The future of Australian property prices

[Value Collector]

What do you call a strong rental market ?

Plenty of renters for limited housing, therefore higher rents for you ?

I mean low vacancy rates, eg investors can feel confident bringing more product to market knowing that they will be able to rent it out swiftly and at a decent enough return.

At the end of the day, if you think new properties are going to sit vacant for 6 months after they are completed and the rents are going to be low you aren't going to be rushing to bring new product to market.

Its the age old rule of business, if wheat prices are high farmers will plant more wheat, if wheat prices are low they might skip a season.

 

[SirRumpole]

I mean low vacancy rates, eg investors can feel confident bringing more product to market knowing that they will be able to rent it out swiftly and at a decent enough return.

I think in normal times this would be true, but these days with increasing costs affordable buildings simply can't be built at a margin that builders would find worthwhile to do hence builders are going broke.

There has to be a change in worldwide economic and political conditions long term, or in the short term the government has to get into cheaper housing or pass tax laws that make it easier to buy a house to live in than it is to be landlords. (Sorry about that).

 

[sptrawler]

I keep asking the question, "where are these people going to live ?".

Demand for housing is at record highs and builders are going broke, so an increase in demand is only going to make the situation worse.

People are living in shipping containers because they can't find or afford accommodation , and more people imports is going to make it even harder.

That is IMO, the crux of the issue, they can't afford accommodation, why?
Because most are in the service industries on low wages.

So why don't we encourage more skills training to higher paying jobs, rather than import skilled migrants?
Because the Governments no longer want to pay for training people or be responsible for supplying essential services e.g cadetships, apprenticeships in Government owned power stations, government owned and operated main roads dept's, government owned and operated railway workshops, govt owned state housing commission building and maint dept's
And the private sector wants ready to go workers not spoon feeding some trainee for four years.

So another example of a failing, where all our manufacturing that was a nursery for the skills we need has been offshored and now we import trained people and make our kids baristas to serve at the table of the imported workforce.

The clever country, where the few who are fortunate enough to get ahead, can build their investment property and still have enough left over to help fund the unemployed Australian youth.

The sad state of Australian politics, that is focused on the next election, rather than the next century. It is time the State Governments bit the bullet and took responsibility for social housing again.
If they are not going to take responsibility for supplying our kids with work opportunities to improve their skill set, then they should take responsibility for the unfortunate financial situation a lot of the kids find themselves in and build some affordable public housing, which will also put downward pressure on private rental costs.
If they started the State housing commissions again, they could actually again train drafting people, civil engineers, all the trades etc. But no that would entail having a brain, which unfortunately isn't a prerequisite for a politician, much easier just to sign cheques to companies and offload the responsibilities.
It a shame the media doesn't put as much emphasis on these issues, as they do on social engineering.
My rant for month.

 

[Value Collector]

There has to be a change in worldwide economic and political conditions long term, or in the short term the government has to get into cheaper housing or pass tax laws that make it easier to buy a house to live in than it is to be landlords. (Sorry about that).

I don't know if there is any real fix besides increasing supply, which a big part of increasing supply is increasing supply of labour.

There are 5 main things that determine the cost of production of new dwellings.

1, Cost of purchasing the land content.
2, Cost of purchasing the materials.
3, Cost of employing skilled Labour.
4, Cost of capital.
5, Government fee's and red tape.

The sum of these costs represent the bare minimum break even price of bringing projects to market.

Of course, no developer is going to start a project unless they believe they will earn a decent enough margin above that base level cost of production, So the market has to be strong enough to encourage market prices above this break even levels.

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Now of course some of those 5 costs also have there own supply demand pricing, eg the cost of tradies is very high at the moment due to developers competing to get trades on their projects, materials are also high due to supply chain issues and general high demand, cost of land is high in the cities this can't be helped etc to move more projects out to regional areas with cheaper land.

Bringing in an immigrant tradesman of course increases demand by 1 dwelling, but his/her presence in the market also should put downward pressure on the market price of tradesman, which contributes to lower costs of completing developments, which encourages more developers to deploy capital.

