House prices

Hey Nick that's a bit sad to hear it's going on in the starter suburbs on the other side to. Must be a flood of demand? I like your idea of locals getting a boost; for the riverside suburb of Perth I grew up in (the olds bought for 80K in the mid '80s) not one of my contemporaries lives there now, they've all moved on. One guy did, but had to do something like O&G in Mongolia or one of the 'Stans to afford it - a divorce put paid to living where he grew up tho. I'm not sad about not being there, the dinghies and windsurfers got replaced by surfboards and off I went to follow the waves.
I'm seeing lots of work for the young apprentice now, don't know if it's slowing for them at present. A tour of central G-town reveals the cafes etc that got nuked by corona. Construction seems pretty robust.

Are we due to end Jobkeeper etc at the end of March? Will that end it? Gittins was squawking in his column at the age that we need more Gov support. Is it ending? We might as well Turbo-Keynes it now, lets blow this thing to ludicrous speed. I laugh at the Dutch and their tulips.

a threat?... it's reality. that ship sailed long ago.

its moved on from the ‘poor me’ - I can’t find a backpacker au pair / house cleaner / fruit picker / barista that charges a decent (i.e. illegal) wage that can afford to travel 3-4 hours a day to service my multi billion dollar suburb’.

if you are a kid - why the fark would you want to spend a fortune in time and money, to be a tradesperson, doctor, scientist, engineer, teacher, healthcare, architect etc
for a life time of debt and little chance / increasing difficulty of reward e.g. ability to purchase a place to call home.

The government guarantees that even the lowliest dumb fark uneducated, untrained can be a big shot property investor and or a real estate agent hero.

you can never lose. so why try?
wheres the incentive for a diverse productive society?

It's not just Australia it's been blowing up in NZ too, how's the first headline.

So what's the common thread? (other than low interest rates)

Maybe like suggested it is fuelled by people returning home? (i wonder how many Kiwis have retired home from Australia?)

"New Zealand’s property prices are so cooked, Kiwis want to move to Australia for cheap housing" (from 3 days ago)
https://www.domain.com.au/news/high-property-prices-in-new-zealand-could...

"New Zealand house prices surge, again" (from 3 days ago)
https://www.afr.com/markets/debt-markets/new-zealand-house-prices-surge-...

"No end in sight for New Zealand’s great house price boom (from late Jan)
"https://www.globalpropertyguide.com/Pacific/New-Zealand/Price-History

It's amazing to go back 12 mths and read what was going on in the real estate market and the fears regarding the Pandemic....and where we are today....

I ve watched globally as sea change/coastal real estate has boomed in the last couple of mths.....here in the SCS it's been totally crazy as I watch friends sellin houses and expensive property some up 30% more than a year ago.
I have so many stories of my house was valued at 980K a year ago , i just sold for 1.7m , or anther was convinced to try 1.7m 1 week later 2.2m....Anglesea/Airey's Inlet/Torquay/Jan Juc all are now having a huge boom in Prices , locals cashing in and moving inland or interstate...when you add this to rental market , the same thing has happened rents have gone up 20-30% and people from Melbourne are offering 20-30% more for rentals ......which locals, especially younger residents are eating shit at the moment...all the young guys that I know have stories of," ready to sign 1 year lease at $490 pw....go in 2 days later to sign contract and it;s been rented out for $700pw.......there are hardly any Rentals left on the SurfCoast ...and real estate prices are now well in excess $1m......and it's happening all over Australia the World..

there will be very heavy social and lifestyle consequences that will be paid , eventually by every body.....there is an "us and them culture " developing , the richer have doubled down and are spending big $'s to secure a second house and or rentals , so they don't get stuck in an urban lock down again......and suddenly the country life, is evaporating as crowds increase , and the local workers are now being pushed into Geelong...so now either the price of labor goes up or there will be a shortage of workers .....
I think we are heading for the biggest social upheaval we have seen in our lifetimes and the wealth gaps widen...the poor get poorer......but this time it's interesting as there is literally no-where to live for the average workers , and of course as the local populations and more weekend Tourists......where do you fit the Tourists?

Heavy lifestyle and social consequences indeed.
That’s the nature of the economic system we are living in - Trickle down theory is largely bullshit the rich get richer but at the expense of others.
There will be places to live for the have-nots, but not places to buy and of course with (intentional) wage stagnation, rental outlay as a percentage of income will just keep rising and rising and so we have an entrenched working poor forking out relatively more and more to support the increasing wealth of the haves.

