I think the second sentence says it all!!
In saying that I have actually enjoyed this thread, rather then the usual "you are all doomed" theme HBS has asked questions and put his points over rather more diplomatically than the normal D & Ger!
Home Buyer Strike
- Thread starter HomeBuyerStrike
- Start date
I think the second sentence says it all!!
In saying that I have actually enjoyed this thread, rather then the usual "you are all doomed" theme HBS has asked questions and put his points over rather more diplomatically than the normal D & Ger!
By the way what's this $300bn 'income' thing you're talking about? If you're talking about stamp duty and agent fees etc, I doubt there's $300bn of 'income'.
If you're talking about property transactions creating 'credit' perhaps you should have a read of the thread about money creation and just about half the more economically-attuned thinkers dispel the multiplier 'myth' there but anyway...
+1. Let's keep it nice - there's some good food for thought amongst this.
One thing I'd add is the time value of investments. Over time your rents rise and your loan reduces. I've never done hard economic analysis on how this will work for me (beyond basic calculations), because the difference is likely only to mean working (or not) for an extra year or few.
Units which in today's terms are making 5% are in fact making a lot more for me, because I bought them at a significant discount to today's price. This doesn't always model well, but it's the reality for investors who can hold on over time (and buy multiple IPs).
Actually the 'time value' of investment line of thought would require you to express your future rent in today's terms adjusted for inflation, so goes against what you're saying.
because people buy HOUSES, not ROOMS.
there's no "roombuyers affordability index", nor is there any mortgage product for buying a "room".
your question specifically related to people abstaining from buying houses, not rooms. if you change the goal posts of the original argument to get a point across, then i refuse to participate in a nonsensical discussion about rooms / houses supply.
there may be a huge supply of rooms in this case, but clearly there is no demand. therefore, it wil have little impact. even if there was a demand, a single person buiying a 4 bed house may not WANT to let other people live there. should we mandate one person per room per household? very draconian.
if all the room-thinkers out there could just get their heads around the basic supply/demand argument and try to understand that 99% of the worlds western population (excluding students) do not envisage themselves - ever - living with someone else and/or another family - then you can understand the real-life mechanics of it.
regardless if there are a lot of rooms, or not.
Seriously, the guy's a troll.
He's just using junk economics.
Just because you take out 5% of the demand, doesn't mean 5% less gets sold. Supply and demand are not in sync, otherwise there would not be auctions as you'd only have one bidder per house.
So he's deliberately using false economics to argue the $7.5b figure. To work out an exact amount would be almost impossible, and involve a lot more calculations than by simply taking 5% off it. eg a 5% reduction in demand in a situation where supply exceeded demand would mean a larger drop than when demand exceeded supply, simply because when demand is higher there is excess capacity to absorb the reduction.
Regardless of your position on capacity, the guy's a troll and he's got everyone going.
He's just using junk economics.
Just because you take out 5% of the demand, doesn't mean 5% less gets sold. Supply and demand are not in sync, otherwise there would not be auctions as you'd only have one bidder per house.
So he's deliberately using false economics to argue the $7.5b figure. To work out an exact amount would be almost impossible, and involve a lot more calculations than by simply taking 5% off it. eg a 5% reduction in demand in a situation where supply exceeded demand would mean a larger drop than when demand exceeded supply, simply because when demand is higher there is excess capacity to absorb the reduction.
Regardless of your position on capacity, the guy's a troll and he's got everyone going.
Yes, I'm talking about the effect on GDP of investment in the form of credit for housing purchases or development. I'll have a read of that thread thanks.
I agree with you on the end result, however I would not say there is no demand.
It is that there is no supply of extra rooms while people own the homes and live in them. It is like supply of gold, if everyone who has old jewellry locked up in the cupboard went out and scrapped it we would have a gold price fall too but is this going to happen? Well it depends on sentiment and other factors.
Again we have capacity for many more people if you compare us to the likes of Singapore, Hong Kong etc but the the changing utility rate of our housing stock is a difficult thing to determine. The actual supply of homes on the market is not determined by capacity anywhere near as much as it is determined by factors like affordability. We don't live like people in Hong Kong because we can afford to build 4 or 5 bedroom homes. If we could only afford one bedroom mud huts than this is the stock developers would build for us and we would live ten people to a room!
i.e. we might have the capacity and if some day down the line we have a recession or depression which causes us to live more frugally we might suddenly have a surplus of existing homes but at present we do not.
It is why as a housing bear I think the damage to house prices is far more likely to occur if our governments move to make building houses easier. You only have to look at the progressive policies in Perth now and compare them to councils / State gov in Sydney and you can see the effects on new build rates and the follow through to prices. House prices have far less to do with population growth than costs of new production in my opinion. A government can plan and release enough land for a million more people or more, but only if it wants to.
this was the next step in my argument - so yes i agree entirely. the point is the capacity may be there, but the demand is not.
Perth? Progressive? are we talking Scotland or Western Australia here? because the Perth i live and work in is FAR from progressive in a macro sense.
we got state planning policy designed to reduce the number of houses per hectare - that's anything but progressive unless you consider urban sprawl a great thing.Absolutely, your own yield depends on the price you bought at. These yields can now be very attractive due to rent inflation. But because capital values have increased asymmetrically to rents I wonder would these investors be in a better position to cash in and retire in relative luxury with their capital. The rents for these investors would seem less relevant than the capital appreciation and I suppose they have to make their own decisions based on where they think capital values are going over the medium to long term.
It's not a questions of 5% less demand = 5% less sales. It's a point of less demand equals less sales. The 5% figure was used purely for illustrative purposes. It could be a hypothetical 1% of it could be a hypothetical 20%. It doesn't change the nature of the discussion really.
Perth? Progressive? are we talking Scotland or Western Australia here? because the Perth i live and work in is FAR from progressive in a macro sense.
Actually I do agree closer in to Perth city you have more NIMBYism but out in the fringe you have councils very progressive and keen to chase the developer dollar as well as grow their populations. The state government steam rolls through new developments unlike in Sydney where they are beholden to NIMBYS and while I am not in the residential industry short of bribes it would seem to me there is little wriggle room on getting developments up.
Australia has coped with rapid population growths in the past, when governments of the past talked about building a big Australia it had as much to do with bringing people in, it was about BUILDING a big Australia. You build the freeways, **** farms, water treatment plants and then put in place the things you need for new development like residential land release. You do not say we have a population that has grown by 100,000 people we have released housing lots appropriate for 110,000 people. As long as the price for greenfield sites on our cities fringes go at $60,000 per lot or under I think the government can lay off releasing more. FFS in the likes of Sydney you are lucky to pick them up under $150,000 per lot. Then get slugged near 100k in levies plus your actual development costs at around 60k or more per lot. No wonder finished blocks are really expensive on the fringes of Sydney.
They are not so expensive around Perth.
Edit: Just realised you are a developer, so I imagine you would know far more about the topic. Be very interested if you could run your eye over the fringes of Sydney to compare with Perth though to see what developers are up against so far as competing with existing stock in that area.
Edit 2: Then again if you are a consolidation developer rather than greenfield I guess Sydney may suit. Having no competition from new areas creates windfall profits for owners of existing homes and infill developers would probably be able to take opportunities around the place too without acres of new land for sale in competition with you.
As has been mentioned several times on this thread, people have three main options for their housing:
A) Buy.
B) Rent.
C) Live with family.
In the latter two cases your points regarding homebuyers are redundant. The three 'markets' are not independent of each other.
Next there is the question of why there is such under-utilisation of housing. What are the nature of the purchasing or similarly 'hoarding' (can't think of a better word) decisions that lead people to under utilise their properties and how will this trend be maintained in the future? I don't think this has been adequately investigated by property market commentators. I fear that some developers and planners have been making decisions on the basis of single person households as a result of this growing demographic without fully understanding the reason behind this.
the reasons matter not, the facts at hand do.
someone wants a 4 bed house. if they can afford it, they wil buy it.
this isn't a post WW2 economy with no credit whatsoever, no jobs, no bricks and a large, redundant workforce. we are not going to see families of 5 living in a 2 bed house as the norm, in australia, in the short or medium term future.
your fears as highlighted are certainly unjustified. no developer designs a development around single person households unless the market is there to take it up - any smart developer will tell you that if you exit strategy isn't secured then you are destined to fail.
insofar as "hoarding" goes, ask state planning bodies why they allow lot of 500sqm - and fight for the right to retain those lots - so close to CBDs.
give someone a large plot of land, and they will put a large home on it. funny though, because give someone 200sqm of land, and they will put a large home on that too.
maybe people just enjoy the space. but you can't back that argument up with stats, so i guess it's futile even suggesting it.
Price is set by current demand and supply. Projected supply and demand can only act on current price around sentiment and drive lower demand and lower new supply. Perhaps this is what is happing in our building approvals? Perhaps not?
