Solving the housing affordability crisis
- Thread starter Cupcakes
- Start date
I know. Obviously no CG isn't realistic. I was just answering the question.
Of course houses in scarce locations should have capital growth (e.g. close to beach and city) and over time areas become relatively closer to the city as people build further out.
But it isn't just those locations which have increased in price relative to income, it's the market on average which has increased. So the lowest end of the market is now more expensive. Maybe it's just because of dual incomes though. But I don't understand why Australia is so different to overseas? They don't seem to have housing which is as expensive as ours?
Anyway, I wanted to discuss innovative ideas and come up with lots of ways to make housing more affordable. Instead it just turned into the same argument people are having everywhere else on this forum. BORING!
Given that outer areas seem to have risen a lot, do you think that would be a good place to go bargain hunting as the market subsides?
Australia is different to overseas for lots of reasons. I suspect you don't want to discuss them here, though.
Maybe if they halve in price lol. I'm not paying $300k to live in Cranbourne!
Personally I wouldn't want to live in the mortgage belt areas. I think they're great for young families who need a lot of space, especially if you work in the suburbs. But I'm single, what they hell am I going to do with a 4 bedroom house in the middle of nowhere? I'm not going to have time to clean some gigantic house either. You can't even develop them in the future because the blocks are so tiny and they have all these rules and regulations about what you can do.
I'd be happy in a small apartment closer to the city which you can get for about the same price. If I was going to move that far away from the city I mightaswell just goo realllyy far out to somewhere rural and pretty for a third of the price.
But I think my price range is more $200k and nothing exists for that lol.
Why is Australia so different to every other country?
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Solving the affordability crisis?
Raise wages.
I know I and the majority of my friends are all still on basically the same wage as when property here was $150,000 cheaper. It IS getting a little harder than it has been for many years and I feel for some certain folk in certain circumstances.
As a married man with no kids and both of us on a decent income we still 'struggle' to get to where we want to be. It's easy to fight back to those who are voicing their anger and opinion when we are where we are in our fairly comfortable lives, it's so easy to say 'well I managed to do it, why can't you?' but circumstances are different for many than they were with us at the time.
It's sometimes hard to see where people are coming from, whatever the topic but I've recently started to see a few things that I previously was completely blind to in a whole range of life's different aspects.
Raise wages.
I know I and the majority of my friends are all still on basically the same wage as when property here was $150,000 cheaper. It IS getting a little harder than it has been for many years and I feel for some certain folk in certain circumstances.
As a married man with no kids and both of us on a decent income we still 'struggle' to get to where we want to be. It's easy to fight back to those who are voicing their anger and opinion when we are where we are in our fairly comfortable lives, it's so easy to say 'well I managed to do it, why can't you?' but circumstances are different for many than they were with us at the time.
It's sometimes hard to see where people are coming from, whatever the topic but I've recently started to see a few things that I previously was completely blind to in a whole range of life's different aspects.
WA gets a 12m "phase in" period - just a way to delay the inevitable huge spike in housing prices.
You just need to find someone to sell you their property for 45% less then the market and your away.
I am unsure where you get the figure 45% over priced.
The prices as they are, are the reality. You can either wait and continue renting at say $400 a week, $20k a year. Or buy somewhere where you can afford and that 20k a year can start coming off your property instead of paying off an investors mortgage hoping for housing prices to plummet.
If housing prices collapse then there is a good chance that something very bad has happened to the economy, you probably wont have work and wont be able to buy that property anyway.
You just need to find someone to sell you their property for 45% less then the market and your away.
I am unsure where you get the figure 45% over priced.
The prices as they are, are the reality. You can either wait and continue renting at say $400 a week, $20k a year. Or buy somewhere where you can afford and that 20k a year can start coming off your property instead of paying off an investors mortgage hoping for housing prices to plummet.
If housing prices collapse then there is a good chance that something very bad has happened to the economy, you probably wont have work and wont be able to buy that property anyway.
