Chimerica

Aus House Prices 50% Overvalued - The Economist

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now they're 50% overvalued. (I would say 100%, as in double what they're worth, but that's just me). remember the OECD report that said they were 20% overvalued by looking at some chickens guts?

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We still have Spain and Hong Kong to be better (worse) than yet. No need to stop pumpimg up our bubble yet:)

Most people agree that the 150k we paid for an average new house on a fair sized block of land was reasonable in the mid 90s, right? Same thing should cost us 200-250k in all capital cities now, that would represent stable growth and be in line with the 3 to 4 x wages thing.

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Most people agree that the 150k we paid for an average new house on a fair sized block of land was reasonable in the mid 90s, right? Same thing should cost us 200-250k in all capital cities now, that would represent stable growth and be in line with the 3 to 4 x wages thing.

as always, my comments are going to be canberra-centric...

the problem is one of supply and demand. i'm not taking the typical bull argument here because, at least in canberra, there has been plenty of building to accommodate the growing population, but even so prices have been rising.

part of this is due no doubt to the fact that the act gov't and developers are working hand in hand to keep prices high. the other part, however, is that the new builds are not "average new houses" they are overpriced 4 &5 bedroom mcmansions with all sorts of crap you don't need (and probably, after you live there for a couple of years, crap you decide you don't want). it's very hard to find a *reasonable* new house these days in canberra. its a joke, really.

so while we have new supply coming out in the new suburbs that, being on the very outskirts of town, *ought* to be affordable 250k places, they are actually selling for just as much as the houses in the inner suburbs. And since the ACT contrives to let most land go direct to the builder (who then adds all sorts of crap to inflate his profit margin) rather than to the individual (who can plan for his/her own budget and needs), there is little/nothing that can be done about it.

if the gov't were having a hard time getting rid of these new lots i could understand that they might want to work closely with developers to lessen the risk, but since that is most definitely not the case (the last lottery saw double or triple the number of applicants than lots of land) it is obviously a matter of mutual back-scratching.

i think that one quick way to bring down the median price of new houses would be to give individuals--not builders/developers--first crack at new releases. people will be able to decide for themselves whether they need a 280m2 house for a 4 person family, whether they really need a marble countertop, etc., etc.. if nothing else it would reduce prices by the 20-40k premium that developers add to the price of the land...

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We still have Spain and Hong Kong to be better (worse) than yet. No need to stop pumpimg up our bubble yet:)

Most people agree that the 150k we paid for an average new house on a fair sized block of land was reasonable in the mid 90s, right? Same thing should cost us 200-250k in all capital cities now, that would represent stable growth and be in line with the 3 to 4 x wages thing.

Everoyne has been brainwashed into thinking that a 300K mortgage is small.

I strongly disagree with this.

Contrary to what many have said, a 300K mortgage is sufficient to kill the average punter once interest rates rise to normal settings.

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Contrary to what many have said, a 300K mortgage is sufficient to kill the average punter once interest rates rise to normal settings.

I believe it is sufficient to kill the averge punter if they live a normal consumers lifestyle. If they cut back on other consumption, they will survive.

The issue with cutting back is that it will affect wages and employment with our very sales and services driven city jobs - already has.

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HK is extremely volatile, and rents can jump up or down 25% at a time -- this particularly affects Westerners, as I believe many locals are housed in govt housing with more certainty than that -- and the analysis of rents in The Economist may well be net of the govt housing -- bit like REI fakery -- giving a false impression of actual conditions there for most residents. So the volatility really just follows business conditions and supply/demand in the Western sector housing market, much of which is paid for by sponsoring companies and absorbed into the cost of doing business there.

I would also note that HK types are also massive gamblers, and every time some sort of venture is advertised on the market in HK to make any money at all it's flooded by speculators who then get royally screwed. People are always losing all their money and committing suicide there etc. It's a great way to live your life, being in a casino capitalist Asian country and subscribing to all the bullsh*t.

