Society/Culture The housing crisis. How is it fixed?

[Purple7x08_24]

Seriously. You just have to listen to most politicians talk to know that they didn't get to where they did on brains. Come on, most of them can barely string a coherent sentence together.

If politicians are loading up on property, I'm more than happy taking the other side of a risk free bet knowing that 2026 is fast approaching.

My old man was a pit trader in the day, years ago now. So I know a thing or two about markets and sentiment.

I think Aussie property is primed for a bust. The entire market has been distorted, land markets are so high no one can dare start a business to make a quid. The only growth is from public spending and public sector jobs.

This bubble is gigantic and it will be absolute carnage when she pops. The government of the day won't know what to do. Ipswich, west of Brisbane, is currently trading at price levels comparable and higher than Melbourne.

I mean look around. Look at the data. This is going to be yuge. Absolute carnage incoming. Scary in fact. We won't know what hit us.

I think Adelaide has exploded to the point that a lot of investors can't make money on development properties because sale prices have gone through the roof.

Problem is the RBA will likely drop rates by 1% by the end of '25 and my belief is it may stall the economy because those people already stretched are going to be less likely to spend the money they recoup. I think this will potentially stall the economy resulting in job losses but the RBA can't afford to reduce rates too fast either.

I think it's more likely that people won't sell their properties which will increase demand for those that need to buy a property. I could see 10% falls in Adelaide but doubt we're going to see any doomsday crashes given the need and want within the government for migrants and the lack of properties.

If people stopped spending money then the RBA is going to reduce rates again and investors will flock.

I think for a major crash to come we would need to see a number of key industries fail on the global market.

 

[imtall]

I think Adelaide has exploded to the point that a lot of investors can't make money on development properties because sale prices have gone through the roof.

Problem is the RBA will likely drop rates by 1% by the end of '25 and my belief is it may stall the economy because those people already stretched are going to be less likely to spend the money they recoup. I think this will potentially stall the economy resulting in job losses but the RBA can't afford to reduce rates too fast either.

I think it's more likely that people won't sell their properties which will increase demand for those that need to buy a property. I could see 10% falls in Adelaide but doubt we're going to see any doomsday crashes given the need and want within the government for migrants and the lack of properties.

If people stopped spending money then the RBA is going to reduce rates again and investors will flock.

I think for a major crash to come we would need to see a number of key industries fail on the global market.

The prices of rentals especially will push people to innovate to escape the higher prices - whether that is group housing or moving in with their folks or even living in their car. That is how markets work - if you price the market out, then the market will innovate - which in turn leads to corrections in pricing. This is the inherent beauty of markets and why they should never be tinkered with.

People forget that markets are dynamic - they will soon learn that lesson.

 

[peetoo]

The prices of rentals especially will push people to innovate to escape the higher prices - whether that is group housing or moving in with their folks or even living in their car. That is how markets work - if you price the market out, then the market will innovate - which in turn leads to corrections in pricing. This is the inherent beauty of markets and why they should never be tinkered with.

People forget that markets are dynamic - they will soon learn that lesson.

Markets are rigged to monopolise. Wealth gap gets bigger.

 

[peetoo]

How to fix housing?

For one make it a 6 day process for a building permit not 6-12 months. That is an easy start.

There’s plenty of approved developments not being built

 

[imtall]

Markets are rigged to monopolise. Wealth gap gets bigger.

That is not how it works at all mate.

Markets are built up and then crash....allowing buyers to buy assets on the cheap and then the market builds again.....and the cycle repeats.

 

[Purple7x08_24]

The prices of rentals especially will push people to innovate to escape the higher prices - whether that is group housing or moving in with their folks or even living in their car. That is how markets work - if you price the market out, then the market will innovate - which in turn leads to corrections in pricing. This is the inherent beauty of markets and why they should never be tinkered with.

People forget that markets are dynamic - they will soon learn that lesson.

While that's true, it's having a minimal impact. To some degree it's having an impact in some areas around Sydney where demand is too low both from those factors and there has been a level of overdevelopment, but also people leaving NSW.

We're expecting +3Million people in the next 5-6 years, plus a forecast growth in tourism and we're not going to cover that through development and innovative thinking alone.

What I think we're going to see is more people with higher levels of income price out those middle income earners with 2nd and 3rd properties to set themselves up in turn creating continual growth. Yes we will have ups and downs along the way but at least for the next 10-15 years we're not going to have a crash. We're also going to see foreign investors prepared to pay top dollar given the exchange rate. Even a 2 bedroom apartment in Woolongong is out of reach for many reasonable income earners. Someone is still out there buying these properties.

It's going to be the apartments that suffer in overdeveloped areas but no more than 20% reductions. Land will still achieve growth.

Having said all of that, if you've got more than 80% LVR you're not leaving yourself much room to move. I think I'm about 65% RN and I have some freedom so in the end it's all about long term.

