Potential negative gearing changes
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This preoccupation with getting a house for FHB seems to be going round and round. What are FHBs entitled to? Australia subscribes to international declarations. From Wikipedia, the right to housing is recognised in a number of international human rights instruments. Article 25 of the Universal Declaration of Human Rights recognises the right to housing as part of the right to an adequate standard of living. It states that:
" Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control."
The basic housing 'entitlement' people can expect is basic shelter. The declaration does not mention garage, ensuite, living areas, size or location. From that perspective, basic shelter in current terms must be available if FHBs tone down their expectation. How else do other signatory states fulfill this obligation? Is their basic shelter meeting the same standard as in Australia?
I know that Asians can live in tight apartments, eg HK and Singapore. They do not have qualms with that, nor is there much stigma. In populous cities eg Shanghai, it is the standard type of housing. So discussions on affordability of housing in Australia should realistically include apartments.
In Melbourne, cheap and well built student apartments are available in Carlton. They are located close to many city employers. FHBs will save heaps on transport and time on travel. Some are just $240k - $280k. They are 1-2 bedrooms with kitchen. FHBs with average salaries should be able to service the loan on this type of affordable housing.
If students can find such apartments affordable and suitable housing, perhaps FHBs could consider them too. Their age range would not be too far apart.
" Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control."
The basic housing 'entitlement' people can expect is basic shelter. The declaration does not mention garage, ensuite, living areas, size or location. From that perspective, basic shelter in current terms must be available if FHBs tone down their expectation. How else do other signatory states fulfill this obligation? Is their basic shelter meeting the same standard as in Australia?
I know that Asians can live in tight apartments, eg HK and Singapore. They do not have qualms with that, nor is there much stigma. In populous cities eg Shanghai, it is the standard type of housing. So discussions on affordability of housing in Australia should realistically include apartments.
In Melbourne, cheap and well built student apartments are available in Carlton. They are located close to many city employers. FHBs will save heaps on transport and time on travel. Some are just $240k - $280k. They are 1-2 bedrooms with kitchen. FHBs with average salaries should be able to service the loan on this type of affordable housing.
If students can find such apartments affordable and suitable housing, perhaps FHBs could consider them too. Their age range would not be too far apart.
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Not everyone, but they don't call it the central business district for nothing.
Happy to answer some of your questions just as soon as you answer the one I've been asking you repeatedly and yet you refuse to acknowledge or answer.
Can you admit that property is substantially more expensive than it was 30 years ago in real terms?
By your measure, every property bubble the world has ever seen consisted of affordable property, even right at the peak because there were some people prepared to buy and sell at the very top. Clearly we both have a very different idea of what affordability means, so we will never see eye to eye on the topic.
My definition of afford: To manage or bear without disadvantage or risk to oneself
Yours must be the other...
http://www.bullionbaron.com/2012/06/does-australia-have-housing.html
As a city grows and it's boundaries spread further out, areas that were once on the fringe 30-40 years ago that were cheap and "affordable" to lower income earners may have been seen as the **** end of the universe are now inner/middle ring.
It stands to reason that these areas have in real terms outpaced "average" wage growth etc as they are now not being bought by lower income earners, they are being bought by people who can afford much higher prices and are happy to pay them because they "can".
"Affordability" for lower income earners just shifts further out again as it always has, it's not that complicated.
Multiples of income etc for an "average" property is misleading because as every new house is being built somewhere on the fringe of a city or an infill site is being redeveloped, the nature and size and demographics of a city continue to evolve.
It stands to reason that these areas have in real terms outpaced "average" wage growth etc as they are now not being bought by lower income earners, they are being bought by people who can afford much higher prices and are happy to pay them because they "can".
"Affordability" for lower income earners just shifts further out again as it always has, it's not that complicated.
Multiples of income etc for an "average" property is misleading because as every new house is being built somewhere on the fringe of a city or an infill site is being redeveloped, the nature and size and demographics of a city continue to evolve.
As Natedog said; If you look at a particular suburb which was once classed as outer-ring, but has now become close to inner-ring due to population growth and spread; then no.
But that is standard procedure all over the world and always was.
The volume of folks has increased and the demand for those areas has increased. The volume of folks with more to spend will therefore also increase with it.
