Back in the 2008/2009 when home prices in parts of Europe and the United States were tumbling there were plenty of “experts” saying Australian house prices would also come crashing down. But alas the residential property market remained fairly robust during the global financial crisis and the experts who predicted a crash in property prices were wrong.
But the question we need to ask ourselves now is: can Australian home prices really keep rising?
Of course the answer to this question will depend on if we are talking about a time period of one month, one year or ten years. We also need to remember that the further we try to look ahead and forecast how house prices will perform, the less likely we are to be right. (unless we are very vague about our forecasts, a trick used by plenty of market commentators and self anointed financial gurus)
As it stands today we know that generally speaking average house prices across Australia have held up fairly well and even risen over the last coupe of years. Some luxury homes and developments have not fared so well, but the home price data appears to indicate that most home owners have come through the last few years in fairly good shape.
Many property investors however did not make it through the last few years in good shape and quite a few high flying Gold Coast property developers saw their little empires collapse similar to what happened back in the 1990’s.
So although it appears on the surface that the Australian residential property market looks bullet proof, the fact is that there have been some areas where prices have fallen and even dare I say it, crashed.
As a result a little heat has been taken out of the housing market and since many property developers have been finding the going tough, the supply of new housing has also been slowed.
But the demand for housing has held up fairly well, thanks largely to lower interest rates, continued high immigration and the money made available via the first home buyers grant.
Now if Australia were an economic island where money grew on trees then property prices would continue to rise, but what we need to take into account the following:
- that much of the money we use to fund our lives in Australia is borrowed offshore and that Australia does not control how much interest needs to be paid on this debt.
- that the RBA is focused on fighting on inflation and therefore interest rates will probably remain at current levels or creep higher this year.
- that people can only afford to pay so much for housing. (i.e. there is not an endless amount of money sloshing around)
Back in September I wrote that I thought home prices in Australia would fall by around 10% in the next 12 months and at present my short term residential property market outlook remains pretty much the same.
I am not suggesting there will be a crash in the housing market, but rather I simply don’t see how prices will keep rising in 2010 as interest rates go up and with the first home buyers grant back down to “normal levels”.
As for the long term outlook for the housing market the simple truth is that nobody has a clue. There are simply too many variables to take into account not only within the Australian economy, but across the global economy as a whole.
We have no way of knowing what measures governments may take to address problems they see with the housing market. How would a massive increase in public housing for example affect property prices? Or perhaps steps will be taken to release more land for housing and/or existing areas will be rezoned to allow higher density dwellings to be constructed?
In addition we need to be careful when we make the assumption that a rising population will support house prices because this is not entirely correct. If people moving to Australia for example cannot find good paying jobs then house prices may actually fall. People alone don’t make house prices go up, because at the end of the day prices are driven by the interaction of buyers and sellers, and the buyers need money. (plenty of it)
If Australia does not become more productive over the next decade or so then it is quite possible house prices will remain flat or even trend downwards. I am not saying this will happen, but what I am trying to highlight is that the long term trend of house prices heading upwards is not set in stone. An ever increasing population alone does not guarantee an economy will keep growing or that house prices will keep rising.
When you think about it, for Australian home prices to keep rising over say the next 10 years or so then we need to have a growing population and an economy that is able to keep growing while also creating new well-paying jobs. This might sound easy to do, but in practice it is quite tough to achieve.
Perhaps if the Chinese economy keeps growing then we have little to worry about in Australia, but there is also plenty of room for the Australian economy to contract if things don’t work out quite the way most people seem to assumed they will.
As I have written before, it has been over a decade since the last recession in Australia and many people in the workforce today with mortgages have never experienced an economic downturn.
The chances are that many of these people are also unprepared for a few lean years so the next recession in Australia could have a more severe impact on the housing market than would otherwise be the case.
Over the next 12 months or so I expect house prices to ease back (around 10-15%) and remain fairly subdued for maybe 18-24 months. I am aware that there is apparently a housing shortage (although I am not sure it is quite as large as commonly reported) but I just can’t see where the extra money will come from to keep pushing prices up.
Over the longer term (say 5 years plus) I believe it is almost impossible to make an accurate forecast, the best we can do as investors is make assumptions and adjust our outlook as conditions change. I know this does not sound particularly insightful, but it is simply the reality as I see it.
But perhaps I have everything backwards? Maybe house prices will rise in the short term and enter a period of long term decline? Or could Australia become a nation of people who prefer to rent and live without the life-long burden of a mortgage? If so how would that impact house prices?
Then again maybe prices will rise in 2010 and keep heading upwards for decades? Maybe the GFC has just spooked me a little and I am starting to see asset bubbles where they don’t exist?
Anyway I certainly don’t have all the answers so I invite readers to share with readers of this blog and myself their view of how the housing market will fare over the short and long terms and if needed, set me straight on a few things!
Over to you…..
Related posts:
- What might an Australian economic slump look like?
- Australian stocks, house prices and the economy in September 2010
- Shareswatch Australia Blog: hits & misses of 2009
- Australia’s Balance of Trade, the Funky Four and the ASX All Ordinaries.
- A quick look at 52 week high and low stock prices: October 2009
893 responses so far ↓
Pages: « 1 2 3 4 5 6 7 8 [9] Show All
801 Firebug // May 20, 2010 at 1:42 pm
My concern is that as a nation with low savings, we need to import capital from overseas. There may well be a day when the international money market demands higher interest for borrowing. The day could be interesting.
Also, we are far too socialist. Whatever we’re going though now, it is not the end of capitalism, rather, it is the end of socialism. A danger child of the marriage between democracy and socialism is that the nation eventually goes broke as politicians keep bribing the masses into voting for them…
But the end of the day we’ll be alright. A period of hardship isn’t bad for a nation. As always, some people will grow richer, some will be poorer, some sitting on the sideline…
802 Biker // May 20, 2010 at 2:42 pm
“My concern is that as a nation with low savings, we need to import capital from overseas.”
Totally agree, FB.
Far better that we print our own, like everyone else!~
803 Biker // May 20, 2010 at 8:49 pm
Good grief… I think, I think…I’ve been CONROYED!!~
804 Greg Atkinson // May 22, 2010 at 1:21 pm
By the way, for those who want to get a different angle on the house prices debate it might be worth having a look at the “Australian Bubble Forum“
805 Ned S // May 22, 2010 at 4:00 pm
You’re just trying to cheer me up I take it Greg?
Heck, even just one little bubblepedia style crash of a paltry 50% would mean I could gallop out and buy 4 more houses with my cash – Rather than a miserable two. So instead of trying to retire on 5, I could retire on 7. (According to the We wanna cheap house now Oz populist version of economic theory.)
That version of the theory would be nice though – I might even start believing in the Tooth Fairy and Santa Claus – Which would be a bit of a turnaround for me; Given that I’m about as sure as I can be, that I never ever did!
806 Ned S // May 22, 2010 at 4:52 pm
“My concern is that as a nation with low savings, we need to import capital from overseas.”
Just playing devil’s advocate in some ways – But our “savings” aren’t actually all that low maybe? Some (albeit overlapping) asset bases for perspective with any guestimate numbers thrown in same in as I recall them:
* We have maybe 1.3t in super (largely in Oz stocks I suspect; But some in cash and housing; Plus a bit in international stocks)
* The All Ords is worth maybe 1.25t
* We have maybe 3.5t in housing (on present values anyway); With the very great bulk being owned outright I’d expect; And the equity in that which is investment housing representing “savings” anyway
* Plus some cash – Not sure how much?
