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The Forum > Article Comments > Homes not costly but deposits are > Comments

Homes not costly but deposits are : Comments

By Graham Young, published 22/9/2016

At 10% of AWE before tax, it takes 12.2 years to put aside a 20% deposit today versus 8.9 25 years ago. That’s a significant increase, and many purchasers just don’t have that much patience.

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An even better solution is to decentralize the Economy. We have several large centers that are growing, and lots of smaller centers that are sinking. A 20% deposit for a house in Sydney will almost buy you a whole house in Hobart.

Median house prices in capital cities
– Australian median house price $695,788 (down 0.4 per cent in December quarter)
– Sydney down 2.5 per cent to $1,025,478
– Melbourne down 0.1 per cent to $718,000
– Hobart up 9.8 per cent to $392,000
– Canberra up 3.7 per cent to $593,000
– Brisbane up 3.2 per cent to $490,000
– Darwin up 0.5 per cent to $608,750
– Perth up 0.4 per cent to $535,000
– Adelaide steady at $430,000
Source: REIA. Weighted average median house price for eight capital cities at December 2015 quarter.
Posted by Cobber the hound, Thursday, 22 September 2016 9:08:37 AM
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If we ended negative gearing on residential housing tomorrow and instead encouraged the much vaunted innovation!?

We might see the widespread rollout of safe clean molten salt thorium reactors, which can power the average family home for a dollar a year!

At 3 cents a kilowatt hour? Capable of achieving massively monumental returns! But particularly when tasked with very safely burning radioactive waste from the rest of the world, who will pay us billions for the amenity! Then here is new wave desalination that relies on deionization rather than reverse osmosis, and consequently desalinates water for quarter of the current cost, while producing 95% potable water!

Coal seam gas and salt problems? What salt problems?

The good news doesn't end there given nuclear technology has recently found a way of combining Co2 extracted from seawater and compounding it with hydrogen extracted from the same seawater to produce superior synthetic jet fuel, diesel and petrol replacing methanol!

Does it work, or just unproven theory? I saw a model plane take off and fly using this synthetic fuel! And molten salt thorium power is cheap and inherently safe enough to perform that task forever!

I mean just 8 grams of thorium will power your car for the next 100 years without ever needing to refuel!

There's enough in the soil to power the entire world for a thousand years! If you want a surefire and safer investment than residential housing? Try energy and innovation!

Or just sit blathering on until the rest of the world has done it, the limit of the imagination of dumb as dishwater, Aussie investors!?

Get on U tube and look at the TEDx Thorium/molten salt reactor lectures, if only to understand what the fossil fuel industry didn't want you to know!?

Now is the time to kick the bricks and mortar mindset get on this gravy train or get left behind with the rest of the dropkick dummies!
Alan B.
Posted by Alan B., Thursday, 22 September 2016 11:08:26 AM
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A few points here:

Not owning a home is not the disaster some make out, as we see in an economy like Switzerland, where most people rent long term.

Home expectations have changed. In the 70s we were happy with a 13 square 3 by 1. Now we live in the world's biggest houses, nearly double that size, with every mod con available and the young don't want to do it tough, without those things, as we did.

The young have a different world view, preferring to travel a great deal more than we did and commonly changing jobs and locations, which all are more difficult once they have bought a house. They also know that they stand to inherit far more than any generation before them, when we fall off the perch, so will likely still own a house by the time that they retire, only obtain it the easy way rather than the hard way.

Any couple really determined to own a home, can still do what smart couples did in my time and that was to shack up with partner, both live frugally off one wage and bank the other. Within 4-5 years they had enough saved to pay off a substantial part of a house, let alone just a deposit.
Posted by Yabby, Thursday, 22 September 2016 12:27:08 PM
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In my view we are surrounded by fools, all seeing their neighbor as just a (captive market) source of largely unearned revenue? And more than willing to see shelter rise beyond the means of our children and their children!? What for?

Money for nothing negatively geared investment that the tenant and the taxpayer pay for!? Even there, wanting the lowest possible deposit!?

Incredibly short sighted! And incapable of passing the J.C., do unto others test/basic economics!

