Long Term Future of Property

[nogen2007]

Just wondering what peoples ideas are of the long term (40+ years) of property investment, and how they feel about those possible futures.

With all the talk by governments about how bad housing affordability is, and how it will most probably get even worse, I wonder if it will get to a point where people truely can not affort to buy their own home, or to even rent one. What would happen if this did come about? Would the government try to interveen? Or would the people who couldn't afford homes try? This would be assuming, less people own their own homes, than the investors do.

Or, will the market even out again naturally somehow? Or is the affordability issue just a lot of hype?

 

[TheCamel]

there was an article in the recent API that summs it up

there's not a housing affordability crisis, there's an attitude crisis

I just watched Insight, which is also about the same subject, and a few key points came to mind:

young people are making lifestyle choices

a house in a Nice suburb

That sums it up, as far as i'm concerned.
If I could afford to buy an apartment, in canberra, as a single person, on a 45K wage, why can't a couple afford to buy the same apartment ?
Now yes, I agree it's changed alot in the past 18 or so months, and you wouldn't get the same thing here, but I settled for something less han what I ultimately want, because it's what I could afford.

I also sacrified things like going out and spending money on alcohol, and i have a minimal Capped phone bill, and drive as little as possible, even though I have an econobox. I have no new furniture or stuff, the only things I buy is a laptop every 3 years, for work purposes.
I have a very cheap ADSL internet connection, again, for work purposes. In honesty, what the HELL do I want with 200GB a month at 24Mb a second ? Sure, it makes me e-Penis look big, but there's no justifiable reason for it.


Of course, if i drove a big 6/8 cylinder, and had a 200pm phone bill, and went out every weekend and sank piss, then sure, i'd have an affordability problem too.

 

[alexlee]

Western Sydney prices are falling. You can get an older, structurally ok house on a 600sqm block 10-15 minutes walk from Blacktown station for $250k. What affordability crisis?

What's they calling an affordability crisis is simply a gap between what people want and what they can afford. Johnny Howard would call it an aspirational crisis.
Alex

 

[devo76]

I look at it this way. People will always look for ways to increase wealth for either supplimental income or early retirement. Generally speaking there are two ways the majority of australias population can do this.
PROPERTY and SHARES.
I can never see this attitude changing.
Even if there was a big housing price correction. Once prices drop many will see oppertunities and if the economy is good people will re enter the market and once again prices will go up. Affordability will always fluctuate and im sure people who buy just before the next boom will be harrassed by there friends who bought just after. Saying things like you got in at the right time.you had it so lucky,its so hard now, ra ra ra.
Over the last few cycles its somewhat easy to see how the majority of the population thinks and thats reflected in the past property markets. I cant see this changing drasticaly in the future.

 

[trendsta]

long term future for well-selected property that will remain in demand, with restricted supply, looks rosy...

 

[landlubber]

No way but up.

Medium, long and every other outlok for Aussie property is good....and there's about 3 billion people in the regions to our North who will keep it that way for a long, long time.

It's not just "us" anymore .... take a look at the immigration numbers and they're only going to grow. And the "new" immigrant is bloody wealthy. There are more millionaires in India ( for exmaple) than the whole of the Aussie population.

LL

 

[feihong]

Medium, long and every other outlok for Aussie property is good....and there's about 3 billion people in the regions to our North who will keep it that way for a long, long time.

It's not just "us" anymore .... take a look at the immigration numbers and they're only going to grow. And the "new" immigrant is bloody wealthy. There are more millionaires in India ( for exmaple) than the whole of the Aussie population.

LL

Again, the question is "where"? These cashed up immigrants are not just going to simply buy anywhere, but somewhere quality. So perhaps medium and long term trend looks awesome for some places, but not everywhere has its fair share of "wealth".

 

[alexlee]

Ask yourself, what happens when the richest people come in and buy the choicest areas? The next group buy the next choiciest areas. And so on.
Alex

 

[VYBerlinaV8]

Like other western countries, over the next generation or so the quality Australian property will become owned more and more by us investors. In many overseas countries, only a third or quarter of people own, and everyone else rents from them. We have perhaps 10-20 years to acquire property before it becomes so expensive only the very wealthy will be able to afford it. I plan on being one of them.

