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Australian Housing Affordability Crisis
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Topic Started: 23 Jan 2011, 10:00 PM (5,661 Views)
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Oz Housing
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23 Jan 2011, 10:00 PM
Post #1
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Housing Affordability
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There have been several material trends over previous years, related to household income levels and household formation, that have worked together to excessively and unsustainably force up property prices to unfair levels.
1. Increased female workforce participation has led to far more dual-income families
2. Competitive bidding for property, driven by the amount banks are willing to lend based on joint income
3. Reduced family sizes, as a result of personal preferences and higher participation in the workforce
This factors are combined with unchecked commodification of shelter for the population. This is caused by misguided governments who omit to regulate house prices, while unfairly allowing over-leveraged bidders to force up housing costs so they, the government, can benefit from vast streams of land tax, stamp duty, and council rates revenue. Australia's dangerously unregulated property environment includes these elements:
Liberalization of debt at higher risk profiles for lenders.
The ascent of non-bank lenders and their reckless low-docs loans and non-conforming (sub-prime) loans
Dominance of interest-only loans among investors and speculators
Equalization of interest rates on credit for IPs and PPRs
Inappropriately low mortgage rates
Prevalence of spruikers' who promote 'get rich quick' rorts based on speculation and exploiting others especially renters
Unfair tax breaks, in particular negative gearing
Capitalization of interest and buying costs such as stamp duty
Desperate buyers, hysterically outbidding each other to get 'on the ladder'
Speculative irrational exuberance, faith that house prices can only go up and unending capital gains will bail out their ongoing losses
Greedy real estate agents, baby boomers, and developers cashing in on this hysteria
Low costs for property purchase compared to other nations
A rental market that favors landlords and unfairly gives few rights to tenants
Sadly these factors all mean that every spare dollar of household income is spent on overpriced housing and capitalized into ever increasing house prices as young families battle for decent shelter while speculators unfairly hoard the available housing stock.
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Australian Housing Affordability Blog
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Deleted User
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23 Jan 2011, 10:21 PM
Post #2
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Deleted User
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Bubble up = ageing + easy available credit + affordability + consistent high population growth (1970 to 2010)
Bubble down = ageing + unaffordability + rapid population growth decline (2011 to 2020)
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SausageDog
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24 Jan 2011, 11:53 AM
Post #3
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- Oz Housing
- 23 Jan 2011, 10:00 PM
Unfair tax breaks, in particular negative gearing
This is the big one. Governments should be subsidising everybody or nobody. Both the investor and the owner-occupier are performing the same function, i.e. providing a dwelling to the community to house one of its residents. It makes no sense that I and a friend could buy properties and then rent to each other, giving us tax breaks so that we end up owning our homes faster than us both living in our own residences. The burdern (or lack thereof) to society is unchanged.
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Catweasel
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24 Jan 2011, 12:09 PM
Post #4
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- SausageDog
- 24 Jan 2011, 11:53 AM
This is the big one. Governments should be subsidising everybody or nobody. Both the investor and the owner-occupier are performing the same function, i.e. providing a dwelling to the community to house one of its residents. It makes no sense that I and a friend could buy properties and then rent to each other, giving us tax breaks so that we end up owning our homes faster than us both living in our own residences. The burdern (or lack thereof) to society is unchanged.
Catweasel say hmmmm.... What if all a mouse start to think out a box. Why it always the rely on a subsidy and govty? If it think and wonder why a property industry and local govt so the inefficient and productivity, then it a understand that a no incentive to be the productive. If govt, media, and industry say it a too expensive, then so the be it. Stop a interfere, let a property company and mouse die and let out-the-box thinker find solution (if can be done). If Australia richest country a world, but still the too expensive for mouse, need to look new solution. Mouse camps perhaps. Sound a stupid but it a same in another the country where the too expensive. Mouse live in camp or makeshift. Create its own the economy.
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b_b
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24 Jan 2011, 12:29 PM
Post #5
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- 23 Jan 2011, 10:00 PM
There have been several material trends over previous years, related to household income levels and household formation, that have worked together to excessively and unsustainably force up property prices to unfair levels.