Not even I can afford a house these days in a suburb such as say; Hawthorn or Beaumaris on my income. But they are very high demand areas and lots more folks out there than me with better incomes.
I could, however; sell my current PPoR and possibly buy a modest house in one of those areas - but I have built myself up to that level over several years....a FHB of course will have almost no chance; but they are fresh on the scene and cannot expect to have the wealth behind them that older folks who have been working for decades, and/or high income earners have.
But this argument is about the affordability of housing for FHB's, and the impact of NG on affordability....
We have proven time and time again to you that there are literally thousands of places a FHB can afford to buy - if they choose to.
I have already explained and illustrated how a FHB can afford a modest property for their first attempt, and without going in for ridiculously high loan amounts as a % of wages...very little mortgage stress or risk....two years of living at home with Mum and Dad, working hard and saving hard. Not much to ask.
"To manage or bear without disadvantage to oneself" - I can think of many times on this forum where older folks who are now well-off have illustrated what they had to go through to get onto the property ladder...
We can't make it any clearer; as a FHB, you are required to work hard at saving, to sacrifice, to look at areas which are cheaper to buy in - just like every generation before us has had to do....no furniture, no curtains, no car (or no car debt), no holidays and so forth and so on.
When you get a bit older, have the loan paid down, a bit of CG for your current property, then you look at moving up if you desire.
Same trend if use median. Lot sizes are decreasing.
Didn't read your post past this answer, as without the ability to admit what is factually correct we aren't going to have a constructive conversation.
Regional areas with little change in population growth have seen similar astronomical price growth relative to incomes, how do you explain that?
If you really believe what you are telling everyone, then please identify the outer suburbs where FHBs can buy homes for 2-3x incomes as they were able to 30 years ago.
& why do you think RBA would publish such misleading charts if they weren't an accurate reflection of what happened?
Hey Hobo,
Have you got stats for "household" income from 30 years ago compared to today?
I wouldn't know where to find it, but this may be more accurate than multiples of the average wage as dual income families probably more the norm today than 30 years ago.
Also what about the real decrease in the cost of other major household items (cars) and technology today compared to 30 years ago leaving us with more disposable income to be able to be used for housing purchases?
Have you got stats for "household" income from 30 years ago compared to today?
I wouldn't know where to find it, but this may be more accurate than multiples of the average wage as dual income families probably more the norm today than 30 years ago.
Also what about the real decrease in the cost of other major household items (cars) and technology today compared to 30 years ago leaving us with more disposable income to be able to be used for housing purchases?
Hmmm....
Your use of this definition appears to be flawed....
The dictionary defines affordability as
You appear to have chosen an incorrect usage for the context.
By your definition it is impossible to afford anything except risk free treasury bonds. You would have considered a cheap house in 2000 at 3 x income was still not affordable because it carries some risk.
It appears that the basic premise of your argument is fatally flawed.
Most people would consider the 1st definition to be applicable to housing - have the financial means to bear the cost of.
And maybe while we're looking at the historical affordability you could consider re-reading A fortunate Life by Albert Facey. There's some bits in the early chapters about what housing was like a 100 years ago.
But; house size is increasing.
From my distant memory, most houses back when I was a kid had 3 bedrooms and one bathroom.
An ensuite was found in "mansions" and not yer bog-standard family home.
From my distant memory, the average sized family home was about 13 or maybe 14 squares?
Usually a carport or one-car garage if any, and very seldom attached to the house with an internal entry.
I clicked on the Metricon site as one example and tried to select a 3 x 1 house between 14 and 15 squares...see below.
http://www.metricon.com.au/new-home...defacades=0&includepromotiles=1&maxrecords=28
Their smallest house is 17 squares - 3 bed 2 bath. At least the house itself is 13 squares (plus garage under one roofline to create 17 squares)
I would like to see an option of a 3x1 with a carport (no garage), but a design that allows a second bath to be added, and carport to be converted to garage - later on as finances permitted.
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Presumably the chart was using local incomes as the basis (so more expensive on an income to price basis).
