Saint Tony falters – house prices ARE too high

Unfortunately, the Prime Minister has said he hopes house prices will continue to rise gradually and is making political capital from suggestions from the Labor side that they are too high.
The fact is that median house prices in Australia are, in relation to income levels, two to three times as expensive as in those jurisdictions (including most of the US, and Germany) where planning and other regulations are less stringent.  This is not because of land shortages (Australia has more abundant land availability than any other nation – even Sydney hemmed in by the ocean and national parks could increase its size by 50 per cent simply within the County of Cumberland). Nor is it because building costs are high – although unionisation of apartment buildings creates excessive costs, single and double story houses are built by small businesses contracting with each in a highly competitive manner.
The contrived land shortages created by the Australian planning regime operates most severely on the periphery of cities.  New suburban houses are under $200,000 in Houston, a city that is growing rapidly, compared with $400,000 to $550,000 in Australia.  The excessive cost of houses on the periphery of our cities creates a knock-on prices effect across the city areas.
We need to find ways of freeing up the planning restraints that have created excessive house prices, which though to the great benefit of incumbent owners like many of us operate to the great disadvantage of younger people not presently owners of their own home.
Home building is not high tech and as an industry can easily be expanded.  It can even be expanded, regulatory xenophobia permitting,  to take advantage of the apparent interest in Australian property ownership by the newly enriched Chinese.  An expanded housing industry supplying domestic customers and as a form of exports to buyers overseas would be particularly timely right now given the demise of the latest mining boom.
This entry was posted in Uncategorized. Bookmark the permalink.

120 Responses to Saint Tony falters – house prices ARE too high

  1. Michel Lasouris

    I’ve always been told to compare the average house price to the average income. It seems that house prices are still affordable by that simple yardstick; 4 to 5 years gross average income. It has been as high as 5-6 years with high borrowing rates to boot. Perhaps the American homes are relatively cheap, or is the average gross income lower there as well?

  2. Lem

    +1

    If there’s one way to disenfranchise a nation, it’s to take away the ability to put a roof over your head. I despair at what Abbott said. Politics fail.

    You can forget about class wars, since we are all dragged down to the same level now by successive socialist governments. What’s happening now, with the lack of investment opportunities outside of property is that the older folk are pricing the younger folk out of the market, and Abbott just said he doesn’t care.

    We are in the generation wars.

  3. john of gaunt

    A block of land on the edge of Sydney is a minimum of $300,000. A house built on that block will cost $200,000. So there you have your base price. God is no longer making land, so a standard house closer to the city than the $500,000 house will cost more. That has something to do with that supply and demand thing.

    Talk about bubbles all you want but unless you can deregulate the development of land and reduce the cost of materials and labour, at the same time, or force developers and builders to make a loss, housing prices will stay high in Sydney and Melbourne. Then add the increase in demand caused by a swelling population and the impact of overseas “investors”. Let the market determine the price of dwellings without government interference or regulation. Talking about the price of housing is as relevant as the discussion of the price of beef.

  4. Combine Dave

    Talking about the price of housing is as relevant as the discussion of the price of beef.

    Exactly.

    Abbott did well not to add fuel to the fires of this retarded debate.

    Sydney is Australia’s largest city and where a lot of the investment goes, you can’t expect the housing prices there to be low nor for low wage, young people just entering the workforce to be able to afford a large family home there immediately.

    If you don’t like it then move to sunny Qld (and stop voting ALP).

    High housing prices in Sydney are not a national issue worthy of comment by the PM.

  5. Youngster

    When most Australians have the majority of their personal wealth tied up in property, it would have been unthinkable for the PM to say anything other than what he said. The Prime Minister cannot say “I hope you all get poorer”. That’s exactly what he would be saying if he said house prices were too high.

  6. Riverina Matt

    A block of land on the edge of Sydney is a minimum of $300,000

    And that is the problem. Why is this?

    Let the market determine the price of dwellings without government interference or regulation

    A large proportion of the price of a dwelling is the artificial restrictions in place because of “government interference or regulation”. This is not an accident – both major parties know that cheaper houses are political suicide. Home owners will severely punish any government who allows housing prices to fall by relaxing their artificial chokehold on developed land.

    Don’t think it is any easier freeing up land for housing in rural areas, in NSW at least. Getting land rezoned for residential use even in communities of less than 2,000 residents surrounded by vast tracts of land is a long, costly and drawn out process requiring the use expensive “consultants” to satisfy NSW Planning requirements.

    Houses are just as expensive as our state and federal governments – knowing on what side their bread is buttered – want them to be. Home owners have political power.

  7. .

    House price inflation is at least double CPI since Hawke was PM.

    Australia is running out of land? Yeah right.

    “But investment…”

    So people are investing to increase their capital base and lower their yield?

    No. We don’t have enough investment. Not even Sydney is “running out of land”.

  8. Rabz

    It’s all negative gearing’s fault, I tells ya! 😡

  9. Riverina Matt

    There is little difference between a taxi licence and a house in Sydney. The value of both is largely determined by artificial restrictions put in place by the NSW government.

  10. Rabz

    Seriously – this is yet another ridiculous beat up by various leftist idiots.

    Howard said pretty much exactly the same thing back when he was PM.

    I don’t remember a similar amount of hyperventilating at the time.

    Anyone with a functioning brain should be aware of why homes are so expensive – restricted supply and restrictive regulation.

  11. Combine Dave

    When most Australians have the majority of their personal wealth tied up in property, it would have been unthinkable for the PM to say anything other than what he said. The Prime Minister cannot say “I hope you all get poorer”. That’s exactly what he would be saying if he said house prices were too high.

    Can Do in Qld said it and shoved through as many new development approvals as possible while he was in office.

    A great time to buy an appartment in Brisbane now, not so great to sell.

    For example 2 bed inner inner city appartments are now selling for what I had originally paid on my 1 bed unit on the outer of the inner suburbs.

    These, relatively, low prices have no where to go but up.

  12. Ant

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    Then what?

  13. Fred

    I heard Tony say that and I was miffed.

    I’m wanting to buy a house one day and they are ridiculously expensive.

    The basic needs in life are food, clothing and shelter. I can’t see why any politician would boast that he wants to see the price of these things increase.

  14. Combine Dave

    It’s all negative gearing’s fault, I tells ya! 😡

    Don’t forget the ‘damn Japs Chinese stealing our jerbs houses’ schtick.

  15. Combine Dave

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    Then what?

    Let’s not pretend that Australian houses have ever had good build quality.

  16. .

    Ask yourself why so many jobs exist in Sydney (not just the population) – now think of all of the unnecessary government jobs (including local government) and centralisation that occurs.

    Our current Federal structure creates problems for Sydney.

    But alas, the house prices in country ares with ample land aren’t far behind. There is also vast amounts of land in Sydney.

    Height restrictions and the artificial costs of code compliance means there is little medium density where people might want it, such as around train stations outside the CBD.

    Then there is the fact that over a third of most housing costs are tax, and new homes in NW Sydney can comprise over 45% of taxes. Not to mention the costs of zoning rules.

    Government policy and greed are the root causes of expensive housing.

  17. Entropy

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    Then what?

    Let’s not pretend that Australian houses have ever had good build quality.

    The utility of their owners is increased. You elitist wanker.

  18. .

    Let’s not pretend that Australian houses have ever had good build quality.

    HAHAHAHA!

    I’ve yet to see an Australian home that has a properly constructed architrave.

  19. Rabz

    I can’t see why any politician would boast that he wants to see the price of these things increase.

    Fred – I don’t disagree, but as pointed out above, homeowners are possibly the most important and influential voting bloc in this country.

    Abbott is playing to the (very) large majority here.

  20. min

    Ask a Self funded retiree how they bought their first house. They saved and did not live the lifestyle that the younger generation lead today. When we bought our first home we had no carpet ,no furniture and made do . I made my children’s and my clothes and had one outing a week with friends . I went back to work when my boys started school as there was no child care back then and my husband and I were both professionals.

  21. Yobbo

    You can buy a 2 bedroom house on the beach here in Thailand for $60,000.

  22. Lem

    Abbott said he was happy to see modest house price rises.

    But that’s the problem. Housing price rises are not modest. They have gone up 15% in Sydney.

    And anyway, an asset is worth nothing until you sell it, so Abbott sucking up to current property owners misses the point that when the market declines, as it must, those people will be bitching about loss of value of their assets. He’s on a hiding to nowhere playing that line.

    The market has been infested by small time leveraged investors and retirees needing income looking for ongoing price rises and prepared to accept a 3% yield on rental (in Sydney), to the detriment of young people trying to buy in.

    House prices cannot continue to rise at the current rates; the smart money is getting out of the market because they know the good times could soon be over (Harry Triguboff is a prime example) and so they are doing what the smart money does at the top of the market: sell.

    Personally, I think it would be a great thing to see the heat go out of this market for the benefit of young people.

  23. Anne

    ICLEI, the ‘International Council for Local Environmental Initiatives,’ was founded in 1990. It is the result of the meeting of 43 countries at the United Nations in New York. While this international body plans its ‘sustainable development’ ruse, your property rights are under threat. It is part of the “Earth Summit,” Agenda 21.

    Is your Local Council on this list? Mine is.

    http://procinctu.info/iclei-list-members-agenda-21-implementation/

    Alexandra Swann explains how the Central Planners ‘sustainably’ erode property rights and reclaim land and resources for the US Government.

    The same policies are at work here in Australia.

    https://www.youtube.com/embed/TDDWY7veVjc

  24. I Am the Walras, Equilibrate and Price Take

    If Abbott believed in economic freedom he would have diverted the debate straight to the restrictions on land release and planning. Which is the chief cause of the problem.

    Instead, like the clueless £€#%ing hack that he is, he came down on the wrong side of the debate and made himself look as useless as he is.

    Yes, homeowners don’t want house prices to fall. But at the same time they are concerned that their children will never be able to buy houses of their own – and may have to rely on the Bank of Mum and Dad to get a start in the market.

    And everyone can see the tidal wave of dodgy Chinese money flooding into Sydney and Melbourne, pushing up prices across the market.

    min those ‘bare minimum’ houses don’t exist anymore. Everything meets a minimum standard and that standard is bloody expensive.

    Abbott was completely unprepared for the question. Utterly %£#!ing useless. What a lost opportunity to get rid of him last February

  25. blogstrop

    Min, quite so. It never looked easy. Only in retrospect do the prices back then look silly. We were a bit daunted by them at the time. Like you, moved in with bare unpolished floorboards, very little furniture, and a small portable black & white TV. Eight years later the house had doubled in value and we moved on to the next rung up the ladder and a growing family in need of more bedrooms. While not living extravagantly, we were able to manage that next stage on one income – but that was not in Sydney. That’s a whole new chapter.

  26. blogstrop

    Decentralisation would help a lot.

  27. .

    min – people literally cannot save for the same home you bought when you were first married, after 30? years of depreciation.

    Was your house new or 40-50 years old?

    Their lifestyle is irrelevant. What was rent like whilst you were saving?

    House price inflation is at least double CPI since Hawke was Prime Minister.

    When we bought our first home we had no carpet ,no furniture and made do .

    Where did you sleep? On the coat rack?

    The cheapest one bedroom apartment I could find in Dee Why was $400 a week. The cheapest in Penrith was $250, but there are less on offer – only two right now.

    Quickly the search on real estate for 1 bdr goes quickly to temporary accommodation and “portable rooms”, or very small caravans.

    $195 for an old shack

    $185-$230 for a room (shared housing) or a granny flat

    *Later I found about 4-5 good 1 bdr units/1 bdr cottages for $240-250, also $250 pw above a shop.

    So there are about seven affordable houses for a young single person in Penrith right now.

    After tax, on a graduate salary, they’d be giving away a third of their income for this “privilege”. How after transport, food, insurance and other necessary items, are they meant to save for a home? How long would it take? What would they have to give up? Is it worth actually living like that?

    Cheapest 2 bdr unit, Dee Why:

    495 k

    Cheapest 3 bdr home: $850 k

    Penrith: Cheap 2 bdr unit:

    $299 k(brick)
    $219 k (Wallacia)
    $240 k Jaminsontown, portable home

    – note that these are rare as. Most units (new start at $450k).

    Cheapest 3 bdr (fully detatched) Penrith

    $379 k (fibro)

    Brick: over (offers starting at)$450k for a fully detached home.

    This doesn’t even mention living in a safe area, let alone access to the highway, trains or closeness to schools or jobs.

    The costs are people start their families much, much later.

  28. Seza

    Forget about the price of houses, which is a result of scarcity. If you were struggling to afford and buy a home, would you really borrow and buy in a falling market? Normal people, who don’t have cash to buy outright, rely on the price of their house rising to make the interest payments viable. Rising prices is what you want, but only moderate rises for the sake of your children being able to afford their own house. Shorten only wants falling house prices so he can buy more to give them to the (ho)useless.

  29. .

    Normal people, who don’t have cash to buy outright, rely on the price of their house rising to make the interest payments viable.

    Bullshit. You need to be able to service the loan. You cannot pay off the loan by mortgaging more equity.

  30. Chris M

    I’ve always been told to compare the average house price to the average income. It seems that house prices are still affordable by that simple yardstick; 4 to 5 years gross average income.

    I’m trying to figure out if the first poster was goofing or what. Most major Australian cities the house prices are in the 7 to 9 years gross average income – and that doesn’t even factor in income tax which is taking an increasingly large chunk out.

    Maybe he was serious and simply has a high income so can’t see the problem. In the real world the value of wages has about halved since large numbers of women joined the workforce forcing couples to both work simply to obtain shelter.

  31. .

    I’ve always been told to compare the average house price to the average income. It seems that house prices are still affordable by that simple yardstick; 4 to 5 years gross average income.

    What a joker. Michael has also complained about plebs watching the cricket on weekdays. They all must be dole bludgers or cheating their employees or something. Who’d thunk they’d be self employed or be taking a day of annual leave?

  32. Zulu Kilo Two Alpha

    min – people literally cannot save for the same home you bought when you were first married, after 30? years of depreciation.

    Was your house new or 40-50 years old?

    Why are you funding the Sydney real estate market? I brought in Perth, in the early 1980’s for 2 1/2 years wages, for just over half what I would have paid for a house in Sydney, and sold three years ago for ten times what I paid.

  33. Mayan

    The most worrying thing is that people are loading up on debt to pay these prices when interest rates are low. Will they stay low for the next 20 to 30 years? I don’t have a crystal ball, so don’t ask me. However, Herbert Stein’s observation gives me pause.

  34. Lem

    Why are you funding the Sydney real estate market? I brought in Perth, in the early 1980?s for 2 1/2 years wages, for just over half what I would have paid for a house in Sydney, and sold three years ago for ten times what I paid.

    That’s great, were you investing, or were you trying to put a roof over the head of a young family?

    There’s a difference in why people are buying. Good for you, you made a return on an investment at the right time in the cycle. But for a lot of young people they just want affordable shelter.

  35. Ellen of Tasmania

    Bullshit. You need to be able to service the loan. You cannot pay off the loan by mortgaging more equity.

    I would argue that it is not the home-owners who are so keen to see prices rise as the mortgage-holders. They have incredible debt and are banking on inflation to help it fade away, poor souls.

    Inflation is theft. It’s robbing from the savers to give to the debtors. The government – big debtor that it is – knows this.

    But Anne has a good point. Even in out of the way rural Tassie, they won’t let you subdivide under 50 acres.

  36. Lem

    The most worrying thing is that people are loading up on debt to pay these prices when interest rates are low. Will they stay low for the next 20 to 30 years?

    One things for sure, it won’t bother the property investors who will have sold at the top of the market and moved on to greener pastures (probably major infrastructure or the AIIB).

  37. Ant

    “Nor is it because building costs are high”

    I humbly disagree. In fact, it’s complete BS.

    Going back to my point about the polystyrene clad palazzo proliferation across the outer suburbs of our major cities, ever wonder what would possess anybody to build a house with (essentially) the same stuff we use to pack frozen fish, rather than brick, and then skim it with a 3mm coat of acrylic render and call it a “house”?

    Bricks are still pretty cheap. However, the labour rates to construct a brick wall – especially above the ground floor are astronomical.

  38. .

    But Anne has a good point. Even in out of the way rural Tassie, they won’t let you subdivide under 50 acres.

    In NSW, the rules are similar and unnecessary.

    It really is snobby contempt that leads to such a rule. Horticulture and viticulture can be viable, highly profitable business on less than 40 acres. I know a bloke who only needs 5 acres max. I’ve heard some winemakers say if they lived on 20 acres with enough rainfall and good winemaking skills, they’d need 15-20 acres at most.

    What is bizzare is that even if it is livable, you cannot live in commercial property you own – not even if it has cooking, cleaning, toilet and shower/bathroom amenities.

    The government insists that you MUST buy/rent a house. Shop toppers are a remarkably exception to this rules.

    You must live on a specified block size, use the block as they say so (in Canberra a bigger block means you MUST build bigger), otherwise you have limits to how big you CAN build…

    The only saving grace might be mass produced, CNC milled flat pack homes making a comeback. I hope the softwood timber industry can help achieve this. I’ve seen Chinese houses built entirely out of radiata.

  39. .

    God help us in the next crisis if rates are too high. There will be an absolute bloodbath. Whoever is left in government is going to be annihilated.

    We have 370 bn of Federal debt and counting. Interest rates are too accommodating right now.

    The IS-LM trick only works for so long.

    It doesn’t matter what is in the future fund. It has no bearing on debt servicing or the flow of funds matrix.

  40. .

    You could get a flatpack home under 60k and a block in the country on the edge of town with a bit of space for about the same price. You only need pay site connection and general construction.

    Probably a better lifestyle too…

  41. H B Bear

    House prices are central to understanding many of the economic problems in Australia.

    How much of the $9bn per year childcare spend would be required if a 2nd income wasn’t required to service crippling mortgages? How much business investment, discretionary expenditure and jobs would there be without 25%+ of peoples discretionary income going to the mortgage for most of their working lives?

    By any measure Australian labour costs and productivity are massively out of wack with the rest of the world and these are inextricably linked to the price of people’s single greatest lifetime expense.

  42. .

    Exactly. When people realise 40% of their housing costs are tax (after they’ve already paid income tax), they might wake up and demand changes, not handouts for second jobs the family doesn’t truly need in a free market/low tax situation.

  43. Zulu Kilo Two Alpha

    That’s great, were you investing, or were you trying to put a roof over the head of a young family?

    Brought said house serving with the A.D.F., lived there for several years after discharge.

  44. Craig Mc

    Comparing Sydney with Houston is idiotic. NSW has Sydney and Newcastle as its two biggest population centres. Texas has seven metropolises between Houston and the equivalent of Newcastle. Imagine all seven cities merged into Houston and then think about the subsequent price pressures there.

    Decentralisation is why housing is cheaper in Texas, as it is in most of the USA. Where decentralisation doesn’t exist (NYNY, Silicon Valley, San Fran Peninsula) similar price pressures exist as in Sydney.

    So, should governments intervene to create new population centres like Albury/Wodonga? That’s whole ‘nother discussion.

  45. .

    So, should governments intervene to create new population centres like Albury/Wodonga? That’s whole ‘nother discussion.

    Please stop “intervening”!

  46. Craig Mc

    Probably a better lifestyle too…

    Except you’d really be living in your car – commuting for twenty hours a week.

  47. .

    FFS there are jobs outside of Sydney. Despite what people in Sydney think, people west of the Lithgow have jobs and aren’t all on welfare.

  48. Craig Mc

    Please stop “intervening”!

    I realise it’s anathema here (and for good reason), but has Albury/Wodonga turned out so bad? Have any cost/benefit studies been done? IANAE, so I’d appreciate someone who is giving their opinion. There’s forty-odd years of data to lean on there somewhere.

  49. Ellen of Tasmania

    It really is snobby contempt that leads to such a rule.

    Actually, Dot, as conspiratorial as it may sound, it is overwhelmingly influenced by ICLEI and Agenda 21. It isn’t a secret, they talk about it all over their web site. They have a dream, don’t ya know, with people all conveniently housed together, and great swathes of land left to itself. Sustainable, they call it.

    They hold these big international get-togethers for local council people, who then come back to their little country towns with power under their finger nails.

    What’s happening in the wooden, flat-pack housing world is really exciting. What a pity the greenies think that growing sustainable, CO2 neutral, beautiful, harvestable trees is so wicked. The stupid is overwhelming.

    What kind of government thinks that cheap housing is bad?

  50. .

    Albury and Wodonga existed before the Feds tried to play their hand at regional development.

    It has military bases, quarries, tourism, a large dam, a major highway and train corridor as well as beef, sheep and nearby viticulture (and grains further north). Corowa has a piggery, major wineries and an Uncle Toby’s factory.

    I read some stuff on growth poles and other regional development a long time ago it was of the general conclusion it worked but wouldn’t pass a CBA.

  51. Craig Mc

    FFS there are jobs outside of Sydney. Despite what people in Sydney think, people west of the Lithgow have jobs and aren’t all on welfare.

    I’m looking forward to season 2 of Struggle Street set in Mosman.

  52. .

    I used to think it was a bit nutty but now it has been explained to me, this Agenda 21 stuff is downright evil.

  53. Crossie

    You can forget about class wars, since we are all dragged down to the same level now by successive socialist governments. What’s happening now, with the lack of investment opportunities outside of property is that the older folk are pricing the younger folk out of the market, and Abbott just said he doesn’t care.

    We are in the generation wars.

    Is it the oldies or the Chinese? If one is pricing the kids out of the housing market so is the other.

    The poor oldies are now classist as well as xenophobic.

  54. Crossie

    I used to think it was a bit nutty but now it has been explained to me, this Agenda 21 stuff is downright evil.

    Anything with sustainable in its goal raises a red flag with me, and I mean a red flag in both senses.

  55. Anne

    to give them to the (ho)useless.

    That’s clever Seza. 😉

  56. Craig Mc

    One additional reason for wanting higher housing prices. It’s the one form of retirement-saving governments are too scared to fuck with.

  57. Combine Dave

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    Then what?

    Let’s not pretend that Australian houses have ever had good build quality.

    The utility of their owners is increased. You elitist wanker.

    Wow. I just dont think a fibro shack nor flimsy city Queenslander with frail rattling glass windows is superior to a modern house, town house or concrete appartment building.

    Not you C Dave.

    Ah that’s okay. No harm no foul.

    If there’s one thing I’ve never been then it would be ‘an elite’.

  58. Driftforge

    What kind of government thinks that cheap housing is bad?

    One whose voters benefit from artificially raised house prices who would suffer a vote changing loss if that were to change.

    Tyranny of the majority in effect.

  59. Anne

    Craig, property is also the greatest contributor to Individual wealth and thus something the Left are instinctively antagonistic to.

    Dot, since your interest has been piqued watch this 3 minute video.

    And if you really want a nightmarish scenario read the article below.

    KGB defector predicted this 30 yrs ago and it is happening. Ideological Subversion and Demoralisation of America.

    https://m.youtube.com/watch?v=Y_uTw1v_ce0

    UN/EU/USA Elites seek not just a One World Order under Global Communism, they seek to eradicate any semblance of Individuality.

    http://golden-dawn-international-newsroom.blogspot.com.au/2013/01/the-coudenhove-kalergi-plan-genocide-of.html?m=1

  60. Combine Dave

    You can forget about class wars, since we are all dragged down to the same level now by successive socialist governments. What’s happening now, with the lack of investment opportunities outside of property is that the older folk are pricing the younger folk out of the market, and Abbott just said he doesn’t care.

    We are in the generation wars.

    Is it the oldies or the Chinese? If one is pricing the kids out of the housing market so is the other.

    The poor oldies are now classist as well as xenophobic.

    It depends on buying habits. O/S is forced into new developments largely appartment complexes, whereas oldies tend to live in those established house’s that those with young families long for but can’t afford.

  61. Combine Dave

    That’s great, were you investing, or were you trying to put a roof over the head of a young family?

    Rent. Then save up for a deposit on a place out in the sticks and a 1-2hr commute to the city. Later in life sell up and retire to the coast.

    It’s not rocket science. Obviously if you want everything on a plate upfront and a penthouse in the Sydney CBD without any hard yakka you’re going to be disappointed.

  62. Zulu Kilo Two Alpha

    FFS there are jobs outside of Sydney. Despite what people in Sydney think, people west of the Lithgow have jobs and aren’t all on welfare.

    This is a subject guaranteed to raise the blood pressure. For whatever reason, I listen to University educated professionals, with skills desperately needed in rural and regional Western Australia, complaining about the high cost of housing in Perth. If you suggest moving out “not necessarily to the sticks, but housing in Bunbury or Albany is a lot cheaper, it is paaaaatiently explained, as though to a backward child, that “All our friends live in Perth, and we need the network and contacts, for the development of our careers.

    (I do know someone who did relocate. He sold up in Perth, paid out his mortgage, and purchased a house , out right, on five acres in regional W.A. His wife now only works part time, the children have a pony, and he says the biggest shock was when he suggested a 12.30 meeting with a new client. The reply was “Don’t you close at twelve, and go home for lunch, like everyone else?)

  63. Not sure why people like to look for ONE cause to blame, it’s the kind of binary thinking the left engage in. I don’t know what weight we attach to the following; Chinese buyers, land supply, Union labor, high taxes, low interest rates, ICLEI, old people, zoning restrictions. I do know they are all converging into a shit storm of epic proportions.
    There is an entire generation of people who either cannot afford to buy – it’s truly terrifying meeting people in the top 2 income tax brackets who say they cannot afford to buy – or are mortgaged to such an extent that just one small change in the economic weather and they are screwed.
    The root cause of the last GFC was housing, the next one will be too.

  64. .

    Obviously if you want everything on a plate upfront and a penthouse in the Sydney CBD without any hard yakka you’re going to be disappointed.

    I think I demonstrated that even buying home in Penrith as virtually unaffordable.

  65. Tim Neilson

    H B Bear
    #1699506, posted on June 3, 2015 at 10:07 am
    House prices are central to understanding many of the economic problems in Australia.

    How much of the $9bn per year childcare spend would be required if a 2nd income wasn’t required to service crippling mortgages?

    The problem is that 2nd incomes push up prices. To the extent that there’s a relationship between two income households and high house prices, I’d reckon that the relationship kicked in when we started to get two or more “dual income” couples turning up to every auction, not because house prices went high of their own accord and subsequently compelled tertiary educated women to forego staying at home changing nappies. We can hardly tell career women and their partners that they shouldn’t place a higher bid on a house they want because that’s unfair to single income bidders.

  66. Craig Mc

    I think I demonstrated that even buying home in Penrith as virtually unaffordable.

    Obviously it’s affordable for someone.

  67. Driftforge

    We can hardly tell career women and their partners that they shouldn’t place a higher bid on a house they want because that’s unfair to single income bidders

    No, but we could stop subsidising childcare. Mind you, at the same time if we cut the regulations that are pushing the prices up, everyone would win…

  68. Combine Dave

    Obviously if you want everything on a plate upfront and a penthouse in the Sydney CBD without any hard yakka you’re going to be disappointed.

    I think I demonstrated that even buying home in Penrith as virtually unaffordable.

    Sorry, I am not really across NSW geography.

    Why not a sea change to a less expensive state.

  69. Sydney Boy

    2 issues:

    1. Yes. House and unit prices in Sydney and Melbourne are increasing at a rate that is faster than the rate of inflation. Which is why real estate in those markets is a good investment. But as others have pointed out, leave those two cities and the picture changes dramatically. In many regional areas (Wagga Wagga, Cairns, Mackay, Shepparton) house prices have fallen and have continued to slide since 2007; while in others – particularly those close to the capital cities (Newcastle, Ballarat, Tugun) – prices have risen, but slowly, and possibly behind the CPI.

    2. New houses are often known as McMansions for a reason. The level of fit-out and consumer goods expected to be included in a new house build are much more extensive and expensive than they were in years gone by.

  70. Robert Crew

    I don’t believe in buying real estate, for the same reason I didn’t invest in solar cells, or pink batts, or any other program the government is pushing. It would be extremely foolish to invest in an asset class whose value is entirely based on government fiat. Somewhere over half the present value of house prices in Australia is due to restrictions on building and red-tape that could be removed in an instant by any State Government that cared to, so they are an extremely risky asset to hold. All it would take is for a Government to decide the benefits of a building boom would outweigh the complaints of existing home-owners.

    Add that to the risk of being trapped in an economically depressed area, unable to sell because everyone else is (see Holden, Ford, and Mitsubishi workers), and that rent is far cheaper than a mortgage under normal circumstances (think of the opportunity cost of 20-30 years of mortgage payments), owning real estate is clearly a mug’s game.

  71. Zulu Kilo Two Alpha

    2. New houses are often known as McMansions for a reason. The level of fit-out and consumer goods expected to be included in a new house build are much more extensive and expensive than they were in years gone by.

    That’s valid point, indeed. As posted up thread, I brought, in Perth, in the early eighties. The house was a “California Bungalow” built in the mid 1950’s. Three bedrooms, one bathroom and a sleepout. The newest generation to build regard five bedrooms, three bathrooms, a home theatre and a three car garage as essential.

  72. rickw

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    Then what?

    Many things could be possible, you would have just free’d up a massive amount of cash and individual energy.

    Many people I know would love to do something entrepreneurial except all of their cash and energy is devoted to paying of a relatively cheap house on an expensive block of land.

  73. .

    Which is why real estate in those markets is a good investment. But as others have pointed out, leave those two cities and the picture changes dramatically. In many regional areas (Wagga Wagga, Cairns, Mackay, Shepparton)

    I assure in you even in those areas, in the last 30 years, CPI inflation has been at half the rate of house prices.

  74. rickw

    You can buy a 2 bedroom house on the beach here in Thailand for $60,000.

    Filipino guy I work with purchased an $80k USD three bedroom town house in his home town. Two years working away and he has owning his own house done and dusted.

  75. Combine Dave

    That’s valid point, indeed. As posted up thread, I brought, in Perth, in the early eighties. The house was a “California Bungalow” built in the mid 1950?s. Three bedrooms, one bathroom and a sleepout. The newest generation to build regard five bedrooms, three bathrooms, a home theatre and a three car garage as essential.

    My house is a cheap wood & fibro affair with a tacked on brick facade with bricks that look like they were made out of shit.

    But.. the house did come with aircon, 3 car garage (it was 4 but some zidiot reno’ed out one space), 4 bedrooms, aircon, top of the range hot water system, stove and dishwasher with all new fittings inside.

  76. Ex-Adelaidean

    With reasoning like this from the “conservative” side of politics, one begins to wonder how bad the socialists could (?will) be:

    http://www.abc.net.au/news/2015-06-03/major-political-parties-attack-over-housing-affordability/6516650

    “I certainly don’t think we should be aiming for lower house prices, which seems to be the policy of the Labor Party, because lower house prices would mean a weaker economy,” he said.

    “The way we’re really going to get affordability, and what we can do at the Commonwealth level, is to make sure we have a strong economy, make sure people have a job, make sure people can earn the money they need to save up for a deposit and get their own home.”

    On these lines, one can only wait for Senator Canavan to decry the fatal weakness of the IT sector, given its calamitous price falls since the introduction of the Apple II.

  77. Andrew

    It’s official ALP policy to engineer falling home prices now. But no comment from the meeja at all. The SLF objected to A666ott’s desire for modest HPA. So we now see their manifesto:
    – falling house prices
    – carbon tax
    – open borders and massive illegal immigration
    – no ports
    – higher taxes on super

    Sounds like a fucking nirvana.

  78. Dan

    If your currently trying to buy property, you’re insane. Never buy at the top of the market

    Put your extra cash elsewhere

  79. Dan

    Is there some kind of economic theory about hordes of irrational, uneducated buyers trying to cash in before the inevitable bust?

  80. Sydney Boy

    @Dot – I see what you did there. You selectively removed my qualifier “since 2007” to extrapolate to “in the last 30 years”. Have you been to the #TheirABC school of journalism recently?

    @Dan – it may be the top of the market in Sydney and Melbourne – but it certainly is not the top of the market in most of Australia.

  81. Dan

    The second irrationality is that owners of homes (and the parliamentarian owners of these homes) in inner city established properties believing they will suffer any sort of huge loss in the short to medium term from developing available land out in the boonies.

  82. Dan

    My point is that there is a herd mentality of people willing to pay $400k + for a house shitbox out in the boonies in the belief that this asset class is a must have and the belief that they need to get in now while it’s on the rise seemingly oblivious to the short term bust, that they themselves are feeding.

  83. Seza

    Dot,
    I was not relying on price inflation to pay the interest on the loan, but making the payments worthwhile.

    Ann,
    Thanks, but it was not original and came from graffiti on the old sea wall on the corner of Braconsfield Rd. and Pickles St., Port Melbourne from years ago saying “What about the (ho)useless?” Given what has happened to house prices in that area, it used to make me laugh.

    Dan,
    It is called the One More Idiot theorem, where you know you are paying too much, but are assuming there will be one more idiot to take it off your hands.

  84. Yohan

    Putting aside supply restrictions and expensive regulatory requirements…. the state government taxes and connection fees are very large. For a 500k House and land package in Western Sydney, they account for about 140k of that price.

    This is also the reason why cheap and basic new housing has disappeared. An economic fact about high entry costs is they make it risky for builders to supply low margin house packages.

  85. Yohan

    Bob Day (who is a home builder) did some great work a few years ago looking at State legislation around Australia. In the 1980’s the State housing and land commissions had a legislated mandate to provide ‘cheap and affordable land’. In the 1990’s this mandate was changed to ‘maximize profits’ for state governments.

    This is why they now drip feed new land releases on the suburban fringes and zone off sub division in rural areas. State governments think they will lose revenue if they open the market up.

  86. Dan

    Government cost is between $40k to $100k per block for greenfield development.

    Hard to not be cynical about that.

  87. Jim

    “We need to find ways of freeing up the planning restraints that have created excessive house prices”

    I’m not sure that changing regulations will necessarily solve the “affordable housing” problem.

    Some of the house price rises are demand and supply dynamics in the land market. But in South East Queensland, local governments have already approved seven years supply of land for developers, but supply on the market is less than enough for the next 12 months. The perceived supply constraint is not a regulatory failure. It is the developers maximising yield by scheduling releases. A perfectly rational thing to do. The bulk of the profits are made from the land component of the sale in new developments, not the building of the house itself.

    And how much of the price increase is driven by changing consumer preferences? 40 years ago, the average size of a new build in Queensland was 175m2. Now it is 240m2. If you want an affordable house, build one the same size as your parents did, only have one bathroom, drop the media room, and install modest finishes.

    Housing prices in Australia are high, but to blame it on regulatory failure is over the top.