* And a few bucks equity in private businesses and farms and commercial buildings I imagine
Plus we also have a rather considerable untapped minerals resource sitting in the ground as a bit of a hedge/hope for the future
I don’t like those big foreign financials – I’d love to get my fingers into Oz’s books and see how our figures really balance out. And if all possible, make them balance out! So we could then say, We don’t need ya foreign loot – Bugger orf and use your freshly printed paper to buy stocks and bonds from countries that do!
Just a thought?
807 Anon // May 22, 2010 at 4:58 pm
Shareswatch error page !
Easy, tiger. This is a 404 page.
You are totally in the wrong place. Do not pass GO; do not collect $200.
Instead, try one of the following:
* Hit the “back” button on your browser.
* Head on over to the front page.
* Try searching using the form in the sidebar.
* Click on a link in the sidebar.
* Use the navigation menu at the top of the page.
* Punt.
haha – of course I chose the “punt” option
808 Ned S // May 22, 2010 at 5:06 pm
I suspect it would also sum up “the big foreign financials’” response to my thoughts?
809 Biker Pete, Niagra Falls, Canada // May 22, 2010 at 5:23 pm
I think you’re correct in your definition of ’savings’, Ned. Super particularly represents a significant amount for many of my generation… and we just saw friends dramatically increase their funds through the sale of their family home… quickly downsizing to a smaller ($650K) house, two minutes drive from the latter.
Perhaps it’s a little different in WA. I’m continually, repeatedly astonished at the very high level of private wealth in this state… .
810 Ned S // May 22, 2010 at 5:34 pm
PB was always going to show his hand I guess?
811 Anon // May 22, 2010 at 5:40 pm
Ughhh sore throat city…I feel the flu comming on
Don’t you hate that calm before the storm…you know its comming but theres nothing you can do.
*cues jaws music*
812 Ned S // May 22, 2010 at 6:57 pm
I hope your throat clears up soon Anon!
813 Anon // May 22, 2010 at 7:03 pm
Thanks Ned!
Wont need to do much now that everything has been set – so can go and rest and hopefully this flu will pass.
Looks like banks across the board have dropped those 8% for 5 year term deposits! haha what a bad mispricing.
http://www.infochoice.com.au/banking/savings-account/term-deposit-interest-rates.aspx
814 Biker // May 22, 2010 at 7:16 pm
Term Deposit (250,000+ ) 6.60 Bank of Cypress!!~
815 Greg Atkinson // May 22, 2010 at 7:29 pm
I am playing with the moderation settings Biker as I mentioned elsewhere.
If every single comment gets posted it will cause the site and pages to load more slowly, so when comment posts start to be discussions just between two people and are not even about investing or shares, then I have to start cutting them out.
Also if people change ID’s or e-mail address then those comments will get held up in the spam queue automatically.
816 Anon // May 22, 2010 at 11:30 pm
It looks as tho the Consumer Metrics Growth Index is getting worse!
End of July US GDP may follow the path of the CMGI? The problem with this is will the correlation hold up…who knows?
In any event, it looks like theres a several month lag so we might have till end of July to work out what to do…
Also note it contracted in 06 and the market just went sideways … with rallies in between.
http://www.consumerindexes.com/commentary_2010_dailygrowthindexvsgdp.png
None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.
817 Ned S // May 23, 2010 at 12:00 am
I just had a significant breakthrough re what I’m gunna do with these few insignificant little properties of mine Biker. It’s taken 18 bloody months of chewing around the edges and hehawing it all up and down. (Whilst also waiting for the KHR [response] in case it counted … Which it didn’t if one was in property and cash. Nevermind.)
But yes, I finally have a damn plan and can begin to execute same. What a very, very, very nice feeling!
818 Anon // May 23, 2010 at 12:10 am
Greg can I ask a question. Have people emailed you complaining the threads are not exactly relevant to the topics?
819 Ned S // May 23, 2010 at 12:29 am
It’s the stuff that isn’t specifically relevant that’s specifically most useful I suspect?
No value in trying to keep info in a box. And Greg has certainly never shown any inclination to do that – And it’s appreciated!
820 Anon // May 23, 2010 at 12:31 am
Yeah I know…thats what separates this blog from other sites…the ability to post outside a thread topic in addition to positing topic related posts.
Hate to see that lost.
But we probably do need to cut out the unnecessary chatter. Altho I must admit the unnecessary chatter is the reason why I come on here more often…entertainment
821 Anon // May 23, 2010 at 12:42 am
Also arguing small discrepancies in arguments and proving you are more intellectually superior to one another is boring zzz.
It really adds no value in terms of market execution and your ability to generate higher returns on investment than the index offers – over the longterm.
I’ve seen lots of people argue the most indepth, carefully measured, ridiculously meticulous and intellectual arguments…only to bomb on execution and delivery.
822 Ned S // May 23, 2010 at 1:00 am
If I recall correctly, Sir Isaac Newton blew his bucks on the “market” – And I don’t recall anyone ever feeling especially inclined to question his IQ?
Different people just have different skill sets maybe.
Ghandi mightn’t have been good at stock market picking either maybe. Or Churchill, or Stalin, or Hiltler … Or Coppernicus or da Vinci – Each to their own perhaps?
823 Anon // May 23, 2010 at 1:05 am
“If I recall correctly, Sir Issac Newton blew his bucks on the “market” – And I don’t recall anyone ever feeling especially inclined to question his IQ?
Different people just have different skills maybe.”
Yep he got swept up into stock mania. I guess thats why university lecturers are usually bad investors aswell
824 Ned S // May 23, 2010 at 1:32 am
Agreed – The likelihood of those who seek security in truth suceeding in making a buck from stocks is low …
825 Greg Atkinson // May 23, 2010 at 8:45 am
All views welcome here. That is why I have included links to other sites although I may not necessarily agree with much of the content on those sites.
Anyway, the reason I started talking about house prices is that they have an impact on the economy and hence also on the stock market and shares.
When I first started focusing in on the Australian residential market it was just as the U.S housing market was imploding and my view at that time was, that there was no reason why prices in Australia should just simply follow that lead.
During 2008-2009 I stood my ground; basically I said that I did not expect to see the housing market crash, that talk about a global depression was rubbish and that stocks would climb again.
So here we are now. No global depression, stocks are a lot higher than the lows of March 2009 (despite the current correction) and house prices have actually risen.
So now as you might have guessed from my recent comments, I have become somewhat bearish about house prices. Why is that?
Well basically because I see a big disconnect between what the stock market is telling me about the health of the Australian economy and the housing market.
Yes commodities exports are doing well, but basically all our other exports are down, our balance of trade is not in our favour and the nation is racking up more debt everyday. Yet people still want to take on bigger mortgages and buy bigger homes.
While the corporate sector is trying to pay down debt, Australian households seem quite willing to still take on more long term debt..why? Why are individuals so confident about the economic outlook when businesses are not?
Yes I know there is suppose to be a housing shortage in Australia, but frankly I wonder if that is true. Where are all these people who apparently cannot find a home?
Something just doesn’t add up and it makes me worried.
826 Biker Pete // May 23, 2010 at 12:36 pm
“Greg can I ask a question. Have people emailed you complaining the threads are not exactly relevant to the topics?”
Just checked. Yep, right at the top of this column, it reads
“Can Australian home prices keep rising?”
Yet we continually read comments like:
“It looks as tho the Consumer Metrics Growth Index is getting worse!
End of July US GDP may follow the path of the CMGI? The problem with this is will the correlation hold up…who knows?
In any event, it looks like theres a several month lag so we might have till end of July to work out what to do…
Also note it contracted in 06 and the market just went sideways … with rallies in between.”
