Australian Housing Affordability Discussion

[alieninperth]

I've stopped reading the general media when it comes to housing. Its either paid advertorials for developers or written by journalists who are ignorant of the complexities in the housing market.

This morning there were two articles on the ABC related to housing affordability that were pathetic.

The first (Housing affordability: Federal Government plan to use bond aggregator 'not a game changer' - ABC News (Australian Broadcasting Corporation)), condemning the bond aggregator was woefully short sighted and failed to consider the broader impact that a scheme such as this might have, and assumes that the capital will only be used for very low income housing.

The second (Trapped by a mining town mortgage after the boom - ABC News (Australian Broadcasting Corporation)) totally fails to appreciate the changing nature of housing demand. Yes resource prices will have an impact on how many workers are in a town, but for areas like the Hedland a greater impact is the move from the construction phase to the extraction phase of mining.

 

[RAM]

Very telling graph from the CSFB analysts pulled from GIPA requests for the stamp duty info for the current financial year - individual dwellings, does not include the Chinese developers' purchases of large land banks for high rise or high density development - just single house y house or unit purchases by mainland Chinese.

 

[whatmeworry]

Australia doesn't have enough Chinese speaking Real Estate agents, so about one per week is coming to Australia on 457 visas.

There were 253 real estate agents on 457 visas who enjoyed New Year’s Eve in Australia last year - a tenfold increase since 2013, and up 81 in a single year. More than half came from China.

Property sector scrambling to recruit Chinese real estate agents on 457 visas | SBS News

 

[RAM]

Australia doesn't have enough Chinese speaking Real Estate agents, so about one per week is coming to Australia on 457 visas.



Property sector scrambling to recruit Chinese real estate agents on 457 visas | SBS News

and with 80% of all foriegn purchases of new dwellings being Chinese in NSW or Vic since 1/7/2016 it all adds up. Next largest purchasing group - Indonesians 1.7%

 

[CaptJCool]

Australias greatest game cricket has long embraced the term Chinaman'. so it stands to reason we welcome any one from that great place to our shores to buy any property they like (as long as they only take up one place in our team of 11).

So just because China buys large % of props bought by foreigners, how much of the total props sold (to Aussies and all foreigners) are bought ?

Also, you may know of over 55 housing in the country. Has anyone checked out the recent pricing ?
Clearly insufficient people want to live in Neutral Bay! Just goes to show what can be achieved if you constrict demand (by age and probably recurrent fees)....
Bougainvillea - The Bay Club Resort, 7-17 Waters Road, Neutral Bay, NSW 2089

 

[whatmeworry]

Experts give warning on interest rates. No action from our Laissez-faire government on housing.

"In global terms our housing prices are asking for trouble," Mr Richardson said, arguing many workers have found their homes make more money each day than they do. "That's kind of God's way of saying: this thing's gonna blow."
Sydneysiders were particularly vulnerable, Deloitte found, having benefited enormously from low interest rates but now witnessing "silly prices" that continued to grow - a "rather worrying development" in Deloitte's eyes.

As the Turnbull government grapples with how to address the housing affordability crisis in its May budget, some experts are predicting a housing correction that cannot and should not be stopped.

Deloitte Access Economics' quarterly business outlook, released today, predicts the official cash rate of 1.5 per cent will climb slowly in 2018 and 2019 to reach 3 per cent in the early 2020s.

'This thing's gonna blow': Top economists' interest rate warning

The poorest at risk due to spike in negative gearing.

Household incomes have grown, not because of rising wages and salaries, but rather due to higher investment income and government transfers, according to KPMG Economics' report Financial Stress in Australian Households: the haves, the have-nots, the taxed-nots and the have-nothings.
The report found that the bottom 20 per cent of households recorded the highest rate of growth in investment income, at 8.5 per cent per annum, compared to an average of 2.3 per cent over the past decade for the other households.

Financial distress looms due to spike in negatively geared properties among Australia's poorest: report

 

[drron]

Experts give warning on interest rates. No action from our Laissez-faire government on housing.
'This thing's gonna blow': Top economists' interest rate warning

The poorest at risk due to spike in negative gearing.

Financial distress looms due to spike in negatively geared properties among Australia's poorest: report

So let me just get this straight.You want action to make housing more affordable-ie reduce the price of housing.
So a modest rise in interest rates(1.5%-3%) is going to cause a big drop in house prices and now you are complaining.
Of course if you also move to ban negative gearing the drop almost certainly will be even bigger.

