The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
The Forum - On Line Opinion's article discussion area



Syndicate
RSS/XML


RSS 2.0

Main Articles General

Sign In      Register

The Forum > Article Comments > Why 1.7 million landlords could be wrong > Comments

Why 1.7 million landlords could be wrong : Comments

By Kris Sayce, published 7/4/2010

Housing has morphed from a consumer item into an item that is now seen as the lifeblood of an economy.

  1. Pages:
  2. 1
  3. 2
  4. 3
  5. 4
  6. 5
  7. All
wonderful stuff, full of common sense.
"The emperor has no clothes."
Indeed.
Posted by SHRODE, Wednesday, 7 April 2010 10:06:05 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Agreed! It's nice to see common sense in an article about the housing market and someone thinking about sustainability, productivity and by inference making a contribution to society rather than just taking what you can. The housing market is currently sustained by greed and fear, two of the worst bases for decision making!
Posted by bast, Wednesday, 7 April 2010 10:26:13 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Such a long article, yet no mention of why things are as they are. No mention of the severely restrictive, opaque, time consuming and expensive development approval process. No mention of the massively increased rate of immigration and introduction of foreign buyers into the market. In short, housing prices are a consequence of government restricting supply and increasing demand, not wanton speculation.

How much more supply would there be were development restrictions eased? How many inner city blocks would be subdivided were it not for the severe restrictions on landowners? The restrictions seem designed to deny them a commercial opportunity which is transferred to developers via secretive approval processes.

The only thing the author got right was the realisation that high house price inflation is economically damaging.
Posted by Fester, Wednesday, 7 April 2010 12:04:06 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Great article Kris. The obsession with real estate has put Australia on a path to ruin.
Posted by Jasper the Second, Wednesday, 7 April 2010 12:26:23 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
The other thing that is happening Fester is an increase in household size. Most of the two-bedroom units around me used to have singles in them. Now there is someone else in the unit in that other bedroom. That makes it possible for rents to rise and justify higher prices because the occupants can now afford to pay twice the rent.

The biggest problems will be for people with young families where increasing household size is caused by economically unproductive units called children coming on the scene. No way to split the rent or mortgage with them!

And with no sign that the housing shortage is going to stop, prices probably have a way to go yet. But then, I've probably forecast 6 of the last two downturns in housing, so maybe my bullishness is a sign that the market is about to tank.
Posted by GrahamY, Wednesday, 7 April 2010 12:37:12 PM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Interesting article. I will take up the challenge of answering your questions.

Firstly ‘the economy’ is just an abstract collective expression meaning all the exchanges between people. When people are productive, they do so not to ‘add something to the economy’, but because they hope to sell what they have produced, and then use the proceeds to buy goods or services to satisfy a particular want, or to remove a particular dissatisfaction. The point is, the motivation is subjective, even though the thing they produce may be objective.

In the early history of economic thought, it was thought that only primary production adds value to the economy. Manufacturing, it was thought, is not really productive, because it merely shuffles things around, it doesn’t produce anything. But as manufacturing got bigger than agriculture, eventually people came to understand that, no, manufacturing must actually add value to the economy – (which it does, because the stuff manufactured may be used to satisfy human wants). But still people denied that tertiary activity – services – is “really” productive, that it adds value to the economy. But when whole countries came to make high standards of living mainly from services, people realised that tertiary industry also is “really” productive and adds value to the economy. The value in issue is subjective; and you can’t pronounce finally on whether there has been an increase in value by considering only objective goods, because it is not the objective goods themselves that are decisive; it is when objective goods *are brought into connection with satisfying human wants* that value is created.

When someone makes a profit, the reason is, because the price of the completed product is greater than the price of the factors of production. The profit results from the fact that the entrepreneur has adjusted the factors of production so that they satisfy the more urgent wants of the consumers than they would have done in their original uncombined state, which is why the consumers are prepared to pay more for the finished product than they are for the factors of production.
(cont.)
Posted by Peter Hume, Wednesday, 7 April 2010 4:41:08 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
And the reverse in the case of a loss: the entrepreneur has devoted scarce factors of production to a use that the consumers consider less urgent, thus wasting the resources and causing a loss in value.

