expressing my general frustration with Sydney folks who are obsessed with real estate prices and trot out this flawed logic at every BBQ they go to.

You still got cgt, agents fees and somehow the forgotten interest paid to the bank so far. It is a profit but its the govt and the other pests in line who are really making the bigger killing

 

[MovingAverage]

You still got cgt, agents fees and somehow the forgotten interest paid to the bank so far. It is a profit but its the govt and the other pests in line who are really making the bigger killing

Agree--conga line of downstream people wanting to clip the tick, that's for sure.

My comment was more in relation to folks bragging about how much they've made on their PPOR--so sell that and you've got to buy another PPOR to live in.

 

[greggles]

Lots of talk about a housing shortage since COVID-19, but I can't recall a lot of talk about it before. With most foreigners on work visas having left once COVID-19 hit, is all this demand coming from returned ex-pats?

 

[MovingAverage]

Lots of talk about a housing shortage since COVID-19, but I can't recall a lot of talk about it before. With most foreigners on work visas having left once COVID-19 hit, is all this demand coming from returned ex-pats?

Can't believe that many ex-pats have returned to move the market the way it has over the past two years.

 

[greggles]

Can't believe that many ex-pats have returned to move the market the way it has over the past two years.

So, it is just renters deciding to buy? Has COVID-19 done something to our collective psyche? It's worth noting that real estate prices have spiked in many other countries after the pandemic hit. There must be some psychological underpinning to it all.

 

[MovingAverage]

So, it is just renters deciding to buy? Has COVID-19 done something to out collective psyche? It's worth noting that real estate prices have spiked in many other countries after the pandemic hit. There must be some psychological underpinning to it all.

Based on some discussions with a few of the prominent local agents in my area and lot of the sales were going to first/second home owner occupiers (generally younger) who, in the first 18 months following the covid outbreak, were being driven by FOMO of rapidly rising prices with not a lot of properties on the market. Certainly were I am the big price increase was driven my high buyer demand but not a lot of properties on the market. But since December last year there has been a noticeable increase in properties coming onto the market so no doubt the drop off in clearance rates and drop in median prices is the direct result of greater supply. Interestingly a lot of the properties that have come on the market here in the last 3 months have been long term rentals so maybe investors are cashing in around here. Probably worth noting that my comment is with reference to inner Sydney city areas and I have no doubt different areas of Australia were being driven by different factors.

 

[wayneL]

You still got cgt, agents fees and somehow the forgotten interest paid to the bank so far. It is a profit but its the govt and the other pests in line who are really making the bigger killing

Plus stamp duty... That's a biggy

 

[againsthegrain]

Plus stamp duty... That's a biggy

Yeah when you are up sizing or downsizing. Unless you live in a car and just stare at your profits on your banking app

 

[JohnDe]

Living in Sydney this line is getting trotted out all the time...bought for 850k got it valued and now worth 1.2 mill--made $400k in a few years. I find this logic extremely frustrating...if he sold for 1.2 mill tomorrow, guess what he'd be paying that and some for a new house. So reality is most people are buying and selling in the same market and odds are people will make nothing and probably just extend their mortgage further to "up size" to a bigger, better and shinier house. Not having a crack at your statement more expressing my general frustration with Sydney folks who are obsessed with real estate prices and trot out this flawed logic at every BBQ they go to.

I think that you'll find that most people get excited when they hear that their property is worth a lot more than what they paid for it. It's the same as when someone buys a car for significantly less than the sticker price, or re-sells it for more than it is really worth. Human nature.

I'm wit you on the idea of selling for a huge profit but having to buy another for a huge expense, doesn't make sense. Unless you're the type of person that doesn't mind where you live, and selling in a sort after suburb only to buy in a no-name suburb or further out.

 

[wayneL]

Yeah when you are up sizing or downsizing. Unless you live in a car and just stare at your profits on your banking app

As I've said elsewhere we have just bought a PPOR (otherwise would have been living in the car... long story).

Close to $70k in stamp duty, ouchies

 

[MovingAverage]

I'm wit you on the idea of selling for a huge profit but having to buy another for a huge expense, doesn't make sense. Unless you're the type of person that doesn't mind where you live, and selling in a sort after suburb only to buy in a no-name suburb or further out.

Folks moving from a sort after suburb to a no-name suburb are definitely not the norm (not saying someone hasn't done it, they are just very much the exception to the norm). The vast majority of people are aspirational and want to move up.

 

[Warr87]

I'll admit I'm one of those people who whinges about the market. I just don't get it and how it's still been up so high. I remember thinking 10years ago that it had to collapse sometime soon. I was obviously wrong then. My main bemoanment these days is more how it gets prop'ed up and touted as the only smart investment. I was lucky enough to find myself in a better paying job starting last year, above the regions average wage, but I definitely can't afford a house in my area. I also hate those articles that say 'bought for x in 2011 and now its worth almost twice as much!'. They don't take into account council rates, capital spent for upkeep, or the interest paid while holding it. Even with those figures I'm not sure the ivnestment really stacks up for the risk that is involved. The longer it keeps going up and incentivised to go up, the worse it'll be when it comes down. It's just a 'hot potateo' right now waiting for it to go off (passing it to the next gov in the hope it blows up in their face, not their own).

Anyway .... end rant. lol

 

[JohnDe]

I'll admit I'm one of those people who whinges about the market. I just don't get it and how it's still been up so high. I remember thinking 10years ago that it had to collapse sometime soon. I was obviously wrong then. My main bemoanment these days is more how it gets prop'ed up and touted as the only smart investment. I was lucky enough to find myself in a better paying job starting last year, above the regions average wage, but I definitely can't afford a house in my area. I also hate those articles that say 'bought for x in 2011 and now its worth almost twice as much!'. They don't take into account council rates, capital spent for upkeep, or the interest paid while holding it. Even with those figures I'm not sure the ivnestment really stacks up for the risk that is involved. The longer it keeps going up and incentivised to go up, the worse it'll be when it comes down. It's just a 'hot potateo' right now waiting for it to go off (passing it to the next gov in the hope it blows up in their face, not their own).

Anyway .... end rant. lol

I did ok with property.

My father helped me buy a home nearby when I got my first job, by opening my mind to thinking forward. Our suburb was in a good location but nothing special, prices were low, I rented it out while I lived at home and working low paid jobs.
I soon got married and we moved in. Several years later, while still having a mortgage, I had an itch to buy a second property and negative gear it.
Most of the tenants were good but we did have one family that trashed it and ran. I took some time off of work while we had a 3 and 2 year old, and repaired the rental property.
About 10 years later the next door neighbour offered us her house, we took out another loan and rented that out.
Property prices started to go crazy, we decided to bulldoze the first rental and build two stylish homes on the large block. Sold one and kept one.
Last year my son decided he wants to buy a house, he and his girlfriend are quite serious. He couldn't touch anything near us but said that he'd like a little bit of land, and started looking out places about 45-60 min away. Even there, prices were ridiculous for shabby houses.
My wife and I had a discussion and decided to offer him the house next door for what it cost us plus taxes. Rent had been good for us and the bank still owned some of it.
In September he and his girlfriend move in when the current lease is over, they both have good jobs and are aiming to pay off the loan quickly.
We didn't get rich from property but we were comfortable and had some great experiences and best of all we helped our son into the property market.
Hopefully my son can do the same for his offspring, help them into the property market

Morale of the story, everyone has a different story to tell. Some good, some bad, and some neutral. The thing about property is that it is finite. Infrastructure and maintaining it is expensive. Yes people can buy cheap property but those cheap properties are long distances from work and amenities, away from the support of friends and family.

 

[Warr87]

There are definitely different stories to tell. I've known of a few who, while on apprentice wages, bought a house. They did it up, lived on nothing, and similar story to you were able to eventually buy a second. They're not rich but they are comfortable. I'm not saying its not possible to buy a house right now, but I think policy that has been engineered to keep the prices inflating along with almost any metric, shows that it's at a crazy level right now. (Even thinking of getting together 20% deposit is a tall order for most, especially with the average $900k house ...)

I think a lot of negative stories are yet to come. All of us here know that profits can't indefinitely go up. There is always a correction.

