Article on housing affordability

[FelixL]

There is an article on the issue on housing affordability and ways to improve it. Its quite in depth, and surprisingly, coming from a mass media newspaper

http://www.smh.com.au/news/business...1183833431275.html?page=fullpage#contentSwap1

 

[tubs]

I read that. Funny how Rudd is proposing further tax breaks for investors. I thought that this was the cause of the problem in the first case (or at least so the newspapers tell me). Problem is, the majority of the problems are state responsibilities, particularly around infrastructure and land releases.

John Edwards from Residex has been particularly scathing towards the state governments for limiting the supply of new land, and for poor infrastructure to allow new land releases. Scarcity of land is one of the key factors that has led to high prices and its not changing (I'm sure MBL would disagree with me here, but, well, you know ). And now Howard gets the blame.

Other measures proposed by the HIA include a tax reduced savings plan for new homes like super, an increased FHOG and increasing depreciation from 2.5% to 5%. All these measures will get new buyers into the market and increase demand (hence prices) so I'm all for it. The HIA also proposed lots of new low cost houses to be built. Of course, the HIA are a body who's description is (directly from their website):

HIA is the largest building industry association in Australia supporting the businesses and interests of builders, contractors, manufacturers and business partners in the industry.

Funny how they propose things that would encourage lots and lots of building.

Here's a similar article from the age.

http://www.theage.com.au/news/natio...aper-homes-plan/2007/07/09/1183833431728.html

 

[steveadl]

Federal Labor leader Kevin Rudd is proposing low-tax home deposit savings accounts, an overhaul of local government funding to rein in rising infrastructure charges on developers and home buyers, a shared-equity scheme and tax credits which can be offset against tax liability for investors who agree to charge below market rents as a way of encouraging the supply of low-income rental housing. All will be considered at a national housing summit in Canberra later this month.

What a great solution! How many people will this actually help to buy a house - saving a few bucks of tax a year they pay in their savings account!

 

[VYBerlinaV8]

Does this mean I could get a tax deduction for saving money into my offset account?

 

[LynnH]

Steve

I agree! And a "national housing summit in Canberra later this month" - yet another ****** talkfest!!!

Cheers
LynnH

 

[jingo]

The housing affordability issue is vey interesting. From an investor's point of view, do people think that the new initiatives proposed by the various political groups (eg releasing more land, tax breaks to aid people with saving towards a deposit for a house, more low cost housing in the cities etc) will actually mean that capital growth will slow down in our cities?

Regards Jason.

 

[VYBerlinaV8]

I think that many of the measures being discussed will actually increase property values. Giving people more money to buy and/or reducing costs will increase demand, hence price increases. Increasing land release in outlying suburbs means inner suburbs become a smaller proportion of the available property pool, hence price increases. Making credit more available means more demand and hence higher prices. About the only way that prices could decrease is BIG development in inner and mid city apartments. But even then house prices will likely increase because they represent a smaller proportion of the available property.

It seems that most of measures being discussed relate to lowering the barriers to entry, implying greater demand for property. For those of us with multiple properties, this is good news indeed.

 

[jingo]

I About the only way that prices could decrease is BIG development in inner and mid city apartments. But even then house prices will likely increase because they represent a smaller proportion of the available property..

Are you thinking that the development of 'affordable housing' would more likely be high rise apartments? Do you see these developments having a negative impact on the price of apartments in smaller blocks, or town houses with land component within the inner city?

 

[steveadl]

One issue that seems to come to mind for me is, even if all these different plans etc. are initiated and working - in about 10yrs or so, we will still have the same problem all over again, albeit at a higher house price.

Does anyone else get the feeling that sooner or later, all these different options won't make a difference anyway. Despite any social group and govt. intervention/incentives - house prices will become beyond the ordinary person, but more importantly - will NOT stop there. So whilst we can bandage the solution somewhat for the time being as prices are'nt too far past affordibility, sooner or later it IS going to happen that we end up like New York, London etc, and there really won't be any solving it - the market will just have to be accepted for what it is?

 

[Ausprop]

agree totally steveadl... all this jabber jawing and EOD bricks cost x, land costs y, taxes are z and I dont believe developers are makign super profits, so a house will cost x+y+z and unless the govt wants to suddenly drop taxes or start selling their holdings at siginificanlty under market rates, then inflation will continue to drive prices up. It's a bit like the price of oil - somebody should do something about!

 

[VYBerlinaV8]

Are you thinking that the development of 'affordable housing' would more likely be high rise apartments? Do you see these developments having a negative impact on the price of apartments in smaller blocks, or town houses with land component within the inner city?

I suspect 'affordable housing' will be a range of property types. There will still, however, be significant barriers to entry to 'affordable housing' due to the conditions that will be put on getting such a property (eg means testing, asset tests, etc). Ultimately, it will make up only a small proportion of the market anyway so any effect will be small, and temporary.

I think that Australia will go the way of other western countries, where property is beyond the reach of the average worker. This has happened in a range of other countries, and there's no reason to expect we will be any different. Other countries are also going through having a wider range of credit types and options than Australia - that is what we will likely see here over the next couple of decades.

Ultimately, housing/property is a pure supply/demand type situation. The larger cities become, the less (proportionally) property will be available in the inner and/or desirable areas. I always counsel people to buy as soon as they reasonably can, because long term, property prices have nowhere to go but up. We are not in a property bubble in Australia - bubbles burst at the end of a long climb in value. Most places around Australia have not had much prices movement in the last 2-3 years (WA excepted, of course).