Once this happens, rents will be driven purely by supply/demand (although that largely happens now), and property value will be more related to income than it currently is.

Long term house price crashes are a complete myth - there is way to much demand, and way too much price support.

 

[buzzlightyear]

Does anyone see regulatory/tax changes by future governments (state, federal and local) as being a risk to this property path of riches?

Will the political landscape change as eg Gen X's move into politics, positions of power, brigning a different view of housing issues?

Australia, by comparison to the many other Western countries is quite egalatarian (despite the contrary view being proposed by various sections of the community) and I wonder if our sense of fair go, may eventually impact public policy (?)

 

[Kennethkohsg]

Dear All,

1. If there is one important lesson that I learnt from Rory O' Rourke's life experiences and some of the property investing lessons highlighted in his book, "Born Free, Taxed to Death", is his own observations regarding the fast disappearing of the the middle class in Scotland in 1980s and the choice for the future young generations of Scots to choose between being rich or poor through their choice/attitudes towards house ownership.

2. Rory observes that majority of his friends who are from the middle class Scot families could no longer afford to own their houses to live in because of the expensive high housing costs. consequently, many of these middle class familes are renting on a permanent basis.

3. I have personally observed that the same trend is presently fast occurring in Singapore today.

4. Just like my generation of Singaporeans ( as well as future generations of youbng Singaporeans) have been similarly priced out of the private property/housing market in Singapore today, I also believe that a similar trend will soon happen to Australia in the near future as housing ownership become increasingly expensive and less affordable for the majority of future generations of young Australians, in time to come.

5. Consequently, I will humbly urge and suggest that young Australians who can afford to enter the local housing market today, "to make hay while the sun still shine" before they are similarly priced out from the housing market in Australia too, in the not too far distant future.

6. For your kind update and further comments/discussion, please.

7. Thank you.

regards,
Kenneth KOH

 

[james_w]

there was an article in the recent API that summs it up


I just watched Insight, which is also about the same subject, and a few key points came to mind:





That sums it up, as far as i'm concerned.
If I could afford to buy an apartment, in canberra, as a single person, on a 45K wage, why can't a couple afford to buy the same apartment ?
Now yes, I agree it's changed alot in the past 18 or so months, and you wouldn't get the same thing here, but I settled for something less han what I ultimately want, because it's what I could afford.

I also sacrified things like going out and spending money on alcohol, and i have a minimal Capped phone bill, and drive as little as possible, even though I have an econobox. I have no new furniture or stuff, the only things I buy is a laptop every 3 years, for work purposes.
I have a very cheap ADSL internet connection, again, for work purposes. In honesty, what the HELL do I want with 200GB a month at 24Mb a second ? Sure, it makes me e-Penis look big, but there's no justifiable reason for it.


Of course, if i drove a big 6/8 cylinder, and had a 200pm phone bill, and went out every weekend and sank piss, then sure, i'd have an affordability problem too.

I do drive a v8 but it's lpg and is more econimcal then my old 4cyl hyundai

I also drink but don't go out and drink though at home or friends only

although didnt buy the v8 untill after our 3rd poperty transaction and I'm only a youngin 27 in 8 days lol but we don't have any affordablity issue

a friend of ours on a better income didn't understand how we did it untill I give them the option of a cheap block to resell and make some quick cash they chose to pay off a vt instead 10 months later we sold a new house on the block bought the car with cash these days there kicking themslves

I have only just bought a new computer

first time ever that haven't budget built my own hehe we drive all the time but too look at oportunities like I have said since could talk can't live in a car
things are just material and nice too look at night

 

[alexlee]

Unfortunately, Kenneth, it would seem that no enough young people are taking your advice. Witness the price falls in cheaper suburbs (Western Sydney) while more expensive suburbs continue to show strong demand, and mass turnouts at showings for apartments at 'hip' suburbs.