The buying and selling of shares *is* the readjustment of the factors of production, namely capital funds. It has just as much claim to productive activity as have the activities of the butcher, the baker and the tailor in buying factors of production and re-allocating them to different combinations with a view to profit by satisfying the needs of consumers; only the consumers in the case of the share market are the consumers of capital funds, rather than of consumer goods.

So bearing that in mind, what has been contributed to the economy when the shoemaker sells the second house to the carpenter? A: the carpenter has now got two houses, which he considers more satisfactory than having only one, which we know by logical deduction from the fact that he bought them; otherwise he wouldn’t have done it.

>As we've pointed out before, a 50-square house that provides a dwelling for one person isn't more productive than a 15-square house that provides a dwelling for one person.

Yes it is. It’s more productive of dwelling-space, by 35 squares. Perhaps people *shouldn’t* want larger houses; but the fact is, they do.

But the rest of your article is right: what goes up, must come down, and the housing bubble must eventually pop. But that’s not because housing is not productive. It’s because money substitutes – credit – channels scarce resources into the sector in which they enter the economy - housing - which causes prices to rise in that sector, which causes people to seek capital gains there, which diverts scarce capital from elsewhere, to be channelled into the housing sector, out of proportion to its actual productivity compared to productivity in those other sectors absent the inflation.
Posted by Peter Hume, Wednesday, 7 April 2010 4:43:36 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Oh don't you see? The tax payers are paying for this supposed 'loss' of the landlords via negative gearing. It's the owner-occupiers who are the real fools.

BUT, with so many home owners the government will do anything to stop a correction. There is fewer first home buyers than there are people wanting to retire on their housing equity.

Any government who allows a housing crash will be turfed out quicker than you can say negative gearing.

So rant about doom an gloom all you like, you underestimate the governments desire to distort the market.

BTW: I agree the investment in housing is not as productive as some things. But then worshipping at the church of Bunnings does help the economy. Especially when the DIY cowboys end up having to hire plumbers, electricians and carpenters.
Posted by Houellebecq, Wednesday, 7 April 2010 4:48:57 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
>>exactly where in the example has anything of any value been added to the economy?

>>> How does the buying and selling of a house contribute anything to an economy?

Simple.

The profit, in most cases has been spent, either on another house and or on something else, hence, the ecconomy has gained from this surplus.

There are also the fees attached to the buying and selling of houses.

Lawyers, agents, councils, advertisers, the list goes on. All make money from the sale of property and all spend their earnings which helps drive the ecconomy.

>>Call us mad if you will, but we're yet to find anywhere in our investing textbooks where it says making a loss from your investments is a good idea.

Simple explaination.
We buy a property and take a hit for a few years until the rental income covers the costs through the increased values. Then, you simply buy another, again at a loss until the same is repeated.

If things get tough, which I doubt they will the way Gen-Y wastes money and will therefore continue to be mostly 'renters', we simply sell one, two or more, pay off some debt and ride it out.

A few tips
Don't have all you property in the one area.
Spread your property from beach, to cities, to mining towns.
Don't buy where there are few jobs or the area relys on uncertainties.

Thanks, but I will take my chances.
Posted by rehctub, Wednesday, 7 April 2010 7:24:30 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
*The lure of making money from houses has taken money and resources away from the manufacturing industry and other industries and instead invested it in housing.*

That is a bit of an over simplifaction. Most people who invest
in houses, like the fact that they are in control and can actually
see what they have bought. Unlike the stockmarket, which needs
a bit of understanding and we all know of examples where money
managers can make investments vanish into thin air!

So I doubt if these people would rush out and invest in Australian
manufacturing, for much of it is hardly profitable.

Next, if people invest in their own homes, all profits are tax free!
If they invest in houses, capital gains tax at least allows for
inflation, (that is why Costello reduced it), unlike bank deposits,
where Govts ignore the reality of inflation and rob deposit holders
by way of taxation.

I agree, we have a housing bubble and if China should sneeze, our
bubble will pop. But many of those investors can afford to think
beyond popping bubbles and when viewed over 25 years, they will
still come out in front.

It it those who are overgeared, who will shed tears, for they were
simply too greedy for their own good, so will learn the hard way
Posted by Yabby, Wednesday, 7 April 2010 8:44:39 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Yabby >>Next, if people invest in their own homes, all profits are tax free!

Not really. You see most people who buy their residential home, also have a mortage. Now although their 'capital gain' may well be free, their interest and other 'outgoings' are not free as they are all paid for with 'after tax dollars'.

Now we know the average mortage is $300K and, the interest componant of that is around $18,000 per year. So, assumming the property is purchased for say $380,000, this means the property must increase by almost 4% each and every year for the capital gain to be worth while.

Now with the investment allowance, currently 50%, it may be worth buying the house in a trust and renting it yourself when considering the tax benefits collected along the way.

$18,000 per year in interest alone.
Posted by rehctub, Wednesday, 7 April 2010 9:25:10 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rehctub, indeed profits are tax free. The little old lady who
bought a house 40 years ago for a song, can sell it for 2 million$
and pay no tax. The home owner-owner renovator, can buy an old
shack, doll it up with his labour, which adds value, then on sell
that home, all tax free money.

Last time I checked the % of Australians who actually have a
mortgage on their first home, is not that high, something like
30%. Some prefer to rent, some have paid it off, pensioners,
baby boomers etc.

All those who bought houses more then 10 years ago, would not
be owning much in real terms, due to the benefits of inflation.

If you Rehctub, pay cash for your house, you can earn substantial
amounts from capital gain, all tax free. Buy any other kind of
investment and get hit with capital gains tax.
Posted by Yabby, Thursday, 8 April 2010 10:13:11 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Yabby. "The little old lady who bought a house 40 years ago for a song, can sell it for 2 million$ and pay no tax."

Do you have any examples? Because such cases are rare and are reported in the media to boost sales for white shoe brigade advertisers and to spruik fraudulent 'how to' seminars by the quick witted.

She wouldn't have bought it for a song it would have been market rate.
Since then the value has merely tracked inflation as all real estate does - it lags for many years, finally to jump up to and sometimes correct above inflation. In the latter case, buyers lose and take years to 'recover' their position.

There is no magic multiplier unless she was lucky enough for there to be a re-zoning of her block to a higher and more valuable level, eg high rise. That is impossible for a Res A block.

The woman and her family have lost substantially from any 'increase' in the value of her block over the years through ramped up Council rates and charges over the years that are fixed against the assessed improved 'value' of that block. Councils never take CPI increases, when they have the goose that lay the golden egg, which is the increased value of the land.

However in the case of an old lady who sells her property that has all of its sentimental memories, where can she buy another residence with similar amenity, or are we assuming she should be relegated to a mobile home in a caravan park (if one can be found)?

Yabby, "The home owner-owner renovator, can buy an old shack, doll it up with his labour, which adds value, then on sell that home, all tax free money."

I have met many would-be developers, it is high risk. The rare renovator who makes money has no recreation, lives in sawdust and forgets his labor and lost opportunity costs while adding icing to a 'cake' that is limited by its land value. ATO is zealous in identifying possible abuses of tax.
Posted by Cornflower, Friday, 9 April 2010 8:55:38 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Yabby, "All those who bought houses more then 10 years ago, would not be owning much in real terms, due to the benefits of inflation."

If you meant 'owning' you are most likely right and please disregard the remainder of my comments. However I think you meant 'owing' and I have addressed that probability below.

No that isn't the case at all, except for the fortunate few who bought astutely and were lucky enough to time entry to the market (with no house to sell) when the market was at a low point and before a sudden rise (which might not be sustained). It is because the market is so difficult to time that the risk management is to buy and sell on the one market. Anyway, owners have to live somewhere.

It is one thing for real estate spruikers to claim that 'value' doubles every ten or so years but practical experience, for example of people buying into new sub-divisions and new unit blocks, demonstrates that more often than not they can lose money over ten years and more, especially after a peak in the market. There are many young couples who were not over-extended ten years ago but are now and could lose all they invested.

Real estate is moderate risk and investment real estate, especially where buy and rent is concerned, is high risk. Returns were even lower after the Howard government's changes that affected investment property.
Posted by Cornflower, Friday, 9 April 2010 9:13:28 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Cornflower, my figures are based on Perth, as its a market that
I know about. The Sunday Times here produced some tables of
real estate values over time and suburb, so I will use their
quoted figures.

In 1960 the average house price was 7000$. There are plenty of
couples who bought houses then, in their 20s, who are now in their
70s. If they bought them in what have become upper class suburbs
over time, due to Perth's growth, then 1-2 million is what they
can achieve in the market today. Many are indeed selling and moving
into retirement villages.

In 1990 the average house price was $100'600. So people who bought
a house in their 20s then, are in their 40s now. They have had
twenty years to pay off their mortgage, they would hardly owe much.

In 2000 the average house price was $195'700. Now we have averaged
inflation of around 3%, which when compounded adds up to around 40%
over 10 years, IIRC. So to pay off that remaining debt, in real
terms its costing people 40% less then it did 10 years ago.

*The rare renovator who makes money has no recreation, lives in sawdust*

For some it is recreation, as they enjoy it. At the same time making
good profits. But I grant you its not for everyone. That does not
change the fact that it can be very profitable and all tax free.

*No that isn't the case at all, except for the fortunate few who bought astutely*

There are many who were astute enough to be fortunate and not gullible
enough to buy from real estate spruikers, or believe their spin.
Posted by Yabby, Friday, 9 April 2010 10:49:27 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Cornflower
"Since then the value has merely tracked inflation as all real estate does - it lags for many years, finally to jump up to and sometimes correct above inflation. "

I think the rate at which housing rises in value has outperformed inflation. I once read a book by Jan Somers I think her name was, and she researched the rise in house prices since the Torrens title register was established in the 1840s. She found that there is a long-run rise of doubling in value about every 8 years, or 12.5 percent.

I think reasons that housing is so attractive to investors include that
a) it's politically difficult to tax
b) it serves a double function of providing a dwelling at the same time as increasing in value
c) it is relatively easy: pretty much any bog-normal dwelling is going to go up at the average rate; much easier than investing in the stock exchange where you can wake up and find your company doesn't exist any more, and
d) every other kind of productive activity is licensed and regulated so much, it basically doubles the amount of trouble and stress trying to make money by investing in business.
Posted by Peter Hume, Friday, 9 April 2010 2:27:21 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Yabby

You referred to a newspaper article that 'proved' there are windfalls from investing in one's own shelter, however there are as many articles 'proving' there is less risk and far better returns from renting for life and investing in shares instead.

Generally these articles miss risks and large on-going costs which in the case of residential housing can include rates, insurance, maintenance and improvements.

While it is true that some houses will do better over time, country areas can provide plenty examples of loss of real value over time and so can city suburbs that were not subject to favourable planning decisions - a railway can benefit locals while the smell of stock being transported will not. The necessary resumptions for a freeway rarely represent windfall profits for affected owners or for those who must stay behind. Again, city growth is rarely uniform throughout and many suburbs linger in value through being unpopular.

Perhaps the truth is that anyone who is willing to commit to an investment long term and is disciplined enough for forgo luxuries over many years should eventually reap some reward. Thrift over forty or fifty years should amount to something. How often does one hear stories of people of apparently humble means who leave fortunes behind when they die?. For some, the 'fortune' is limited to the house they have maintained and paid all outgoings for over a lifetime.

Many people realise the benefits of compulsory saving through buying their own home and a large part of that saving is through disciplined budgeting and controlling their discretionary spending.

To an older person her house is priceless for its familiarity and memories, even if the outgoings are a millstone around her neck. The house is usually worth nothing either, because she must live somewhere and would not sell unless forced by circumstances beyond their control. I wonder what value it is to the taxpayer to have the home-owner support herself and be independent all of those years.

Renovating and selling PPORs is a business and is subject to tax.
Posted by Cornflower, Friday, 9 April 2010 7:45:22 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Peter Hume

Jan's example is not as simple as first supposed, but should be discussed along with the general economic and purchasing factors hat affect real estate. To give an example of purchasing factors, maybe as a newbie at the time she 'lucked' the right street or locale for the future, but not everyone is so fortunate, it takes skill, research, discipline, deep pockets and decades.

Is it fair though to compare growth in the value of residential property against the CPI, which is after all discounted according to the preferences of the government of the day? The politicians don't think their superannuation should be set against CPI, they chose average weekly earnings.

Jan and her husband Ian have done well out of investment housing because as they freely admit and these are some of the lessons of their books, they arrived at a formula for investment, always performed their due diligence religiously, were enormously patient and managed their properties professionally. For their efforts there should be rewards.

Read more books and there are plenty of disasters. Rarely does luck or belief in the rosy future of the real estate market (which market for a start) guarantee results. It is big money and big risks, never a sure bet.

There are many books on real estate that are more motivational than anything else.
Posted by Cornflower, Friday, 9 April 2010 8:24:45 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Cornflower, the Sunday Times article did not try to "prove" anything.
It was simply a whole lot of tables, dates, suburbs and averages.

Indeed, location is a key when buying property. Yes, owning
property involves rates etc, but you also get your rubbish carted
away and the roads fixed. As Peter Hume has noted, there are good
solid reasons why your average punter invests in their own home,
or in the extra house, rather then more risky ventures like the
stock exchange.

You are preaching to the converted here, for I personally prefer
the stock exchange as an investment. But I also know how risky
it can be for the uninformed and how many sharks are circling out
there to rob people of their savings.

So my point is that for the average punter, investing in real estate
makes perfect sense, from a taxation point of view, from a disciplined
savings point of view, from a safety point of view and from an
inflation point of view.

People really have 3 options. Banks deposits will ensure the Govt
screwing them with tax and inflation. Shares are great for the well
informed, but not for those who don't do their homework. Houses
are still the most tax effective and safest option for most.
Posted by Yabby, Friday, 9 April 2010 8:44:56 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Good article, Mr Sayce, and I thank goodness there remain some who don't take a lead from the privileges the tax system grants to property 'investors'.

That means there are at least a few people left to do the work - to produce things - even if they do get it in the neck in comparison to tax system-created property speculators.

I'm tickled by those who consider escalating land prices create broader employment: for lawyers; real estate agents, etc., etc. They don't see it'll also create a far greater, and longstanding, pool of unemployment when the Australian property bubble does finally burst?

Oh, it's not going to burst? It's just 'supply and demand' in action? Pull the other one - it's a bubble!
Posted by Bryan Kavanagh, Saturday, 10 April 2010 11:36:30 PM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
That 'bubble' has been around for such a long time that prospective home buyers must be wondering if it is just spin to try to dampen prices that are continuously being driven up by demand resulting from federal government immigration policies that regularly set new records in the quest for a 'Big Australia'. Big business must have new record profits every year and government needs inflation to reduce its debt.

Then there is the plethora of taxes applying to development and building levied by all levels of government, enthusiastic to take advantage of the property milch cow. On top of that 'user pays' is increasingly applied to make the developer and by flow-on the eventual home owner responsible for the supply and maintenance of infrastructure that was formerly provided by government.

On top of all that, there is continuing under-supply of trades as a result of the ongoing building boom to keep up with high population growth, resulting in higher labour costs. In view of the chronic under-supply of trades it is incredible that government levies high TAFE fees that deter enrolment. Again, job permanency has all but disappeared, so how can youth commit to and complete education unless they have parents with deep pockets?

