House prices
"When interest rates had not risen in about a decade, having a buffer might have seemed like a waste of time.
However, the lower rates got below historical norms, the bigger that buffer should have become to protect against a reversion to mean (average), something that happens quite a lot in economies and on financial markets.
Instead, by removing the floor, the regulator effectively did the exact opposite, taking the same gamble as the RBA governor that interest rates would stay abnormally low for quite some time."
Yeah, whoops.
"The Bank for International Settlements (BIS) has published global household debt statistics for the June quarter of 2022. This shows that Australia’s total household debt is the second highest in the world when measured against gross domestic product (GDP)."
https://www.macrobusiness.com.au/2022/12/soaring-interest-rates-have-mor...
I think we can get to #1. Who's with me? It might be harder now, but one final almighty tap of the credit card, and we can beat Switzerland and be on top of the world.
:o
From VJ’s article above -
“Nearly one-in-four mortgages (by value) will switch in 2023 from ultra-low fixed rates originated at around 2% to rates that are more than double these levels.
Accordingly, the share of household income used to service principal and interest debt repayments will soar next year to its highest level in history.”
My fixed on 2.05% ends in 2024. Does that mean my repayments will double?
Umm, you kinda should be all over that Bone.
Nick Bone wrote:My fixed on 2.05% ends in 2024. Does that mean my repayments will double?
Yep, maybe more. You should really look into the details and do some calculations.
My twos time stables? It seems bleeding obvious but I honestly have no idea where if double means just that or some subsidy-esque might come into play.
A double in repayments is pretty gnarly. Surely that would equal something times unseen before? Little guy loses and the big dogs clean up again I spose.
Maybe not as dramatic:
$500,000 @ 2.05% = $1,861 per month (P+I)
$500,000 @ 5.50% = $2,839 per month (P +I)
Depends on the size, terms...
Nick Bone wrote:My twos time stables? It seems bleeding obvious but I honestly have no idea where if double means just that or some subsidy-esque might come into play.
A double in repayments is pretty gnarly. Surely that would equal something times unseen before? Little guy loses and the big dogs clean up again I spose.
Little guy loses and big guy cleans up? Ummmm the little guy (2.05% til 2024) is winning whilst the big guy (your bank) is losing until 2024.
I'm on a variable interest rate, so whilst eight consecutive monthly mortgage increases in the $150 range haven't been great, it's a lot better than a $1,200 kick in the balls.
flollo wrote:Maybe not as dramatic:
$500,000 @ 2.05% = $1,861 per month (P+I)
$500,000 @ 5.50% = $2,839 per month (P +I)
Depends on the size, terms...
Exactly, as I said, I've got no idea but that double isn't double.
Don, I meant more that people who are already in and very finically set up will be able to clean up and get another invest property while the people who scraped in get shafted. I'm sorry to hear the banks didn't post massive profits in the couple of years, but hey, I think they'll manage.
Anyways, I'm out of my depth here. Just saying it sounds pretty fucked ahead for a lot of people. Thankfully we had a good opportunity to get in in our crazy market area but that mean I feel for a fuck load of people who weren't so lucky.
donweather wrote:Nick Bone wrote:My twos time stables? It seems bleeding obvious but I honestly have no idea where if double means just that or some subsidy-esque might come into play.
A double in repayments is pretty gnarly. Surely that would equal something times unseen before? Little guy loses and the big dogs clean up again I spose.
Little guy loses and big guy cleans up? Ummmm the little guy (2.05% til 2024) is winning whilst the big guy (your bank) is losing until 2024.
Banks don’t lose
Yeah. Just had a quick look. My bank posted a $7,119,000,000 net profit 21-22 Financial Year. I really fucking feel for them.
Here's Will Emerson from a bank pointing out they don't lose, and also giving a handy budgeting lesson:
Nick Bone wrote:Thankfully we had a good opportunity to get in in our crazy market area but that mean I feel for a fuck load of people who weren't so lucky.
Their time will come soon enough. Question is will anyone have the balls to jump into a falling market? But you know what they say. Buy when everyone is selling and sell when everyone is buying.
goofyfoot wrote:Banks don’t lose
They're currently losing to those on low fixed rates.
“ Given Commonwealth Bank's $9.6 billion full-year profit reported in August, the total full-year profit for the big four banks in 2022 could hit $28.4 billion, assuming expectations are met over the coming fortnight. That would be 6 per cent higher than the $26.8 billion the big four banks reported for 2021.”
Really Don?
Imagine winning
Winning is in this kind of size bracket:
https://www.investopedia.com/ask/answers/052715/how-big-derivatives-mark...
I wish I understood all that vj but it may as well be written in Chinese to me
A quadrillion sounds like a fair bit though
udo wrote:https://m.realestate.com.au/property-house-qld-balgal+beach-141093832
wonder how the shed will go in a cyclone.
Easy to read article that seems to cover all bases (inflation, rates, migration, supply, demand, etc) It's long and thorough but easy to digest.
Nutshell ~ no housing bust and there aint even a bubble.
"Latest property price forecasts for 2023 revealed. What’s ahead in our housing markets in the next year or two?"
https://propertyupdate.com.au/australian-property-market-predictions/
"They have obviously been listening to those perma-bears who keep telling anyone who's prepared to listen that the property markets are going to crash, but they've made the same predictions year after year and have been wrong in the past and will be wrong again this time.
You've probably also read those forecasts - you know...that property values will fall 10 to 15%.
"In fact... Property Prices Will Fall 30% was a recent headline in the Australian Financial Review by a respected columnist, and here he was not talking about a specific segment of the market, but about "the Australian property market”.
"Fact is.... a fall of this magnitude has never happened before.
"Not during the recession of the 1990s, not during the global financial crisis and not during the period of a credit squeeze in 2017-18.
"The worst slump in the overall Australian property market was after the credit squeeze on 2016-17 and when there were concerns around proposed changes to negative gearing before the 2019 election.
"And at that time the peak to trough drop between December 2017 and June 2019 was 9.9%.
"And considering the current state of the economy, our financial health and property markets there's no credible reason to suggest a fall of this magnitude should happen now."
https://www.dailytelegraph.com.au/business/economy/how-many-slabs-of-vb-...
lol, very good article, made me laugh and gets the point across
A damning view into Australia's rental market:
https://www.japantimes.co.jp/news/2022/12/23/asia-pacific/australia-hous...
"Rental supply is at the lowest in two decades, pitting renters against record numbers of people who can no longer afford to buy after a surge in house prices. “We have seen increasingly at the lower end of the market, people on lower incomes, the supply of rental stock available to them is reducing quite significantly, so this could have spillover effects on homelessness,” said Cameron Kusher, Director of Economic Research at Data firm PropTrack.
Homelessness ‘tsunami’
Rising migration levels after borders reopened this year have added to demand, with competition for properties resulting in rental bidding wars. "
IMF has a say:
https://www.smh.com.au/politics/federal/australia-s-misaligned-housing-m...
"In a report on housing stability and affordability, the International Monetary Fund said Australia’s property and rental markets are some of the most “misaligned” in the developed world."
Patrick wrote:Easy to read article that seems to cover all bases (inflation, rates, migration, supply, demand, etc) It's long and thorough but easy to digest.
Nutshell ~ no housing bust and there aint even a bubble."Latest property price forecasts for 2023 revealed. What’s ahead in our housing markets in the next year or two?"
https://propertyupdate.com.au/australian-property-market-predictions/
He’s fatalling missing one massive criteria in his assessment. He’s looking at Australia in isolation and missing what will happen in the world economy which will affect buyer and seller sentiment significantly in Australia.
Canada bans foreign investors from buying some forms of property
https://www.dailymail.co.uk/news/article-11592499/Canada-bans-foreign-in...
Didn't New Zealand do that?
"Red Hot Chili Peppers star Michael ‘Flea’ Balzary selling $3m home at Moruya on NSW South Coast"
https://www.realestate.com.au/news/red-hot-chili-peppers-star-michael-fl...
Not sure that would ever happen in Australia.
I expect the vested interests will continue to control the narrative and call any change "racist".
Meanwhile, the well-meaning but misguided will nod and go along with it.
Thought this article from the SMH about projected population increase was interesting and telling.
First thing that struck me was the language used.
Population increase was seen as "rebounding" from a "slump".
Population has been "stagnant" which has been a "handbrake on growth".
Everything in the article screams that population growth is not only desirable but essential.
Which, in a roundabout way, brings me closer to the point of this thread.
