Australian Housing Affordability Discussion

[Rigs]

Given the median (not avg) household wage (not to be confused with median income which dilutes the figure by including households solely reliant on generally tax-free welfare of some sort) is north of $80,000 pa. Perhaps being taught at an early age that you do not need to have the latest smartphone and a $100/month contract, pay TV, new car, go on a holiday (overseas?) each year as well as have a 50" OLED TV - may just advance the saving for the deposit.

Similarly, cutting the 'purchased' coffee/tea habit back somewhat could also aid the 'deposit-building'.

Come on mate. Those stereotypes don't add up. The facts on Australian housing affordability

I am both a millennial and a home owner. I just won't invest in Sydney because the market is crazy. I am also a very lucky millennial who studied my backside off and got into a good field (I paid for it by being in the Army). Personally I get sick of this condescending nonsense.

My generation gets called welfare dependent by people who are running up a deficit to pay their pensions. Lazy by people who asked us to fight the country's longest war. Directionless by people who undermined the labor market and entitled because yes we have high rates of smartphone ownership (unlike previous generations we are conversely less likely to own a car). Your generation is launching satellites into the sky to give boomers in the country rubbish internet instead of wiring up the CBD's of Australia to the a properly fast NBN so my generation can create the start ups to employ our own generation.

I pay my taxes to give you a pension I will likely never get. Carry a deficit I didn't create. I also had to pay for my university too and you want me to give you a 1 million dollar windfall on your place in Epping? Sorry, no deal.

 

[Moindardt]

Actually our deficit was paid. This new one is all the friends of Labor, those same people constantly have their hands out. The thought that people could even consider the median as a first home is mind boggling. Try thinking a third of that, two-thirds for your second and then, maybe, the median for your third.

Complaining about people's pensions is so ridiculous. They paid full tax at higher rates with none of these entitlements that you have. It is the business owners, or us taxpayers in your case, who are paying for your superannuation. GenX's missed out on both but only respect what the boomers had to live through. Full credit to them and don't begrudge them anything.

Every generation has their pluses and minuses. However, one generation pays the lowest tax levels, is subsidized the most and still has their hand out the most. Can we guess which one?

Btw. Wait until we finally have that recession and see how much the interest on that debt bites.

 

[Rigs]

Actually our deficit was paid. This new one is all the friends of Labor, those same people constantly have their hands out. The thought that people could even consider the median as a first home is mind boggling. Try thinking a third of that, two-thirds for your second and then, maybe, the median for your third.

Complaining about people's pensions is so ridiculous. They paid full tax at higher rates with none of these entitlements that you have. It is the business owners, or us taxpayers in your case, who are paying for your superannuation. GenX's missed out on both but only respect what the boomers had to live through. Full credit to them and don't begrudge them anything.

Every generation has their pluses and minuses. However, one generation pays the lowest tax levels, is subsidized the most and still has their hand out the most. Can we guess which one?

Btw. Wait until we finally have that recession and see how much the interest on that debt bites.

I don't have any entitlements:

Working age on income support ^

Working age is defined as the population aged sixteen to sixty-four years. Source: Calculated from Department of Social Services, Income Support Customers, A Statistical Overview, various years; Department of Social Services, DSS Payment Demographic Data, June 2014; ABS,Australian Demographic Statistics, 2014[FONT=pt_serif].[/FONT]

I don't know where your generation get's its perceptions of mine. Its based on a lot of myths that cant be found in the stats. Previous generations didn't pay enough into the system to cover the pensions nor did you create enough of my generation to cover the aging population. It was made solvent not base on premiums paid over a lifetime but on the rate of workers to retirees. So less of us have to pay more to cover you. There are a lot of fictions and myths about pensions in Australia. Most probably can't even identify the aged pension as the biggest government outlay on welfare.

As for myself, I pay for my own superannuation (once again with the silly stereotypes). I pay more taxes than most Australians earn. I didn't take much in the way of welfare (unless military service counts). Paying my taxes is fine in principle but in reality its a wealth transfer from my Generation to boomers. It's not my generation creating the ongoing and increasing unfunded liability (which is the real source of our deficit and it will only get worse).

 

[whatmeworry]

Actually our deficit was paid.

But wait what did the LNP do with the cash? Biggest mining boom and privatisation of public assets leading to unnecessary [-]bribe[/-] cash handout to the populace, not to mention the halving of the CGT which has led to the obscene property prices we have today.

 

[kamchatsky]

But wait what did the LNP do with the cash? Biggest mining boom and privatisation of public assets leading to unnecessary [-]bribe[/-] cash handout to the populace, not to mention the halving of the CGT which has led to the obscene property prices we have today.