I take it that your references here are to the _property_ market, then, Anon?
Be careful with the flu tablets… .
827 Anon // May 23, 2010 at 1:13 pm
That was arguably a mistake, should have posted that in another thread. I will work on that. Sometimes I get abit caught up with an idea and am more concerned about posting it than fiddling around with where things needs to go…and I understand that would make Gregs moderating abit of a hassle. Additionally it would make the readability of a thread a nightmare. Obviously there have been complaints and I accept that.
Appologies
Altho Biker its not like you have been precise with your posts in terms of their relevancy of where you post them. So abit hypocritical there no? If I go back i’m sure i’d find lots of posts of yours that are in incorrect spots
And also that index could arguably be related to the Australian Housing market in terms of how Americas stimulus wearing off indirectly affects our Housing markets. So its not a black and white error
None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.
828 Anon // May 23, 2010 at 2:11 pm
Anyways I know people may want me to stop posting (or reduce posting)…but alas I will do the opposite
Dont really give a damn what people think in all honesty 
I will make an effort to conform to the moderation policies setout by Greg.
829 Biker Pete // May 23, 2010 at 5:30 pm
“If I go back i’m sure i’d find lots of posts of yours that are in incorrect spots
”
Doubt it. I get obsessed and stay obsessed. Property is my thang. I do get a little conversational at times, since I’ve developed an online friendship with one of you; but like you, prefer to remain anonymous for very good reason; in my case, my profile in my home community. I’d rather these folk don’t know we own a large number of properties.
“Anyways I know people may want me to stop posting (or reduce posting)…but alas I will do the opposite
”
Truly, it has never crossed my mind _once._ Feel free to post twenty blogs per day. Every now and again you offer something relevant… the five year fixed interest rate pullback, for example. Sent the link to our son, who appreciated the information, especially as he’s locked in to 6.8% and the Greeks are offering 6.6%… .
“Obviously there have been complaints and I accept that.”
Only one of which I’m aware. (818)
In conclusion, if Greg objects to anything I write, it quickly disappears. That’s his right. I’ve never objected and I find it both educating and amusing to ponder which of several inappropriate remarks I made in that post got me sent to the corner!
Greg has also very kindly ‘pulled’ a link which identified me; posted after I’d exceeded the recommended 250mL of daily shiraz. Thanks, Greg!
830 Biker Pete // May 23, 2010 at 5:44 pm
Ned: “I just had a significant breakthrough re what I’m gunna do with these few insignificant little properties of mine Biker. …I finally have a damn plan and can begin to execute same. What a very, very, very nice feeling!”
Great to hear, Ned. Was just saying today how brilliant it will be to have this particular project completed within the fortnight.
Yes, the KHR slowed it all down to walking pace. I needed to catch my breath anyway… . As you say, it’s nice to be going forward!~
I get a real buzz when a plan comes together as well as this one has…. on budget, when the budget is so low… and such a neat concept that around 2% of passing drivers come back for a second look!!~ Neither event has ever really happened before. Must admit we have been a little lucky. The quality of home which has risen around us totally amps up the halo effect. It’s just a sweet location: park, lake, little stone bridge…
and all the houses are singing the same song… .
I’ll miss it in a coupla weeks. The old drama of evacuation…
831 Anon // May 23, 2010 at 6:00 pm
“Anyways I know people may want me to stop posting (or reduce posting)…but alas I will do the opposite
”
Truly, it has never crossed my mind _once._ Feel free to post twenty blogs per day. Every now and again you offer something relevant… the five year fixed interest rate pullback, for example. Sent the link to our son, who appreciated the information, especially as he’s locked in to 6.8% and the Greeks are offering 6.6%… .”
Well thats good…i do post the links/comments on here to help others – so its good that some of it can be useful
It doesn’t benefit me really in anyway, but if it helps others – it was worth it.
Although I must admit I do withhold some of the stuff I find (as most of us do). It is very competitive out there of course!
None of my posts constitute financial advice – so do not act on it in that manner. Its just chit chat. Always see a financial advisor for decision making / advice / info.
832 Greg Atkinson // May 23, 2010 at 10:18 pm
By the way, and totally off the subject at hand, let me just say that my tweaks of the moderation system were not aimed at anyone in particular. So please relax lads
Sorry for any comments that were deleted or moved or otherwise messed up over the last few days.
I am an engineer by background remember, so I have to keep making adjustments or I cannot sleep
833 Ned S // May 23, 2010 at 11:58 pm
I’ve got a few reservations about this:
http://www.news.com.au/money/property/revealed-the-home-loan-that-could-save-you-a-fortune/story-e6frfmd0-1225870019522
Anon: “I must admit I do withhold some of the stuff I find” – Seems reasonable – If I found a property I was hot to trot to buy, I wouldn’t be giving the vendor any free advertising until I’d at least had my best offer declined.
A 250 ml rule Biker? – I breached that rather spectacularly last night!
834 Biker Pete // May 24, 2010 at 8:58 am
Interesting read, Ned. Thanks. I’ve sent the link home for some further analysis.
We pay a sizeable deposit and then interest only, on every block we purchase, in the first stage of each project. Then, at the point of construction, we switch to an offset account, cash it up, and repay principal and interest (which is minimised).
I was pleased to see Noel Whittaker advocating a similar strategy in yesterdy’s Sunday Times, mainly because every now and then, it occurs to me we’re hardly leveraged, tax-wise.
Mind you, we need no tax relief whatsoever… .
Yes, I overdid it, too, at my son’s thesis party Friday night. Eight Mexican beers and a bottle of good red. Had to drive the missus to a Maths Conference the next day. I was OK, but I might have been just a little over the limit… .
835 Greg Atkinson // May 24, 2010 at 11:01 am
It seems even people on fairly good incomes are getting into trouble at an increasing rate according to this story in the SMH: http://www.smh.com.au/business/rise-in-middleclass-bankrupts-20100523-w41p.html
I found this paragraph particularly interesting:
A major cause of rises in bankruptcy among the middle class, said Professor Ramsay, has been due to unsustainable home loans. Excessive use of credit as a cause of bankruptcy has jumped significantly in recent years, he added.
Looks like another red flag to me.
836 Greg Atkinson // May 24, 2010 at 11:05 am
Oh I just read the article posted by Ned and nearly fell off my chair laughing when I read this:
“It has worked fantastically in Europe as a way for people to get home ownership and build wealth throughout their lives. It just requires a change in mindset about how you live with debt,” Mr Koch said
Yes, let’s follow the European example of managing debt! Are these people serious?
837 Biker Pete // May 24, 2010 at 12:34 pm
Yes, I too had a good laugh reading your comments, Greg.
Middle class debt is an interesting concept. In an earlier post I briefly recounted the tale of two MC families who overextended.
In both cases they had:
* Beautiful ‘resort-style’ homes;
* Expensive vehicles;
* Several investment properties (few income-producing);
* Countless luxury items of all kinds;
* Incredibly expensive lifestyles: “I want that, now.”
When the slump hit, both couples were forced to sell the main home. Three $100K+ cars also went. So did one marriage.
Interestingly, no-one went bankrupt(!) In both cases, the sale of that single large asset, the family home, got them (all) totally out of debt. And one family went straight back in again, picking up a fantastic high block above the water.
Not my way of doing things at all!!!~ But it brought home to me what a safety net their equity in those palatial homes was, even during a plateau.
Has either couple learned anything from what would be, to our family, a very major trauma? I very much doubt it.