Sure, we're seeing a post-Covid housing price correction but with an extra million more people in NSW alone in the next ten years, what does this mean for house prices (not to mention rental prices) in the longer term?
And still no sign whatsoever of a broader conversation about population growth and its implications socially and environmentally.
https://www.smh.com.au/politics/nsw/sydney-s-population-forecast-to-hit-...
You’re dead right there Andy. The way they use language gives the game away. They are either deluded or conflicted, or so completely sold on outdated ideas they can’t see that their logic chip is broken.
Imagine if they (correctly) said “Population has finally stopped growing at unsustainable levels, but there are signs that this might not continue. Rampant growth in population imperils the ‘best for 50 years unemployment rate’, and government policy remains staggeringly obtuse to the benefits of reduced immigration rates. Lazy business lobby groups and the real estate industry continue to call for population growth with no answer to the question of ‘where are they going to live?’
SMH and other news media outlets are hopelessly conflicted with real estate side hustles such as ‘Domain’.
Bingo Andy, you are spot on. Any savings we make on CO2 reduction will be negated (and then some!) before all the effort and engineering to achieve it is expended. Add to the amount of new coal fired power stations going up all over the world, and put a fork in her, she's done.
Suburbs and towns where homeowners have won the property lottery:
https://www.realestate.com.au/news/suburbs-and-towns-where-homeowners-ha...
velocityjohnno wrote:Suburbs and towns where homeowners have won the property lottery:
https://www.realestate.com.au/news/suburbs-and-towns-where-homeowners-ha...
Kingscliff and Casuarina growth are a joke. Although they’re far more attractive (given proximity to Gold Coast airport) than Minyama on the SC which has absolutely sweet Fck all to offer.
Gonna be a lot of people in a world of hurt in 12 months time.
Biggest drop on record!!!
And more of the same to come.
https://thenewdaily.com.au/finance/2023/01/09/property-downturn-biggest-...
I found an excellent explanation for why Canada banned foreigners owning property, why housing in Western cities has gone mental and priced out the locals, why immigration has been turbo charged, and why this system might not work into the future:
Part 1: the problem of demographics:
Part 2: the example of Canada:
He explains things very clearly. The bit about the parking of the money and then moving on while pricing out locals was the penny-drop moment for me; it seems an unintended consequence of a policy designed to kick the can and not face demographic decline, to the detriment of people already here.
Regulating foreign investment and AirBnB are no brainers that could have immediate impacts on availability, but don't necessarily change the structure of the housing problem we've been dealt up by successive governments. I would welcome both of course, and in some places regulating AirBnB would bring hundreds of homes back into the long term rental market if coupled with strong vacancy taxes.
The biggest problem we're facing is one of supply, and supply will always be constrained if the purpose of the housing is not primarily to give people homes, but is financialised as an asset. If this was not the economy we lived in, investment in public and social housing would be much easier to achieve, and investors seeking quick profits would think twice about buying existing residential properties that could otherwise go to first home buyers, and put their money elsewhere. As long as governments continue to structure the economy around assets (in Australia this is mostly housing), and implement policies to ensure asset owners never lose (CGT discounts, negative gearing, weak renter protections) then it will keep going regardless of whether it's foreign investors or middle-class "mum and dad" investors from Australia.
A good article out today:
https://theconversation.com/how-housing-made-rich-australians-50-richer-...
It's a good article dandandan with some commonsense ideas.
But I think the article misses the mark and ignores two elephants in the room.
The first I would suggest is that Australia politicians and others with decision-making influence and power, and in general a very large chunk of Australian society, via property and other asset ownership like shares, have a vested interest in doing everything they can to keep increasing the nation's economic growth and prosperity, corporate profits and asset prices, and only provide lip service to anything contrary even if in the interest of the struggling and left behind, and even if in the interest of things like the environment and climate change.
This is the US-driven neoliberal model in which we live.
The second more obvious one is interest rates and quantitative easing/tightening. Isn't the current largest-on-record property price decline due to increased interest rates and quantitative tightening - nothing else has really changed at all in the past say 6 months, in particular housing supply or tax rules relating to property investing...? (And this is not an argument however against the above paragraph: Embedded higher inflation, wage-price spirals, hyperinflation and currency debasing, etc, are far more damaging to long-term economic growth and prosperity, corporate profits and asset prices, than some short-term economic pain from higher interest rates.)