They are not called "bribe" but "incentives"

But halving of the CGT was to replace the indexation of the CGI of cost base though .....

 

[drron]

I don't have any entitlements:

Working age on income support ^

Working age is defined as the population aged sixteen to sixty-four years. Source: Calculated from Department of Social Services,Income Support Customers, A Statistical Overview, various years; Department of Social Services, DSS Payment Demographic Data, June 2014; ABS,Australian Demographic Statistics, 2014[FONT=pt_serif].[/FONT]

I don't know where your generation get's its perceptions of mine. Its based on a lot of myths that cant be found in the stats. Previous generations didn't pay enough into the system to cover the pensions nor did you create enough of my generation to cover the aging population. It was made solvent not base on premiums paid over a lifetime but on the rate of workers to retirees. So less of us have to pay more to cover you. There are a lot of fictions and myths about pensions in Australia. Most probably can't even identify the aged pension as the biggest government outlay on welfare.

As for myself, I pay for my own superannuation (once again with the silly stereotypes). I pay more taxes than most Australians earn. I didn't take much in the way of welfare (unless military service counts). Paying my taxes is fine in principle but in reality its a wealth transfer from my Generation to boomers. It's not my generation creating the ongoing and increasing unfunded liability (which is the real source of our deficit and it will only get worse).

So you are having a go at my generation and I get sick of that.The Federal Government was in surplus until Rudd came to power and had set up the Future Fund to cover Government Pensions.
I haven't received any entitlements,dont and wont get a government pension,have put in all of my super money and at the age of 69 still pay more in taxes than the average wage.
The problem we both have is that we are not typical of our generations.
And record low interest rates which have a lot more to do with escalating house prices and inequality are also a recent thing.Not my fault.

 

[Moody]

So you are having a go at my generation and I get sick of that.The Federal Government was in surplus until Rudd came to power and had set up the Future Fund to cover Government Pensions.
I haven't received any entitlements,dont and wont get a government pension,have put in all of my super money and at the age of 69 still pay more in taxes than the average wage.
The problem we both have is that we are not typical of our generations.
And record low interest rates which have a lot more to do with escalating house prices and inequality are also a recent thing.Not my fault.

Abbott/Turnbull (or will it be Abbott/Turnbull/Abbott?) are on track to exceed the deficits run up by Rudd/Gillard/Rudd, but of course that's not their fault. Not that it has much per se to do with house prices, which were being hyped up by all the parties who stood to gain by it (surprise, surprise). Hopefully a large and brutal correction is in the offing.

 

[cove]

Moving back from a nation where 50% of the population get some handout from the government to about 30% will take about a decade.
Perth property prices have started to look more reasonable but are now not supported by the weak rental market seeing the vacancy rate has risen sharply. Many younger workers have gone back to live with their parents so that they can save faster. I think many Perth homes have dropped 15% in value as employment opportunities have reduced post the mining boom.
Having been in Sydney for a week I have noticed very few for sale/auction.
I do think many couples who are borrowing more than $500,000 as a mortgage will find it difficult when interest rates rise. That may be sooner rather than later unless there is an economic downturn.

 

[RAM]

Come on mate. Those stereotypes don't add up. The facts on Australian housing affordability

I am both a millennial and a home owner. I just won't invest in Sydney because the market is crazy. I am also a very lucky millennial who studied my backside off and got into a good field (I paid for it by being in the Army). Personally I get sick of this condescending nonsense.

My generation gets called welfare dependent by people who are running up a deficit to pay their pensions. Lazy by people who asked us to fight the country's longest war. Directionless by people who undermined the labor market and entitled because yes we have high rates of smartphone ownership (unlike previous generations we are conversely less likely to own a car). Your generation is launching satellites into the sky to give boomers in the country rubbish internet instead of wiring up the CBD's of Australia to the a properly fast NBN so my generation can create the start ups to employ our own generation.

I pay my taxes to give you a pension I will likely never get. Carry a deficit I didn't create. I also had to pay for my university too and you want me to give you a 1 million dollar windfall on your place in Epping? Sorry, no deal.

Hmm, wood for trees meets 'entitlement' fact twisting.

