Australian Broker forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Bubble speculation making us miss the real issue

Notify me of new replies via email
Australian Broker | 05 Jun 2015, 07:00 AM Agree 0
Leading housing association adds its voice to those challenging claims that there is a property price bubble in Australia, saying we are ignoring the real culprits
  • Joe Siragusa | 05 Jun 2015, 09:57 AM Agree 0
    I tend to agree with the article in relation to Supply Vs Demand. If you look at the states with low property appreciation the common factor is low population growth and falling or static employment growth. The issue of Stamp Duty creates a poor use of housing at it discourages older people from selling their large family home to go and buyer a smaller / cheaper home. I would like to see people over 60 being able to sell their existing family home and be able to put some of the proceeds into their superannuation funds without penalty and thus help them grow their retirement fund in a tax effective manner.
  • John | 05 Jun 2015, 10:23 AM Agree 0
    Having worked in the building trade I have no doubt that the lack of supply of land and the associated greed of governments are the main reason house prices are so high. Go 20km from any town/city centre and there is land as far as the eye can see. Land in this country should be really cheap given the amount that we have but as long as greedy governments manipulate the market home ownership will continue to be a dream.
  • Les | 05 Jun 2015, 10:40 AM Agree 0
    Now there is an unbiased point of view, from the Housing industry?
    So we are to believe that builders, land developers and suppliers are not getting rich?
  • tim | 05 Jun 2015, 10:42 AM Agree 0
    there can be supply vs demand issues and we can still have a price bubble: this is based on demand for purchasing properties - not just living in them. 40% of new mortgages are going to investors, what happens if this reduces for some reason? i.e they decide to invest in other things, or find it harder to get a mortgage. do you really think prices wont be affected??
  • Steven J | 05 Jun 2015, 10:43 AM Agree 0
    It's the reason i can't afford to buy a house in QLD . Average New house and Land Package on the Gold Coast is $400,000. 30 yrs ago my parents got one $52,000. Lost it during the Keating resession. Same place is now $560,000
    Still can't afford this Dream. Renting sucks.
    Drop the GST and Stamp Duty. Drop land prices on Gold Coast.
  • Mike Griffin | 05 Jun 2015, 10:48 AM Agree 0
    Stamp duty doesn't apply to a new home, but it does apply to undeveloped land and established homes, at least in WA. Contributions to superannuation can be made up to age 74. I agree with Joe, that age barrier should be removed as many might want to sell their homes later in life.
  • Ada Vale | 05 Jun 2015, 12:15 PM Agree 0
    Low interest rates, investors and banks are the cause of high housing prices.

    There are towns in regional Queensland with 500 new homes built and sold to investors with guaranteed rents for 12 months. Upon visiting their investment house, owners found them empty! Yes, the price was inflated to accommodate the 12 months of rent.

    When those houses come on the market and the RBA begins to lift interest rates, we'll be hit by an exploding housing bubble.
  • Don | 05 Jun 2015, 01:01 PM Agree 0
    The investors conspiring to the problem is perhaps true, but not one I cannot avoid... As a Sydney-sider earning 200k per year I'm devastated that I cannot afford my own home to bring up my beautiful children in Sydney. We took the risk of buying investment properties to try and grow wealth to get into the market but it's going too quickly. What's equally interesting is there are many others like me (plus many many foreign investors from Asia) looking in QLD, Northern NSW, rural Victoria, etc etc. Real State folk telling me that they're getting high volume calls in areas like Newcastle, Central Coast and Inner Brisbane. I've had to take risks in getting 95% LVR to enable us to buy at scale. Equally there's debt we potentially may have to manage with the impending interest rate increase in the next X months/year(s) (delete as appropriate). We have a major league challenge to set ourselves up for retirement but we have to plough on... I agree with most comments, demand is outweighing supply and for us it means Sydney's bubble is unlikely to burst at all and that means us renting forever more...
  • Michael Kent | 05 Jun 2015, 01:23 PM Agree 0
    One of the reasons MOST house and land packages are over-priced are these over the top commissions developers are factoring in.

    $20-30k commission is simply a rort.

    A friend of mine recently tried to justify why they should be paid this amount when sometimes all they are doing is handing over a name and number to a sales agent who does the rest.

    There is a reason why 45% of house and land valuations come up short. It's because this $20-30k commission has to come from somewhere. It is added to the price to the consumer.

