Housing bubble in Australia

[bestluck]

I don't think there's a bubble when it comes realty. The simple demand and supply will be the real reason why investors loves to invest to house and lot. It's a basic need of human being and it's a normal movement of pricing for a house and lot. And well it's everyone's dream to have house so he has the right to buy as many as he can and the government will be on their favor as they will pay tax.

Yes you got the point here and a lot of people think the way you do. But there are more and more houses are now going to build but it still need to go just up. It actually dependent on the thinking of the users. And it is really amazing that it is already happening there in earth far away in a well developed and well balanced country Australia. But I guess in our country's people think that either if you don't have a house to yourself even though it is of economic values for you.

[gueorguiev]

Well something that they are doing in Vancouver, and now Toronto is that they implement a foreign buyers tax, which is essentially a fine that buyers have to pay for every year their houses remain vacated.

I'll have to double check, but I think those were two separate things.  Foreign buyer tax is 15%.  The vacant-home tax is what you're referring to.

ah yes, those were two separate trains of thought, the vacant home tax right now is 1%.

[freeyourmind]

Well something that they are doing in Vancouver, and now Toronto is that they implement a foreign buyers tax, which is essentially a fine that buyers have to pay for every year their houses remain vacated.

I'll have to double check, but I think those were two separate things.  Foreign buyer tax is 15%.  The vacant-home tax is what you're referring to.

ah yes, those were two separate trains of thought, the vacant home tax right now is 1%.

Interesting.  I wonder what the criteria is to actually enforce that.  I don't think the city has any clue as to which properties are vacant and which aren't.

[jorneyflair]

Well something that they are doing in Vancouver, and now Toronto is that they implement a foreign buyers tax, which is essentially a fine that buyers have to pay for every year their houses remain vacated.

I'll have to double check, but I think those were two separate things.  Foreign buyer tax is 15%.  The vacant-home tax is what you're referring to.

ah yes, those were two separate trains of thought, the vacant home tax right now is 1%.

Interesting.  I wonder what the criteria is to actually enforce that.  I don't think the city has any clue as to which properties are vacant and which aren't.

It'll be extremely hard to follow.

In my opinion i would honestly just build more houses to build the demand. The government can build outwards into nearby cities and make sure that the infrustructure is actually functional so that people can actually have incentive to live there.

Restricting the amount of property per person or charging a tax never works, and it's proven in china. There will always be legal loopholes no matter what, unless you apply to everyone which is quite unfair. Property can be a good hedge against inflation in some cases as well, and some legit home owners need multiple houses/apartments as well.

If government can subsidize housing in nearby areas, and more importantly, make sure that there are certain attractions such as employment etc. to back up the area then the problem will self resolve.

[freeyourmind]

Well something that they are doing in Vancouver, and now Toronto is that they implement a foreign buyers tax, which is essentially a fine that buyers have to pay for every year their houses remain vacated.

I'll have to double check, but I think those were two separate things.  Foreign buyer tax is 15%.  The vacant-home tax is what you're referring to.

ah yes, those were two separate trains of thought, the vacant home tax right now is 1%.

Interesting.  I wonder what the criteria is to actually enforce that.  I don't think the city has any clue as to which properties are vacant and which aren't.

It'll be extremely hard to follow.

In my opinion i would honestly just build more houses to build the demand. The government can build outwards into nearby cities and make sure that the infrustructure is actually functional so that people can actually have incentive to live there.

Restricting the amount of property per person or charging a tax never works, and it's proven in china. There will always be legal loopholes no matter what, unless you apply to everyone which is quite unfair. Property can be a good hedge against inflation in some cases as well, and some legit home owners need multiple houses/apartments as well.

If government can subsidize housing in nearby areas, and more importantly, make sure that there are certain attractions such as employment etc. to back up the area then the problem will self resolve.

Not sure if you're talking about Toronto, but depending on the government to provide functional infrastructure (especially transportation) to nearby cities is a joke.  Our city's current transportation system is maybe 30 years behind where it needs to be right now, let alone supporting other cities.



Two ways to go though.  One is your approach - to have urban sprawl, and the other is to add density and build vertical.  Both are happening.  If we could just get out of artificially low interest rates, speculative real estate purchases would be greatly reduced.

[magneto]

Thanks for the responses guys, appreciate it.

Well something that they are doing in Vancouver, and now Toronto is that they implement a foreign buyers tax, which is essentially a fine that buyers have to pay for every year their houses remain vacated.

I'll have to double check, but I think those were two separate things.  Foreign buyer tax is 15%.  The vacant-home tax is what you're referring to.

ah yes, those were two separate trains of thought, the vacant home tax right now is 1%.