The more we spend on housing and essential (captive market) service, reticulated energy/water etc. the less we have as disposable income, the basis of all discretionary spending and though it the domestic economy! Or, makes affordable super doable!

The basic tenet of capitalism is competition, not monopolies and captive markets screwed for the last dollar!

Look, if we just eliminated the profit demanding middle man, we'd halve the cost of living and put irresistible downward pressure on the interminable price wage spiral!

Long overdue decentralization puts genuine downward pressure on house prices!

We need can do leaders whose actions speak louder than words and at least one new idea to bless themselves with, rather than a mottley collection of eternal blame shifting excuse makers, who seem unable to think beyond selling our heritage and economic sovereignty?

If I had my druthers no foreigner would be able to buy any Australian real estate and if an investor? Would be limited to thirty year self terminating government guaranteed, income earning infrastructure bonds!

The only way of separating foreigners from their hard won without selling the farm/icons or economic independence or control!

I mean, case in point, selling milk co-ops to foreigners competing with us for market share went well didn't it!? And deregulating the sugar industry forced farm gate price through the roof? Yes?

Ah well, you can fool some of the people some of the time and or all of the people some of the time!

We've had the million miles a minute yakity yak blah blah blah blah! Time for something different!
Poor beggar my country!
Alan B.
Posted by Alan B., Thursday, 22 September 2016 12:43:32 PM
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Three problems:

1. the devil is in the detail of "regard the house as part of retirement planning." which is not precisely explained.

2. might "regard the house as part of retirement planning." be inflationay on housing prices - particularly hitting those who don't have superannuation?

3. would "regard the house as part of retirement planning" be political suicide for the Coalition or Labor - just as the no-go zone "cancelling negative gearing" is?
Posted by plantagenet, Thursday, 22 September 2016 3:27:37 PM
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Not owning your own home almost guarantees, you retire in penury? And more applicable to single elderly females than males? Supply and demand has a place in affordability, as does rationed urban land release and land banking, which does the same thing!

And another of those money for nothing schemes that some folk see as their entitlement! The stark differences between still affordable Hobart housing and almost unaffordable Sydney housing and the fact that Emergency response Firies, ambos, police and nurses have been priced out of an artificially massaged market, highlights the problem as nothing else has or could!

Yes sure we can put people further out and make them spend 2 hours or more each way, in the average daily commute! And you guessed it, folk who have/can afford/inherit homes don't see the problem? Nor are they troubled cramming families with kids into pocket handkerchief sized apartments as a problem!?

They're alright Jack! And all too often waxing fat on the rent they extract from the homeless? Moreover, reducing deposits is almost guaranteed to force house prices higher!

However, removing residential housing from negative gearing or as some kind of actual investment, as opposed to an essential human right to shelter? The J.C. whip whip test! Might help reduce obscene prices?

As would eliminating non nationals from our housing market!

Let them invest in self terminating thirty year infrastructure bonds, if we want their money minus their control/tax avoidance/profit repatriation!
Alan B.
Posted by Alan B., Thursday, 22 September 2016 3:31:46 PM
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The bricks and mortar mindset of lazy, investors should be taxed out of existence, with tax breaks all but reduced almost exclusively to nation building infrastructure!

The postwar Japanese economic miracle was founded by that wartorn and bankrupt nation working together as a single entity for the common good! A practice that built the second largest economy in the world for a time!

Until crippled by extreme capitalism and I'm all right individualism! That put a once prosperous nation into economic reverse and stagnation that profits nobody whatsoever!

And the very opposite to the former collective cooperative capitalism that raised almost everybody, left very few behind? And very different from today, where coffin sized apartments are the sometimes humble hovels of those left behind by selfish, I'm alright individualism!

If there is a lesson here or in the other remarkable tiger economies or the Celtic economic miracle! When the goal is national prosperity that leaves only the wouldn't work in an iron lung drones behind, everyone prospers!

Ireland imploded by allowing debt laden foreign speculators to all but take over her residential housing market! A result that served very few and guaranteed that the (hollowed out) Celtic economic miracle would fail!

Japan managed the same outcome by overvaluing and over-leveraging its real estate market! And again as seen elsewhere, all but destroyed a cooperative collective remarkable for the general well being of a nation that left very few behind!