I have had friends (who will only live in the East or North) telling me that they just can't believe in the long term viability of the cheap suburbs. That's the kind of blinkered vision my generation has.

If prices get so expensive that no one can afford to buy, prices either fall or rents go up to the point where the big super funds and managed funds come in and buy them, and we'll have more a US system. The market will find equilibrium somehow.

Yet, I observe that even in a supposedly institution-dominated market like the US, they have also had price booms that have benefited individual investors (and is, currently, killing those individual investors who are over-leveraged).
Alex

 

[Kennethkohsg]

Does anyone see regulatory/tax changes by future governments (state, federal and local) as being a risk to this property path of riches?

Will the political landscape change as eg Gen X's move into politics, positions of power, brigning a different view of housing issues?

Australia, by comparison to the many other Western countries is quite egalatarian (despite the contrary view being proposed by various sections of the community) and I wonder if our sense of fair go, may eventually impact public policy (?)

***********************
Dear Buzzlight,

1. In his article, entitled, "Housing Boom Far From a Bust", which was published last Saturday in the West Australian Newspapers dated 6th October 2007, Dr Mike Nahan has argued that "as long as immigrants keeping coming (to Australia) - and that the State and local Govt maintains their grip on the land supply, the housing boom in Austraiia will continue".

2. Dr Nahan has gone on to further assert that, " How does a sparely populated and land -abundant nation such as Australia, run short of land? Well, the only way it can is through the daft hand of government""

3. He further alleges that, "State Governments and local governments have assumed control over land supply and adopted policies that restrict supply of land in a period of high period of high immirgration and demand. This has happened in every (Australian) State and all the Nation's major cities face big and growing (land/housing) shortages".

4. Do you agree with Dr Nahan's a/m claims?

5. Looking forward to your as well as other members' views/contributions for further discussion regarding the a/m claims made by Dr Nahan, please..

6. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Unfortunately, Kenneth, it would seem that no enough young people are taking your advice. Witness the price falls in cheaper suburbs (Western Sydney) while more expensive suburbs continue to show strong demand, and mass turnouts at showings for apartments at 'hip' suburbs.

I have had friends (who will only live in the East or North) telling me that they just can't believe in the long term viability of the cheap suburbs. That's the kind of blinkered vision my generation has.

If prices get so expensive that no one can afford to buy, prices either fall or rents go up to the point where the big super funds and managed funds come in and buy them, and we'll have more a US system. The market will find equilibrium somehow.

Yet, I observe that even in a supposedly institution-dominated market like the US, they have also had price booms that have benefited individual investors (and is, currently, killing those individual investors who are over-leveraged).
Alex

***************************
Dear Alex,

1. I do agree with you as far as the present "well-to-do" young Sydneynites and Melbournites are concerned, at this point in time.

2. However, I am not sure whether the young Australians in WA do presently agree with your views at this point in time, given the fast increasing house prices in Perth over the last few years.

3. Consequently, as the local housing prices become increasingly more expensive and less affordable for future generations of young Australians, I am not sure whether future generations of young Sydneynites and Melbournites would still be as "choosy" regarding their housing requirements as the present counterparts today.

4. For your kind update and further comments/discussion, please.

5. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

What's they calling an affordability crisis is simply a gap between what people want and what they can afford. Johnny Howard would call it an aspirational crisis.
Alex

&&&&&&&&&&&&&&&&&&&
Dear Alex

1. Not when the household credit/borrowings in Australia has suddenly shot up from some 35% of the disposable income in 1977 to 160% in June 2007 of which 85% are related to housing.

2. Morever, the median house price in many of capital cities in Australia are also fast becoming among the most expensive ones, in the world.

3. While I may agree with you that the present housing/land affordability issues in Australia, may appear to be an "apsirational crisis" more for the YUPPIES, DINKS and for some of the well-to-do Generation Y in Australia, I also believe that there is also some form of a real limit to the Australian housing price growth, in the not so distant future.