The trajectory of modern, developed economies, fearlessly led by the US, continues to be one of going further down the neoliberal path towards more inequality, disadvantage, poverty, people being left behind, and extreme concentrations of wealth.
The reality seems to be that one needs to get themselves at all costs on the correct side of the economic growth and asset price ledger, or just get left behind. I'm not sure if anyone really cares about those being left behind, who can easily be swept under the rug and written off as being in their situation due to self-sabotaging and victim mentality.
Actually it seems that in the neoliberal model an increasing stock of disadvantaged and people left behind is beneficial to the already landed, asset owning wealthy and the corporate world since it puts the wealthy in an even more privileged position with more power, and it increases the stock of cheap labour trapped with no options and forced to take the working conditions and wages on offer, holding down wages and thus increasing corporate profits and asset prices (hello 200k immigrants/yr under the guise of skills shortages!).
I very strongly think Australia needs to take a good hard look at itself and at what's going on around us on this planet, and think twice about getting further tied up and in bed with the US, and thus getting trapped in the US's neoliberal economic policy and warmongering foreign policy agendas. We should consider looking more closely at the Nordic economies for our economic inspiration, and pursue more independent foreign policy relations (that are not influenced by the US) with the EU and member countries, and also countries like India, China, Indonesia, etc. I believe that we should also consider the idea and policy of military neutrality like say Switzerland or Ireland.
Completely agree GCSO.
you haven't already read The Asset Economy (it reads like you have!), then you will nod along furiously - emphasis on furious - with it. Short at only 90 pages, but it's the most damning and unsettling book I've read in ages (probably less so if you have assets or expect to inherit them).
One of their main points is to make clear that critiques of the current asset economy fall short in that they emphasise the growth, interests, corruption, etc of the 1% rather than look more broadly at how the democratization of asset ownership through policy settings (including low interest rates) has done exactly what you have said - created a large cohort of middle-class Australians with a vested interest in the continued rise in asset prices.
They go further to argue that we need to completely reshape our understanding of class in Anglo countries away from relationship to labour and your employment, and towards asset ownership. We're really at a point now that we risk locking in a new class structure that is entirely reliant about asset ownership and asset price increases, and on the other side of the coin a demographic of people who will never participate in the asset economy and exist to serve the debts of others.
First chapter is here if you're interested!
https://lareviewofbooks.org/article/the-asset-economy/
gsco wrote:It's a good article dandandan with some commonsense ideas.
But I think the article misses the mark and ignores two elephants in the room.
The first I would suggest is that Australia politicians and others with decision-making influence and power, and in general a very large chunk of Australian society, via property and other asset ownership like shares, have a vested interest in doing everything they can to keep increasing the nation's economic growth and prosperity, corporate profits and asset prices, and only provide lip service to anything contrary even if in the interest of the struggling and left behind, and even if in the interest of things like the environment and climate change.
This is the US-driven neoliberal model in which we live.
The second more obvious one is interest rates and quantitative easing/tightening. Isn't the current largest-on-record property price decline due to increased interest rates and quantitative tightening - nothing else has really changed at all in the past say 6 months, in particular housing supply or tax rules relating to property investing...? (And this is not an argument however against the above paragraph: Embedded higher inflation, wage-price spirals, hyperinflation and currency debasing, etc, are far more damaging to long-term economic growth and prosperity, corporate profits and asset prices, than some short-term economic pain from higher interest rates.)
The trajectory of modern, developed economies, fearlessly led by the US, continues to be one of going further down the neoliberal path towards more inequality, disadvantage, poverty, people being left behind, and extreme concentrations of wealth.
The reality seems to be that one needs to get themselves at all costs on the correct side of the economic growth and asset price ledger, or just get left behind. I'm not sure if anyone really cares about those being left behind, who can easily be swept under the rug and written off as being in their situation due to self-sabotaging and victim mentality.
Actually it seems that in the neoliberal model an increasing stock of disadvantaged and people left behind is beneficial to the already landed, asset owning wealthy and the corporate world since it puts the wealthy in an even more privileged position with more power, and it increases the stock of cheap labour trapped with no options and forced to take the working conditions and wages on offer, holding down wages and thus increasing corporate profits and asset prices (hello 200k immigrants/yr under the guise of skills shortages!).