Interesting.  I wonder what the criteria is to actually enforce that.  I don't think the city has any clue as to which properties are vacant and which aren't.

It'll be extremely hard to follow.

In my opinion i would honestly just build more houses to build the demand. The government can build outwards into nearby cities and make sure that the infrustructure is actually functional so that people can actually have incentive to live there.

Restricting the amount of property per person or charging a tax never works, and it's proven in china. There will always be legal loopholes no matter what, unless you apply to everyone which is quite unfair. Property can be a good hedge against inflation in some cases as well, and some legit home owners need multiple houses/apartments as well.

If government can subsidize housing in nearby areas, and more importantly, make sure that there are certain attractions such as employment etc. to back up the area then the problem will self resolve.

Not sure if you're talking about Toronto, but depending on the government to provide functional infrastructure (especially transportation) to nearby cities is a joke.  Our city's current transportation system is maybe 30 years behind where it needs to be right now, let alone supporting other cities.



Two ways to go though.  One is your approach - to have urban sprawl, and the other is to add density and build vertical.  Both are happening.  If we could just get out of artificially low interest rates, speculative real estate purchases would be greatly reduced.

This is an interesting pic to look at, i would have never thought that Toronto transport would be so bad.

Though i'm talking about Australia here. There aren't that many australians on here so i guess it's hard to relate. Yes, an urban sprawl could help, and so could higher buildings. But the thing is nobody wants to live in far away areas. We need more CBD areas to attract home buyers in the area and better transport....

[freeyourmind]

Thanks for the responses guys, appreciate it.

Well something that they are doing in Vancouver, and now Toronto is that they implement a foreign buyers tax, which is essentially a fine that buyers have to pay for every year their houses remain vacated.

I'll have to double check, but I think those were two separate things.  Foreign buyer tax is 15%.  The vacant-home tax is what you're referring to.

ah yes, those were two separate trains of thought, the vacant home tax right now is 1%.

Interesting.  I wonder what the criteria is to actually enforce that.  I don't think the city has any clue as to which properties are vacant and which aren't.

It'll be extremely hard to follow.

In my opinion i would honestly just build more houses to build the demand. The government can build outwards into nearby cities and make sure that the infrustructure is actually functional so that people can actually have incentive to live there.

Restricting the amount of property per person or charging a tax never works, and it's proven in china. There will always be legal loopholes no matter what, unless you apply to everyone which is quite unfair. Property can be a good hedge against inflation in some cases as well, and some legit home owners need multiple houses/apartments as well.

If government can subsidize housing in nearby areas, and more importantly, make sure that there are certain attractions such as employment etc. to back up the area then the problem will self resolve.

Not sure if you're talking about Toronto, but depending on the government to provide functional infrastructure (especially transportation) to nearby cities is a joke.  Our city's current transportation system is maybe 30 years behind where it needs to be right now, let alone supporting other cities.



Two ways to go though.  One is your approach - to have urban sprawl, and the other is to add density and build vertical.  Both are happening.  If we could just get out of artificially low interest rates, speculative real estate purchases would be greatly reduced.

This is an interesting pic to look at, i would have never thought that Toronto transport would be so bad.

Though i'm talking about Australia here. There aren't that many australians on here so i guess it's hard to relate. Yes, an urban sprawl could help, and so could higher buildings. But the thing is nobody wants to live in far away areas. We need more CBD areas to attract home buyers in the area and better transport....

Yeah our subway system doesn't reach very far.

Which city do you live in?

Some people don't mind living far from the city, in fact some people don't like the city at all, and they live in the suburbs with a lot more space.

[bohr]

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

That bubble is going to burst, one of the things you need to understand is those bubble go for very long time because they are fueled by cheap credit, but at some point there will not be a way to sell all those houses and bad credits will be given to people that will never be able to pay them.

[wantjokull]

This kind of bubble led in India to restricted building of single homes. That is a builder or civil engineer or even land holder can not build house for single family. They can build either apartments or society or row houses so that more families can reside in single home. This will decrease the demand of house requirements due increase build up area. So such project implementation can help make it healthy to invest into future. Due to this costs of houses are also decreased.

[tabnloz]

As we all know it's getting more and more expensive to buy a house, and the rate of growth currently associated with investing in a house is just phenomenal, and obviously too good to not be a bubble. We all know that. However, WHEN will this bubble pop?

More and more houses are being built but the demand for it just continues to go up. And many houses are bought and just left to sit there, not even rented out, fueling the problem further because investors just want a safe and profitable investment.

What do you think the governments can do to avoid this? Put a limit on houses per person? Your opinions?

Have you done a "big short" kind of research ? Have you visited abandoned neighbourhoods ? Have you heard people getting unusual credits ? Have you heard people giving unusual credits ? If so, how many ?