How do you picture this upheaval playing out Brutus?
I just see it as a slow burn, the proverbial frog in the warming water.

It's certainly worse than working around the country, mid 2003, family of 4, 16ft van: $6 per night in Donald. Vic. Hardly another camper in sight as out of season.

Agree on the social consequence vignette Brutus, agree it will be a slow boil Andy.

Do we have anywhere in the world that's already at this stage, so we can see what it looks like? Places like Monaco in the Med, where housing is so expensive it just gets handed down in families, Ferrarris ripping down the streets? (That's my image of the place, anyway)

It does feel like there's nowhere to go. There's practically zero rentals on the entire East Coast of Tassie, with everything that used to be for rent now being an AirBnB. Every new subdivision is snapped up by people in the regional centers to run as an AirBnB. I reckon you could go through some of the small towns and more than half the houses would have an Instagram page for it with some fake boho name full of photos of women in big hats sipping cups of tea on the beach. It's maddening how lifestyles and land have so easily and enthusiastically been branded and packaged up for sale.

I've been pretty deeply involved in politics and activism for more than a decade, and nothing makes me feel as hopeless, sad or angry as the way Australia manages housing. It's a bloody disaster.

Hi Andy...hate to say , but this is happening now , at a real rapid rate....in fact the House prices have only been going up for about 3 mths........the rentals about 6mths as during lockdown people wanted a coastal address so they could do lockdown on the Coast and not in the city;s.
Caravan sites are even being scooped up , as this is the only hope here on the SCS to stay on the coast....but there are not enough.......I know a couple of single mothers who have kids in Primary and High school , and are freaking out as they have no where to go...no rentals within 50K's.....
as Blowin said the future of affordable housing and rentals are Trailer/Caravan parks....which creates another whole host of social problems...at present there are really none here.....
The big problem is all of these people who can't afford the new price rentals/buy a house ....are the workforce in the local communities.......with no sign of substantial increases in wages coming , and no real industry here.....the future is indeed bleak for our kids and for those who don't already own a house......
This has only just started within the last year and a side affect from the pandemic....where people now want a country lifestyle , so the lifestyle we have lived thru surfing over the last 5 decades, will now be greatly diminished , and there will be a much higher percentage of homeless kids ( already up 300% in Melbourne)....with no real careers to look at locally except the service industry as waiters/waitress's and checkout clerks....no chance of ever buying a house and now nowhere to rent.......a sense of hopelessness brings increase drug use, social stigmas , crime and an us and them situation which is already happening...
So the shit has hit the fan...now we look at what the consequences will be in the next few mths years.....but life as we knew it has gone so the question is ...how do we adjust?

“I see in the fight club the strongest and smartest men who've ever lived. I see all this potential and I see squandering. God damn it, an entire generation pumping gas, waiting tables, slaves with white collars, advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of the history man, no purpose or place, we have no Great war, no Great depression, our great war is a spiritual war, our great depression is our lives, we've been all raised by television to believe that one day we'd all be millionaires and movie gods and rock stars, but we won't and we're slowly learning that fact. and we're very very pissed off.”
― Chuck Palahniuk, Fight Club

That one was relevant for our generation in the 90's recession. It's worse now for those younger, as the very means of keeping a roof over your head is now slipping out of reach.

I kind of agree and disagree Brutus.
I mean, this has been going on for decades, from Point Lookout to Noosa to Yallingup.
Enclaves become holiday towns and the actual locals who live and work there end up in granny flats if they're lucky but often sheds, garages and tents.
Point Lookout was taken over by the lawyers, stockbrokers and QCs from the late 90's and the rental situation was a real game of musical chairs. At various times I was living in a backpackers and once I was camped under a tarp on a vacant block of land.
Generally speaking if you scored a decent backyard shed you were stoked.
So yeah it's been going on for a fair while but I agree that this spike is more severe and much more universal.

Monaco's an extreme example VJ, maybe it'd be an end-of-days case study.
A huge chunk of the Monaco workforce commute in from surrounding France or from over the border in Italy.
Maybe another example is Port Douglas.
And I'm wondering if the working class will (continue to) be moved on from Byron to places like Lismore or if the ghetto housing in some areas Of Byron will just get worse and spread.
Funny, like I say this shit has been going on for decades but it takes this current level and rate of change for people to start showing an interest.

There was some interest last election Andy but of course Shorten was painted as the devil incarnate for even suggesting a change

“Now is the worst possible time for Labor's disastrous housing tax — which will ensure anyone who owns their own home will see their house worth less under Labor, and anyone who rents will end up paying more.”

https://www.abc.net.au/news/2019-01-03/labor-negative-gearing-gfc-housin...

Fair call, Labor could smell it in the wind but couldn't organise a persuasive sales pitch and/or was brutalised by the press, including, in your link above, the ABC.
As an aside, don't ever think that the ABC is above being a corporate outlet or toeing the government line.
That article appears to be balanced but I think it's clear what its angle is.

As a comparison to Australia I think you will find New Zealand scrapped any tax benefits from negative gearing a few years ago, and well you can see from the articles i linked on this page above NZ real estate market is even hotter than ours.

N.Z. has no capital gains tax, wonder if that plays a part.

I've thought for the last few years, pre Covid, that Air BnB has been a dagger in the heart of most struggling Aussies that are just tryin to find a place to live and survive. One guy gets richer, the other guy is looking for a home, whereas in the past, the two were coexisting and mutually beneficial to the other. Would this be tied into the bigger picture, because i know it's affected my place of residency many times over for the last 5 years and plenty of people i know who have left coastal towns for lesser dig, pre covid too. Covid no doubt has exacerbated it but, as a radical thought, i wonder how much things would change if Air BNB was scrapped.

Perfect storm?
Interest rates, government policy, COVID, Air BnB...

Checked out a nice little place the other day.Telephoned the real estate agent only to be told, "already sold."
I then asked how long had the property been on the market?
Agent replied,"everything is selling in 2 to 5 days!"

How many Air BNB'S are sustainable if in the future only a select few are left that can actually afford a holiday?

These current prices show how little a dollar is now worth.

Yep Andy, it’s disheartening watching the way ol’ Aunty has been pumping the market with stories and TV shows of the great wins people are making.

I realise that blaming only negative gearing for the situation is too simplified but there is no doubt that those incentives started the whole frenzy and still does play some part in the problem.

Point is though the situation needs a solution. To just outright ignore any attempt that would in some way ease the problem will, and has, made it worse for anyone trying to get into the market without the benefits of the past concessions.

I just can't see a change happening.
The LNP are going to be in for the foreseeable future and they're going to flog this housing horse for all it's worth.
Maybe throw a bit of window dressing in here and there like the deposit guarantee but in essence change nothing.

According to a real estate agent in Apollo Bay there are 600 Airbnbs there, in one small coastal town!!

Guy..yeah there are examples like Monaco and France/Italy providing the workers , but it's been like that for a century....

what we are talking about is the rate of change in Coastal Communities , where it's only been a couple of mths ,, this year, and we can see that there are no rentals available anywhere even Geelong/Whinchlesea.....we are just starting a rental crisis for younger people.Short term the camping grounds are the only solution ......

there are already local grumbles out all the rich "blowins " in there Range Rovers , creating an us and them social situation....then where do all our kids work....where do they rent, and now they feel left out/behind.......hope is?

RE what happens once real estate prices shoot beyond the reach of any younger workers.

That's what's already happened in some parts of Europe. Friends of ours are a Swiss French/German couple and where they're from home ownership is a foreign concept. Unless your parents pass property down the line then lifetime renting is the norm.

Of course, the rental market is vastly different - five or ten-year leases are common and the rates are well below what Australians pay.

There are many many reasons but IMO the two main reasons why we are here are the Howard govt decision to allow SMSFs to borrow money to buy houses (and hence the finance vehicle for the exceptional growth in Airbnbs in AU) and the historically never seen before low interest rates and the resultant flight from cash based investments to assets (shares and housing).

The genie is out and the bottle broken.

Overseas? What about the families that have lived in cities like Venice for decades/generations only to be evicted to make way for an Airbnb?

This is all you get when money or the cost of borrowing it is worthless. Monumental failure of central banks and governments the world over since the GFC.

Govts fed and state need to open up more land and actually buy some large tracts themselves and go into competition with developers who are drip feeding estates into the market to keep the crazy prices high. It costs $50K to do a block and get it through council including services so why not lots of 100K priced blocks where Govt makes a few grand after purchase of ex farmland costs etc. Australia is a big place and lots of builders are doing nice $200k homes so it cant be that hard to get tons of $300K houses into the market if the spirit is willing. There would be no housing shortage then. Us being totally reliant on greedy developers to supply Australians with homes has to stop. It needs to be a Govt priority and even Govt housing can be paid off by low income earners as well so they can actually own the thing. A $300K home loan to anyone even a housing commission applicant is only $300 a week which is cheaper than rent right now. House prices will come down as well if stock increases, or is that the actual problem....nobody wants theirs to be worth less even if it helps others to own one.
Regarding current rents, My work took me everywhere and a few years ago I rented a little flat on the tweed that was a dump, but I fixed it up nice and when I left everyone wanted it as it was next to the beach. The stupid thing was, I was chatting with some of the 40 or so people who were frothing at the inspection and there were single mums with kids on centrelink etc etc looking at this little flat and I asked some of them some questions like.."Do you spend much time at the beach".....No never was one reply...hate sand...I asked her, "why dont you take your family and move to the country to a nice little town where you can get a big house for 200 bucks a week in a great little community?....Dunno...never thought about it came the reply...So just maybe, there are a lot of people out there who could invigorate a country town with their centrelink money and rents and maybe even get a job and buy something themselves one day.

The cost of borrowing is what has broken the genies bottle GuySmiley.
All you have to do is look at around whilst driving nowadays and see how many shitboxes or old model cars are on the road. Hardly any - most people have a new flash car be it at the bottom or the top of the market.
It's the same with boats - go park at your local boat ramp and see the eyewatering amount of borrowed money being used to go get some flathead for dinner.
The real estate boom has cashed us all up like never before and we are spending like there is no tomorrow.
Regional real estate at the moment is in the hands of the big city buyers who are looking at relocating. They have a vastly different view on what value for money is in these regional areas compared to the local residents who don't have a hope in hell of competing against them. As Brutus mentioned this is now creating and "us and them" situation.
Case in point - there was a period home just down the road a while back listed at $750k but ended up going for about $1.1 million. Pretty much a real estate feeding frenzy at the moment being driven by a population shift none of us have ever seen. Somehow I don't think it's going to end very well.

Air BNB's might be a factor in some way but i dont think it's a huge one, holiday houses all along the coast have always been holiday let, real estates still manage shit loads of them.

I know quite a few people that have holiday houses and ditched the Air BNB thing, when I've asked them why they say the hassle is just not worth it, risk of place getting trashed, wear and tear, repairs and then hassle of getting cleans done.

Add to that if you need the income to pay the mortgage it's risky especially with how much competition there is, much safer to get in permeant tenants...but i guess people want to have their cake and eat it too, get income but also use their holiday house.

IMHO the bigger factor other than low interest rates is the mindset shift of many people now realising they don't have to live in cities and can live and work in coastal communities this has been fuelled by advances in technology Covid has fuelled this mindset.

But really there is many different factors that add up.

End of the day though rising realestate prices are also a result of Australias long prosperity and the fact we havent had a real recession since the 90s.

The thing that i don't get is after the financial crisis, banks actually really tightened up on lending and did make it harder to lead, so it is surprising to see this recent boom.

Blowins all over it.....Id live there!
ttps://www.rent.com.au/property/3a-shield-st-zeehan-tas-7469-4289152

GS post 10:26 counldn't agree more. The market is no longer setting the price of money (interest rates) - the central banks are doing it by dictat and the debt levels are so high they are boxed into a corner keeping it at the most unprecedented low levels imaginable. Even negative, in the bond market in places! Govt policy has been... encouraging... and any going back will risk the ire of those working class people who've loaded to the gills on RE investment properties in the last 30 years.

I've thought about Brutus question, how to adjust. Don't want to sermon for others' situations, but for mine: stay, hold on, continue my work. Keep surfing, smile and talk to others in the lineup. Frantically try to build a capital base for the kids, so peddle that like the duck on the pond. All is well. Quack.

I remember working through Roseberry, FHOG was 7K, houses were 6K... early 2000s.

Would have to be one of the most hardcore places to live and surf that lower end of Tassie West coast though, howling onshore 300 days a year and howling offshore or cross shore 60 days and maybe no to light wind the other 5 days and would have to be one of the wettest coldest areas in Aust....then the waves chunky raw and mostly too big, with very little variety or options then add in freezing water for most of the year, even in summer its cold water.

Yep Indo, demands a very hardy breed of surfer.