What was reinforced, for us, was that there’s a tendancy, even here in Australia, to use home equity as an ATM to fund the cars, the wall-size TVs, the expensive lifestyles.
I’d argue that _this_ is where the nouveau riche most frequently become unstuck.
838 Ned S // May 24, 2010 at 2:02 pm
For anyone who has followed the GFC, the article has all the makings of a parody – Even the bit where the CEO of a bank tells the yarn with a straight face.
What would it mean for house prices? Well, to the extent that it becomes accepted, it’s obvious it will push them up – Same old storey of more capacity to borrow feeds higher house prices. At least until something breaks. And then the debt gets socialised. And everyone pays. Except the banks. Who obviously know that’s how it works too.
Whenever I see anything written about regulating Financials, I just naturally assume it must be a good thing these days. But don’t trust the pollies to really do it; Despite their rhetoric. If only for the simple reason that the economy of the US is so heavily reliant on the Financial sector.
The banks have got us all by the throat – Even if we don’t personally owe them anything.
839 Biker Pete // May 24, 2010 at 4:37 pm
“The banks have got us all by the throat – Even if we don’t personally owe them anything.”
I see it in less threatening terms, Ned. Our relationship with the ANZ has been a productive partnership. Having said that, our mistrust and hatred of Westpac is infinite!~
When interest equals rent… and there’s expertise in taxation matters… the partnership can be quite beneficial and productive.
I see this thread has been bumped… !
840 Greg Atkinson // May 24, 2010 at 4:49 pm
Biker I couldn’t agree more with your comment about people using their home loan like an ATM.
Your observation that “….there’s a tendancy, even here in Australia, to use home equity as an ATM to fund the cars, the wall-size TVs, the expensive lifestyles.”
Is a very important one in my opinion.
This is one of the things that worries me about the level of household debt in Australia.
People are not always borrowing to get a roof over their heads, they are often borrowing to fund a lifestyle which for me, is not a very sensible thing to do.
So the question is, what % of home owners are doing this and does this present a threat to house prices?
I don’t expect canny players like yourself to get into trouble if property prices slip a bit and the economy hits a rough patch, but I would guess there are plenty of property investors and home owners out there that have over extended themselves.
But how do we get a handle on what the situation is really like out there?
Remember, people who have over extended themselves don’t need to default on their loans to cause problems for the economy, they just need to stop spending as much.
841 Ned S // May 24, 2010 at 4:55 pm
If I recall correctly, it was a top Brit banker, who in the first half of the last century, passed a comment to the effect, that If people understood the banking system, they’d riot in the streets! (With Karl Marx being one example of a chap who had a bit of an understanding of it maybe?
)
Given that Marx’s solution sucked, and that knowledge is supposed to be power (whilst also bearing in mind the old storey about what Absolute Power does – And the fact that the banks have it), I guess the trick really is to figure out how one makes the best of it all? (As you imply.)
842 Ned S // May 24, 2010 at 5:23 pm
I was talking to a young bank employee a few months back – About the issues youngies face getting a home. We were going just fine (with me making the appropriate commiseration type noises – with same being honestly felt), until she mentioned, that To top it all off, one has to buy a houseload full of nice new furniture too – At which point, My eyes popped open and I said Gawd NO … You go to Vinnies and get it all for under $1K !!! (The conversation just sort of died at that point.)
I’m definitely NOT saying all youngies think that way! But, one’s who’ve had nothing but happy experiences with banks to date might? There’s potentially useful debt, and pretty bloody useless debt maybe?
843 Ned S // May 24, 2010 at 5:44 pm
“people who have over extended themselves don’t need to default on their loans to cause problems for the economy, they just need to stop spending as much” – Which is why house prices are so important to an economy. (And the fact that houses are the source of collateral for a lot of private “business” loans maybe?)
It is still a bit ugly “out there” – For small businesses – Another “I was recently talking to” yarn goes along the lines of a local businessman I deal with, whom I’d actually guess is in way better shape than a lot(?), but is still feeling a bit insecure seeing others fold, and as part of his business gets to see old pensioners’ bank balances sometimes – The chap (late 50’s ?), commented to me what a waste it is to have these old buggers sitting on big amounts like $40K – As they don’t need it; And will never spend it!
Gawd, even our businessmen are bloody socialists!
844 Ned S // May 27, 2010 at 11:36 am
Terry Ryder (of hotspotting.com.au reknown) reckons ‘The “chronic housing shortage crisis” is a myth’ – And also gives his thoughts on affordability plus a report on each state:
http://www.jenman.com.au/news_subscribers_item.php?id=25&Section=Reports
I’m not quite sure what to make of some of his thoughts on affordability.
845 Biker Pete // May 27, 2010 at 11:58 am
“You go to Vinnies and get it all for under $1K !!!”
I hunt for Arabia Ruska there, Ned. With folk my age dropping like flies, the kids don’t recognise its value… and I now have quite a collection of my favourite dinnerware.
Visited the next door neighbours recently… couple about 26, I guess. Every single item in the house brand new… and very expensive. Mind you, they’re on around $220K per year. They could no more imagine stepping inside Vinnies or Sammies than they could landing on the moon…
As Greg notes, there’s very little data about the group who, leveraged out to the max, don’t actually get to the ‘bankruptcy’ stage, but simply reduce spending. One of the two couples I mentioned did that. When the fancy cars went, along with the main residence, the flow of luxury items dried up. No more toys. What is interesting, however, is that they immediately bought two more properties with the proceeds of the Big Fire Sale! And one of those blocks is a humdinger!!!~
Read recently that there are now well over 1500 Perth streets where the median is a million plus. Now _that’s_ inflation…
846 Ned S // May 27, 2010 at 1:03 pm
Hmmmm …
http://www.businessspectator.com.au/bs.nsf/Article/Housing-affordability-has-remained-steady-over-6-y-pd20100122-ZX524?OpenDocument
Christopher Joye is the Rismark CEO – And while I don’t know much about him, I do know he isn’t the property bears’ most favourite fellow.
847 Biker Pete // May 27, 2010 at 1:38 pm
Two thought-provoking links, Ned. I’ll forward them.
You’re right, the Bears hate Joyeboy, as they call him.
Some quick responses:
* Over the road from our current project, two full families share a house. Four late model cars, including a Merc.
* We know of half a dozen ‘Steven cases’ where mid-twenties remain at home. These tend to _not_ be happy families… .
If it’s by choice, it tends to not be the parents exercising that option… .
* We currently have two ‘empty’ homes, according to the criteria. One is our guest cottage… the other this project, which should be ready for occupancy 14th June. 99% complete, gets daily mail, ready for occupany… but empty. Tradies are so bloooody slow. Too much work on… . But technically, we contribute two homes to the ‘pool available’…
* Just three houses in this suburb vacant, waiting for tenants:
$420 pw, $400 pw, $350 pw. All will go withing a month. A few weeks back, _none_ were listed at all.
I see Rudd is backing off the mining taxes.
848 Ned S // May 27, 2010 at 4:28 pm
The follwing is taken from an article posted by Joye today:
“The latest auction results from RP Data provide us all the evidence we require to know that house price growth is going to slow right down.”
http://christopherjoye.blogspot.com/2010/05/housing-market-cooling.html
That doesn’t sound like the ravings of a totally unbalanced property bull to me?
This is also an interesting graph:
http://3.bp.blogspot.com/_5ko-n37P8OI/S_KdxfvxPLI/AAAAAAAAAZg/_fcWkfg9eAU/s1600/afr6.bmp
Taken from the following article where Joye talks about Housing Risk:
http://christopherjoye.blogspot.com/2010/05/so-how-risky-is-your-home.html
Might try to read a bit more of Joye’s stuff.