  88. Tim

    House prices in the new suburbs in Albury- Wodonga are stagnant, because they build them as fast as people buy them. But if you want to live in the centre of Albury, the house prices keep climbing. Supply and demand work everywhere.

    Our house in Wagga (that is now a rental) went up in value 25% since we bought it in Dec 2007. But the Wagga council keeps a tight reign on new development, to keep the prices rising, and the rate income pouring in. I don’t expect our house in the suburbs of Wodonga to increase at the same rate.

  89. alan moran

    Bill,

    House build costs are not the issue in Australia. Bigger houses than those of our parents are much cheaper.
    Look at any real estate brochure and you will find new houses larger than most of us grew up in (3 beds, double garage two bathrooms) for less than $140k.
    The issue is land costs and if there is 7 years supply on the market according to the municipalities but prices are still considerably above the cost of provision of the basic land plus its infrastructure and taxes (say $100k) then there is a lack of competition. The solution is to release more land (why the land is subject to release conditions in the first place is a separate matter). They may not be making any more of it but with an urban footprint in Australia of 1% we have lots of it.

  90. .

    Seza
    #1699748, posted on June 3, 2015 at 1:56 pm
    Dot,
    I was not relying on price inflation to pay the interest on the loan, but making the payments worthwhile.

    You gotta be careful with words. You meant something completely different to what you wrote!

    You can get price appreciation without inflation. Buy in a new suburb early.

  91. Alex Davidson

    Jim,

    All over Australia there is land in good locations that isn’t owned by large developer groups but can’t be developed for no other reason than government restrictions upon its use. If developers are jacking up prices by withholding land from the market, it’s because they know that they aren’t going to be exposed to competition from other landowners, because they know the government will NOT, NEVER, EVER allow such potentially competing land to be used for housing. At least not until it falls into the hands of one of the favoured developer groups.

  92. Yohan

    At the last state election is SA, the local member that encompasses McLaren Vale was on TV, boasting at having closed off the entire area to housing development. For those that don’t know, its open fields and paddocks 30 minutes from the Adelaide CBD. This is why land is so expensive.

  93. Squirrel

    Sooner or later, the PM’s line on housing affordability and on superannuation are going to come back to bite him, and many others.

    Eventually, there will be another Labor government, with a sympathetic Senate (thanks to the Greens), and Coalition intransigence on these two issues (which will be extremely useful for stirring up visceral inter-generational and class warfare) will make it so much easier for the left to take far more drastic action than is currently being hinted at and mused over in public – particularly against the background of a far worse fiscal situation than the rosy Budget estimates would suggest.

  94. wreckage

    Throw open approval, planning and development in regional Australia. The twits keep their escalating value, but cheaper housing at least becomes possible.

    Right now even houses in small country towns cost an obscene amount of money. Right now farms in many council regions can’t be subdivided even into small hobby blocks, let alone housing. Lean on councils to open this up. Hell, pick on or two councils and only lean on them.

  95. Arky

    There is one, and one only solution to housing affordability.
    Abolish local government, along with their rates, regulations, town planner wankers and all their other greeny agenda 21 bullshit and petty, corrupt, power abuse.

  96. .

    Shires do what the States tell them.

    Abolish the States and have smaller states with local government, both with short, strict enumerated lists of heads of power.

  97. Amused

    Fer fooks sake!

    I bought this house in 2009, and the price still hasn’t recovered to what I paid for it after another 4 years of those ALP clowns being in power.

    I’m seriously going to break the nose of the next person who mentions ‘boom’ to me.

  98. wreckage

    Federation and Canton, eh, Dot? Can’t work! Never been done! Shouldn’t be tried! Chaos and anarchy, dogs and cats living together, mass hysteria!

  99. mundi

    Squirrel nailed it. Local councils prefer land restriction to boost the price locally. The will re-zone farmland to residential, not based on supply and demand, but based on their town principles plan. This usually means not allowing re-zoning until a huge company promises to build an entire ‘community’ with the promise of a new ‘town ship’ and new government buildings etc. as part of the deal.

    $800 of farmland can be worth $140,000 once re-zoned, add $60,000 for roads and services, and that $800 block goes for $200,000.

  100. Combine_Dave

    Shires do what the States tell them.

    Abolish the States and have smaller states with local government, both with short, strict enumerated lists of heads of power.

    Ban the councils aside from privatized garbage collection.

    Then smash and privatize the assets of the states.

    Restrict the federal government to debt of a certain percentage of GDP.

    Solved.

  101. Riverina Matt

    Shires do what the States tell them.

    Yep – and what the States actually let them do. Unlike the US, local government operates at the discretion of the state governments – it is, in effect, an arm of the state government – able to be dismissed or abolished at will.

    In NSW at least, local government has little control over land use changes – even a small rezoning requires State government approval through NSW Planning. Even if a place such as Wagga or Bathurst wanted to massively free up land, they would not be permitted to unless they demonstrated to NSW Planning that demand is there – a bit of a chicken-and-the-egg problem.

    Abolishing local government will only add to the centralisation of power and increase bureaucratic power. Devolve power down to local areas and make local government meaningful. Let local areas make their own decisions about development and change will happen. Most of all, release the grip of Sydney on the regions.

  102. wreckage

    Exactly. Autonomy for the regions.

    Some stuff does get decided at local council level; minimum size for farm/hobby blocks, for example, is set locally; “good” councils set it as small as possible, “bad” councils set it high, ostensibly to create “farm blocks of at least a minimum viable size” but actually to stop small, close-to-town farmers from chopping up their land into hobby blocks, thus denying that land to the big farming families.

    Rural politics can be an especially dirty game, since everyone is on a first-name basis with the people they’re knowingly screwing over….

  103. .

    In NSW at least, local government has little control over land use changes – even a small rezoning requires State government approval through NSW Planning. Even if a place such as Wagga or Bathurst wanted to massively free up land, they would not be permitted to unless they demonstrated to NSW Planning that demand is there – a bit of a chicken-and-the-egg problem.