 

[MovingAverage]

I'll admit I'm one of those people who whinges about the market. I just don't get it and how it's still been up so high. I remember thinking 10years ago that it had to collapse sometime soon. I was obviously wrong then. My main bemoanment these days is more how it gets prop'ed up and touted as the only smart investment. I was lucky enough to find myself in a better paying job starting last year, above the regions average wage, but I definitely can't afford a house in my area. I also hate those articles that say 'bought for x in 2011 and now its worth almost twice as much!'. They don't take into account council rates, capital spent for upkeep, or the interest paid while holding it. Even with those figures I'm not sure the ivnestment really stacks up for the risk that is involved. The longer it keeps going up and incentivised to go up, the worse it'll be when it comes down. It's just a 'hot potateo' right now waiting for it to go off (passing it to the next gov in the hope it blows up in their face, not their own).

Anyway .... end rant. lol

Talking of risk…wouldn’t want to be holding an IP when the ALP get in. They’ll be looking for some quick wins and knowing the ALP they’ll be sizing up a slap down of owners of IPs—after all, investors are the root of all evil, right ?

 

[moXJO]

There are literally a handful of houses for sale round my area. Some suburbs have nothing for sale and maybe 1 or 2 to rent at ridiculous prices.

Industrial properties are insane prices and super low stock. There's nothing decent for sale anywhere.

Living in Sydney this line is getting trotted out all the time...bought for 850k got it valued and now worth 1.2 mill--made $400k in a few years. I find this logic extremely frustrating...if he sold for 1.2 mill tomorrow, guess what he'd be paying that and some for a new house. So reality is most people are buying and selling in the same market and odds are people will make nothing and probably just extend their mortgage further to "up size" to a bigger, better and shinier house. Not having a crack at your statement more expressing my general frustration with Sydney folks who are obsessed with real estate prices and trot out this flawed logic at every BBQ they go to.

Agree with this as well. Unless you are buying 6 hours drive away you ain't trading up.

 

[moXJO]

Talking of risk…wouldn’t want to be holding an IP when the ALP get in. They’ll be looking for some quick wins and knowing the ALP they’ll be sizing up a slap down of owners of IPs—after all, investors are the root of all evil, right ?

I'd hate to see rents if they touch it.

 

[Humid]

Talking of risk…wouldn’t want to be holding an IP when the ALP get in. They’ll be looking for some quick wins and knowing the ALP they’ll be sizing up a slap down of owners of IPs—after all, investors are the root of all evil, right ?

Probably got more IPs than the libs

 

[Warr87]

Rents are certainly crazy in my area. Certainly a lot of people trying to cash in. I got into a place before it went too nuts and thankfully the landlord hasn't tried to screw me (I keep ahead in rent, place is always spotless, report any issues). When I've advertised for a flatmate to share the costs, the number of applicants is crazy (and overwhelming). I'm lucky that I can survive without a flatmate if needed, but having one allows me to save some extra cash. I'm not going to try and put together a house deposit right now though, the extra money will be used for my trading.

The way the market is I will probably use my super to buy a retirement house, preferrably have that sorted before I retire. For those that follow my journal for my super account, it should be doable .

People do have different preferences for investments too. I lean more towards more liquid and mobile asset classes than something like RE. Not to say it's not a sound investment, but certainly different risks. Either way, I think everyone (if they could) would like to own a house at some point in their life. I would say the annoyance with my generation is what seems to be an ever increasing place out of reach for even the well-paid individual. I wont lose sleep over it though. I would hope that a cultural change will come though, i.e. a change in the belief that owning a house is the only smart investment and way to capture wealth. Having lived overeas before, it strikes me very abruptly that we have an obsession with home ownership. I think this cultural aspect, exacerbated by politics, has helped create the current situation (and something that crosses party lines).

 

[MovingAverage]

Industrial properties are insane prices and super low stock.

I get the feeling that there has been increased interest in industrial properties particularly from the SMSF sector. Relative to residential properties--commercial properties certainly provide a good yield (particularly in this low interest environment) and commercial leases are much more in favour of the landlord.