 

[SirRumpole]

Bringing in an immigrant tradesman of course increases demand by 1 dwelling, but his/her presence in the market also should put downward pressure on the market price of tradesman, which contributes to lower costs of completing developments, which encourages more developers to deploy capital.

I'd suggest that the marginal effect of one migrant tradesman on the price of tradesmen does not even begin to compensate for one dwelling being taken off the market.

If you can produce any data to the contrary I may change my mind.

 

[Value Collector]

I'd suggest that the marginal effect of one migrant tradesman on the price of tradesmen does not even begin to compensate for one dwelling being taken off the market.

If you can produce any data to the contrary I may change my mind.

It would because over that tradies working life they will produce a lot more dwellings than they use for themself, so he or she will be contributing more dwellings to the supply side than they consume from the demand side.

think about it, bakers produce more bread than they eat, tradies produce more projects than they live in, it literally has to be that way, if over his working life a tradie produced less dwellings than he consumed he would starve too death because he wouldn't be able to trade with the baker to buy bread, all of his efforts would have to go to purchasing his own home or paying rent, however if you look at most tradies, they have quite large disposable incomes.

The Reserve bank is currently in the process of increasing the price of item 4 on my above list though, eg the cost of capital so that will be increasing the cost of building dwellings, and will offset any reductions in the other 4 cost items for a while.

 

[SirRumpole]

It would because over that tradies working life they will produce a lot more dwellings than they use for themself, so he or she will be contributing more dwellings to the supply side than they consume from the demand side.

Maybe but the problem is that their demand is immediate but their production is long term, in the meantime you still have people living in shipping containers.

The best solution is train local workers and use temporary migration visas (max 5 years) to fill in the gaps.

 

[divs4ever]

I keep asking the question, "where are these people going to live ?".

Demand for housing is at record highs and builders are going broke, so an increase in demand is only going to make the situation worse.

People are living in shipping containers because they can't find or afford accommodation , and more people imports is going to make it even harder.

that is a logical question ....

STOP IT .. stop it NOW ( or the government will silence you ) you know how they feel about critical thinking

now since some states are building 'quarantine camps ' one might think they would be useful for current citizens no longer in the work-force ( since there is little manufacturing near those accommodation centres )

new workers should ideally be housed near their current employment ( or at least near the company HQ )

paranoia you say ?? maybe but i see the slow creep towards Communism/Totalitarianism

 

[sptrawler]

Maybe but the problem is that their demand is immediate but their production is long term, in the meantime you still have people living in shipping containers.

The best solution is train local workers and use temporary migration visas (max 5 years) to fill in the gaps.

It's cheaper for the Government to import workers and tax their wages, which then helps pay the unemployment bill.
As was proven during covid, when there was no immigration, people still weren't interested in jobs.
As posted back then the daughter in law who runs the office for a road repair company couldn't get lollipop attendants for traffic control and she ended up getting all her tickets + HR, HC, EWP and all the traffic control tickets.
So she could fill the gaps and make sure the contracts were completed.
Driving down Roe highway (Perth ring road) on Tuesday, there is a big lit up billboard at the South Metropolitan bus depot, saying drivers wanted all training supplied. I've never seen that before.
Yet there are still plenty of young people, sitting out the front of the shops, with the begging cardboard.

 

[divs4ever]

however if you look at most tradies, they have quite large disposable incomes.

only the ( financially ) clever ones , i learned from several over the years that went bankrupt a couple of times when THE BIG FISH ( insurer or developer or banker ) got squeezed and turned off the money-tap to the minions

but yes i overall agree with your reasoning

take as an example the latest telecommunication technician to visit ( from Liberia , of all places !! ) a fairly young guy , deliberately chose to work as an employee for the contractor , rather than turn contractor or sub-contractor after calculating the over-all costs of each path ,

i assume after he had all his ducks in place , he would be financially cashed up for a future path ( say working inside the server farms ) .. he did know his stuff unlike the five locals before him

another example was a carpenter/builder , who had such 'liquidity moments ' and finally decided after finishing two profitable homes to quit the game and buy a cycle retailer/repairer that made enough to set up his two oldest sons in their own cycle outlets and the boys soon had a chain of cycle shops throughout the state ( so three carpenters left the industry )

 

[SirRumpole]

new workers should ideally be housed near their current employment ( or at least near the company HQ )

Maybe employers who apply for overseas migrants should have to guarantee their accommodation.