    The last 5 loans I did for a property investment company doing house and land packages all had issues with the valuations coming up $20-30k short.


    Even if a real estate/ sales agents spends 5hrs with a client or 5hrs putting the deal together is their time worth $4000 an hour?

    My friend's argument is that it is industry standard. True, does that make it right??
  • Bob Dogs | 05 Jun 2015, 11:29 PM Agree 0
    Nice article, however it only tells the story of obvious taxation. There is much more to whats causing us to have the most expensive real estate in the world...

    With over 30 years experience in the industry i have seen hidden taxes gradually applied to land.

    I'll explain some examples or hidden taxes. In the 60's and 70's the government paid for roads and infrastructure costs around land developments. Today the developer is responsible for all the associated costs. Since the developer has been responsible for this there has been no reduction in government or council taxes on new developments. These costs ultimately get passed on to the consumer.

    Here's another in direct tax slipped through. The Housing trust now claims (steals) a percentage of land in every development for low income housing. In the past this was paid for by the housing trust at the market rate. Effectively its a tax which is well hidden.

    There are literally hundreds of these little tax cheats that the government puts on developers and builders, which has drive the cost up.

    The insanity continues. The government then taxes the developer at the higher rate when stamp duty is paid plus subdivision costs and multiple land holding land tax. Double dipping!!! Then the consumer buys from the developer and pays stamp duty on top. Triple dipped

    Tax is a big issue, but the real big issues is government manipulation of land supply.

    This issue has had little light shed on it. Back in the mid 90's the country was awash with labor governments. At this time there was a policy to reduce urban sprawl. The governments used a brutal method to achieve the outcome.

    Basically the state governments redrew the urban development boundaries. They reduced them significantly. The effect was to create a lack of supply which drove up land costs.

    It was a brutal strategy which had completely the reverse effect. developers who were sitting on pockets of land went crazy subdividing land on the fringes.

    This ridiculous policy has not been reversed and is only causing more problems with time.

    So now we are in a position of constricted supply and what does the government do?
    These same developers start kicking and screaming for land....

    They allow selected individuals (mates who pay) to develop land outside the boundary.

    Case in point. Lang Walker got several nice globs of land outside the restricted zones and freeways built to his backdoor to boot.

    He wasn't the only one... Many people made a killing off the tax payer and consumer.

    Land development in Australia is so wildly corrupt.

    If people only knew the financial impact to their lives directly.

  • Bob Dogs | 05 Jun 2015, 11:34 PM Agree 0
    The tool who said builders are getting rich is an idiot.. Developers getting rich.. the ones who act with in the law and don't get involved with the corrupt government make stuff all.

    The developers who pull the strings with brown paper bags make off like bandits.

    Trust me I'm high up in the building industry. I haven't come across a land deal that a grubby politician hasn't had something to do with.

    It makes me so furious. The general public are being screwed.....
  • Joe Siragusa | 09 Jun 2015, 10:27 AM Agree 0
    Is it time to review Negative Gearing which also distorts the market. I suggest that unless the investor can demonstrate that the property will be positively geared within say 3 years then within 3 years the negative gearing ceases. Similar to the ATO ruling on hobby farms - unless it can be shown that the venture has a chance and/or a plan of being profitable, then the tax deductions are no longer available. It will stop the practice of debt shifting to the investment loan from the non tax deductable home loan.
  • SEQ Broker | 11 Jun 2015, 10:13 AM Agree 0
    I find it hard to believe people still think renting is cheaper. If you push it, and even if you slightly over extend but you get a mortgage and buy a home. The mortgage payment, give or take, is basically the same for 30 years. Less if you have a brain. Rent on the other hand will go up. After a couple of years owning you are already better off then renting. After 10 years you are paying almost half of what the rent is. Buy as soon as you can and keep no matter what. I pay $860 per month for my place.
  • tim | 11 Jun 2015, 10:37 AM Agree 0
    "The mortgage payment, give or take, is basically the same for 30 years"

    Not really. Interest rates are at historical lows and can only go up from here, and when that happens your mortgage costs will increase; this is different from the past 30 years when they were continually decreasing.

    "I find it hard to believe people still think renting is cheaper."

    I'm not sure where you live but renting here is definitely cheaper. We pay $2230/month... This is the equivalent of a mortgage of 450k and there is no way we could get any place for that amount of money in my neighbourhood; they go for about 700-750k. Rent and house prices are totally disconnected.
Post a reply