Mark my words - all the homes there will be bought up within 2-3 years tops. It happened in Derby after the mountain bikes, it happened in Maydena after the same thing. Eventually people with capital will see an easy win. You'd only need to have a handful of people stay a month as an AirBnB and you'd cover the mortgage and then some. It sounds ridiculous now, but it was ridiculous to think house prices in Derby would go up ten times over in 5 years but they have.

The big problem here is that we've let a basic human necessity become financialized. Housing should never have been made an appealing way to create individual wealth. Now that it is, people can't imagine any other way to exist. All you have to do is use your existing privilege - an inheritance, a stable job, parents who will guarantor your loan etc - to get an investment property, and with historically high rents you can just force a poorer person to pay off the mortgage for you without putting a single cent of your own money into it. Wait a few years for some capital gains and sell it off having spent nothing, meanwhile the tenant has paid $40k and has literally nothing to show for it. The system is a cruel farce but Australians are addicted to greed and self interest and I can't see it ever changing.

Well said Dandandan.

Can't see those Zeehan and Queenstown trails having the same appeal as Derby and St Helens. Just too exposed to weather. Also feels like the Tassie MTB thing is getting a bit diluted. Surely not every town that puts money into trails can have the ROI that Derby had. It's an early adopter model.

Wholeheartedly agree with you on the rest of the post.

Zeehan - the last time we drove through there it was like a scene from Deliverance barring the banjos and tumbleweeds; one shop open at the time everything else closed. The misses aptly called it Zoohan. There is something very different about the west coast towns that makes you eternally grateful you live elsewhere. Queenstown and even Strahan have similar DNA bubbling away just below the surface. Oddly an area of Australia with very high youth unemployment at the same time as businesses falling over themselves to hire backpackers.

St Helens is going down the same path that Derby and Maydena have mainly due to the MTB industry.
I think if the tracks tick all the MTB adventure holiday/scenery boxes, it won't matter where you build them the adrenaline junkies, associated industries and real estate price increases will follow.
One positive though is that the petty criminals in these areas are now getting a much better return on their investment skills when they steal a push bike nowadays.

"The big problem here is that we've let a basic human necessity become financialized. Housing should never have been made an appealing way to create individual wealth. Now that it is, people can't imagine any other way to exist. All you have to do is use your existing privilege - an inheritance, a stable job, parents who will guarantor your loan etc - to get an investment property, and with historically high rents you can just force a poorer person to pay off the mortgage for you without putting a single cent of your own money into it. Wait a few years for some capital gains and sell it off having spent nothing, meanwhile the tenant has paid $40k and has literally nothing to show for it. The system is a cruel farce but Australians are addicted to greed and self interest and I can't see it ever changing."

Nailed it!

Yeew, how good in neoliberalism??

Every man for themselves fellas!

If you haven't got the flash house, the Air BnB'd investment property, the fourbie and the jetski, you've only got yourself to blame for not working hard enough.

Could house prices ever reduce? - The late 80's interest rate rise didnt do it, the War in Iraq didnt do it, the Twin Towers didnt do it, the GFC didnt do it and certainly Covid19 didnt do it so what will? Everyone "banks' either short mid or long term that house prices will increase...Always has always will! OR WILL IT? Ask yourself if a perfect storm occurred say China War, Interest rate increase by 3-4 fold and say another COVID 2 (Which are all spoken about) what will your financial position be? Farken scary thought. If I could only bottle some of the visionary confidence of the bloke that paid $1m for a Holden Ute then it'd be easier to rest my head on the pillow. Sadly, I think he, and all his mates paying the prices for houses as they are may well discover .....gravity..! I hope the madness ends soon for my kids sake.

The latest phase of capitalism is interesting because it’s turned something that is essential in our lives into a commodity.
We are heading towards an existential crisis in that the commodification of a basic necessity is a conceptual difference that will clearly have profound effects.
If you want to go off on a bit of a tangent you can say that late capitalism either has or intends to commodify absolutely everything including human existence.
And it seems that this commodification has been sold well enough that, generally, people are ok with it.

There have been significant periods of very slow house price growth over the decades. Indeed, in times of high inflation there have been decreases in real value. What we have seen since The GFC is fairly unprecedented as far as I can tell. I have no idea where it's going to end. Hopefully in a extended period of flat growth rather than a crash.
The average homeowner where I live made a $684 capital gain per day over the last year. That's madness.

I wouldn't have thought so either Stu, but every time I say "this place will never blow up" it always bloody does. I must be carrying some kind of curse.