Yup. Here's a real life example: I'm living in Spain at the moment. Over here you can find those big 45% discounts, but guess what? You can't get a loan! You know why? Because you're unemployed! You know why else? Because the banks are broke! That, and they already have enough repossessed housing stock on their books, they don't want/can't add your mortgage to it too.
But here's the interesting bit for FHBs waiting for price drops. Even if you *could* get a loan, that 300K apartment in the trendy part of Barcelona that you had your eye on back in 2007, hasn't gone down at all. It's maybe lost 10% from the peak in 2006-7. There are no 45% discounts on prime properties. Just like when the US bubble burst, you couldn't suddenly by NY penthouses at half price. And, if the Australian market bursts (FTR, I don't think it will because I don't think we have a 'bubble') FHBs still won't be rushing the Vaucluse market.
LR, you still in Espanol?! Given the economy in Spain, what is the effect on the people? Do they see a way out? How is government handling the crisis?
I visited Spain in mid 2007, and whilst I was in Malaga, I saw a significant number of new and near apartment buildings, being advertised for lease and for sale. I always wondered who was coming / moving there and buying.
Your commentary about Spanish property is very much the same in some parts of Greece that I know of. Banks lend to 65% max if you qualify and buying costs (stamp duties) equate to another 13-15% of the purchase price.
For example, the population, especially in Rhodes, is so reliant on tourism, is doing it tough. They won't have 35% unless it is inherited or gifted. And some prices (at least in the island of Rhodes) haven't really come off that much from their 2007/8 prices.
They did that, and all the Companies moved OS.
Where do you want to be?
DINKS should be able to do very well in a very short period of time. My wife and I managed to do it; we both worked our backsides off for a time, went basically nowhere and spent not much; not smokers or shoppers, nor brand name junkies nor had to go OS every year etc. Plowed LOTS of our income into our first PPoR when we got married and smashed the loan to billy-o in no time.
Welcome to equity heaven, add a little bit of investing knowledge and the ability to pull the trigger and voila!
Given that I've been on this planet probably the second longest on this forum of ever-increasing nappy wearing whiners, I'd say categorically that nothing is different now than it was 30 or more years ago in terms of buying a house. It was bloody hard then, unless you wanted to buy dogboxes in the never never paddocks, and still is now.
Cupcakes wants ideas to improve affordability - the biggest cost of property is Gubb charges and fees.
We are currently building a house. We bought the land a number of years ago. The overall fees - stamp duty, GST, design costs, permits, GST on all those, and other Gubb charges, rates etc for the various processes to get the project done will be near on $150k from original purchase of land in 2005.
The Gubb then give a miniscule proportion back to the penguins by way of rebates (solar power) and other "incentives" to make them look like good blokes near erection-time (not a typ-o).
Good luck getting rid of that cashcow.
Here's my idea;
1.Cupcakes becomes PM, abolishes stamp duty and all GST charges on any costs relating to building or buying or owning a PPoR for the first 5 years of ownership. After this, GST applies to all holding costs.
IP's are not exempt, but can claim part of the GST in their tax deductions; say 10%. (I can't believe I said that).
2. R/E agents get a flat $1k commission for selling a house across AUS, and are fined that $1k if they turn up to an OFI in a Beemer (or higher) and/or wearing a red tie.
3. Auctions are banned, and anyone found giulty of conducting one is horsewhipped in centre of MCG at half time of Grand Final.
I've got loads more, but they are too politically incorrect to mention here, and I would get the sook police onto my good self.
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I didn't say improving housing affordability = crashing the market. I really want to make it clear that I DO NOT WANT THE MARKET TO CRASH.
That would be awful! So many Australians who will be retiring soon have their entire worths tied up in their homes!
I'm really scared there will be a downturn in Australia. I'll be graduating soon and looking for a job and I think the unemployment rate of young people is 45% in Spain!!!
Sounds like 1992-3 in Australia, though it was only 20% odd unemployment for graduates then.
LR, you still in Espanol?! Given the economy in Spain, what is the effect on the people? Do they see a way out? How is government handling the crisis?