849 Greg Atkinson // May 27, 2010 at 5:05 pm
Hi all. I have set up a forum area where those who wish to, can expand the discussion regarding house prices.
See: http://www.shareswatch.com.au/blog/discussion-forum
If you are a registered/sign in user you can add topics, post items etc.
850 Biker Pete // May 27, 2010 at 6:06 pm
Among the best links you’ve ever posted, Ned. Thanks!
I’ve sent them to family members and a couple of friends.
Auctions? Attended one in my whole life. Highest bidder, too.
Never again. B*stard withdrew it from sale!
850 posts! Fairly popular topic I’d have thought… .
851 Anon // May 27, 2010 at 6:36 pm
Great blog link there Ned, thanks.
852 Ned S // May 27, 2010 at 10:36 pm
Thanks fellahs.
As Greg has said, there seems to be dearth of decent info/stats on Oz housing. So it’ll be interesting to go through the Rismark stuff. On the chance Joye is trying to come up with unbiassed stats – Why would he do that? Well, it is my understanding there is the possibility of the ASX and Rismark working together to set up some sort of virtual housing market. (Senator and Greg will recall me mentioning the possibility of using it to “short” housing as a hedge many months ago I fully suspect?) So maybe Joye figures if he can put together some reasonable indexes, he can make his fame and fortune that way? Rather than by necessarily going out of his way to especially back any bias or lobby group??? His yak here would certainly seem to try to give the impression he is out to develop (has developed?) some pretty respectable indexes:
http://christopherjoye.blogspot.com/2010/01/house-prices-for-dummies.html#more
And based on same, I do note that he says: “The ABS only examines detached house in capital cities and therefore excludes all ‘attached’ forms of accommodation such as apartments, terraces and semis (which account for around one quarter of the housing stock).”
I’ve also had a look at the Demographia stuff again – And they could certainly be seen as having an axe to grind? They make no secret of the fact that they are anti high density dwelling; With the preface being written by Dr. Tony Recsei, President, Save Our Suburbs, Sydney. And they don’t exactly seem embarrassed to state “The Demographia International Housing Affordability Surveys, with their focus on the relationship between household incomes and house prices, have been instrumental in stimulating public discussion of housing affordability, especially in Australia and New Zealand.” Plus I’ve got to admit, that if there is anything in their “survey” to indicate they include apartments (which have been bouncing around in the back of my mind as being important for a while now), as opposed to the detached housing they have a stated preference for, it hasn’t hit me in the face yet?
A problem for another day perhaps?
853 Biker // May 28, 2010 at 11:08 am
Well, apartment living certainly appeals to the young. Both our kids could buy beachfront homes, but prefer to rent apartments.
And, yes, as you say, the data seems skewed, Ned. And you probably have figured out Joye’s angle.
)
(Follow the dollars… .
854 Ned S // May 28, 2010 at 3:39 pm
A few more numbers:
http://www.numbeo.com/property-investment/rankings.jsp
855 Biker // May 30, 2010 at 11:11 pm
Another brilliant link, Ned.
Sent it to The Montreal Kid. The rental returns there look impressive… but I guess that if Canada raises its interest rates to our level, returns will shrink somewhat.
Mind you, a couple living in Canada can accumulate quite a nest egg, saving tax-free (and compounding) $10K annually. Makes Rudd’s token gesture look feeble in comparison… .
856 Ned S // May 31, 2010 at 12:01 am
It’s just so difficult to get good numbers Biker. (I don’t have a opinion about that last lot – And can only say that I looked at a blog where they squabbled over same and at the end of it they seemed to settle for saying that in the absence of evidence to the contrary, they figured the numbers could be OK.)
Either way, it’s pretty obvious that your market in WA is different to that in SEQ. But irrespective, at the end of the day I reckon it’s still about how to have enough coming in off rent that one can retire – Outside of returns that bounce around based on other asset classes.
857 Biker // May 31, 2010 at 8:01 pm
Good points, Ned. Valid data is very difficult to come by… .
Spent part of the weekend talking to our tenants (also ‘checking the traps’). One of them, the fella with rentals up north, has a tax refund of $44K due from 2009. That’s over double ours.. . And this bloke is pulling $245K pa in rent from just TWO of his houses up north.
WA is a strange set of marketS. When I told our agent we were looking at three new blocks and two houses on the weekend, she was gobsmacked. Her problem is that she’s too close to a very parochial set of markets… and simply can’t see beyond that narrow field. Because we’re immersed in two _very_ different areas, we can see how brilliant our new area is. She simply hasn’t looked (in any depth) _anywhere_ else.
Despite all that, I think I can see the writing on the wall for two of our major developers… . They’re working just too far from the action, too soon. May be some very cheap stuff on the horizon, but it would be a l-o-n-g wait for profit…. .
858 Ned S // Jun 1, 2010 at 2:35 am
Yes. It’s not much fun trying to do international comparisons. I just pulled up the ABS stats:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6416.0Mar%202010?OpenDocument
Sydney was an eye opener. For all the stuff one reads on it, the fact of the matter is that their established house prices basically went nowhere for 5 and a bit years until Mr Rudd waved his magic wand and gave them a 20% kick along over the 12 months to March this year. But that still only put them about 16% higher than they were back in late 2003 – When their last “bubble” failed to “burst” I guess.
The stuff that has doubled or a bit more over the last 7 years has been Perth and Darwin. With both of them having their own particular reasons for that pretty obviously.
Brisbane has gone up by a much more conservative 55% over the last 7 odd years. Pretty much what one would expect I’d imagine – Being about 6.5% pa compounding when averaged out. I don’t find that extraordinary for established houses.
Melbourne is the one that’s probably been putting real pressure on price perceptions overall though. It’s only about half a mill behind Sydney population wise now – I hadn’t realised that.
The Sydney figures made me think of a comment in the Demographia report where they were complaining about so little new land being released there – Down from 10,000 lots pa to 2,000 or some such.
Very probably a method in that – Why cut your own idustry’s throat by releasing heaps more land when existing house prices are struggling? Don’t know about the Yanks but apparently the Spanish have got about 6 years worth of housing supply on their hands and the Irish are owning up to maybe 3 years.
As to those 800,000 vacant houses we read about in Oz, I know of two of them. But they are pretty special cases. The owner would be crazy to rent them as he’d expose his one hectare PPR that they are on to CGT. And selling them isn’t an option or even something he wants to do would be my guess. Apart from those, I don’t know of any others sitting around here vacant.
859 Biker // Jun 1, 2010 at 7:02 pm
“The stuff that has doubled or a bit more over the last 7 years has been Perth and Darwin.”
And some of the regional stuff in WA trebled between 2004 – 2007, Ned. We sold one block right at the top-of-the-market. Bought for $125K, sold for $310K. Then the GFC hit. The buyer, a Perth accountant, must have been expelling his cornflakes…
There is just SO MUCH data. Interpreting it seems to be the issue. Take the latest WA news… . Construction has dropped 8% in April… latest figures. Probably too early for mining taxes. Certainly some of the FHB drift. Interest rates, too.
Walked over one of our blocks on the weekend… and found that someone has dug four holes on it… probably representing the four corners of a proposed dwelling. So we’re waiting for a phone call. In the past, I’d have raised the stakes, marking our sign significantly higher… then accepting the original sign price. But I don’t have the confidence to repeat a strategy which has worked 95% of the time, in the past!!~
See support has dropped for both major parties.