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as always, my comments are going to be canberra-centric...

the problem is one of supply and demand. i'm not taking the typical bull argument here because, at least in canberra, there has been plenty of building to accommodate the growing population, but even so prices have been rising.

part of this is due no doubt to the fact that the act gov't and developers are working hand in hand to keep prices high. the other part, however, is that the new builds are not "average new houses" they are overpriced 4 &5 bedroom mcmansions with all sorts of crap you don't need (and probably, after you live there for a couple of years, crap you decide you don't want). it's very hard to find a *reasonable* new house these days in canberra. its a joke, really.

so while we have new supply coming out in the new suburbs that, being on the very outskirts of town, *ought* to be affordable 250k places, they are actually selling for just as much as the houses in the inner suburbs. And since the ACT contrives to let most land go direct to the builder (who then adds all sorts of crap to inflate his profit margin) rather than to the individual (who can plan for his/her own budget and needs), there is little/nothing that can be done about it.

if the gov't were having a hard time getting rid of these new lots i could understand that they might want to work closely with developers to lessen the risk, but since that is most definitely not the case (the last lottery saw double or triple the number of applicants than lots of land) it is obviously a matter of mutual back-scratching.

i think that one quick way to bring down the median price of new houses would be to give individuals--not builders/developers--first crack at new releases. people will be able to decide for themselves whether they need a 280m2 house for a 4 person family, whether they really need a marble countertop, etc., etc.. if nothing else it would reduce prices by the 20-40k premium that developers add to the price of the land...

I don't disagree - it's that crony-ism thing that we have mentioned here before.

That said, the solution for Canberrans is as simple as don't buy - it would bring down the price even quicker. But Canberrans love to spend their money.

PIs don't want the overwrought 4 & 5 bedroom places. The returns are sh*t. Most PIs I have spoken to say they would take a 3 beddy or a small townhouse any day, as they can always be rented. Sub-divided battle-axe blocks with 2 x 3 beddys are the golden chalice.

I am less sure of a solid Canberra correction in 2010 than just about anywhere else in Australia because Canberrans have the means and desire to spend and because they sit stubbornly on what they think something is worth. I am resigned to the prospect of never buying here and just using it as a place to earn a good wage, save and get something nice rural or costal when the time comes.

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PIs don't want the overwrought 4 & 5 bedroom places. The returns are sh*t. Most PIs I have spoken to say they would take a 3 beddy or a small townhouse any day, as they can always be rented. Sub-divided battle-axe blocks with 2 x 3 beddys are the golden chalice.

The amzing thing when you try to subdivide and develop on one of these golden chalice blocks is how the local council will immediately levy massive 'developer' charges on your DA, e.g. what you're proposing would be an extra $30,000 charge easily, neatly itemised and broken into 'local parks and amenities', 'local child care centre run by us', 'our wages', etc.

I am less sure of a solid Canberra correction in 2010 than just about anywhere else in Australia because Canberrans have the means and desire to spend and because they sit stubbornly on what they think something is worth. I am resigned to the prospect of never buying here and just using it as a place to earn a good wage, save and get something nice rural or costal when the time comes.

The Canberrans are also buying up the rural and coastal all around with their flash guaranteed public service wages coming straight from the taxpayer to them for no real work.

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The amzing thing when you try to subdivide and develop on one of these golden chalice blocks is how the local council will immediately levy massive 'developer' charges on your DA, e.g. what you're proposing would be an extra $30,000 charge easily, neatly itemised and broken into 'local parks and amenities', 'local child care centre run by us', 'our wages', etc.

Buying them ready made is the chalice, I guess - not actually making them.

The Canberrans are also buying up the rural and coastal all around with their flash guaranteed public service wages coming straight from the taxpayer to them for no real work.

Guess I won't be buying close to ACT then:) If it wasn't for my wage and Mrs ummesters enjoyment of the biking facilities (and abundance of bike riding peers) I would have left the place long ago. People in the ACT are the spoilt brats of Australia, I am sure of it, and living amongst them too long isn't good for the soul.

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part of this is due no doubt to the fact that the act gov't and developers are working hand in hand to keep prices high. the other part, however, is that the new builds are not "average new houses" they are overpriced 4 &5 bedroom mcmansions with all sorts of crap you don't need (and probably, after you live there for a couple of years, crap you decide you don't want). it's very hard to find a *reasonable* new house these days in canberra. its a joke, really.

659207.jpg

Do shrinkings blocks mean rising prices?

BY JOHN THISTLETON 12 Dec, 2009 09:42 AM Canberra architect and planning activist Jack Kershaw is warning land prices per square metre in new suburbs are heading toward levels paid in prestigious suburbs of Forrest and Red Hill.Mr Kershaw said shrinking block sizes in the new suburbs of Crace and Macgregor West were seen as a solution to housing affordability, but were becoming more expensive.

''Is this the direction we want to go in housing?'' he said.