1. Increased female workforce participation has led to far more dual-income families
2. Competitive bidding for property, driven by the amount banks are willing to lend based on joint income
3. Reduced family sizes, as a result of personal preferences and higher participation in the workforce
This factors are combined with unchecked commodification of shelter for the population. This is caused by misguided governments who omit to regulate house prices, while unfairly allowing over-leveraged bidders to force up housing costs so they, the government, can benefit from vast streams of land tax, stamp duty, and council rates revenue. Australia's dangerously unregulated property environment includes these elements:
Liberalization of debt at higher risk profiles for lenders.
The ascent of non-bank lenders and their reckless low-docs loans and non-conforming (sub-prime) loans
Dominance of interest-only loans among investors and speculators
Equalization of interest rates on credit for IPs and PPRs
Inappropriately low mortgage rates
Prevalence of spruikers' who promote 'get rich quick' rorts based on speculation and exploiting others especially renters
Unfair tax breaks, in particular negative gearing
Capitalization of interest and buying costs such as stamp duty
Desperate buyers, hysterically outbidding each other to get 'on the ladder'
Speculative irrational exuberance, faith that house prices can only go up and unending capital gains will bail out their ongoing losses
Greedy real estate agents, baby boomers, and developers cashing in on this hysteria
Low costs for property purchase compared to other nations
A rental market that favors landlords and unfairly gives few rights to tenants
Sadly these factors all mean that every spare dollar of household income is spent on overpriced housing and capitalized into ever increasing house prices as young families battle for decent shelter while speculators unfairly hoard the available housing stock.
1. Liberlization of debt:
This has created a fairer Australia where people who can afford a loan are granted a loan. Try living in the 1970’s when you could only get a loan if you were “connected”. As far as the comment that lenders now have a higher risk profile…well that’s just not supported by the data. Aussie banks remain the strongest in the world by the ratings agencies and the bet price in the world (price / book) according to the equity market. They also generate superior ROE versus just about any other bank in the world.
2. Accent of non bank lenders?
Again not supported by the data. Traditional bank market share has increased during the GFC. Credit standards are tighter.
3. Dominance of interest only loans?
Source?
4. Equalisation of rates for IP’s and PPR.
What economic reason would justify a difference? IP’s offer the same security, but better cashflow.
5. Inappropriate low mortgage rates?
Inflation is targeted at 2.5%. Mortgage rates are circa 7.5%. That a 5.0% real rate of return to the mortgage provider. Not bad for a loan when real equity returns = 6.0% over the long run. By this measure, mortgage rates are inappropriately high.
6. Prevalence of spruikers
Any prevalence of spruikers are more than offset by the prevalence of Bear spruikers in the MSM. Seen the run that stupid Demographia report is getting today?
7. Unfair tax breaks?
These are the same tax breaks given to any share investor or business person. So on what basis are they unfair?
8. Capitalisation of Interest and buying costs such as stamp duty?
Why is this unfair. If I have an LVR of just 30%, why shouldn’t I capitalise some costs. Shouldn’t LVR, and serviceability be more important? This comment is a nonsense.
9. Deperate Buyers? On this forum all I ever hear about is desperate sellers.
10. Developers cashing in? Don’t make me laugh. Please, supply your evidence on this one!!!!
11. Low costs for property purchases compared to other counties? Source?
12. Rental market that favours landlords? Can’t comment. I don’t invest, and I don’t rent.
All in all, this post is just emotion. For the hard data please see link below. Housing costs as a % of income has not changed in 16 years.
http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/72A5703726A305B8CA25773700169C7C?opendocument
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SausageDog
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24 Jan 2011, 12:43 PM
Post #6
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- b_b
- 24 Jan 2011, 12:29 PM
7. Unfair tax breaks?
These are the same tax breaks given to any share investor or business person. So on what basis are they unfair?
Because those same breaks aren't given to people buying their own property perhaps? Where is the inequity in the share market that you can see in the property market?
And why is lending to a bank in the form of buying their shares not treated the same as lending to a bank in the form of depositing all your savings? One is taxed more heavily than the other, although both serve the same purpose: providing capital to the institution to invest.
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Ray White
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24 Jan 2011, 12:50 PM
Post #7
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- SausageDog
- 24 Jan 2011, 12:43 PM
Because those same breaks aren't given to people buying their own property perhaps? Where is the inequity in the share market that you can see in the property market?
And why is lending to a bank in the form of buying their shares not treated the same as lending to a bank in the form of depositing all your savings? One is taxed more heavily than the other, although both serve the same purpose: providing capital to the institution to invest.
No one, not one person, ever gets taxed on their savings or on shares that they own. There is no wealth tax in Australia like in some other countries. People get taxed on the income arising from those savings or shares. Both are treated in the same way.
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b_b
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24 Jan 2011, 01:06 PM
Post #8
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- SausageDog
- 24 Jan 2011, 12:43 PM
- b_b
- 24 Jan 2011, 12:29 PM
7. Unfair tax breaks?
These are the same tax breaks given to any share investor or business person. So on what basis are they unfair?
Because those same breaks aren't given to people buying their own property perhaps? Where is the inequity in the share market that you can see in the property market? And why is lending to a bank in the form of buying their shares not treated the same as lending to a bank in the form of depositing all your savings? One is taxed more heavily than the other, although both serve the same purpose: providing capital to the institution to invest.
I can see no inequity between a property owner and a share investor. The issue of inequity was raised by the original post, not me.
People buying their own property get the best tax break fof all. No CGT.
re your question lending to a bank. Not sure I can answer that one. As I said, the issue of inequality was raised by the original post. This issue is moot for the reasons outlined.
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Catweasel
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24 Jan 2011, 02:03 PM
Post #9
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- 24 Jan 2011, 01:06 PM
I can see no inequity between a property owner and a share investor. The issue of inequity was raised by the original post, not me.
People buying their own property get the best tax break fof all. No CGT.
re your question lending to a bank. Not sure I can answer that one. As I said, the issue of inequality was raised by the original post. This issue is moot for the reasons outlined.
Why it a "best" tax break of all? If all the white shoe do a argue that a buy house is a best inflation a hedge, then a future house price carry a relatively same real value as a today (with a assume that house price not outpace inflation in a long run). In fact, it not a tax "break" at a all.
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SausageDog
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24 Jan 2011, 02:07 PM
Post #10
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- Ray White
- 24 Jan 2011, 12:50 PM
No one, not one person, ever gets taxed on their savings or on shares that they own. There is no wealth tax in Australia like in some other countries. People get taxed on the income arising from those savings or shares. Both are treated in the same way.
I didn't say you pay tax on your savings, I said the activity of investing in shares and depositing your cash is taxed differently. There is no concept of CGT and associated discount for cash unlike the sale of shares. There is no opportunity to claim a loss if your cash depreciates in real terms unlike shares.
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b_b
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24 Jan 2011, 02:07 PM
Post #11
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- Catweasel
- 24 Jan 2011, 02:03 PM
- b_b
- 24 Jan 2011, 01:06 PM
I can see no inequity between a property owner and a share investor. The issue of inequity was raised by the original post, not me.
People buying their own property get the best tax break fof all. No CGT.
re your question lending to a bank. Not sure I can answer that one. As I said, the issue of inequality was raised by the original post. This issue is moot for the reasons outlined.
Why it a "best" tax break of all? If all the white shoe do a argue that a buy house is a best inflation a hedge, then a future house price carry a relatively same real value as a today (with a assume that house price not outpace inflation in a long run). In fact, it not a tax "break" at a all.
What?
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SausageDog
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24 Jan 2011, 02:15 PM
Post #12
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- 24 Jan 2011, 01:06 PM
I can see no inequity between a property owner and a share investor. The issue of inequity was raised by the original post, not me.
People buying their own property get the best tax break fof all. No CGT.
re your question lending to a bank. Not sure I can answer that one. As I said, the issue of inequality was raised by the original post. This issue is moot for the reasons outlined.
You said property and shares are treated the same. They aren't. All buyers in the sharemarket have the same tax advantages. Not all buyers in the property market do. Capital losses in the share market earn you a tax break on the sale of the shares. Negative income in the property market earn you a tax break on ordinary earnings. This encourages people to make a loss because they'll still end up with a positively geared asset as rents rise and they'll still end up with outright ownership eventually.
These aren't even remotely comparable.
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raveswei
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24 Jan 2011, 02:21 PM
Post #13
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- 24 Jan 2011, 02:07 PM
- Catweasel
- 24 Jan 2011, 02:03 PM
- b_b
- 24 Jan 2011, 01:06 PM
I can see no inequity between a property owner and a share investor. The issue of inequity was raised by the original post, not me.
People buying their own property get the best tax break fof all. No CGT.
re your question lending to a bank. Not sure I can answer that one. As I said, the issue of inequality was raised by the original post. This issue is moot for the reasons outlined.
Why it a "best" tax break of all? If all the white shoe do a argue that a buy house is a best inflation a hedge, then a future house price carry a relatively same real value as a today (with a assume that house price not outpace inflation in a long run). In fact, it not a tax "break" at a all.
What?
If house prices go up with the inflation (as they do over the long periods) there is no real capital gain, so what you call "tax break" is no tax break because there was no capital gain.
Even if house prices go up slightly faster than inflation buying and selling costs + stamp duty (up to 10% in total) usualy kill any real capital gain!
No capital gain - no tax.
This is for long term investments. In short terms there could be sa capital gain that is not taxed but capital loss is equally probable. It’s a risk game where you will not be taxed on Gains but also you may not deduct Losses.
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http://popping-bubble.blogspot.com/
Thinking of an Australian property speculator (PI):
Inaction = missing opportunities.
Missing opportunities = losing.
Too much thinking = inaction.
Thinking = missing opportunities.
Therefore thinking = losing.
disgraceful little man Frank Castle owes a house to Salvation Army
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Ray White
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24 Jan 2011, 02:29 PM
Post #14
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- raveswei
- 24 Jan 2011, 02:21 PM
If house prices go up with the inflation (as they do over the long periods) there is no real capital gain, so what you call "tax break" is no tax break because there was no capital gain.
If investment house prices, or shares, go up with inflation (as they do over long periods) they will attract CGT. If PPORs go up with inflation they will attract no CGT. Therefore PPOR CGT exemption is a tax break.
CGT is no longer linked to inflation. CGT applies to nominal prices.
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b_b
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24 Jan 2011, 02:31 PM
Post #15
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- SausageDog
- 24 Jan 2011, 02:15 PM
- b_b
- 24 Jan 2011, 01:06 PM
I can see no inequity between a property owner and a share investor. The issue of inequity was raised by the original post, not me.
People buying their own property get the best tax break fof all. No CGT.
re your question lending to a bank. Not sure I can answer that one. As I said, the issue of inequality was raised by the original post. This issue is moot for the reasons outlined.
You said property and shares are treated the same. They aren't. All buyers in the sharemarket have the same tax advantages. Not all buyers in the property market do. Capital losses in the share market earn you a tax break on the sale of the shares. Negative income in the property market earn you a tax break on ordinary earnings. This encourages people to make a loss because they'll still end up with a positively geared asset as rents rise and they'll still end up with outright ownership eventually. These aren't even remotely comparable.
Wrong!
Negative income (after interest expense) on owning shares is duductable against income - same as investment property
A realised capital loss on shares is only deductable against gains in that year or future years - same as investment property.
A realised capital gain on sahres received a 50% CGT deduction is held more than 12 months - same as investment property
Pass through depreciation benefits from listed investment trsust is tax detuctable - same as investment property.
So I will ask my question again. How does anyone think investment property has an unfair tax advantage?
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1:43 PM May 26