Australian Housing Affordability Discussion

[cove]

It is a nice thing for Perth properties to be getting a bit more affordable for first home buyers.

 

[Foreigner]

Preliminary clearance rate for Sydney auctions slipped to below 60% this weekend. Firm figure will be reported as usual on Monday.

 

[whatmeworry]

International expert warning against high density at rail stations.

An international expert on planning healthy cities has warned Sydney against following the Asian model of concentrating high rise around train stations to house a booming population.
Dubbing it "suburban cellulite", the clusters of towers were designed to give maximum patronage to private railways and retailers, but are now being regretted by Chinese planners, says Guy Perry of construction firm AECOM.
"People are not happy there," he says.

Read more: High-rise living at train stations is 'suburban cellulite', warns healthy cities expert
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IMF also warning too much of the population concentrated in Melbourne and Sydney.

The International Monetary Fund, one of the world's most important financial institutions, drew attention to this part of Australia's housing story in a recent report on the nation's residential prices. The IMF economists noted that, despite Australia's huge size, our population is highly urbanised. But the very large population share of our two biggest cities sets us apart from most other highly urbanised advanced nations.
The most recent population estimates by the Bureau of Statistics showed 9.3 million people live in Sydney and Melbourne, or four in every 10 Australians. It is very uncommon for just two cities to account for such a large portion of the population.


The IMF's figures showed Japan's two largest cities, Tokyo and Yokohama, account for less than 10 per cent of the total population. London and Birmingham, Britain's two biggest cities, make up less than 20 per cent of the population.

Read more: The problem with Sydney and Melbourne, they're just too big

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[JohnK]

We have learned nothing from what's been going on in overpopulated cities overseas.

Those high density apartments built in Hurstville and Bankstown ~20 years ago are now slums.

And what population boom unless you are thinking of bringing in another 25 million in the next 10 years?

 

[deka2]

We have learned nothing from what's been going on in overpopulated cities overseas.

Those high density apartments built in Hurstville and Bankstown ~20 years ago are now slums.

And what population boom unless you are thinking of bringing in another 25 million in the next 10 years?

The 15 year old office building recently vacated by the ATO in Hurstville has a DA pending on it for 4 towers, two of which will be 18 stories.

Completely on breach of the councils own height restrictions.

 

[Alanslegal]

*wears flame suit*

Creating so called "slums" may not be the intended consequence however if building all these high density units lead to a situation where supply is much more than demand, then prices in theory should plateau or come down and thus make it more affordable for the younger generation, lower incomes and those who simple can't afford the current prices.

If high(er) density properties cause a loss of amenity to the nearby area, again that may be a good thing to curb demand to the nearby area or those properties become slightly less favorable.

Even though we are homeowners, the cost of homes in Sydney, right now, is ridiculous and I am all for house prices to come down. It is crazy that an ordinary home in an average Sydney suburb is easily over a million dollars.

At the end of the day, good properties in good location will always be the key.

 

[UP4014]

*wears flame suit*

Creating so called "slums" may not be the intended consequence however if building all these high density units lead to a situation where supply is much more than demand, then prices in theory should plateau or come down and thus make it more affordable for the younger generation, lower incomes and those who simple can't afford the current prices.

If high(er) density properties cause a loss of amenity to the nearby area, again that may be a good thing to curb demand to the nearby area or those properties become slightly less favorable.

Even though we are homeowners, the cost of homes in Sydney, right now, is ridiculous and I am all for house prices to come down. It is crazy that an ordinary home in an average Sydney suburb is easily over a million dollars.

At the end of the day, good properties in good location will always be the key.

I think in Sydney and Melbourne they just aren't building them fast enough to get ahead of demand. But yes, Canterbury Road is selling off to foreign developers in large chunks. I drive along there several times per week between the office at Millers Point and Bowral.

 

[Foreigner]

Home sales will slow down as year comes to an end shortly.

I'll be heading to an auction first thing tomorrow. Hope to pick up a bargain. Perhaps

 

[Ric]

What?? Another "Foreigner" pinching our properties??

 

[Foreigner]

What?? Another "Foreigner" pinching our properties??

Hmm...no pinching.

That was one auction i went to last Saturday when there was no one other than the agents, their colleagues and mr. auctioneer. And Foreigner.

 

[Foreigner]

Considering the global financial turmoil atm, interest rate is unlikely to move up too soon, even in the US. Newspapers reported many borrowers were moving to fix rates. I wonder if there's room yet to move down.

 

[penegal]

Considering the global financial turmoil atm, interest rate is unlikely to move up too soon, even in the US. Newspapers reported many borrowers were moving to fix rates. I wonder if there's room yet to move down.

One month on, I think I still agree with you here...

It looks like the next 12 months will be at current, or perhaps slightly lower interest rates.

 

[whatmeworry]

Meanwhile the highest earners in Australia think they are 'battlers'.

Yet, according to the survey to be released on Monday, only 2 per cent of the high earners define themselves as upper class and only 31 per cent as upper middle class.
Almost half (44 per cent), say they are middle class. A further 10 per cent say they are lower middle class, and 13 per cent working class.
Many households in the top 10 per cent struggle to save. The survey finds one in five live "pay cheque to pay cheque", spending everything they earn.

Illustration: Matt Golding

Two out of three say the cost of maintaining their mortgage is "having a big impact on their lifestyle".

Income distribution: Australia's highest earners think they are battlers

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[GarrettM]

No Cookies | Perth Now

While I feel some sympathy for this woman's situation, surely any "ordinary income earner" would think there was something not right in being offered loans worth $6.5 million.

 

[andye]

No Cookies | Perth Now

While I feel some sympathy for this woman's situation, surely any "ordinary income earner" would think there was something not right in being offered loans worth $6.5 million.

I'd be pretty upset as a bank shareholder, given that that money is unlikely to be repaid in full.

I wouldnt be surprised if the bank was apportioned some blame- however the responsibility is with the individual. If they were happy to take geared profits, they should accept geared losses.

 

[CaptJCool]

No Cookies ? Buyer be dumb and greedy. Bank be risqué ? ?

 

[whatmeworry]

Charts suggesting the housing bubble is out of control.

"The Australian housing bubble could not have become as ridiculous as it is without the help of easy financing," he writes.
"Over the past few years, over 40 per cent of all new mortgages originated have been interest-only mortgages.
"This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value," he writes, later describing interest only loans as a "disaster waiting to happen."

The charts that suggest the housing bubble is out of control

 

[penegal]

We don't take out a loan to start a business, grow a business, or create some kind of positive economic activity.

We take out a loan to buy a house which we probably can't really afford.

 

[penegal]

To be fair my previous comments are perhaps slightly unfair.

The charts and figures quoted include offset accounts and loan redraws in such a way which maximise the value of residential mortgage debt (or maximum theoretical exposure). Hence the picture is somewhat distorted.


Two Scenarios:

1) An individual with modest equity and a desire to engage in investment activities would be foolish to use a secondary source of leverage given the preferential rate of interest award to residential mortgages. Some investors borrow heavily against their family home, despite the tax situation, to trim their borrowing costs.

2) An individual with excess cash liquidity beyond minimum repayments would be foolish not to use an offset account or similar facility, unless they can earn much higher returns elsewhere (especially given the tax advantageous nature of offset accounts).

 

[eastwest101]

I have adapted one of those slides because I always wanted to see the same graph with Sydney house prices excluded but couldn't find it - I would bet that it would look something like this: