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RBA baffled by lack of affordability

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Australian Broker | 29 Aug 2011, 05:00 AM Agree 0
The RBA has questioned why adequate affordable housing stock is not available in Australia, saying the issue goes deeper than monetary policy
  • mortgageandlease | 29 Aug 2011, 09:34 AM Agree 0
    it may have something to do with the following:

    - State Government stamp duty on Property (especially SA and VIC).
    - The cost of land for construction. $170K - $200K for a very basic block anywhere near a capital city and even before the $150K - $200K construction costs for a basic house.
    - Interest rates that knock the investors out of the market
    - Interest rates that are knocking business around
    - Interest rates that stop first home owners up scaling and freeing up first home owner stock for new entrants.
    - Depressed income and employment in most rural areas, that prohibits people from moving there or buying there.

    Sure there are other factors as well.
  • Martin J. Rollins MPIA | 29 Aug 2011, 03:05 PM Agree 0

    Firstly, 'Mortgageandlease' above is 100% correct.

    Secondly, Glenn Stevens summed it in-part, by saying "I do not think we can keep having indefinite capital gain. To get the return, you actually need the rental yield to offer the investor a return, and that is coming up gradually,"

    What's missing in Glenn's analysis is this. The whole economy has multiple speeds that as yet, haven't been identified. Everyone discusses Mining V Retail, but this myopic view camouflages 'other' significant dimensions.

    The most important being, wages!

    It's been all good for 10 years on property appreciation, but seriously, people need money to buy houses, and if the rate of proprty appreciation doesn't fit with real wage growth, then voila you have your reason.

    Another point is, Australians' in the main are onto the RBA and that dumb, 1950s model of measuring GDP, CPI and moving interest rates... hence why Aussies are saving money rather than spending it.

    Any cursory examination of housing construction, FHOG applicants, mortgage LVRs, decreasing clearance rates, decreasing refinancing and marginallly increasing mortgage defaults should tell those in ivory towers that Main Street Australia has had quite literally, a gutfull of being on someone else's Chess board... The RBA's included.

    In 2025 their will be a whole bunch of professions looking back at our times to ascertain why we let this (and what's about to happen) happen.

    The real truth is, government has a very large hand in decreasing housing participation in this country, and someone will write of it one day and say "Australia relied on housing-ownership to its benefit, why did they 'Government' let Australia follow the European experience where the majority of people can only afford to rent, and can't buy property ever".

    The FHOG Grants (in-part)fed the appreciation beast and as mortgageandlease pointed out, the States dined on tax windfalls.

    I think the RBA would be served well by listening to brokers collective feedback on what's going on in peoples' homes (financially speaking) there is no group more closely entwined into the fabric of households than brokers, their collective commentary should be heard, considered and valued.

  • Chris C | 29 Aug 2011, 03:44 PM Agree 0
    Fed and State Labour Govts have become too greedy - they think they can just keep taxing us and spending up and keep coming back for more.
    - The cost of land and its processes to get to completion - the councils take forever and a day to approve DAs, charge a fortune, go around and around in circles with their systems & processes & outsourcing QAs in what only seems to be power plays and this all adds to the holding costs and inflate the actual end prices. Imagine if the Councils halved the DA and BA time frames on all projects - the cost reductions that would be obtained.
    The over control (out of control) of compliance and pocesses where we have a weak govt that is a puppet to the greens who would prefer to see our industries close down or go into bankruptcy than to cut a single tree down.
    - I do not believe it is the interest rates because they have been very low now for quite a few years now (ye older ones know what I mean) - its more the cost of living and the Banks attitudes of not lending and therefore higher risk margins applied and passing them off as increasing cost of funds. If that is the case why are the banks bucking the trend and haveing record profits in GFC times when others are going backwards. Banks spruke 'business as usual' but we all know it is clearly not the case.
    Food, fuel, utilities and taxes are at an all time high to normal budget and wages together with mark up on materials are a very large cost of construction now compared to what they were just 20 yrs ago.
    - Interest 'margins' (rather than interest rates) are knocking business around - Banks are simply too greedy); why should they go out and buy new business when all they have to do is increase their margin by %a across the board - straight to the bottom line - hell they own 90%+ of the market - of course they can dictate, why should they lend more and Swanny who is in charge of the country's biggest purse does not have a clue how the finance industry in this country works works, passes legislation against senate inquiry findings that he says will incite competition and reduce costs (um..... buy votes) but in effect, does the opposite and feeds straight back into the major Banks coffers.
    - Accelarated wages in the mining industry push wages up elsewhere (2 speed economy).
    Banks are also dictating to valuers what they want to se in their reports. This is evidenced by Banks going back to the valuers and 'questioning' their valuations and methodology. Aren't they the experts - are the Banks valuers too. Isn't that why we put our clients to 3rd party valuation costs but lower valuations allow for lower lending values and loan size.

  • mortgageandlease | 29 Aug 2011, 05:21 PM Agree 0
    Maybe we have to go the American way in part. Make the owner occupied housings interest tax deductable instead of negative geared investment properties.
  • Martin J. Rollins MPIA | 30 Aug 2011, 12:26 PM Agree 0
    Re Negative Gearing.

    One of the worst economic steering instruments ever introduced into an economy; and it was introduced by those who should know better... a system to engineer 'loss-making' across a whole economy, really smart stuff! (Not)
  • joeinvestor | 12 Sep 2011, 12:33 PM Agree 0
    I have four shops and currently purchasing two investment properties and building another two duplexes. In my shops, for a small job tidying and straighting the back land, which would had been around $8,000 overseas, costed me $40,000. This was one full years rent. With the city council's making rules as they went along, to every 'Tradie' like the electricians and plumbers, who felt that it was his god given right to rip me off. I could not get in a handyman with the same amount of knowledge, because of the huge fines. I am seriously thinking of of loading my properties and moving elsewhere.
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