Just maybe one of the most important drivers of the boom has been lower interest rates.

 

[whatmeworry]

An article how the elderly don't care that housing is unaffordable for the young.

[h=1]I'll never be able to afford a house - and older generations don't give a damn[/h]

You only have to look at the figures to understand the horror in the eyes of Millennials. Total stagnation of wages growth coupled with the median house price now some 14 times the average income, and growing.

By failing to address housing affordability, prioritising investors and allowing rates of foreign ownership to rise – the government is selling out young Australians, and our parents are letting them. The generation that had everything going for them, has turned their back on Millennials, and rubbed salt into the wound, by telling us to "toughen up". The irony is not lost on young people, when older generations complain about anyone making retrospective changes to their superannuation!

I’ll never afford a house and Baby Boomers don’t give a damn | Illawarra Mercury

 

[whatmeworry]

Another article describing the housing bubble as a great intergenerational tax rort.

This is a social form of taxation in which there is a significant transfer of wealth from one generation of society to another. In Australia’s economic model, as house prices continue to soar, young homebuyers are forced to take on huge debts to acquire a home that turns to capital for the older seller of the home.

However, when house prices fall hard, like they have already in some parts of Australia, the intergenerational taxation rate falls hard too – even to the point where the flow reverses and younger people can benefit.
Take the Western Australian mining town of Karratha where a median-priced house back in 2011 would have cost about $850,000, or roughly seven times the median income of a household. Today the same house costs less than $300,000, which is roughly two-and-a-half times the median household income.

The answer to this question is very simple. The reality is a very small number of powerful lobby groups in Canberra have a hundred times more influence on shaping housing policy than young people. In other words, the voice of our youth is unfortunately all but irrelevant and ignored.

https://www.theguardian.com/austral...rket-and-the-great-intergenerational-tax-rort

 

[drron]

An article how the elderly don't care that housing is unaffordable for the young.
I’ll never afford a house and Baby Boomers don’t give a damn | Illawarra Mercury

What a load of crock.
A common refrain I hear from my colleagues is how they are sacrificing their retirement to look after their kids and grandkids both financially and with time.It can cut both ways.
But you should remember these words-

"Every generation
Blames the one before
And all of their frustrations
Come beating on your door.
.
.
.
You say you just don't see it
He says it's perfect sense
You just can't get agreement
In this present tense
We all talk a different language
Talking in defence.
.
.
.
So we open up a quarrel
Between the present and the past
We only sacrifice the future
It's the bitterness that lasts


So don't yield to the fortunes
You sometimes see as fate
It may have a new perspective
On a different day
And if you don't give up, and don't give in
You may just be okay
So say it loud, say it clear (oh say it clear)
You can listen as well as you hear
Because it's too late, it's too late (it's too late) when we die (oh when we die)
To admit we don't see eye to eye."


That was written nearly 30 years ago.It was true 30,60,100 years before that as well.

 

[QF WP]

For those musically aligned, here is drrons' lyrics in music: https://youtu.be/uGDA0Hecw1k. Perfect song as its sentiments echoed my own with my father - thankfully worked through now.

My parents assisted me into the property market in 1989 when I was 21 - with knowledge, no money!

But my wife and I have already discussed what we need to do for or children. We are looking at when we retire, to sell our principal place of residence and use part of the funds to purchase a unit for our children as their start in life (but remaining in our name).

Then we'll travel with the remainder plus our accumulated superannuation. When they are ready to move out and go on with their respective lives, we'll be ready to move in and enjoy our dotage. What we don't spend (and the property and personal effects) will be theirs, so the inter-generational transfer of wealth will be working.

I fear for a lot of people who are not as financially savvy. I can see the Japanese cycle becoming the norm her (the next generation take on the outstanding debt on expensive housing upon the death of the parents). I am so glad that most of my friends and family (in my generation) will avoid it, but not so sure for the next generation.

 

[burmans]

Australia doesn't have enough Chinese speaking Real Estate agents, so about one per week is coming to Australia on 457 visas.

Not now they have decided to scrap 457 Visa's!

I also think this is old news, in my view its just a matter of time until Chinese regulations on taking money out of the country will really begin to bite.

 

[QF WP]

They didn't take long to respond to the news story: http://www.sbs.com.au/news/article/...program?cx_navSource=related-side-cx#cxrecs_s

I can see the value in needing Chinese-speaking real estate agents, but not as many are really needed as the cashed-up Chinese have their children, who generally have reasonable to excellent skills (depending on their overseas education).

 

[penegal]

Did any of you see Chris Richardson's recent comments? Basically his advice to young people is "Don't Buy".

Rental yields do not justify the prices a lot of housing stock is seeing.

 

[Jeffrey O'Neill]

Did any of you see Chris Richardson's recent comments? Basically his advice to young people is "Don't Buy".

Rental yields do not justify the prices a lot of housing stock is seeing.

buying now, with a ~3% yield means you believe either rents will increase as a % of the value of the property, or that prices will increase so as someone is willing to accept a lower yield than you did ie the great fool theory.

Interest-only (IO) loans account for a sizeable and growing share of total housing credit in Australia, now representing around 23 per cent of owner-occupier lending and 64 per cent of investor lending.

From the Financial Stability Review last week

Prepayments on mortgages increase the resilience of household balance sheets. Aggregate mortgage buffers – balances in offset accounts and redraw facilities – are high, at around 17 per cent of outstanding loan balances or around 2½ years of scheduled repayments at current interest rates. However, these aggregate figures mask significant variation across borrowers, with available data suggesting that around one-third of borrowers have either no accrued buffer or a buffer of less than one month’s repayments. Those with minimal buffers tend to have newer mortgages, or to be lower-income or lower-wealth households.

really let that sink in. Roughly a third of borrowers are lurching from pay to pay, with a cut in hours or job loss leading to imminent financial crisis for them. I'd hate to be living that way. Roughly 9% of new lending is with LVR of 90%+.

Back in 2015 the RBA was telling us the debt was concentrated with those who could most afford to service it. S o either they were wrong, or things have deteriorated extremely quickly. I'm erring on the side of the RBA avoiding the problem in 2015.

I'm looking forward to seeing how the new macro prudential kicking in where IO loans are restricted to no more than 30% of new lending (down from 39% last year). This could see around $36B in new lending curtailed, unless P&I lending can increase.

I just don't want much policy changes now. It will get blamed for any housing correction and then wont be a policy choice for a generation or more.

 

[Denali]

Went to my very first home showing on the weekend. Tiny 2 bedroom house on 575sq mtr in the burbs, deceased estate with original flooring, wall paint and the oven has to be at least 50yrs old. On the market for $829.5 for one week only and contracts signed today for $835K.

Im in shock.

 

[blackcat20]

Went to my very first home showing on the weekend. Tiny 2 bedroom house on 575sq mtr in the burbs, deceased estate with original flooring, wall paint and the oven has to be at least 50yrs old. On the market for $829.5 for one week only and contracts signed today for $835K.

Im in shock.

Shop front/house on 1200sqm near us went for $2.8m. Absolute madness.

 

[Denali]

Shop front/house on 1200sqm near us went for $2.8m. Absolute madness.

We went to the house to compare it with a rental we have 2 streets away, this rental just became vacant and needs a kitchen and bathroom upgrade and cleanup before we can re-rent it. After the above house result, we're now going to see the agent during the week.

Must say, I was jealous about the kitchen we were going to put into it, it was going to end up really nice and very affordable.

 

[RAM]

Shop front/house on 1200sqm near us went for $2.8m. Absolute madness.

1,200 sqm = 1/2 block size of 8+ storey block of units if council is sympathetic.... or becomes sympathetic for some strange reason...

Out riding and when going through Taren Point and Sutherland area I saw 5 different sets of houses that have banded together to offer their combined properties for high rise development. Combined block sizes ranged from 2,400 sqm to just under 2,800 sqm. In the last three years there have been 5 high rise blocks built, currently 4 under development.

All within the newly changed zone (now 800m up from 400m) of a heavy rail train station so NSW Govt no longer requires (as of late 2015 I think it was) them to provide ANY on-site parking - not one space.

Interesting thing about all these units now without parking - they seem to cost the same as units with parking for buyers despite saving up to $60,000 per car space in costs of excavation. Definitely not affordable housing at the advertised prices, or at least not affordable for the below median earning Australian family.

 

[TomVexille]

1,200 sqm = 1/2 block size of 8+ storey block of units if council is sympathetic.... or becomes sympathetic for some strange reason...

Thats the thing, the council is not sympathetic and has really cracked down on how many units can be squeezed on a block. 3 is probably the max with the new regulations.