I visited Spain in mid 2007, and whilst I was in Malaga, I saw a significant number of new and near apartment buildings, being advertised for lease and for sale. I always wondered who was coming / moving there and buying.
Your commentary about Spanish property is very much the same in some parts of Greece that I know of. Banks lend to 65% max if you qualify and buying costs (stamp duties) equate to another 13-15% of the purchase price.
For example, the population, especially in Rhodes, is so reliant on tourism, is doing it tough. They won't have 35% unless it is inherited or gifted. And some prices (at least in the island of Rhodes) haven't really come off that much from their 2007/8 prices.
Hey Buzz! Yup, I'm still in Spain - and engaged! To that same lovely Spanish man that I met only 3 weeks after I arrived. Funny how things turn out
Banks here also often require personal or cash guarantees, on top of deposits. So you might have an 60K deposit saved to buy a flat worth 240K but then the bank also asks you to put an additional 60K in a trust account held by them. Crazy! But don't get me started on banks in Spain...
Mostly the people who were buying in Spain were German and English folks, but plenty of other Europeans wanted a little patch of the sun too. Plus, in Spain it's normal to have a holiday home. Most average-Joe families have a little holiday apartment somewhere.
As for the crisis and its effect on the people, well, it's hard to say. Day to day life doesn't seem that different to me, except there are more for sale/rent signs up and I see more people dumpster-diving and going though trash on hard-rubbish night. Everyone in my part of Spain (inner-cuty Barcelona) still seems pretty cheerful. But then you turn on the telly and see tens of thousands of people camped out in peaceful protests across the country. Maybe I just don't know enough (any!) under-25 year olds...
Sounds like 1992-3 in Australia, though it was only 20% odd unemployment for graduates then.
What exactly are you saying? That 45% of young people being unemployed in Spain (and something like 20% of the overall population) isn't an important issue because 20% of young people in Australia were unemployed in 1992? That it isn't something I should think about? Lets just ignoreeee every current problem in society because everyone had it tough during the 80s and 90s!
Sorry, I was trying to be a smart ****. In the coffee lounge you were saying that I didn't understand how tough it was now compared to the 1992 recession.
Agree they have it even tougher in Spain too, but the unemployment rate is certainly a good indicator of how tough it is for graduates to find work and at present it is not as tough as it would be if we have 10% unemployment. Life is never easy cupcakes but it can get a hell of a lot tougher than it is now in a heartbeat.
Anyway I apologise, I forget that I should just turn the other cheek.
I saw a brief report on that protest of graduates in Madrid the other day on television. It is truly alarming that so much of southern Europe is so economically stuffed up right now, and that those least responsible are - as always - bearing the brunt of it.
A vicious thought did cross my mind at that moment though. Certainly not all, but definitely some percentage of them, are waiting for the world to get off its backside and start looking after them properly. I'm talking about the ones who want to go back to the old days of profligate government spending and cozy jobs and pensions for life that got them (or more accurately, their country) into this strife in the first place.
Then another even more cynical thought hit me: How many of those graduates - the best and brightest of their generation - could just muster their chutzpah and go out and start their own businesses, you know, from scratch? Certainly not all of them of course, but a few surely could, and they could in turn employ a few more of the others.
But these are unfair sentiments to cast upon the majority, who are most probably just highly employable people in a horribly non-employing environment, no capital to speak of, and little else but a good education behind them, rightly demanding their country's leadership gets its act together and focus on creating useful job opportunities.
Spain's only been a democracy for a few decades though, and one can all too readily despair at its immediate prospects with such an historical lack of constructive crisis-management leadership experience on its side. The great danger for those young people now I'd suggest would be a societal retreat toward supporting some form of reactionary authoritarianism, in the long tradition of southern European responses to economic crisis. It happened in Russia (NB: as I elsewhere accurately predicted the very day footage came through of the moment when Boris Yeltsin stood up on a tank in Red Square).
The amazing contrast to these protests in southern Europe are those happening now right across the Middle East. Those young people are demanding a civil society of their own, and not just a state to 'look after them' anymore. I know who my heart goes out to most.
A vicious thought did cross my mind at that moment though. Certainly not all, but definitely some percentage of them, are waiting for the world to get off its backside and start looking after them properly. I'm talking about the ones who want to go back to the old days of profligate government spending and cozy jobs and pensions for life that got them (or more accurately, their country) into this strife in the first place.
Then another even more cynical thought hit me: How many of those graduates - the best and brightest of their generation - could just muster their chutzpah and go out and start their own businesses, you know, from scratch? Certainly not all of them of course, but a few surely could, and they could in turn employ a few more of the others.
But these are unfair sentiments to cast upon the majority, who are most probably just highly employable people in a horribly non-employing environment, no capital to speak of, and little else but a good education behind them, rightly demanding their country's leadership gets its act together and focus on creating useful job opportunities.
Spain's only been a democracy for a few decades though, and one can all too readily despair at its immediate prospects with such an historical lack of constructive crisis-management leadership experience on its side. The great danger for those young people now I'd suggest would be a societal retreat toward supporting some form of reactionary authoritarianism, in the long tradition of southern European responses to economic crisis. It happened in Russia (NB: as I elsewhere accurately predicted the very day footage came through of the moment when Boris Yeltsin stood up on a tank in Red Square).
The amazing contrast to these protests in southern Europe are those happening now right across the Middle East. Those young people are demanding a civil society of their own, and not just a state to 'look after them' anymore. I know who my heart goes out to most.
There's an idea. Outsource the Great Australian Dream to a developing country.
Not such a silly idea.
Do a 1 for 1 migration swap with India or parts of Asia.
Our baby boomers without enough money for a good retirement here move overseas where living is cheaper. Their super will see them through and they can have the GA dream - overseas. Our foreign aid money can even build hospitals for them and locals.
For each aged emigrant we get one younger immigrant to do low-paid jobs Aussies don't want to do (anything from aged care staff to rural doctors).
Other countries get an inflow of money while we get a younger working population.
What housing affordability crisis? If house prices in Australia are severely unaffordable, a bubble about to pop as the bears claim then...
1 - Why do we choose to build the largest homes in the world? Wouldn't we build smaller less expensive ones instead?
2 - How are half a million families and individuals (approximately) buying homes every year, if they can't afford those homes?
3 - Why are our mortgage default rates some of the lowest in the western world if people couldn't afford their homes?
Australians don't seem to be having too much difficulty buying at these supposedly bubble prices. Maybe they're not so unaffordable after all? The reasons why most people can easily afford current prices are explained in detail in my blog (google 'Demographia Debunked' to find it).
To summarise briefly, houses are not purchased using wage income alone. Houses are purchased using wealth. A better measure of a household's ability to afford property would be to consider household discretionary income and total wealth. This would include non-wage income (such as income from interest, shares or other investments), and wealth stored in other assets (such as shares or equity in existing property) that may be liquidated or borrowed against in order to fund a new property purchase.
Cheers,
Shadow.
1 - Why do we choose to build the largest homes in the world? Wouldn't we build smaller less expensive ones instead?
2 - How are half a million families and individuals (approximately) buying homes every year, if they can't afford those homes?
3 - Why are our mortgage default rates some of the lowest in the western world if people couldn't afford their homes?
Australians don't seem to be having too much difficulty buying at these supposedly bubble prices. Maybe they're not so unaffordable after all? The reasons why most people can easily afford current prices are explained in detail in my blog (google 'Demographia Debunked' to find it).
To summarise briefly, houses are not purchased using wage income alone. Houses are purchased using wealth. A better measure of a household's ability to afford property would be to consider household discretionary income and total wealth. This would include non-wage income (such as income from interest, shares or other investments), and wealth stored in other assets (such as shares or equity in existing property) that may be liquidated or borrowed against in order to fund a new property purchase.
Cheers,
Shadow.
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