Interesting times!~
860 Ned S // Jun 1, 2010 at 7:42 pm
“There is just SO MUCH data” … AND SO MUCH gum flapping info/crap from the various interest groups that one can’t even dignify by calling data that journos regurgitate irrespective because it sounds scarey and sells newspapers!
“See support has dropped for both major parties” – Yep, my inclination is towards being a conscientious objector as you know. Or as another blogger recently recommended people do on their ballot papers – A little line drawing with the comment “Foo was here!”
On another issue – Can I run a thought past you re super? :
Say a bloke is 60 and about to retire and on maybe $60,000 pa income. To dump $25,000 into super will cut his tax rate on it from 30% to 15% – A tax saving of $3,750. But he doesn’t have a spare $25,000 of his own loot he especially feels to drop into super.
Can you see any issues with borrowing it (at 10% pa for argument’s sake) and dropping that borrowed $25,000 into super on say 30 June of the year and then announcing he is retired on 1 July of the year. So he can say to his super fund I’ll have $25,000 cash please – To pay the lender back the principal in as little time as possible obviously. So minimal interest is charged. Effectively picking himself up near enough to $3,750 for squat. Am I missing something – I can’t see what?
861 Ned S // Jun 1, 2010 at 8:26 pm
I see you haven’t had any breakthroughs with our mate elsewhere – He obviously struggles with the concept that it’s not necessarily reasonable to expect all things to be identical in all respects to what they were in 1990; And 1970; And 1950; And 1930 etc … Good luck with it! (I’m keeping my head down!!!
)
862 Biker // Jun 2, 2010 at 2:03 pm
On Super: Getting the timing right is critical, Ned. Yes, our understanding is that it is worthwhile borrowing to get that result. I’m seeing a FA 16th June, to ascertain if we’re _exactly_ right. In my case it means dropping the tax payable from around 12% down to 10%. Still very much worthwhile.
We’ll simply pull a handful from our largest offset… then repay it two months later. It will cost 16% of 6.7%, nothing at all really, considering we’ll get a tax claim on the extra amount paid in mortgage interest for two months.
But everyone’s situation is different. We have three super accounts each, two which get hit for 10 – 14%; two which have paid tax already (TTRs); and two which are to be hit for 15%, but which we think we can reduce to 12%. What truly _sucks_ is that our Super Fund wants $$$$$ to advise us on this kind of stuff. ($4 – 5K at last count! I’d rather pay an FA by the hour… and save $4K!!~)
863 Ned S // Jun 2, 2010 at 7:28 pm
“What truly _sucks_ is that our Super Fund wants $$$$$ to advise us on this kind of stuff. ($4 – 5K at last count! I’d rather pay an FA by the hour… and save $4K!!~)” – The bloody leeches – That’s scancalous!!! Any decent business would be sending it’s clients that sort of info for free – And proactively if they have reason to suspect it is something the clients might be able to benefit from. Not hard to see whose benefit super funds are run for is it?
I’m actually feeling a bit miffed that my accountancy firm charged me about $1K to do up (unasked!) some statements from my SMSF Trustee (that’s me – with my brother as a “sleeper”) to the fund’s sole member (who is also me of course) advising “the member” of the fund’s financial position – Which I know pretty well and could have whacked up in a few hours if I had the templates to fill in.
While I have the templates now of course, it still isn’t that much help as the auditor has advised that if I do the fund’s paperwork, he whacks HIS fee up! AND they add insult to injury by requiring the “trustees” to sign a statement that it is their opinion that the financial statements are all just wonderful – Which one can only do if he thoroughly reviews them; In which case he might as well have done the damn things himself!
The financial service industries are not my favourite fellows right now!
Although my accountant himself is just fine – Problem goes back to the fact the business was sold to one of those corporate monstrosities I guess.
I see the predictions are for housing to maybe quieten down a bit. I do hope Rudd doesn’t go and stimulate it again unless it is really necessary.
864 Biker // Jun 3, 2010 at 1:25 am
Ned: “Any decent business would be sending its clients that sort of info for free – ”
Exactly what I told them. I share your feelings about these hangers-on who try to bleed us dry… .
I think the cooling property market is a very temporary pause; but who really knows? Having paid $1500 for the new house plans… and signed a contract to have them drawn up… we’re pausing ourselves. Not normal for us.
I think this lethargy is borne of data-saturation! Information is too immediate; too conflicting; too ‘gains’-driven. The viruses of ‘what-ifs’ seem to create an inertia neither of us have experienced before. Conversations seem to confirm neither of us really cares if the next project proceeds or not… Crazy!-
Are we catching pessimism from the news media, the blogs, the goldbuggers?!~
865 Ned S // Jun 3, 2010 at 11:58 am
There is certainly information overload Biker. And the fact that some pretty smart cookies like Marc Faber are still making some pretty dire predictions are damn difficult to totally ignore given some obvious truths about both minor and major bits of the global economy. And even in Oz, in the midst of putting a happy face on the intergenerational report, Mr Rudd’s basic answer was a pretty nebulous We’ll just all have to be more productive – Which didn’t especially inspire confidence.
It is certainly conceivable that the world could be in for a rough decade or more. And in that case, to me, the basic question becomes will Oz cop inflation or deflation? To which I don’t have an answer. But in the absence of an answer, being hedged across cash and property (which both of us are), seems like a reasonable approach to me.
Like you, my personal guess is that we’ll cop more inflation. But, given that there is even a bit of risk of deflation, a bloke would be pretty brave to not have a reasonable amount of cash. Wonder what rocket science the G20 will come up with later this month?
866 Biker // Jun 3, 2010 at 5:15 pm
Ned: “…given that there is even a bit of risk of deflation, a bloke would be pretty brave to not have a reasonable amount of cash…”
More reason for us to opt for offsets, rather than SMSFs, we think, Ned. Certainly leaning that way.
We may see price deflation continue in electrical and electronic goods*… and inflation in everything else. We were both extremely interested and annoyed to see Chinese goods on sale in Canada for less than half the price in Oz. Competition with US manufacturers, I guess. But it didn’t make a lot of sense to then find many consumer goods so highly priced in Mexico! Must admit I have difficulty understanding how trade agreements north and south of the US can affect prices so differently.
* But our falling dollar may stall this trend… .
867 Ned S // Jun 3, 2010 at 7:13 pm
I’ve taken your offsets lesson on board Biker – It’s the obvious (read cheap) way to get access to funds for everything (including that super fiddle I mentioned) – Next dwelling I build will have a loan against it even though I don’t need one.
Back to drawing housing plans here – Brisbane City Council made a major change to its regs VERY recently in relation to small lots if I’m not mistaken? Presumably to do some NIMBY type counter regulatory stuff given the Sate guv changes to THEIR regs to try and get more higher density stuff – What can I say? It will happen regardless! I swear they are all damn dills – Fiddle, fiddle, fiddle; Foo, foo, foo; F, f, f …
868 Biker // Jun 5, 2010 at 1:38 pm
Offests: “It’s the obvious (read cheap) way to get access to funds for everything…”
Agreed.
I’m home again. Long weekend here. Missus and I went over the plan again this morning. Her take on offsets is that ‘you can have your cake and eat it, too’.
In many respects that’s also been true of TTRs. We pull only $50K tax free per year (all we need); but our capital there is working in a tax-free environment. We don’t _dent_ the principal… and the other four accounts keep rising steadily.
I expect that once we a.) pull Super out; b.) transfer nearly all* to offsets; c.) lose both TTRs; we’ll actually dent principal a little… but if rents rise at all, there will even better income… and principal will remain totally intact… despite our increased mobility.