We can do so much better every which way when the other man become the brother we look after via policy, which de-privatizes energy and capital as the first step to unprecedented and enduring prosperity for everyone and reverses housing as an investment, to one of a human right to affordable shelter!

Even so, leaves the entrepreneur with groaning smorgasbord of viable investment opportunities, ensures a large enough well heeled demographic to enable success!?

Doing what you've always done, and expecting a different result is insane! And hardly better than putting the inmates in charge of the asylum!? Today's Australia?
Alan B.
Posted by Alan B., Thursday, 22 September 2016 5:04:24 PM
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More Devils:

This argument overlooks the effects of family breakdown on the joint ownership of housing. Dividing up the house gives two halves of nothing in return, and guarantees a quick slip to the bottom on a snake.

The other is rent.
There is an urgent need for rent control, to ensure renters are not plundered for profit.
Profit is illegitimate if it plunders a family of resources. Especially if those families are powerless to control the rent gouged.

Protections across all states vary greatly in this regard. Queensland has a limited control for example, but laws on rent gouging in NSW are non existent, leaving rents entirely in the hands of greedy landlords.

Leases are structured in ways that afford no protection to families living in a rent-bind: Exampled locally where long term renters were evicted, either volunteering to go, or forced by law to go, as rents escalated quickly to capture an influx of road workers on high incomes, with the easy ability to trump the local population of subsistent renters.

This example is a merciless abuse by market forces, and should be controlled.
Posted by diver dan, Thursday, 22 September 2016 7:14:00 PM
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The deposit was always a problem.

Couples planning a future together cut their lifestyles and saved for a cheap block of land in the sticks. Then used a personal loan as well to buy a starter home. It took years of slog and self-denial. One bathroom, no covered carport or garage, boxes to eke out the secondhand furniture and recycled sheets for curtains. All entertaining at home with others in the same boat. Bring a plate. Cheap Chateau Collapsible, snags and salad, "We grew those lettuce, tomato and shallots".

Over half of my friends were well used to 'saving for Ron' (later on) from day one of the job. That happened irrespective of any thought of a family one day. However, there were always the self-indulgent, who even later with the behind out of the pants in middle age, scoffed at the savers, who 'didn't know how to enjoy themselves' (Yeah, right!).

There is nothing complicated, just compare the lifestyles and priorities. Young people really need to challenge the lifestyles of they are being sold on The Box and elsewhere. It has always been known for instance, how much can be saved with cut lunches.

Discretionary expenditure
Most middle aged or older here would have children who before their mid twenties spent more on toys for themselves than both of their grandparents might have received (in relative value) in a lifetime.

Values and expectations have changed. But movements like feminism have got what they wanted too, casting the baby out with the bathwater, focussing of endless self-entitlement and do not want to be accountable for any downsides later.

Frankly, if I was a young fellow starting out again I am not so sure either that I would forego the international travel to save. I'd do it forever, earning some online and dropping back into a job from time to time to build up again.
Posted by onthebeach, Thursday, 22 September 2016 8:34:31 PM
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If you really want to reduce house prices, stop the state government stamp duty, levies and fees and council levies and fees.
and on a new home remove GST cost.

Then any new home built would be at least $70-100k cheaper.

The problem is governments are like salivating dogs seeing a bone, they forecast X in revenue from rates taxes and fees on houses and they have no incentive to make housing affordability easier. Cheaper houses means less taxes.

As for rental costs it is supply and demand, the more you charge for rent , the less people interested in renting it. I can't say for the big cities, but in Adelaide average rent is $350 per week, meaning a gross yield of 4% (and a net yield of 2.5% after expenses) So, you would be better off investing in the bank at 3.5% than property. But no you want capital growth on your land, so again no incentive to have cheaper housing.

So, new home buyers grant, is just a band aid on the problem
Posted by kirby, Friday, 23 September 2016 11:12:32 AM
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Hi Alan B.

I'd begin to read your posts if you learned how to be brief...

Cheers

Pete
Posted by plantagenet, Friday, 23 September 2016 12:09:02 PM
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