    Communism by stealth.

  104. Yohan

    Bob Day was promoting the idea of the federal government using corporation powers laws to override state and local government planners on land release.

    He sees this as the only practical solution to breaking the zoning and regulatory stranglehold.

    How successful it would be we will never know, because Abbot and Hockey will not do anything that could drop land prices.

  105. .

    That’s a shit sandwich for a libertarian and constitutional conservative to eat.

  106. Tel

    Restrict the federal government to debt of a certain percentage of GDP.

    Solved.

    Not really, they would just invent new ways of measuring GDP in order to push the envelope. I think a yearly question asking everyone what they think is a reasonable per-capita budget would be the way to do it. Then pick the median value.

  107. Yohan

    At the end of the day, local and state governments are violating individual property rights with their insane zooming and regulations.

    But yes, attacking this via central government law is a dilemma for us who want separation of powers instead of federal control.

  108. Kurt

    I cant understand why more economists arent pointing out the futility of a nation spending all its money on a housing ponzi scheme. In Germamy they invest in businesses which create wealth and consume, consume, consume. In Oz we have a morgage and no life. Stupid.

  109. James Gibson

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    Then what?

    Then people have homes to live in. Pretty fucking simple mate. If you don’t like the idea of building homes for people to live in, then you should be removed permanently from yours.

    Alan is right. House prices in Australia are ENTIRELY down to zoning and land use laws, driving the cost of lots on the urban fringe from what they should be (around $50,000) to $300,000 and up. They’re also far smaller than consumer demand would dictate (400m^2 instead of 1000m^2 and upwards.)

    We must ABOLISH zoning laws for greenfield areas. No, we don’t need more disgusting, communist-style apartment blocks or the “medium density” the elite wants for us. We need more suburbs and single family homes.

  110. James Gibson

    Housing prices in Australia are high, but to blame it on regulatory failure is over the top.

    You are totally clueless. You MUST stop commenting on this issue. The average size of a home has not gone up for 15 years in Australia. Housing prices have tripled. This is due to the cost of LAND and LOTS due to state governments making it almost IMPOSSIBLE to subdivide rural land to provide new suburban subdivisions.

  111. wreckage

    Baird did free up a big chunk of land round Sydney, and there wasn’t a crash. The fact is there are more people willing to pay these insane prices than there are houses at these insane prices.

    A lot could be eased up without causing or even intimating a crash. Sequential releases around the major cities, and of course the total freeing up of zoning in the regions. There’s no evidence that small towns and villages need zoning laws at all.

    But this WON’T help without an easing of approvals, environmental, and various other compliance.

    Finally, any easing of the cost of living will ease the burden. Why are governments allergic to promising cheap power? Or cheap ANYTHING?

  112. Andrew

    So, let’s fill the County of Cumberland with cheap 40 square polystyrene clad palazzoes.

    On the subject of what should be built:

    We’ve got the swampies where I live complaining about the Council approving high rise towers, which they don’t approve of because Development! shut up!

    Now, I live at the railway station in one of the larger LGAs in Sydney. In an existing high rise, in a high-rise district. But notwithstanding the equivalent building ACROSS THE FUCKING ROAD, let alone the environmental benefits of 100 families living above the station and not needing to drive to park-and-rides, or the benefits to local business in population density, or the generally reduced environmental impact, or the existing LEP that the development complies with, these BANANAs think the Council should reject it because THEY don’t like development. Too bad about the people that do, and took pre-sales in the building. In fact, they think the Council should repeal an EXISTING DA, and the trigger for this social meeja outpouring was that DEMOLITION HAD ALREADY STARTED ON THE DECREPIT BUILDING BEING REPLACED!! Yes, these scum genuinely campaigned to have an unusable and dangerous building with now only 3 walls preserved by the repeal of a DA on which the developer (a family-owned SME) had spent years and probably a million dollars getting to this point on a property they spent millions to acquire.

  113. .

    Kurt
    #1701124, posted on June 4, 2015 at 10:41 pm
    I cant understand why more economists arent pointing out the futility of a nation spending all its money on a housing ponzi scheme. In Germamy they invest in businesses which create wealth and consume, consume, consume. In Oz we have a morgage and no life. Stupid.

    The debate is happening right before your eyes!

  114. .

    Andrew is right. The DA laws regarding dense housing around train stations are so counterproductive it makes mass transit unviable.

  115. Tim

    No height restrictions within 1km radius of a railway station in Sydney. High density problem sorted.

  116. Combine_Dave

    Abolishing local government will only add to the centralisation of power and increase bureaucratic power. Devolve power down to local areas and make local government meaningful. Let local areas make their own decisions about development and change will happen. Most of all, release the grip of Sydney on the regions.

    Sure, but removing the state government and then handing the very same powers to an even more incompetent and economically illiterate group of individuals is not a great plan.

    When the state planning office is far away, and their ability to enforce their “dreams” on the state are hindered by lack of visibility, distance and general disinterest there is freedom that can be had.

    When every tiny region has it’s own central planning office, with the power to restrict land release and a strong desire and belief in insane green ideology than it’s game over.

    One mini Hitler vers a million decentralized mini Hitlers.

  117. James Gibson

    The DA laws regarding dense housing around train stations are so counterproductive it makes mass transit unviable.

    Mass transit will always be unviable. Australia does not need dense communist style housing; it’s that simple.

    In a free market restrictive covenants would not allow single family homes to be replaced with apartment blocks.

  118. .

    Some people like trains/no car and having no garden to tend to. There is an age where apartment living is attractive. I’m sure the market would cater for them as well.

  119. Combine Dave

    Some people like trains/no car and having no garden to tend to. There is an age where apartment living is attractive. I’m sure the market would cater for them as well.

    Not having a car is a bridge too far, but I can definitely imagine living in an apppartment again, low cost of aircon, good soundproofing, close to work via cheap mass transport (serving only inner suburbs well)

Comments are closed.