Have to giggle a little when it’s suggested on DRA (helpfully of course) that changes to company tax might wipe us off the map. We’ve always found that if we’re not too greedy and if we play with a straight bat, property is a great game.
Lots of action and interest in our No 1 zone, as it’s nearly built-out. Holding a couple of good blocks, we’re enjoying a lot of inquiries lately, but we don’t need a bidding war. If anyone wants a block, the price is fixed… .
* We’ve decided to leave some funds in Super, to take advantage of any Black Swan events; our old cash-to-ASX-then-back-to-cash-trick. It has worked twice now… maybe we can do it again… Maybe not… !
869 Ned S // Jun 5, 2010 at 9:23 pm
“We’ve decided to leave some funds in Super, to take advantage of any Black Swan events” – Must admit, “Black Swans” to date, re stocks, have been reasonably transparent to those who follow the international news reports. Although I’ve been “bumfuzzled” by Oz housing at least once!
“if we’re not too greedy and if we play with a straight bat” – Was talking to my accountant over a year ago about same (and how come a dill like me had gotten away “relatively” unscathed – As did he apparently?) – To which he just replied WE weren’t greedy!
???
870 Biker // Jun 6, 2010 at 11:44 am
Talking to interested buyers… couple actually very much like ourselves, continually buying and selling… who related a couple of horror stories related to rip-off-realtors gazumping them. I had a couple of my own. My view is that once you’ve told a genuine buyer what you want… and you’ve shaken on the deal, you honour that deal, regardless of who turns up with a fistful more dollars… .
It appears someone might be taking your name in vain over at DRA… but I’m used to fielding that stuff… and had a couple of rounds ready!~
Re-reading this I just realised it’s very Clint Eastwood, so my DVD collection must be clickin’ in… !
871 Ned S // Jun 6, 2010 at 3:08 pm
“someone might be taking your name in vain over at DRA” – Nah, that’s just me being a smart arse Biker. And using a
when I should have used a 
maybe?
Interesting article where the Indian Finance minister seems to be advocating acting to withdraw stimulus before being forced to do so by the markets:
http://www.thehindubusinessline.com/2010/06/06/stories/2010060650830100.htm
872 Senator13 // Jun 8, 2010 at 9:34 pm
It will be interesting to see what the new incentives to build new houses in NSW will do to the house prices.
Will other States follow their lead?
873 Biker // Jun 8, 2010 at 10:24 pm
“It will be interesting to see what the new incentives to build new houses in NSW will do to the house prices.”
One of the reasons we build, rather than buying existing houses, is to avoid stamp duty. Whenever we locate a really superb home we _know_ we cannot build for the asking price, my missus reminds me to add in the stamp duty. Most of the time we don’t proceed. WA _already_ has NO stamp duty paid when you build. This really was no _first_ for NSW, as claimed.
And in a state where there’s much more coastline and cheaper land close to beaches, construction is rife.
I suspect that NSW’s move may mean the following:
* Sale of existing homes eases or even plateaus a little;
* Price of premium blocks rises significantly;
* Construction increases;
* Housing shortage (?) eases a little;
* Rents ease a little.
Four of these five effects align with Labor policy. No doubt Labor will point out that the policy eased the median price; without pointing out that sought-after blocks rose in price.
Employment in the building trades is also likely to increase.
Finally I suspect you’ll see more people camping out a couple of days prior to land release, as we do _every_ time a new subdivision occurs. There are usually scores to hundreds of people who miss out… .
874 Biker // Jun 9, 2010 at 9:24 am
Maybe our current house design is a better plan than the new one we just commi$$ioned:
http://www.watoday.com.au/wa-news/more-of-us-but-mostly-living-alone-20100608-xti4.html
875 Ned S // Jun 9, 2010 at 2:30 pm
Anna Bligh wants to build three new “cities” in QLD’s SE corner – Largely along the historical detached housing lines I fully expect? And relocate some guv departments to places like Townsville maybe? At least partially to avoid going into bat against NIMBY voters and their local guv councillors I imagine.
I seems to me, that in many ways, many East Coast Aussies haven’t got our heads around the fact that the 4 bedroom 2 Bathroom 2 Car accom homes in the ‘burbs with lots of lawn to mow, aren’t the only way to do things. Or even what lots of us will really be screaming out for in a few years time.
There are some pretty obvious solutions; But our guv regs at NONE of the three levels seem very supportive – Yet? With any that are implemented needing to be thought through VERY thoroughly to avoid crashing housing prices, the building industry, the banks, and thus the economy.
Car (and boat and winnebago and motorised scooter and wheelchair) accomodation has still got me a bit tricked though – Not sure how much of that we’ll want – Not that there’s any shortage of space to put it all even in existing subdivisions – Given that we’ve had pretty big vacant front yards for many years now. Except the regs aren’t supportive of one building covered and fully enclosed secure accomodation of any sort in that vacant space – Which I must admit seems a bit strange to me – Outside the fact that our regs still reflect our current aspirations rather than our future needs maybe?
Current plans I’m working on are very much orientated towards redevelopment of existing property to provide accomodation for singles and childless couples. But as stated, the regs aren’t supportive – To the point of being actively anti even? With the danger being that I’ll end up with something that is a dog’s breakfast. Bouncing the ideas around is a bit of fun though.
876 Senator13 // Jun 10, 2010 at 5:37 pm
“… Outside the fact that our regs still reflect our current aspirations rather than our future needs maybe?” – I think you hit the nail right on the head, Ned. I think there is definitely an instant gratification mentality that sees people get into a lot of debt that they can not manage.
Also a lot of little yuppie type suburbs are popping up that have a lot of expensive building requirements. A simple house on some land does not cut it any more – but instead need to be of a particular standard. Drip feed of land release and high spec building requirements does not help the situation.
877 Ned S // Jun 10, 2010 at 8:54 pm
I’d have trouble finding a house that really suited me personally I think Senator. Historically I doubt we’ve ever really made a habit of building them. My “needs” would go along the following lines:
Low set (no value walking up stairs if one doesn’t have to)
)
Large kitchen (with eat in dining being convenient – So no need for a seperate dining room as such)
Lounge room very much optional – Handy as a place to sit and chat with visitors one doesn’t feel comfortable having see the mess in one’s kitchen/dining room maybe? Or if one has a TV fancier in the house???
A small study/office
No need for a laundry – A washing machine in either the kitchen or bathroom is fine
A bathroom with a toot in it
A separate toot (being told “Hang on!” is not a lot of fun for the “elderly”
3 car accom (Not that I have 3 cars but I sure do have a lot of “stuff” – Workbench, tools etc – So lots of singles/couples would probably be happy with 2 or even 1.5 car accom)
2 decent sized bedrooms (one of which would be a bit of a “necessary” luxury given that it would pretty much just be for guests and/or to store indoor type stuff and/or to give a missus a place to go and sulk whenever I wasn’t doing what I was told quickly enough (the “boss’ study” perhaps?)
About 1.5 meters all around the house as “yard”
But the temptation to build such stuff is low. Partly because I question it’s resale value – Given that it is atypical. And housing lots that support it just aren’t what we have in SE QLD anyway – Maybe 220 square meters would be ideal? With the building being maybe 140 m2 tops – Not many 220 m2 blocks available in our land of sweeping plains and far horizons though. (Or regs that support building 140 m2 houses on them.)
878 Ned S // Jun 10, 2010 at 11:46 pm
“high spec building requirements” – In the bad old days when affordable accomodation was required, I gather a reasonable number of large homes were pretty much just split down the middle, developed under etc. I rented in one for a while – I had half the lower floor (2 BR, combined bathroom + toot, combined lounge/kitchen/dining – About 50 m2 all up I guess. With shared laundry out the back as well as some corrugated iron roofing to park cars under.