''It is treating people like peasants medieval in a way.''

link

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How an Aussie newspaper would cover this story:

Rents Tipped To Soar!

by P. Spruiker

Australian Rents are 50% undervalued according to economic survey...

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The Canberrans are also buying up the rural and coastal all around with their flash guaranteed public service wages coming straight from the taxpayer to them for no real work.

you got that right, no joke. I have tried looking pretty damned far afield but no go. Unless you go to Yass and Goulburn up north or Cooma down south, the rural properties in the middle are even more expensive than canberra. I wouldn't mind a couple of acres an hour away from canberra, but development fever has hit even tiny towns like burra. You can get 2 acres of land there, sure, but it costs $250k+, and its basically 2 acres of empty field--no trees, no privacy, no nothing. like living in the middle of a kansas cornfield (i imagine).

housing in the ACT is like some cheesy horror movie - in Canberra nobody can hear you scream....

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PIs don't want the overwrought 4 & 5 bedroom places. The returns are sh*t. Most PIs I have spoken to say they would take a 3 beddy or a small townhouse any day, as they can always be rented. Sub-divided battle-axe blocks with 2 x 3 beddys are the golden chalice.

I don't get the move towards 4 and 5 bedroom houses as most people have 1 or 2 kids. Modern bedrooms are so small you really can't put more than 1 kid in a room unless they only have 1 set of clothes and 2 toys each (you can barely use bunk beds either with 2.4m ceilings), so once you have more than 2 kids you do need 4 bedrooms.

I want a 4br house purely because one of my kids will be 9.5yo when I get a 3rd offspring, and the other one is an extremely noisy anti-sleeping late night owl who hurls things around at night while she's trying to avoid sleeping and I wouldn't wish sharing a room with her on *anyone*. Otherwise I'd just jam the two small ones in together.

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659207.jpg

Do shrinkings blocks mean rising prices?

BY JOHN THISTLETON 12 Dec, 2009 09:42 AM Canberra architect and planning activist Jack Kershaw is warning land prices per square metre in new suburbs are heading toward levels paid in prestigious suburbs of Forrest and Red Hill.Mr Kershaw said shrinking block sizes in the new suburbs of Crace and Macgregor West were seen as a solution to housing affordability, but were becoming more expensive.

''Is this the direction we want to go in housing?'' he said.

''It is treating people like peasants medieval in a way.''

link

This is an interesting issue that has been occurring in every major city, and in some rural areas as well.

Under the disguise of creating cheaper housing, and cheaper infrastructure; local councils and state and federal governments in general, have opted for smaller land sizes or more congested living, similar to what the British call a house. ("That's not a house! - THIS is a house!!")

Unfortunately what i observe is that it hasn't led to lower house prices, but rather us now having to accept the same prices for a smaller parcel of land, or a smaller dwelling.

It has been a deliberate rip-off, and the masses have fallen for it.

Further we haven't gained cheaper infrastructure costs, but rather rising costs.

So I have to ask, how long do you continue the experiment hoping to get the results you desire, when it obviously isn't working.

I predict a whole range of severe social issues arising from having human beings living in such close proximity to each other.

Especially if our unemployment was to get worse, or our standard of living drops.

I'm reminded of the European experiment, especially in the Eastern bloc countries of high rise apartment living, which formed into ghetto's and led to complete and utter debilitation of people's sense of self-worth. Gang controls, was/is very difficult to control in such a situation.

Britain has had centuries to get used to that style of living, and yet Australians are having it forced upon them.

The big push now by developers is to buy the large block, with a house already on it.

Sub-divide the block and place another house at the back, allowing a sale of two homes on a previously half acre block.

Local councils don't seem to give a hoot about what social consequences this might have upon neighbours and family life.

I personally would hate to see Australia, head down this path, and yet that seems to be exactly what is happening.

Short sighted answers, leading to long term problems.

Ah well - what else is new.

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This is an interesting issue that has been occurring in every major city, and in some rural areas as well.

Under the disguise of creating cheaper housing, and cheaper infrastructure; local councils and state and federal governments in general, have opted for smaller land sizes or more congested living, similar to what the British call a house. ("That's not a house! - THIS is a house!!")

Unfortunately what i observe is that it hasn't led to lower house prices, but rather us now having to accept the same prices for a smaller parcel of land, or a smaller dwelling.

It has been a deliberate rip-off, and the masses have fallen for it.

Further we haven't gained cheaper infrastructure costs, but rather rising costs.