Or is that too Totalitarian ?

 

[divs4ever]

What do you call a strong rental market ?

Plenty of renters for limited housing, therefore higher rents for you ?

every chance a government facing an election ( or civil unrest ) will bring in price caps ( including on rents )

look at how many brought in rent or eviction moratoriums during the virus saga

that is very likely to happen again when politically expedient

 

[divs4ever]

Maybe employers who apply for overseas migrants should have to guarantee their accommodation.

Or is that too Totalitarian ?

and the government missing out on controlling accommodation ??

i grew up in an area of 4 housing commission estates ( i would not wish that on anyone , not even a crappy landlord as punishment )

but employers guaranteeing accommodation hints at the problems encountered by the fruit-pickers ( and the farmers )

MAYBE we should just limit University and Tertiary college places and have more young adults available for the work-force

 

[Value Collector]

Maybe but the problem is that their demand is immediate but their production is long term, in the meantime you still have people living in shipping containers.

The best solution is train local workers and use temporary migration visas (max 5 years) to fill in the gaps.

With birth rates dropping, and Australia’s population ageing, we need to have immigration.

It’s also not just building, we have an immediate demand for people in other industries such as the medical field, I don’t think we can tell Doris she has to wait until her 14 year nephew finishes his medical degree before she can have a hip replacement.

 

[SirRumpole]

With birth rates dropping, and Australia’s population ageing, we need to have immigration.

It’s also not just building, we have an immediate demand for people in other industries such as the medical field, I don’t think we can tell Doris she has to wait until her 14 year nephew finishes his medical degree before she can have a hip replacement.

Birth rates are dropping because couples can't afford to have a house and children as well.

Make housing affordable again and the birth rate problem will be fixed.

 

[qldfrog]

Birth rates are dropping because couples can't afford to have a house and children as well.

Make housing affordable again and the birth rate problem will be fixed.

The only place where birth figures are not a problem are the places to avoid like hell, aboriginal communities, migrants slums like France, bangladesh and pakistan, Nigeria and generally Muslims hellholes

 

[againsthegrain]

The only place where birth figures are not a problem are the places to avoid like hell, aboriginal communities, migrants slums like France, bangladesh and pakistan, Nigeria and generally Muslims hellholes

Makes you wonder how come they don't fix those places up if they are so skilled

 

[sptrawler]

Maybe employers who apply for overseas migrants should have to guarantee their accommodation.

Or is that too Totalitarian ?

The problem with that, as happened in mining towns, when fringe benefit taxes were introduced by Uncle Paul the house become a tax liability so they were sold off and FIFO started.
So the chances of employers organising accommodation, would be very low IMO.

 

[Value Collector]

every chance a government facing an election ( or civil unrest ) will bring in price caps ( including on rents )

look at how many brought in rent or eviction moratoriums during the virus saga

that is very likely to happen again when politically expedient

The problem with price caps is that it suppresses production.

Higher prices promote more production, where as lower prices discourage new investment.

If prices are temporarily out of whack due to war, weather or something else I guess short term price caps can work if they are also accompanied with rationing.

However if the pricing is high due to genuine long term supply demand imbalances, capping the price will only make things worse.

Eg if there is a shortage of wheat, you want the wheat price to rise so farmers are encouraged to plant more wheat. You don’t want to cap the price of wheat, because then farmers have no incentive to plant additional acres especially if the cap price is below their break even.

Most of the time the cure for high prices is high prices.

 

[Value Collector]

Birth rates are dropping because couples can't afford to have a house and children as well.

Make housing affordable again and the birth rate problem will be fixed.

Women in general are deciding to have less kids regardless of their wealth, in fact the richer people generally have less children.

I could afford to have 30 kids housed in 10 houses, but I choose to have zero.