4. Consequently, I also believe that the present related land/housing affordability issues are ''real" to a certain extent, given the increasing number of Australians on the present public/rented housing waiting lists over the last few years.

5. For your kind update and further comments/discussion, please.

6. Thank you.

regards,
Kenneth KOH

 

[HiredGoon]

Western Sydney prices are falling. You can get an older, structurally ok house on a 600sqm block 10-15 minutes walk from Blacktown station for $250k. What affordability crisis?

At 9.5% costs (interest + bills etc) that is $23.75k a year.

Average household in Sydney is what, 60k? So the average house paying almost 40% of their wage on the cheapest area of Sydney is affordable?

 

[HandyAndy888]

Although I'm relatively new to investing, I like to look to the past to see the future...if we asked this same question 40 years ago, what would have people replied? Herein lies the answer...IMO.

 

[Debt Junkie]

This was in the Courier Mail last Thursday (Qld) (only selected paras) ...

*****
"FIRST-home buyers purchasing units or townhouses over traditional housing are saving up to 60 per cent in some Queensland centres.

Latest research from the Real Estate Institute of Queensland has found the difference between the median price of freestanding houses and units and townhouses can save first-home buyers between 20 per cent and 60 per cent on their purchase.

Mr McGrath said while there were plenty of new unit and townhouse developments currently being built, many first-home buyers were unable to afford them because of the high annual cost of body corporate fees.

He said new developments often included extras such as swimming pools, gyms and other leisure facilities which drive up the price for the end user.

"They (first-home buyers) would love to have a new place, but if it means them buying that or a cheaper, older place, they'll inevitably go for the older place," Mr McGrath said.

In August, the Queensland Department of Housing released to tender three sites for residential development of which 10 per cent of each site must be used for affordable housing set aside for first-home buyers.

Mr McGrath said he expected similar Government initiatives to be implemented in the future.

*****

The bit that cracks me up is the comment about first-home buyers buying a cheaper older place. Not noticeably ... the sort of place I bought (and live in) is well below the acceptable standard for many home buyers in Brisbane today ... I mean, it's built out of brick! It's in suburbia! It's not a Queenslander!

I recently replaced my $28 walkman with an iPod (cassette hadn't worked for about three years ). Now, if I just buy $500 suits, get a blackberry on an expensive monthly plan, join a gym, go on Tony Ferguson, buy a zippy new car, go on an overseas holiday every year, rent a poxy one bedroom apartment in the inner city with just enough room on the balcony for my $4,000 BBQ and get drunk go to raves and take ecstacy , then I'll be able to join my anxious and depressed renting friends (and no, they're not all Gen Y, just mostly).

Somehow, I don't think so!

DJ (Gen X)

 

[Andrew_A]

Just wondering what peoples ideas are of the long term (40+ years) of property investment, and how they feel about those possible futures.

This is a safe one to reply to, 40 year predictions!

I was looking at a newspaper from January 1959 recently, there was a future prediction column running in the Courier Mail and it was interesting to read! We are just very bad at predicting the future, we tend to hang onto the noticeable hits and forget the misses, which is a common technique used by predictors who make a living selling their wisdom. One of the predictions from this 1959 column was for a population of 50 Million in Australia by 1999, there is also this website which is a demonstration of how hit and miss (though mostly miss) future predictions can be. http://paleo-future.blogspot.com/

I think profiting from the future in terms of investing could be a bit like the recipe for success in VC, take a lot of diverse bets as you never know what is going to pay off big.

With property I would guess that the next 40 years will be pretty much like the last 40, I mean we have already survived two world wars, a depression and countless other problems in this country. Sure all empires eventually end and fade away but I think you make your money betting on the continuation of the Roman Empire rather than waiting for it's end.

I would guess Jan Somers recipe for wealth creation from resi property will be a persistent method to create wealth into the next 40+ years.

Oh.. and my RE in Brisbane will be rezoned into 10 story hi-rise development land as it's near rail and shopping centres and I will be able to leverage into buying my own football team and small country