1. In my piece you responded and claimed 'stereotypes' - there was not one stereotype mentioned. I did supply some RBA sourced figures to show how 'selective' claims by vested interest groups can turn fiction into fact - or at least mislead.
2. The fact that the Australian savings rate has fallen significantly over time contributes greatly to the puzzle - smaller relative deposit = bigger mortgage (ceterus paribus). Similarly house not unit = bigger mortgage. Bigger house floor space than 1960s-1980 = bigger mortgage. If you want your cake then perhaps choose one that will not make you sick = personal responsibility.
3. Five of the top ten donors to both political parties historically (all levels of Govt & Australia wide, and all their subsidiaries) are property development related.
4. The media, especially print media, are hostage to the property industry for as much as 92% of their revenue (suburban newspapers in this case). Very rarely is the true picture revealed.
5. People have the responsibility for the choices they make. Bad choices are not everyone else's problem - lack of personal accountability has much to do with the clamouring.
6. It is in the developers' interests (and their politicians/political parties on a string) to foment the 'crisis' for their own wealth benefits and the wider community's detriment. Did you know there is much research showing that living in a building higher than 5 storeys results in increased mental illness? The Australian Property Council (not dominated by the big 5 as it is one m'ship one vote so small builders are not squelched) had a lead editorial in Feb 2013 detailing a number of the studies and questioning the adverse impact on the industry from selective lobbyists.
7. I totally agree there are some people who are in a very bad way with a property purchase and others who cannot afford to buy their own house. But should it be a unit vs a house? The median size (floor space) of new build Australian houses (not units though!) has grown by over 40% from the 1960s-early 1980s period. You want a bigger house - it costs more - that's your choice. It also costs more to maintain, heat/cool, light. Less open space and more house also increases the urban heat island effect.
8. The cost of servicing a mortgage (either paying P&I or just I) for the 'median house' is around 50% less (as a proportion of household disposable income) than it was in the late 80s early 90s - that is why most graphs do not go back before the early 2000s. No stereotype just maths.
9. Developers make much more (think Meriton, Mirvac, Greenland aka Shanghai City Council) from high rise over-zoning FSR than from building houses. Why do you think that you have NEVER heard the peak lobby groups/developers pushing for satellite cities or the movement of the public service out of CBDs or thereabouts to regional centres with higher unemployment and significantly cheaper housing? Why should public servants be in prime CBD office space? Why should they have unobstructed views of Sydney Harbour or the ocean etc? In the 1950s and 1960s certainly companies and Govts all were located in the various CBDs but then the smarter companies and their boards realised they could cut lease costs by over 70% (Woolworths for example) by moving out. Why do senior public servants need the views?
10. Developers use the 'crisis' to get building regulations eased and zoning requirements over-ridden (NSW >95% success rate for multi-unit developments bypassing Councils to go to the JRPP). For example one large unit builder constructed numerous high rise in Melbourne (and elsewhere) using single-skin concrete. Cheap to do but creates mould/mildew problem forever unless air con left on even when you are on holidays. NEVER prosecuted nor fined - no blow-back on them and try finding media coverage.
11. Perversely the lack of a recession since 1989-92 has created much more leverage in the property sector and combined with fractional interest rates (3.7% vs 17%) much more debt. The bubble is definitely growing but it is not in the politicians' interests (or the source of the major proportion of their fighting funds) nor the banks' for it to be cleared out. Why do you think the RBA has been forcing the banks to raise ten's of billions in new equity? A quick search for bank balance sheet leverage history is informative.
12. BTW - there was an 'affordability' crisis for housing in the US. There isn't today. I can (as of yesterday) buy a 600 sqm architect designed free-standing house in Hawaii with unobstructed water views (that cannot be built out), sheltered from bad weather due to its location on lower reaches of a mountain, on close to 1,000 sqm of land, 5 km out of the city - for AUD 700,000 and rent it out for AUD 6,500 a month. In 2008 a 3 brm, 2002 (or 3) built brick and tile home in a non-hurricane area (Orlando Florida) with a 3 car garage and in a bottom quartile crime area, top quartile schools zone and over the road from a Federal reserve - for under AUD30,000.
13. As there was this 'shortage' of housing in the US - NINJAs could get 100% loans thanks to Clinton putting through a law requiring FNMA to insure the loans at the taxpayers (not mortgagee's expense) as it 'is every American's right to own a home'. NINJA = no job, no income & no assets. Guess how that ended?

Are we there yet?

 

[RAM]

My generation gets called welfare dependent by people who are running up a deficit to pay their pensions. Lazy by people who asked us to fight the country's longest war.

Interesting point.

Every day of military service by anyone in any period should be acknowledged for the contribution to the country. Every person lost is a huge cost.

Thought I would have a look at what the relative contribution made by the different generations for the various wars they were 'asked to fight in'. From the Australian War Memorial:


It is true that Afghanistan is our longest war.

It is also true that the generation you seem to have some issues with contributed roughly 1,000 times as much to the country as the current generation has been asked for. Adjusted for proportion of population and the contribution was well above 3,500 times. The contribution by the remaining civilians in Australia was also huge. The rationing of food and all other items impacted every person living in the country to a large degree. Something that apart from a brief hit on petrol prices - the current generations have almost entirely avoided. Going hungry for years was a common impact of WW2, growing your own vegies was widespread. Self-responsibility was nothing special.

Looking back at WW1 - the contribution was closer to 7,000 times as great.

Not trying to belittle anyone's service just ensure that perspective is maintained.

If you take into account the 'greeting' that returned service personnel faced, then personally, I believe that the Vietnam vets should be getting the politicians' gold passes and much more.

 

[Rigs]

Interesting point.

Every day of military service by anyone in any period should be acknowledged for the contribution to the country. Every person lost is a huge cost.

Thought I would have a look at what the relative contribution made by the different generations for the various wars they were 'asked to fight in'. From the Australian War Memorial:

You lost me when you set contribution = to deaths. I have friends in those numbers mate. My intent is not to disparaged the service of other wars and I sledge boomers for stereotyping a generation they asked to fight (which is just silly).

 

[Rigs]

Hmm, wood for trees meets 'entitlement' fact twisting.

I put forward a lot of strong arguments in my links. If you won't deal with those, I don't see a case for engaging with yours.

 

[RAM]

You lost me when you set contribution = to deaths. I have friends in those numbers mate. My intent is not to disparaged the service of other wars and I sledge boomers for stereotyping a generation they asked to fight (which is just silly).

"Contribution" could be measured in many ways - all of which would show that previous generations have served their country 1,000s of times more than the current generation.

You seem to be the one stereotyping anyone who suggests housing affordability is not anywhere near the worst in modern times - as a baby boomer.

I am not actually.

The arguments put forward on number of people who have voluntarily chosen to leverage themselves to the hilt (>30% of HDI) as the indicator really demonstrates a lack of personal budgeting acumen +/or eyes bigger than income.

Due to the extended period without a recession these relatively over-extended borrowers cover multiple groups (including some baby boomers) not just the latest 'generation'. There is plenty of material around describing the recently retired or soon to retire who still have substantial mortgages.

Keeping up with the Jone's is a personal choice as is having 2 or more bathrooms or ensuites etc.

Making a poor financial choice is a personal problem noy an excuse to allow vested interests to profit at the expense of the broader community.

 

[drron]

Abbott/Turnbull (or will it be Abbott/Turnbull/Abbott?) are on track to exceed the deficits run up by Rudd/Gillard/Rudd, but of course that's not their fault. Not that it has much per se to do with house prices, which were being hyped up by all the parties who stood to gain by it (surprise, surprise). Hopefully a large and brutal correction is in the offing.

Glad you agree with me that the debt is not the cause of high housing prices.
But here's a prediction.The current slowdown will probably last 2-3 more years.Then prices take off again with the real crash being pushed back by the World's Central Bankers until 2024-27.
Now if it does come true I just have to remember how to find this post.:shock:

 

[cove]

Well drron I think you may have meant 2024-27.
Vancouver has stopped their price boom it seems.
I caught the river cat from Rydalmere to Circular Quay and the riverside has many newish apartments. Then there are the units in South Sydney and down past Wolli Creek that are being developed. Most of these include a developers margin of about 35% in the selling price so if the Sydney market for units catches a cold it would be possible for prices to drop by well over 25%.
The first bit of pressure is coming from APRA who are examining our bankers mortgage books.

 

[drron]

Thanks Cove.Have amended my senior moment!

 

[cove]

I had thought it may have come from a red wine moment. Currently you have to be 85 in Sydney to be eligible to get see a geriatrician so don't think you are old.
Right now you can get homes in the Pilbara for $200,000 but you may not be able to get a bank loan on it.Quite a bust from a million dollars a few years back.
In Sydney and Melbourne first home buyers will need to buy small if at all.

 

[cove]

Lots of real estate hits the market thru relationship breakdowns, older folks moving to easier to maintain units and others trading up or down.
We acquired our current home about 25 years ago with a property auction in the depths of the 1991 recession that we had to have. We never regretted being the highest bidder as it became a family home with lots of space.
We did find parking for 5 cars to be helpful when our sons started driving.

 

[Foreigner]

Being out and about to see my options for downsizing, we found units to have expansive master bedroom with top end extras in bathroom, walk-in robes, etc., but the other rooms were small, inadequate. One unit had $2.4m tag but the 2 secondary bedrooms had no views.

OT, in Japan there's a minimalist approach to building homes, in part because of high land costs:

http://edition.cnn.com/2016/08/22/architecture/japan-micro-homes/index.html

 

[Warks]

When driving in California last week, on radio a lender was pushing the fact that "interest rates can't stay low forever" and proceeded to offer a 15 year loan fixed at 2.75% ("terms and conditions apply") which seems like a pretty good deal. They must be banking on interest rates staying low for at least 15 years though.