Ratio is lower (at both ends of the scale), trend is essentially the same:
http://www.rba.gov.au/publications/bulletin/2012/dec/2.html
There's obviously reasons why house prices are substantially higher today than 30 years ago, but BV won't even admit that's the case.
By that definition there is no such thing as an unaffordable property market, only affordable, because there are always people buying and selling properties, even at the peak of a bubble. I simply don't agree with that view & definition.
As houses are changing hands they are clearly affordable for some - mostly those who have done the hard yards, invested wisely, taken reasonable risks, have a good deposit and trusted history. There are some houses that are unaffordable to many, and likewise some are unable to afford any house.
You appear to believe we are at a point in history that is unique (ie housing is expensive).... sure it's expensive - it's always been expensive, but never unaffordable for those who do the hard yards.
As you haven't responded to this bit of my post, I can only assume that you are unable to refute it.keithj said:
By your definition a Ferrari is an affordable car, because those who've done the hard yards and saved carefully can buy one. I don't agree with that measure or definition as it relates to property (or cars).
In my view affordability is relative. Relative to local history and other global property markets (currently), Australian property is unaffordable or less affordable (if measuring on a scale).
www.demographia.com/dhi.pdf
I'm not sure what I missed when addressing your post, I thought it was pretty clear. Your opinion appears to be that housing is never unaffordable, I see that argument as fatally flawed.
You need to read my post carefully....
... a Ferrari is affordable to some, a 1990 Datsun 180B is affordable to all who put in the hard yards.keithj said:
I agree entirely. That's why I dispute your absolutist definition that it is only affordable when it is 100% risk free. And even the RBA agrees with us both that while property is expensive, it is affordable (due to low interest rates) - and you too know that, because you & I had the same debate last year, and also 5 years ago, and that probably wasn't the 1st time either.....
So do you agree that the statement Property is only affordable when it is 100% risk free is complete garbage ? ( A simple Yes or No will suffice
)
Just because YOU don't agree with it, does not make it so.
I'm sorry you can't afford to buy a property, but I'm not going to make excuses for the price.
This part is always left out whenever the doomers talk about affordability. How convenient!
Most of the discussion in this thread is use of opinion to persuade on a subjective topic, not sure where I said it was anything else... so I can disagree with what I like.
But there are facts being used at times. For example BV refuses to acknowledge that house prices measured in real terms are higher today than they were 30 years ago, do you agree?
If a property investor can't afford to buy a property without the assistance of deducting losses against other income, I am not going to make excuses for price either. But as I think it's an unfair and distortionary policy I will continue advocating for a change.
So housing costs should by default just absorb any savings made in other areas of our lives?
It does give people more "choice" on what they want to spend it on though, and some will choose to put it into property if it suits them and they want to.
I actually agree in a broad general sense with you Hobo that prices are more expensive than they are 30 years ago, but they were probably more expensive then 30 years before that "FOR THE SAME PROPERTY"
The problem is with comparing then vs now is that the goal posts are shifting on a daily basis as a city continues to grow its boundaries and population and wages and cost of living vary.
Melbourne as an example grew approx. 700,000 people (I think) over the last 10 years so that's an approx. need for 260,000 new dwellings that need to be created to keep pace...that's a shedload.
Not all 700,000 want to live in a new 3 bed home in a new estate on the fringes, they will WANT a closer in dwelling, and they will pay a higher price for that competing against others who WANT they same as they do. If they can afford it they will do it, if they cant they will go to an area they can.
I know this thread is supposed to be about negative gearing, so im a little off topic, but I agree that there is always an affordable property available for a FHB if they want one.
That's my very simplistic view anyway.
Haha or it means incomes are low in Adelaide.
Historically, houses have - on average - doubled in value approx every 10 years.
I think we all are able to work out that this can only be the case if incomes are parallel to support the asking prices.
Income levels are completely different than they were 30 years ago, 50 years ago, etc....many households have two incomes, many are both professionals earning 6 figures each and no kids, and so on.
But, we are discussing affordability for the average FHB, and according to them; affordability is gone.
I have (and others have) shown you that it hasn't gotten that much harder than it ever was to buy a First Home.
Yes, the locations are different, but so is the City itself - the population size, the city size are all much larger, so the cheaper places are no longer closer in.
But buying is still within reach of FHB's.
