Welcome Guest [Log In] [Register]


Reply
Australian house prices are among the highest in the world; The price of land is hurting Australia
Topic Started: 11 Dec 2013, 11:52 AM (965 Views)
Admin
Member Avatar
Administrator

Quote:
 
The price of land is hurting Australia

Alan Kohler

The high price of land in Australia is one of the reasons businesses like Holden and Qantas are uncompetitive and the combination of several recent developments is making the situation much worse.

Australian house prices are already among the highest in the world, both in absolute terms and relative to income, and are now starting to rise rapidly again, especially in Sydney.

Yet new developments in planning laws by Conservative state governments in NSW and Victoria are drastically restricting supply, and at the same time demand is escalating because apartments have become a financial commodity being sold by investment spruikers and the business is rapidly becoming globalised, with powerful demand coming from China especially.

It is a combination of factors that will tend to make Australia even less competitive as housing costs rise and put upward pressure on wages, and put huge intergenerational pressures on families as first home buyers are priced out of the market.

There is now growing demand for investment apartments from self-managed super funds because property is not caught by the Future of Financial Advice legislation that bans commissions paid to financial advisers.

This means developers are able to pay large commissions – usually 10 per cent – to advisers who put clients into apartments that are essentially financial investments.

In some ways it’s similar to the boom in tax-driven managed investment schemes, usually based on gum trees, which collapsed spectacularly in 2009. The promoters of those schemes paid 10 per cent upfront commissions to financial advisers, pushing hundreds of millions of dollars into them, before the money was lost four years ago.

Superannuation regulators and industry are now starting to warn about the potential for big losses in the future for self-managed super funds that are being pushed by spruikers and unscrupulous commissioned advisers into high-priced apartment developments that will be hard to rent and even harder to sell when the time comes.

The other explosive new development is the globalisation of the apartment market.

The research director at property advisory firm Charter Keck Cramer, Robert Papaleo, told me yesterday that global developers operating in most major cities around the world have been outbidding local developers for the best sites and, as a result, the apartment market is no longer acting as a traditional housing submarket to service the basic accommodation needs of Australia’s growing population.

It’s increasingly being distorted by non-housing factors like global demand, residency applications and currency movements.

This is exacerbated by the fact that non-residents can’t buy existing dwellings, only new ones, which means all of the rapidly growing foreign demand is being channelled into new stock.

Meanwhile, in Melbourne the state government has given local councils the right to impose restrictive new planning zones that prevent high density housing in the suburbs, and therefore contain the apartments to diminishing areas close to the city.

The Victorian government has introduced what it calls “Plan Melbourne”, which proposes 393,000 new dwellings in established suburbs, as well as 200,000 in an “expanded central city” to make housing more affordable, but the plan is now being subverted by the freedom the government has granted to councils at the same time.

Specifically, councils have been given the right to impose what’s called a “Neighbourhood Residential Zone” on most of their suburbs, and they’re doing it. NRZ limits development to a maximum of two dwellings per lot plus a range of strict design constraints – effectively banning suburban blocks of flats like the ones that were built in their thousands during the housing boom of the 1960s and are still dotted around the suburbs.

Those mostly ugly blocks of 10-20 flats released a lot of the pressure on house prices in the 1960s that resulted from the post-war baby boom, but local communities are now trying to make sure it doesn’t happen again.

Glen Eira has already applied NRZ to 78 per cent of its land and others like Boroondara, Yarra, Brimbank and Whitehorse are looking to apply it to up to 80 per cent.

In Sydney, the planning reforms of the O’Farrell government’s White Paper on the subject have been watered down by the NSW Upper House and now deferred completely, following lobbying by community action groups.

Chris Johnson of Urban Taskforce, which represents developers, says the process has put the state back many years; “Sydney needs 32,000 houses every year and we are only producing 21,000 now,” he says.

Bans on new suburban apartment blocks by local communities plus rapidly growing demand from ‘financialisation’ and globalisation means that the apartment market is becoming disconnected from the general housing market. But the distorted prices are infecting the whole.

According to Robert Papaleo, less than 10 per cent of Sydney’s and Melbourne’s housing needs are supplied by apartments, whereas in comparable cities like Vancouver and Seattle it’s up to 40 per cent.

The demand for apartments is only going to grow but supply is being choked. The inevitable result is higher prices and less affordable housing, putting more upward pressure on wages and making Australian industry even less competitive than it currently is.

Read more: http://www.businessspectator.com.au/article/2013/12/11/property/price-land-hurting-australia
Follow OzPropertyForum on Twitter | Like APF on Facebook | Circle APF on Google+
Profile "REPLY WITH QUOTE" Go to top
 
Robert
Unregistered

I say it is too late for Alan Kohler to get religion, the damage has been done, the pie is already baking in the oven, its game over for most Aussie manufacturing, fuck what he thinks now it’s too late.

Back in 2009, when I first started looking at Aussie export businesses there was a feeling that RE had run its course and that maybe productive industries were the investments of the future. This was not a difficult sell because RE prices had stagnated (in Sydney) and the risk of a correction was real. Today there is ZERO money available in Sydney for speculative export oriented ventures. Every last dollar is wrapped up in Sydney RE. At least that’s the feedback I get from potential investors.

I can’t see any chance of a change in attitudes until a lot of Sydney RE investors get seriously burned, I’m talking personal bankruptcy style burned. Unfortunately when you look at the economic factors that would cause such a large correction, it is highly improbable (under these conditions) that any money would be available for risky new manufacturing enterprises. C’est la vie.

It’s a pity that such a great country has to suffer such third world style leadership. (and I’m not just talking politics)
"REPLY WITH QUOTE" Go to top
 
Don't Buy Now
Member Avatar

A key feature of Ponzi schemes is that new money is used to service existing investors.

Therein lies their downfall. Price has excluded FHBs and the lauded Chinese investors can place their bets anywhere across the globe.

We approach a key inflection point. For how long can Sydney sustain increases in the rate of increase?

The bogan has the top off the convertible and is cruisin’ for a bruisin’.

Don’t Buy Now!
Profile "REPLY WITH QUOTE" Go to top
 
Pig Iron
Member Avatar
Bogan scum

what a load of shit. the holden is based in SA which is cheap as chips for land.

the problem holden and ford have is thier cars are no good. no amount of cheap land will help them with that.
I am the love child of Tony Abbott and Pauline Hanson
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy