Australia & Lessons Learned

**Chunder** · 16 Sep 09,, 11:39

Originally Posted by Bigfella

The unafordability of housing was the big sleeper in the '07 election. Labor couldn't make too big an issue of it because it still felt vulnerable on interest rates, so they couldn't tackle it as head on as they might have. I think there were a lot of people who were sick of being told how prosperous they were while they were spending every cent on a house that most would consider 'ordinary'. Rudd doesn't need to deal with this straight away, but he will need to deal with it.

I don't think anyone really knows - nor would want to do much about it. I think also, that equal blame rests on the states - not just the Federal Government. When you got down to it - there would be a multitude of factors you could change - all deeply politically unpopular.

Some I would throw out there (IN SA's example) Can the desal plant, and come up with the safe amount of people you could supply with available flows of water. (Indexed perhaps to the amount of self sustained households.
(hugely unpopular)

From there the state could effectively control influx of people, whilst opening up government land whilst denying outer fringe development. (hugely unpopular)

Extend Capital gains tax margins for houses you don't live in. (massively unpopular)

Index stamp duty to taxable income rate
(has holes in this theory)

Make essential services council responsiblity instead of the developers responsibilty. (Would help people decide how they want to get their water - which is corrupt as all hell here in SA). The beutiful thing about the old system, is that the whole paid for the new - i/e state electricity company would levy evey bill payer a nominal fee for the supply of new infrastructure to new developments. Now developers must absorb this cost. The more the developer absorbs, the more tendancy there is to cram in future slums

(again a largely unpopular move).

Service satellite towns with quick efficient transport and the rest not so

(hugely unpopular not to mention hideously expensive)

Wouldn't need a crystal ball to figure those measures probably wouldn't happen (maybe theres a more intelligent way to go about things)

If Rudd could deal with it -it would be great. But the RBA govenor was on the record pre-crash last year that if people wanted a house, they should go look at a house in the country...

If they want the economy to be driven by lending & growing- which it is to a certain extent, there NEEDS to be a readily available source of equity. You don't get it by buying a friggin car. You don't get it buy buying a business. You have two options, Save, or buy an established business which you can pay off in around 5 years. (snatching a figure here but more than several successful businessmen have said as such).

If the average person is more worried about putting food in their mouth, paying the rent, and paying off the car loan than even beggining to think about the affordability of extra risk - to me that doesn't make sence. It certainly isn't good for an economy. It's potentially disastrous with an ageing population.

I fully recognise, that not everyone can own a business of course (we're lucky so it's unfair for me to comment) It's not for many people. But people who want to shouldn't find it so impossible to get a leg up & I think to a large extent, real estate shoulders a lot of responsiblity. Keeping people gainfully employed in small business is what matters essentially IMO for a growing national output and an increasing population. The Less people you have paying for security over the course of their life, directly results in paying for less people in retirement.

Business is just picking up again - only slightly though for us we are very iffy on doing much at the moment - we've got a major piece of equipment on a lease (for risk purposes) I suspect that the article is right, spending might be better than what it was november, december last year - but Business adjusts to an extent and for us that was leasing - without question. Not only that but the generous offers offered by in-house creditors, in an attempt to get rid of stuff they had that gets lodged in the red column for them.

But Im eager to hear your thoughts on the above comments. I feel a lot more confident compared to March/April this year - but with major reservations.

**Chunder** · 16 Sep 09,, 11:51

I couldn't find the article, but I found this one for 2005 - roughly on the same track , from the RBA Gov
From http://www.smh.com.au/news/national/...353492969.html

Don't move to Sydney says RBA governor
August 12, 2005 - 5:45PM
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If you're young and thinking of moving to Sydney, think again, the Reserve Bank of Australia (RBA) warned today.

Sydney was now so much more expensive than anywhere else in Australia that it was in young people's interests to go elsewhere, said RBA governor Ian Macfarlane.

Mr Macfarlane told a House Of Representatives Committee that house prices in Sydney were 50 to 60 per cent more expensive than in Melbourne.

"Recently we've heard so much about house prices retreating in NSW, more so than other states," he said.

"It would give you the impression that somehow or other the imbalance has gone away and that Sydney is no longer so expensive relative to the rest of the country."

But Mr Macfarlane said Sydney was "enormously" more expensive than any other city in Australia.

"In dollar terms, Sydney is still way, way more expensive than anywhere else in Australia, and in fact I think it's so expensive that, particularly for a lot of young people, it's in their interests to go elsewhere, where the lifestyle is more affordable," he said.
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Sydney's median house price in the June quarter was $550,000, compared to $385,000 in Canberra, $350,000 in Brisbane and $320,000 in Melbourne.

NSW Opposition Leader John Brogden said the state government's failure to release enough land for new housing was making it too expensive for young people in Sydney to buy their own homes.

"If you haven't got into the housing market in the last 10 years, if you're a young couple or a young person, you're going to find it very hard over the next years," Mr Brogden told AAP.

Mr Brogden said releasing more land for housing would stabilise housing prices.

However a spokesman for Premier Morris Iemma said young people would continue to flock to Sydney because it was the engine room of the Australian economy and because of the lifestyle it offered.

The government's plans to release more land in so-called growth corridors would ensure enough land was available for housing into the future, the spokesman said.

"Those growth corridors are created to deal with the demand for land in the future decades," he said.

Mr Macfarlane said an increase in Sydney real estate prices would not help solve NSW's economic problems.

"Despite all the increase in house prices in Melbourne and despite all the increase in house prices in Brisbane, Sydney is still extraordinarily expensive," he said.

"And that's why I have to say I get a little impatient when I hear the real estate industry in NSW saying 'Oh, what we've got to do is get house prices going up again' - that somehow or other that's going to save NSW.

"That's Sydney's problem, it's not its solution."

**Chunder** · 16 Sep 09,, 12:01

I can find two conflicting reports. One from Glen Stevens in Feburary on housing affordability getting better, and this one in August.

From Housing affordability falls, but spring looms as boom period for home sales - Business news, business advice and information for Australian SMEs | SmartCompany

Housing affordability falls, but spring looms as boom period for home sales
Friday 14 August 2009 11:43
Patrick Stafford
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Housing affordability continued to fall during the June quarter as prices for established homes increased, according to the latest results from the Housing Industry Association-Commonwealth Bank First Home Buyer Affordability Report.

But while the affordability index has fallen on a quarterly basis, the HIA points out that it is still 44 points higher than during the same time last year.

During the June quarter, the median price for a first home was at $419,000, with the average monthly payment at $1,983, leading a housing affordability index rating of 152.5.

This is a drop from the March results, which recorded a median first home price of $386,400, with an average monthly payment of $1,843 and an index reading of 161.

Comparatively, during the June quarter 2008, the median first home price was at $417,000, with a monthly repayment of $2,777 and a housing affordability index rating of 108.3.

HIA chief economist Harley Dale says that overall the result is good despite the quarterly drop in affordability, and that access to housing is still at the best conditions in several years.

"You have seen a little bit of a fall in affordability in the June quarter, and that's because we did see some house price growth. But that hasn't prevented us seeing affordability up 40% from where it was 12 months ago, and this is still the second highest reading in the last seven years."

Dale dismisses claims that recent growth in housing prices will lead to a bubble, but echoes the concerns of Reserve Bank of Australia governor Glenn Stevens that construction of new housing must keep up with demand.

"I think those fears are a little bit overplayed. On the one hand you could talk about these fears being realised over a number of years, but you've also got fears of this happening in the next six to 12 months."

"I think if you look at this over the next few years, this is a reasonable point to make if we don't continue to find ways to boost the supply of new housing, then we will get more pressure on housing prices than otherwise would have been the case."

Dale also says Australia is lucky enough to have escaped the property crashes seen in the US and Britain, and that such a crash would have seen the country dragged into a recession.

"If in Australia you had a price crash along the lines of what people said we would experience, then we would be in a recession right now and unemployment would probably be over 7%, not at just under 6%. It's all well and good to have a price correction, but if no one can buy the housing without a job, then what's the point?"

The new data comes as results from RP-Data showing that 34,000 pre-listing reports have been prepared during the last two weeks, indicating spring will be a hot time for property.

The findings are a 5% increase on July pre-listings, and are an increase of 36% when compared to the same period during 2008. Queensland recorded a 4% increase in pre-listings.

The results come as auction results around the country are on the rise, with Melbourne recording over 12 consecutive weeks of rates over 80%.

"Based on our findings, the CMA is one of our most popular reports undertaken by real estate agents when they are pitching to list a property for sale. The report provides examples of recent comparative home sales as well as demographic and market statistics. In several states the CMA is considered industry best practice and legislated as being mandatory," executive general manager David Williams said in a statement.

"Our latest results on product usage, particularly for CMA's, on the rpdata.com website suggests that vendors and real estate agents are preparing for a bumper spring selling season."

**Bigfella** · 16 Sep 09,, 14:20

Chunder,

No time for a proper reply, but I hope you are right about house prices not crashing. That would be a disaster for consumer confidence. Too many people sitting on assets worth less than what they owe on them would be a nightmare. A slow letdown would be preferable.