I very strongly think Australia needs to take a good hard look at itself and at what's going on around us on this planet, and think twice about getting further tied up and in bed with the US, and thus getting trapped in the US's neoliberal economic policy and warmongering foreign policy agendas. We should consider looking more closely at the Nordic economies for our economic inspiration, and pursue more independent foreign policy relations (that are not influenced by the US) with the EU and member countries, and also countries like India, China, Indonesia, etc. I believe that we should also consider the idea and policy of military neutrality like say Switzerland or Ireland.
Good summary
This link was very difficult to find, but is essential reading, especially if you are university educated and no-one mentioned anything like this in your studies.
https://web.archive.org/web/20020925223144/http://homepage.ntlworld.com/...
dandandan - the great theft and inequality already happened. I cannot stress this enough. In the place of common land for the people to hunt on, fish in, or farm and ancestral houses, a system of title to land was established. Thus, common people were displaced of their land on an absolutely massive scale (also in Scotland and Wales and Ireland). The land was titled and combined into large sheep farms, productive swamp land was filled in, biological diversity gone. Any resorting to hunting was now poaching, and led to an enormous prison problem - these were overflowing, and for what? Normal activity by common people on their land. The First Fleet, Australia, and Transportation ensued for the common people. And the Aboriginal people were then displaced from their land. In both cases, the newly titled land supported sheep, and was very profitable.
The people left behind agglomerated in cities, and their industry began the Industrial Revolution (and also Association Football, to keep them happy!). Thus, human development began it's current exponential rise, and incredible leaps in technology, medical care, transport, education, opportunity and connectivity began. That genie is out of the box, and most of us would agree we have very great potential to access the experiences possible in this world, far greater than in 1650 for example.
The establishment of titles is not entirely bad: titles can be used within an increasingly complex financial system to raise capital, start ventures, and branch and diversify into an incredible array of activities. This system, along with successful governance (of which the Western liberal system has proved the most adaptable and enduring over the last 3 centuries since Enclosure) permits much of the economic complexity we have today. Important to note too, is that Australia can be economically egalitarian within this system, for example in the early 1970s.
There have been periods of very large inequality - people mention Dickensian London, and every now and then 'feudalism' gets a mention. Feudalism was before Enclosure however, and the Commons still existed. It's relevant to Australia today as the system of land title was brought along as well, and it's the sheer cost of these titles relative to earnings today that has become a pressing issue. A reversion to the mean would be very welcome.
dandandan wrote:A good article out today:
https://theconversation.com/how-housing-made-rich-australians-50-richer-...
This says it all really doesn't it!!!
"Housing is driving up capital income
Rents used to make up just 2% of national income in Australia. Now they’re almost 10%. This explains more than a quarter of the rise in the capital share of income in Australia since 1960.
As housing has become more expensive, it’s the wealthier Australians who own more housing who have benefited the most.
Economists Josh Ryan-Collins and Cameron Murray estimate that up until June 2019, in more than half of the previous 30 quarters the median Sydney home earnt more than the median full-time worker.
In other words, a relatively low-risk, low-effort investment provided greater returns than a year of hard work."
Here's a thought. Decrease the CGT offset/negative gearing arrangements for investment properties greater than 1. ie for your 1st investment property CGT deduction and negative gearing arrangements as per status quo. 2nd, 3rd , 4th etc all of the above are off the table!!!
dandandan, thanks for the book recommendation, really interesting and I nodded my head vigorously (and got a good neck workout) while reading that 1st chapter. I think everyone should probably read that.
VJ, thanks for that link, and Trevelyan's History of England - The Illustrated Edition also has a nice section on the enclosures and brief discussion of the development of private property rights, pp336-40 in my 1973 edition.
Thanks for the tip gsco, will dig around for that one.
I've long thought that a productive economy (ie actually makes stuff, value-adds) should be held in much more esteem here.
VJ if I interpret you correctly, yes I believe it's better if a country's wealth and prosperity are built on foundations of actually producing things and relative equality instead of asset price ponzi schemes and extreme wealth stratification.
Interesting stats on rent prices. Shows overall rents in capital cities haven't actually boomed taking into account CPI/inflation etc.
https://thenewdaily.com.au/finance/property/2023/01/11/rent-assistance-h...
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers