Oracle, I'd completely agree with all this wisdom. So if the rich keep getting richer and vice versa, how do you see this playing out in the long term? Will FHBs be happy to live farther out or keep renting? How much political clout do FHBs have? Will political pressure for change increase? Will that be matched by increasing pressure for status quo? Will gov'mnts be forced to make changes at some point? If so, who will win, who will lose?
Dispelling the doomsday debt myths by the RBA
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Oracle, I'd completely agree with all this wisdom. So if the rich keep getting richer and vice versa, how do you see this playing out in the long term? Will FHBs be happy to live farther out or keep renting? How much political clout do FHBs have? Will political pressure for change increase? Will that be matched by increasing pressure for status quo? Will gov'mnts be forced to make changes at some point? If so, who will win, who will lose?
.toe..it's nothing to do with the rich getting richer and the poor getting poor. We live in a democratic, capitalist country. Where everyone has the same opportunity to succeed in life. The only reason the rich keep getting richer is they know the rules of wealth creation while the poor don't. There is no reason why someone should be poor in this country if they followed good money management and investing principles.
As to FHB, I am afraid hardly anyone gets to buy their first property in the location they want. It's always been the case. Nothing different here. As to affordability. I am very confident a couple earning around average wages can certainly afford a home in any capital city if they want to. But complaining that FHB can't afford in inner suburbs to me is unfair to all those ppl who bought 15-20years ago in the inner suburbs and have made sacrifices all during those years. This is their reward.
Cheers,
Oracle.
Hi, does 12B really support a lot of housing? How many noughts are there in 1B?
1M = 3 houses, so 12B?
If we have 30% renters, let's say 1M households, how many houses can $12B provide?
The last 3 auctions I attended were all sold by Housing Trust.
KY
1M = 3 houses, so 12B?
If we have 30% renters, let's say 1M households, how many houses can $12B provide?
The last 3 auctions I attended were all sold by Housing Trust.
KY
Agree with Oracle..
Many PPOR owners complain that FHB will never be able to afford their first house these days, then they go on to say that they started out in caravans etc to save deposits.
Hmm, isnt that contradicting.
Its those who sacrifice that "usually" become rewarded. Start off in a really cheap home, learn simple renovations, buy the first IP, a cheap one. Few years down the track, sell both & buy a nice PPOR, then work from there. Thats simplified but anyways ....
Areas around me have some houses for the $290k mark, so most people on average wages, who have some money sense & 2 wages coming in, should be able to afford it. However, one of the real problems, most people want it all now, including the new car & house full of gadgets to keep momentum with the Jones's !!
Many PPOR owners complain that FHB will never be able to afford their first house these days, then they go on to say that they started out in caravans etc to save deposits.
Hmm, isnt that contradicting.Its those who sacrifice that "usually" become rewarded. Start off in a really cheap home, learn simple renovations, buy the first IP, a cheap one. Few years down the track, sell both & buy a nice PPOR, then work from there. Thats simplified but anyways ....
Areas around me have some houses for the $290k mark, so most people on average wages, who have some money sense & 2 wages coming in, should be able to afford it. However, one of the real problems, most people want it all now, including the new car & house full of gadgets to keep momentum with the Jones's !!
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Hey Oracle I'm with you, I agree with your every sentiment. FHBs should buy what they can afford. We are capitalist society, everyone has oportunities, they should follow investment principals. The people who came before them made sacrifices over decades. I'm not arguing against these points.
Investors on average spend probably 10% more of thier after tax income inflating house prices (pa per house) than the OOs do, due to NG. So what I'm arguing is that negative gearing means us PIs have a far greater capacity to inflate housing prices than OOs do.
That's good for us, but it also brings political risk, because as time passes more and more buyers become PIs at the expense of OOs. At current count 10% of aussies are NGing PIs. What happens when there are 20% NGing, or 30%? And we're inflating prices 10% faster than OOs. How fast will prices inflate? Who will afford to be an OO?
It's not the only way prices are inflating, but the danger is it's an unsustainable positive feedback loop (ie will keep getting worse). Unless more is done to subsidise OOs, or construct new housing etc.
That's the beauty of free capitalist society where the market takes care of itself by going through cycle of boom and busts.
If more and more people become property investors they can only succeed if there is a market for that many renters. If there is demand for rental accomodation all those PI will do well and so will the Government (extra taxes). If no demand, it will put downward pressure on rent and potentially house prices.
I have tried to explain it in pretty simplistic terms. I hope you get the point.
Cheers,
Oracle.
But its not a free market.
The FHBB and government guarantee on wholesale debt was pure intervention to save the market.
If you intervene to limit the downside, then its only fair you intervene to limit the upside.
B = 1000M
Ergo, using your example, the govt could put 36,000 new houses in the market per annum for the cost of currently subsidising a market that largely engages in trading existing stock.