I believe you, but you can't just say it's a bubble because the sector is growing fast. Where I live it's the same, but it's mainly because of the chinese coming here to live, and other countries like Brazil and centre of Europe where is becoming more and more insecure.

Here's some boots on the ground research, from a year or two ago but the signs are there + many more example of loan fraud continue to pop up (see the work of LF economics).

https://www.youtube.com/watch?v=roNbsqxemyI

You would have to be mad to buy in Sydney at the moment. The risk / return is awful, yield is paltry (less than bank deposits). While I have no doubt that prices can run a lot further up, I think there is an equally good chance that they don't.

[tabnloz]

Bubbles are caused by cheap credit. See US after dot com implosion - rates were lowered way too much for way too long. The advent of MBS's meant that loan originators didn't have to 'keep' the loans on their books anymore - they sold them on (for fees) to bigger institutions, who packaged them into MBS's (for fees) and sold them off. Not wanting to lose their fees (and bonuses), participants all the way up the line found ways to keep making / packaging / selling more and more loans to more and more borderline customers (who were either greedy, liars or duped).

The common sentiment was that housing could not crash nationwide as it had never done so before, and further, there were only a handful of people who actually understood how the housing bond market worked. Even CEO's of the biggest funds had no idea. They just knew packaging them up and selling them on was very very profitable.

Australia survived the 2008 meltdown, largely due to Chinese stimulus and demand for resources. However it did see an eventual drop in interest rates as global demand slowed in every sector apart from mining. Wage growth has gone nowhere even close to matching house price growth. Low wages hasn't led to less real estate being bought, it has seen people go into more and more debt (check out household debt to gdp stats). Credit is cheap and easy to get. The upswing in housing prices comes from record interest rate lows coupled with a stable job market (now ex perth, Darwin). Wages may not have gone up in years but the cost of servicing a loan has lowered (until recently) - even when you traded off low rates vs price increases.

The problem for Sydney now is that yields are well below inflation, so there is no logical reason to buy as an investor other than chasing capital gains. it is a mania, and has become so unaffordable that a large % of wages now go to mortgage debt. The result is that the retail sector is dying. Rents are high but demand is weak because most of it goes to paying off the banks.

If rates were to rise even 1%, around 20% of households would be screwed, in severe mortgage stress. Australia doesn't control the wholesale rate it pays for credit, that it mostly driven by the wholesale markets. On top of that, Australia's banks are heavily weighted towards residential mortgages, some have over 40% assets in interest only loans and property makes up nearly half of the banks assets. Its an accident waiting to happen.

................

Home loan standards are being reduced worldwide as a form of damage control to compensate for falling wages.

Cheap credit isn't a primary cause, its a symptom of underlying issues involving growing wealth and wage inequality, a higher inefficient tax burden strangling economic growth and prosperity with increasingly restrictive regulations which strangle the livelihood of small businesses we rely upon to create jobs.

Credit & debt are always the cause.

The credit boom has been ongoing since the 80's, while cheap credit via low interest rates has been touted as the solution for any popping bubble thanks to the actions of Greenspan post dotcom bust - he lowered rates to entice spending, kept them low for too long, leading to the housing bust - what assets benefit from cheap credit? Real estate, stocks and retail spending.

Post 08 when Greenspans folly came home to roost, Bernanke did the same thing, going ZIRP. For countries that were not affected or who benefitted from China's infrastructure boom (Australia, Canada), low rates and a stable job market has seen parabolic price growth in housing.

In Sydney & Mebourne, saving for a deposit is extremely hard for anyone without parental help. Then, most get in with interest only loans, meaning that capital gains is there main priority.

BTW, wealth and wage inequality are a result of globalisation; the reduction in tariffs back in the day by the WTO cancelled out the main stumbling block for companies to not keep workplace and workforce in country. After they were reduced, companies packed up and headed to cheaper labour destinations (China esp). This is why you have the rust belt in the US and such disaffection in the UK and Europe where industries left families, towns etc decimated. No more 'job for life', the old manufacturing staples of middle class life fucked off in a generation.

Couple this with deregulation of finance, lobbying overtaking politics and a number of other trends, then you see the destruction of the middle class which goes a long way to explaining the wealth and income gap.

[mudiko]

Another point is that Australia had no crisis for longest time period on the world, which makes the price adjustments(lowering) do not find place in the whole market. Australia had this long streak of crisis proof economy through foreign investments. Foreign housing investments(especially from china) inflates this balloon. I believe that Australia would not be able to keep up with current prices in 2-3 years and a burst would happen. I am not an Australia expert, so i do not really know in which state Australian housing bubble is.