Markets are forward looking (but still too often get it wrong!) and I agree that if there is a change in sentiment as happened in the USA and Ireland and Spain then expect some extra houses on the market, one of the reasons I am bearish. People do sometimes buy more than they need because houses are a good place to invest especially your PPOR preventing you paying tax on your capital and avoiding rent payments after tax. But nothing is going to change this except a change in underlying conditions.
I agree that if we had an economic shock or affordability worsened for any number of reasons of course we would not then know what to do with all the houses but I wonder if the government should not supply land into the market (resi land release) rather than playing a numbers game and trying to regulate the market. We deregulated finance and never deregulated development. This is the issue. I am not saying let developers do what they want but give them a framework and apply it consistently.
I think the government sadly thinks as you do and says this is how many people we have and this is how many they should live to a home. This is the very problem. If we had a real market as demographia suggests we do not, we might have more homes / less homes or the same but one thing we would not have in a country with limitless land is expensive homes.
see blue responses
Actually I do agree closer in to Perth city you have more NIMBYism but out in the fringe you have councils very progressive and keen to chase the developer dollar as well as grow their populations. The state government steam rolls through new developments unlike in Sydney where they are beholden to NIMBYS and while I am not in the residential industry short of bribes it would seem to me there is little wriggle room on getting developments up.
NIMBYism is alive and well - look at Stirling and Nedlands - all adjoining property owners have to agree. ridiculous.
although you are very correct - outer councils like Cockburn and Wanneroo are very progressive, but then, Tony Watson and Karen Evans are very switched on chief planners.
Australia has coped with rapid population growths in the past, when governments of the past talked about building a big Australia it had as much to do with bringing people in, it was about BUILDING a big Australia. You build the freeways, **** farms, water treatment plants and then put in place the things you need for new development like residential land release. You do not say we have a population that has grown by 100,000 people we have released housing lots appropriate for 110,000 people. As long as the price for greenfield sites on our cities fringes go at $60,000 per lot or under I think the government can lay off releasing more.
spoken by someone who actually understands the mechanics of it. thank the maker.
FFS in the likes of Sydney you are lucky to pick them up under $150,000 per lot. Then get slugged near 100k in levies plus your actual development costs at around 60k or more per lot. No wonder finished blocks are really expensive on the fringes of Sydney.
They are not so expensive around Perth.
Balga / Nollamara / Westminster is a good example of a dead market - shot down by enthusiastic agents and even more enthusiastic sellers. $120k per lot is a finished lot price, not a wholesale lot price.
Edit: Just realised you are a developer, so I imagine you would know far more about the topic. Be very interested if you could run your eye over the fringes of Sydney to compare with Perth though to see what developers are up against so far as competing with existing stock in that area.
Edit 2: Then again if you are a consolidation developer rather than greenfield I guess Sydney may suit. Having no competition from new areas creates windfall profits for owners of existing homes and infill developers would probably be able to take opportunities around the place too without acres of new land for sale in competition with you.
i do it all - greenfields and infill. prefer infill though, but just has more headaches with town planning schemes etc. not interested in sydney - IMO that's a market that will just self implode through increasing density and severely lacking public infrastructure due to the landlocked nature of the greater metro area.
Ahhhh.....but if spend enough time and cups of tea...ughhh, I'm so sick of cups of tea.....you eventually get that bit of paper signed off by the Council.
Feb 09 - Can I build a shed in my back corner ??
Oct 10 - Yes.
Yippee !!!
Assuming you are talking commercial.
It would seem to me that governments are far more progressive on commercial and industrial land release than residential. It is a well understood law of economics that the more expensive land (talking land which is used in production) is the less real wages are in the community.
Consider if businesses in Australia had to pay the likes of yourself (no disrespect intended) near everything they earn they would either pay their workers less or go elsewhere, offshore etc. It is crucial to our productivity unlike residential where in my opinion they have completely dropped the ball. Australia has a natural competitive advantage in land but our government seems to be the main beneficiary now not the people. I am not a communist by any stretch but the land we have should be available within environmental constraints set by logical technocrats rather than politically motivated individuals.
In Sydney people with broad hectare zoned industrial on our fringes will do anything to have it rezoned residential. Usually futile but it demonstrates the way our governments have it so wrong in resi but get it some way closer to right in other land releases. Or it is an interesting comparison at least the resi / commercial one.
no - Dazz's mention is just a shed out the back of a house.
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