Another point worth making is back in the year 2000 I had these discussions with colleagues and the same comments about a market crash were said back then. We had a rapid level of growth between 1997 and 2003 and people kept saying that the market can't keep going up or noone will be able to afford a property and here we are. We had some blips in 2008, 2012 etc. I think my house at one stage went from $250K to $230K in that period so perhaps a 10% decline, but that house now is worth at least 400K.

 

[peetoo]

Owning a property to rent is not economic without the gearing etc. in too much of the sector.

Come back with success stories etc but there’s also pain.

 

[imtall]

While that's true, it's having a minimal impact. To some degree it's having an impact in some areas around Sydney where demand is too low both from those factors and there has been a level of overdevelopment, but also people leaving NSW.

We're expecting +3Million people in the next 5-6 years, plus a forecast growth in tourism and we're not going to cover that through development and innovative thinking alone.

What I think we're going to see is more people with higher levels of income price out those middle income earners with 2nd and 3rd properties to set themselves up in turn creating continual growth. Yes we will have ups and downs along the way but at least for the next 10-15 years we're not going to have a crash. We're also going to see foreign investors prepared to pay top dollar given the exchange rate. Even a 2 bedroom apartment in Woolongong is out of reach for many reasonable income earners. Someone is still out there buying these properties.

It's going to be the apartments that suffer in overdeveloped areas but no more than 20% reductions. Land will still achieve growth.

Having said all of that, if you've got more than 80% LVR you're not leaving yourself much room to move. I think I'm about 65% RN and I have some freedom so in the end it's all about long term.

Another point worth making is back in the year 2000 I had these discussions with colleagues and the same comments about a market crash were said back then. We had a rapid level of growth between 1997 and 2003 and people kept saying that the market can't keep going up or noone will be able to afford a property and here we are. We had some blips in 2008, 2012 etc. I think my house at one stage went from $250K to $230K in that period so perhaps a 10% decline, but that house now is worth at least 400K.

So what is driving up property prices of noone can afford to buy the house?

 

[Kram]

I said it back on page one. Demand greatly outstrips supply..

 

[DangerousD]

We will see how much balls the Labor party has in relation to changes to negative gearing and then we will see the millions of Australians fear mongering any changes to protect their own interests not knowing that any changes will likely be grandfathered and any changes to investing laws wont necessarily drop prices but more likely just slow the rate they grow.

 

[DangerousD]

A simple fix to increasing the supply of property and land would be cutting council red tape or even speeding up building permit applications, sub division approvals or removing criteria before you can sub divide land.

Im currently trying to sub divide a block and it’s been such a long drawn out process that will cost a fortune.

Being able to sell a block at a lower price and then the buyer can do the work would get a lot more land on the market a lot quicker.

 

[peetoo]

A simple fix to increasing the supply of property and land would be cutting council red tape or even speeding up building permit applications, sub division approvals or removing criteria before you can sub divide land.

Im currently trying to sub divide a block and it’s been such a long drawn out process that will cost a fortune.

Being able to sell a block at a lower price and then the buyer can do the work would get a lot more land on the market a lot quicker.

The Victorian govt is going exactly that with ‘activity centres’ right now.

But make no mistake developers want lower standards of property with better profits. There’s literally thousands of approve projects right now. Developers hoarding them.

The properties are then climate inefficient which costs much more over the lifetime. But hey, someone made a nice profit so all good

 

[DangerousD]

The Victorian govt is going exactly that with ‘activity centres’ right now.

But make no mistake developers want lower standards of property with better profits. There’s literally thousands of approve projects right now. Developers hoarding them.

The properties are then climate inefficient which costs much more over the lifetime. But hey, someone made a nice profit so all good

Im not talking about developers though and i agree with you in regards to what they are doing, they are banking land and drip feeding supply and the building standards are terrible in terms of efficiency.

Im talking about people being able to sub divide their block to sell the land or to knock down and build multiple dwellings and things like that.

I got plans and permits to do a build at the rear of an investment property, this alone cost about $18,000 all up, once i got quotes to build i realised I couldn’t do it and decided that id just sub divide the land and sell and someone else then can build a house.

This process is so so so slow and once again expensive, at every turn there is someone that needs paying and i bet that the council who is enforcing these regulations is making money off of each bill that’s paid.

Just to get the back part of the block sub divided and approved by council will cost about $100,000, i then can maybe sell the block for $280,000, this process started at the start of the year and still seems months off being able to sell.

I would have been more than happy to just sell the block 6 months ago for $150,000 and be done with it.

Or if the process was just sped up, i still pay the $100,000, it still sells for $280,000 but instead of taking 12-14 months it takes 4.

Government and councils supposedly want more supply but they slow down the release of supply with their crap policies

 

[leon123]

Im not talking about developers though and i agree with you in regards to what they are doing, they are banking land and drip feeding supply and the building standards are terrible in terms of efficiency.

Im talking about people being able to sub divide their block to sell the land or to knock down and build multiple dwellings and things like that.

I got plans and permits to do a build at the rear of an investment property, this alone cost about $18,000 all up, once i got quotes to build i realised I couldn’t do it and decided that id just sub divide the land and sell and someone else then can build a house.

This process is so so so slow and once again expensive, at every turn there is someone that needs paying and i bet that the council who is enforcing these regulations is making money off of each bill that’s paid.

Just to get the back part of the block sub divided and approved by council will cost about $100,000, i then can maybe sell the block for $280,000, this process started at the start of the year and still seems months off being able to sell.

I would have been more than happy to just sell the block 6 months ago for $150,000 and be done with it.

Or if the process was just sped up, i still pay the $100,000, it still sells for $280,000 but instead of taking 12-14 months it takes 4.

Government and councils supposedly want more supply but they slow down the release of supply with their crap policies

I can tell you with 100% confidence, this land banking and dripping supply is a total myth

 

[peetoo]

I can tell you with 100% confidence, this land banking and dripping supply is a total myth

What about trying to get standards lowered?

 

[leon123]

What about trying to get standards lowered?

Standards for new development, being the dwelling or wider area is increasing.

I personally think aspirations for new purchasers is excessive, but ultimately higher standards ie energy efficiency is the way to go.... three toilets, butler pantries...whatever, you pay

 

[Nugett]

I was visiting Singapore back in 2018. Went to see the Changi Chapel. The tour guide was explaining the house situation in Singapore, where as a first time owner, for a government flat its citizens could get up to 80% off its price. If you wanted to sell and go upmarket a bit more, than the government would allow its citizen’s to use their future pensions, to invest in that property. The government made its decision, mainly based off what happened during the Fall of Singapore. Their government thought by giving their citizens their own homes, that the citizens would stay and fight for their homes.

If I were to make changes, I would make it so that foreign investment in property would require an Australian citizen to co-own the place. At least 55%

Have Either state/Federal or both homes that can be sold to first home buyers at a discounted rate. When selling the property, it can only be sold back to the relevant government at a percentage of current market rate, so it get puts back into the pool for first home buyers.

Banks also have to come under more scrutiny, which is where I think if we have affordable government houses, it just may stop banks from monopolising the housing market with higher interest rates.

Rental Real estate agents also need to be under more scrutiny. Currently they keep locking tenants into leases, then once that lease is up, they tend to increase the rent significantly on their next lease agreement, locking people in, where it’s financially hard for the tenants to move. Here in QLD and I’m sure everywhere else, tenants have to fight to get their bond back, by using the RTA. I know I had a real estate company, that wanted to keep my bond, because I left the place unclean. On inspection it was 2 specs of dust on a light switch. After a nice email, where I showed before and after photo’s and informing them I don’t mind taking it up with the RTA, they decided in the end to give me back my bond. So my next proposal is that if a real estate agency is found to be making frivolous claims in keeping bond money, then they can be fined for such claims. So an example would be for the letting officer/manager a fine of $5000, for the agency $10000. Another tactic that real estates use, is using their mates as bond cleaners, carpet cleaners ect. It’s a rort. I also suggest, that leases can only be renewed for a certain amount of time. An example being if a person has been living on a property for 3 years, than that property can be periodical for that tenant.

 

[Scotland]

Bought my first house about 15 years ago. Roughly median income and below median priced house. Pretty close to my borrowing limit and definitely wasn't comfortable the first couple of years. Same house now out of reach to an equivalent income in 2024 dollars.

Bought my second house 5 years ago. Higher than median income and slightly above median priced house. Pretty comfortable the first couple of years with covid interest rates. Same house now out of reach to an equivalent income in 2024 dollars. Even with the equity and capital growth of my first house and an increase in salary it would still be just out of reach.

Happy to be in the market and have a roof over my head but what an absolute cluster of a Ponzi scheme we live in.

 

[Kram]

Bought my first house about 15 years ago. Roughly median income and below median priced house. Pretty close to my borrowing limit and definitely wasn't comfortable the first couple of years. Same house now out of reach to an equivalent income in 2024 dollars.

Bought my second house 5 years ago. Higher than median income and slightly above median priced house. Pretty comfortable the first couple of years with covid interest rates. Same house now out of reach to an equivalent income in 2024 dollars. Even with the equity and capital growth of my first house and an increase in salary it would still be just out of reach.

Happy to be in the market and have a roof over my head but what an absolute cluster of a Ponzi scheme we live in.

I still can't get over someone paying $925k for a very medicore 2 bed cottage on Grand Prom.

My uncle also just did $820k for a place in High Wycombe, large and nice place but geez.

Pretty much given up looking seriously atm, just gonna wait for it the eventually cool off and also back to full time work so try and extend the cash in the budget. I don't really need to move back to the city especially now so there's no rush.

 

[peetoo]

I still can't get over someone paying $925k for a very medicore 2 bed cottage on Grand Prom.

My uncle also just did $820k for a place in High Wycombe, large and nice place but geez.

I can’t get my head around our 2-3 million house could be priced 6-9 million inside a decade*

If I had that in super , it gets taxed higher rate

Even then, it went up 6 fold in the eighties in 11 years. It’s not going to be 12-15 million in a decade hence. That was the biggest multiplier time