They needn't spend it directly (though they could...public housing, as distinct from welfare housing, has a good track record historically in keeping housing costs down, with the resultant positive impact on living costs and wages) . It could simply be a matter of applying the savings of removing NG in favour of, say, compensating the states for removing the range of costs making land development more costly than it need be.
I actually take offence with your last comment. There is nothing socially or economically desirable for the cost of an essential good or service to increase at a rate greater than wages, irrespective of the fact that said increase in cost may benefit a particular cohort.
What essential good or service are we talking about here...? If it's housing, then why not...?
Who's wages are you talking about...and in what suburb for the house prices, relative to those wages you speak of....?
Apples with apples remember...
Oracle I pretty well understand how free markets work. I'm trying to go beyond a simplistic view of this. What I'm saying is this not a free market, it's an engineered market.
In a free market if demand increases more than supply, then prices will increase until demand stabilizes and matches supply, right?
But the effect of NG is that when prices rise, instead of demand stabilising demand actually increases (due to more people turning to the subsidy of negative gearing). So prices then increase further.
It's called a Positive Feedback Loop and is the opposite of a free market (homeostatic or self balancing) system. It results in exponential one way change. The climate is normally a self balancing system, but scientists are now saying it's moving toward being in a Positive Feedback Loop.
Why would increasing losses attract more people? there may be a subsidy (as with any loss making investment), but a loss is a loss is a loss
You're obfuscating.
Housing (that is, a dwelling in which people live) is an essential.
Are you of the view that the cost of housing increasing at a rate greater than increases in buying power is a good thing?
Would you take the same view of something like, say healthcare, food or energy?
Oh I agree, but many people dont see it that way. From their point of view a capital gain is their profit. And NG allows them to pay more for an investment for the same rental return (ie accept a lower yield). So NG is one of the reasons why inner suburban yields are so low, because people use NG to bid up prices.
Profit or loss makes less difference if NG increases potential capital gains by average 3%pa (30% buyers are investors times the 10% more they are paying for the same cashflow).
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here here, totally agree.
It does nothing, in fact it hampers, the long term prosperity of the nation by adding to the 'unproductive cost base'.
However whether i agree or not is irrelevant, at the end of the day its about making money.
I will let the academics debate to their hearts content, me, i am just interested in risk protected returns.
Unfortunately this no longer includes residential property (at least in melbourne) with a medium term view point. Just like GOLD, i am not interested in the very long term, in the very long term i am 6 foot under.
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Not everything in the world has to be productive just to justify it's CG.
You have to keep in mind the Human Emotion factor that plays a significant role in higher prices.
I can similarly argue, why would ppl pay top dollars to buy an expensive luxurious car? I can buy a cheap car that will take me from point A to B. So the expensive car has not been productive one tiny bit.
Why dine-in in an expensive restaurant when I can find cheap food elsewhere. At the end I just need to fill my stomach to get some energy. Expensive restaurant food is not going to be any more productive
But people still pay top dollars for these luxurious? And must I say investors would invest in such ventures in the hope of making money.
In the same case, housing also has the emotional factor attached to it. If ppl have money to spend they will want to spend it on something they feel strongly about.
Why do you invest? In the hope of making lots of money, right? What do you intend to do with all that money once you have it? Spend it on luxurious and comfort right? Otherwise what's the point. In the same way housing doesn't have to be productive to justify it's rise in price.
Although, I still believe housing is productive in the sense it does support lot of other industries (building & construction, furniture, hardware, appliances etc.)
Cheers,
Oracle.
No, you didn't answer my question, I suggest you are obfuscating not me...
Every essential item is increasing at a greater rate than buying power it could be argued.....but you need specifics such as what I have asked you...
In what suburbs is housing growing at a greater rate than 'buying power'...?
Remember to factor in the average wage for each suburb....
Your problem lies in what you class as 'buying power'....
Do we all have the same buying power...?...No...didn't think so...
Obfuscating indeed...
people with lower wages move to lower priced suburbs.
people with higher wages move to higher priced suburbs.
folk producing said wages aren't stagnant, immoving sentient beings. considering the average move is made every 5 years, that's half-4r53d proof that wages "growth" does nothing to support or deny the affordability argument.
people with higher wages move to higher priced suburbs.
folk producing said wages aren't stagnant, immoving sentient beings. considering the average move is made every 5 years, that's half-4r53d proof that wages "growth" does nothing to support or deny the affordability argument.
Yes quite agree just look at artwork. but that doesnt make property PRODUCTIVE. From the point of productivity (which is the long term driver of economic growth) housing is just a roof over ones head.
This is the message i think TF was trying to impart.
Although, I still believe housing is productive in the sense it does support lot of other industries (building & construction, furniture, hardware, appliances etc.)
Cheers,
Oracle.
The production of houses is productive