If memory serves me correct there were 2 flats downstairs and 3 upstairs? Worked well for everyone I suspect – At $75 per week (it was 1987) I was paying maybe 23% of my take home pay on rent (and living a bit higher than I really needed being there on my own). While the old boy who owned the property was probably going close to pulling a livable income off it after expenses and tax. But it wouldn’t happen nowadays is my understanding – Even if the zoning was right, one would hit the hurdle that there were unacceptably combustible materials used in the original home – So a conversion to flats wouldn’t be goer I guess.
Is that a bad thing? Probably not! But everyone sure does pay for it.
And yes, I fully expect it WAS reasonably common – I had a good mate living close by. And my recollection is that his digs were a 1 BR upstairs flat in an old house that had been divided up.
879 Biker // Jun 24, 2010 at 7:55 pm
Our agent is _frantic_ Ned. it appears our downsizing is successful. She has a queue of six families… and I’ve attracted five with my sign. This is a record for us. Previous best was a queue of eight… .
880 Ned S // Jun 24, 2010 at 8:46 pm
The couple of rentals I have are both reasonably well located whilst also being cheapies Biker – $340 and $345 per week rent type stuff. One of them is home to a family that has been there for a decade. The other looked like it could shape up similarly, but the FHOG motivated that family to buy. But yep, cheaper stuff doesn’t stay vacant long. My recollection is that I had to demand 6 days vacancy between the last lots of tenants in that second place because there were some internal walls I wanted to prep and paint.
881 Ned S // Jun 24, 2010 at 11:44 pm
Found the following interesting re a comment made by Watcher elsewhere Biker:
http://en.wikipedia.org/wiki/Triffin_dilemma
http://en.wikipedia.org/wiki/Bancor
I posted same on Greg’s most recent article but suspect you aren’t hooked into comments on it yet.
KHR Recommendation 13: Widow’s mite – $2 or $25? (again elsewhere) – No idea what might have been going through Henry’s mind – Which is one of the hassles of the very, very, very great bulk of even the recommendations never having come to the public’s attention:
http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_1/chapter_12.htm
882 Biker // Jun 25, 2010 at 12:40 am
Fascinating stuff, Ned. I knew nothing of these Triffin/Bancor matters whatsoever.
BTW… just in case… how quick a ride/drive is it from Cairns to Brizzy…?!~ Trying to sell the plan.
883 Biker // Jun 25, 2010 at 1:06 pm
It’s OK, Ned. Wife sent me this:
http://www.flyertalk.com/forum/archive/t-299784.html
The first couple of responses put her off… totally.
Think we’re booked for a week in a city hotel in Cairns, anyway. Tamara is intrigued by Don’s negative comments about Cairns. It’s over thirty years since she visited (I’ve been no further north than Tweed Heads) and she figures it’s worth a butchers…
And, if we buy something, the trip will be deductible.
884 Ned S // Jun 25, 2010 at 1:53 pm
My suspicion is that any of the real forced growth that governments push into North QLD will probably go to Townsville rather than Cairns direct Biker.
Travel – Yes, I’d go by plane! (If I had to go at all.
)
885 Biker // Jun 25, 2010 at 2:23 pm
Cairns is THAT bad, Ned??????????!
FNQ isn’t your cup of tea, then?!~
886 Ned S // Jun 25, 2010 at 2:43 pm
I’m just not into travel anywhere really Biker – Am very much a home bod these days – Just a matter of personal preference.
887 Biker // Jun 25, 2010 at 3:07 pm
Won’t can the trip then.
Being escape artists, travel is very much a part of our past, present and future. Caught that virus 33 years ago… and haven’t been able to shake it…
888 Ned S // Jul 12, 2010 at 4:16 pm
Investors are still keen:
http://www.smh.com.au/business/home-loans-on-the-rise-20100712-106hy.html
Although, yeh, the Melbourne real estate industry might be cooking its figures a bit re auction clearance rates (which are low anyway):
http://www.smh.com.au/business/property/clearance-rates-fall-under-50-in-sydney-as-market-cools-20100712-106h4.html
Must admit, if we get any sort of significant price increase over the next 6 months it’ll catch me with my panties down – Not that that’d be unusual of course!
Some are thinking along the lines that we’ve skipped a business cycle. With the thought being that when the correction comes at the end of this cycle, it could be nastier than normal.
Mind you (as Greg has been pointing out), we’ve got to make it into the next business cycle proper yet:
http://www.couriermail.com.au/business/mills-steel-themselves-for-a-fall-in-third-quarter-as-demand-plunges/story-e6freqmx-1225890472397
Not easy investing these days. At least as much about which governments one figures will do what, as anything else. And on that score, my feel is to agree with Biker that unless the world loses it in a deflationary death spiral, Oz housing will continue to benefit from government protection as and if required.
889 Ned S // Jul 18, 2010 at 2:28 pm
Melbourne and Brissy down. Perth flat and Sydney up a bit are the latest predictions I’ve read based on amounts of stock on the market.
890 Biker // Jul 18, 2010 at 5:10 pm
The Barefoot Investor had a nice piece about the ‘kidults’today, Ned. It’s rare that I find any of his stuff on track, but his supposition that the ‘generation-that-stays-put-at-home’ save very little of their ’savings’ made us wonder if this is, in fact, helping to soften the market. This ‘kidult generation’ not only _can’t_ buy, they don’t rent.
You may recall that was this one of the property bears’ original propositions for market failure. Some, like Keen, even argued that it was a laudable arrangement. Have to wonder how long Aussie parents will accept this state of affairs, particularly where’s there’s minimal contribution and _very little actual accumulation_ by offspring… .
891 Biker // Jul 18, 2010 at 5:47 pm
Alternative (additional?) viewpoint to the ‘kidult’ theory:
http://www.perthnow.com.au/business/young-plump-for-inner-city-pads/story-e6frg2ru-1225891485450
892 Ned S // Jul 18, 2010 at 6:25 pm
I’ve seen three generations of ladies and the paterfamilias of that middle class family living together in a two bedroom apartment overseas – Granny’s health was OK and she was out in the village – But came home later for an extended stay when it wasn’t. While it’s handy to be able to do such stuff when one has to, it is not ideal in my opinion?
And cultures differ perhaps – I read a while back about an Italian lass who was 34 or somesuch with a degree and figured she could sue mater and pater for chucking her out. While the Germans seem stronger on mutter und vater being able to sue the kinder who don’t provide for their dotage.
Aussies – We’re a more mixed bag perhaps? But so long as a kid can still head over your way and make $100K pa plus driving a truck, I really don’t think the average ma ‘n pa should feel especially obligated to help them out.
893 Biker // Jul 19, 2010 at 9:49 am
These days it’s hard to know what’s ideal… and what’s not.
We certainly don’t expect to be supporting our offspring in our later years, but, as loving parents we’d find it difficult to say no. I expect most families would feel the same.
The family ‘next door’ (800m further up the hill) have an older daughter staying on. I once offered the suggestion that she was paying board… and was stunned at the logic of their response.
“No way! If she paid board, she’d assume she had a say in the ‘House Rules’. This way, we can determine what’s acceptable and what’s not!~”
I’ve thought about that proposition a lot. It seems illogical to provide for kids long after they reach 21, but, on the other hand, these parents retain almost as much control as if the child was a pre-teen. There are pluses and minuses in that situation, I guess… .
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