So I have to ask, how long do you continue the experiment hoping to get the results you desire, when it obviously isn't working.

I predict a whole range of severe social issues arising from having human beings living in such close proximity to each other.

Especially if our unemployment was to get worse, or our standard of living drops.

I'm reminded of the European experiment, especially in the Eastern bloc countries of high rise apartment living, which formed into ghetto's and led to complete and utter debilitation of people's sense of self-worth. Gang controls, was/is very difficult to control in such a situation.

Britain has had centuries to get used to that style of living, and yet Australians are having it forced upon them.

The big push now by developers is to buy the large block, with a house already on it.

Sub-divide the block and place another house at the back, allowing a sale of two homes on a previously half acre block.

Local councils don't seem to give a hoot about what social consequences this might have upon neighbours and family life.

I personally would hate to see Australia, head down this path, and yet that seems to be exactly what is happening.

Short sighted answers, leading to long term problems.

Ah well - what else is new.

A lot of 'investors' in this nation looking to create modern day slums and let the tax payer pay for it all - through the rent you pay and let the tax payer cover the rest in negative gearing claims.

Yes, it's a social disaster for sure - the biggest issue is the 'masters' trying to suck in the populace to accept such living conditions.

In a country where we have one of the lowest population to land mass ratios in the entire world, you're going to have a massive degree of difficulty in implementing such conditions.

The fact is though, in a country as big as Australia you have no arguement in favour of it. The place is friggen HUGE!

It's a con by a minority of vested interests, nothing more and I hope they all burn in hell for trying to enslave their own f*cking people so they can retire at 40 and contribute nothing to society.

Parasites - all of them.

Mind you, I cannot see ONE rational reason WHY we NEED Land Lords in Australia AT ALL!

It's the massive COST of land/home ownership which has forced a rental class in our society and absolutely NOTHING to do with people's living needs.

Lower the cost of an average home to that of building and the materials alone and even the lowest paid income earner could afford it. You'd have close to 100% PPOR in Australia and I dare anyone to argue how this would be a bad thing for this nation and it's people!

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Lower the cost of an average home to that of building and the materials alone and even the lowest paid income earner could afford it. You'd have close to 100% PPOR in Australia and I dare anyone to argue how this would be a bad thing for this nation and it's people!

I had an Aunty in NZ (recently passed away) who was on welfare her whole life, first DPB (solo mums benefit) and then unemployment then pension.

She didn't work one day yet she managed to buy a home in the early 70's and was able to pay the mortgage from welfare payments.

Her home went on the market recently and is valued at >$550K

I find the whole situation completely bizarre and I doubt we will ever see those days again where you can get a mortgage on welfare and sustain paying it.

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"One day a mild mannered real estate agent sat eating his bar of cadbury chocolate and notice that it was a bit smaller than usual. Check his reciept he found that he had still paid the usual price for it, despite it being 15% smaller. What? How could they do this he fumed? Just then he was struck with a brilliant idea. What if all the world was really made of chocolate...."

1 person likes this

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"One day a mild mannered real estate agent sat eating his bar of cadbury chocolate and notice that it was a bit smaller than usual. Check his reciept he found that he had still paid the usual price for it, despite it being 15% smaller. What? How could they do this he fumed? Just then he was struck with a brilliant idea. What if all the world was really made of chocolate...."

LOL... Nailed it!

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I had an Aunty in NZ (recently passed away) who was on welfare her whole life, first DPB (solo mums benefit) and then unemployment then pension.

She didn't work one day yet she managed to buy a home in the early 70's and was able to pay the mortgage from welfare payments.

Her home went on the market recently and is valued at >$550K

I find the whole situation completely bizarre and I doubt we will ever see those days again where you can get a mortgage on welfare and sustain paying it.

Illustrated perfectly not the change in situation as much as the change in paradigm. Even the bears are thinking this is as unlikely a scenario as smoking in enclosed areas anymore.

We've been conditioned, it's just that some have been quicker to jump on the bandwagon whilst others still hold onto old ideals.

That said, whilst we can debate whether or not you should be able to pay off a home on welfare government funded housing should be a bigger priority for the government in such a climate than giving the land to developers to rape the people for profit and taxes.

The people we have in power are the scum of the earth in my book...

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A lot of 'investors' in this nation looking to create modern day slums and let the tax payer pay for it all - through the rent you pay and let the tax payer cover the rest in negative gearing claims.

Yes, it's a social disaster for sure - the biggest issue is the 'masters' trying to suck in the populace to accept such living conditions.

In a country where we have one of the lowest population to land mass ratios in the entire world, you're going to have a massive degree of difficulty in implementing such conditions.

The fact is though, in a country as big as Australia you have no arguement in favour of it. The place is friggen HUGE!

It's a con by a minority of vested interests, nothing more and I hope they all burn in hell for trying to enslave their own f*cking people so they can retire at 40 and contribute nothing to society.

I agree with this. I notice that many of them are interested in saving what they call "farmland"

"Oh we must stop this horrible sprawl from ruining our best farmland"

Our mate Sean is into that one.

Link for FireFly

</h3>

<h3>The "Poor Widow" Bogey

But when we seek to rectify this system, to break down this unnatural and vicious circle, to interrupt this sequence of unsatisfactory reactions, what happens? We are not confronted with any great argument on behalf of the owner. Something else is put forward, and it is always put forward in these cases to shield the actual landowner or the actual capitalist from the logic of the argument or from the force of a Parliamentary movement.

Sometimes it is the widow. But that personality has been used to exhaustion. It would be sweating in the cruellest sense of the word, overtime of the grossest description, to bring the widow out again so soon. She must have a rest for a bit; so instead of the widow we have the market-gardener - the market-gardener liable to be disturbed on the outskirts of great cities, if the population of those cities expands, if the area which they require for their health and daily life should become larger than it is at present.

What is the position disclosed by the argument? On the one hand, we have one hundred and twenty thousand persons in Glasgow occupying one-room tenements; on the other, the land of Scotland. Between the two stands the market-gardener, and we are solemnly invited, for the sake of the market-gardener, to keep that great population congested within limits that are unnatural and restricted to an annual supply of land which can bear no relation whatever to their physical, social, and economic needs - and all for the sake of the market-gardener, who can perfectly well move farther out as the city spreads and who would not really be in the least injured.

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A lot of 'investors' in this nation looking to create modern day slums and let the tax payer pay for it all - through the rent you pay and let the tax payer cover the rest in negative gearing claims.

Yes, it's a social disaster for sure - the biggest issue is the 'masters' trying to suck in the populace to accept such living conditions.

In a country where we have one of the lowest population to land mass ratios in the entire world, you're going to have a massive degree of difficulty in implementing such conditions.

The fact is though, in a country as big as Australia you have no arguement in favour of it. The place is friggen HUGE!

It's a con by a minority of vested interests, nothing more and I hope they all burn in hell for trying to enslave their own f*cking people so they can retire at 40 and contribute nothing to society.

Parasites - all of them.

Mind you, I cannot see ONE rational reason WHY we NEED Land Lords in Australia AT ALL!

It's the massive COST of land/home ownership which has forced a rental class in our society and absolutely NOTHING to do with people's living needs.

Lower the cost of an average home to that of building and the materials alone and even the lowest paid income earner could afford it. You'd have close to 100% PPOR in Australia and I dare anyone to argue how this would be a bad thing for this nation and it's people!

I agree that there are a lot of parasites out there...but there are studies that show that a high level of home ownership is bad for economies - because it means the population is tied to a home - can't move where jobs are, etc...i read it in the economist last year some time...renting is good - has been good for me and for countless others - it's just the ridiculous rent hikes we're getting even when interest rates were falling that truly shows the greed of the property investor mentality these days...

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it's just the ridiculous rent hikes we're getting even when interest rates were falling that truly shows the greed of the property investor mentality these days...

That shows the shortage of housing in your area. Simple supply and demand.

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I agree that there are a lot of parasites out there...but there are studies that show that a high level of home ownership is bad for economies - because it means the population is tied to a home - can't move where jobs are, etc...i read it in the economist last year some time...renting is good - has been good for me and for countless others - it's just the ridiculous rent hikes we're getting even when interest rates were falling that truly shows the greed of the property investor mentality these days...

Renting is not good if there is no protection for renters. But agreed re: renting gives people flexibility if they want it. The problem IMHO is people having to rent when they don't want nor need it.

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"One day a mild mannered real estate agent sat eating his bar of cadbury chocolate and notice that it was a bit smaller than usual. Check his reciept he found that he had still paid the usual price for it, despite it being 15% smaller. What? How could they do this he fumed? Just then he was struck with a brilliant idea. What if all the world was really made of chocolate...."

biggrin.gif

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