Now when did the 'bubble' first appear, pray tell, because it appears as though government just might a hand in it?
Posted by Cornflower, Sunday, 11 April 2010 10:52:04 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
The housing bubble really got going in the Howard years, for a number
of reasons. More immigration is just one of them, Govts know that
to win the next election, they need a healthy economy, house building
is a huge industry. So both Howard and Rudd have increased
immigration.

Next we have the problem of town planners, who decided that they did
not want urban sprawl, so less land was released. That did not work
for them, as Australians seemingly don't want to live in dog kennels
and in fact now live in the world's largest houses.

The RBA released some figures around 2007-08, which showed that
a large part of borrowings for housing was by DINKS, who were
uptrading or upgrading, commonly to suburbs closer to the city.
Given that they commonly have two large incomes, they can afford
to borrow, to buy whatever they want.

Some of the more informed seem to think that the bubble could
burst around 2012. Commodity prices are once again heading upwards,
which will lead to higher inflation. Not just here but globally.
Alot of large company loans are due for rollover then too. So global
interest rates are expected to rise substantially and reserve
banks will be forced to raise them to tame inflation.

Once people have to pay 10% or so for their housing loans, those
who have overborrowed, will no doubt be in tears.

But of course the smart money could be wrong.
Posted by Yabby, Sunday, 11 April 2010 2:19:30 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Bryan Kavanagh>>I'm tickled by those who consider escalating land prices create broader employment: for lawyers; real estate agents, etc., etc. They don't see it'll also create a far greater, and longstanding, pool of unemployment when the Australian property bubble does finally burst?

Oh, it's not going to burst? It's just 'supply and demand' in action? Pull the other one - it's a bubble!

Rehctub here, obviously this is aimed at me, so I will reply.

Firstly, house often change hands simply because they increase in value and owners 'upgrade' with thier newfound welth.

Now if you think this doesn't create job oportunities then you must live on another planet. Proof of this is evedent in that we have specialist 'conveyency businesses', set up just for the purpose of property transfers.

You simply can not deny that jobs are created from lawyers, to building inspectors and even removalists when sales increase.

Housing bubble.
The housing bubble, as always, started with Sydney in the early 00's.

It was largely driven by the 'first home owners grant', which saw many new buyers enter the market which, until then, was simply a dream.

My bet is that any government would not be game to let our property market plunge without some sought of 'mass jobs creation scheme', otherwise unemployment would be out of hand and there is simply no way we can afford that.

Better to create jobs than let unemployment get completely out of control.

There are also the increased complience costs associated with new land and houses. These simply add value to existing homes.

So in essence, I don't think the 'bubble' as you call it will completely burst.

There may however be some corrections, but my tip is many astute investors will be cashing up right now waiting to grab a bargain from the first home buyers who have been sucked in.

End result, higher rents
Posted by rehctub, Monday, 12 April 2010 7:44:38 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Rarely, in all truth, have I read a more depressingly negative appreciation of the Housing ' bonanza ' market. KS goes to great lengths to presumably expose the farce that successive Govt's, since the end of WWII, have aided and abetted. Refined, and in cahoots with the Banks, some how created a mammoth hoax on all the battling Mum's & Dad's, who religiously adhere to that great Ozzie dream/maxim of " owning your Own Home, and ( your neighbors too )given the possibility !

The Author claims : Housing is not a productive item ? Has NO economic benefits ? Housing prices have to increase for investors to make money ? Is a recipe for a boom that is set to bust ?

As a professional media exponent i.e Money Morning, his hypothesis is not only flawed, it creates the wrong impression for would-be investors, out to acquire wealth, and at worst derides the Banks for profiteering on the backs of thousands of new home owners, who have worked hard, saved frugally, and bought into the Property market.

From Economic fundamentals : You've got to spend money before you can gain Wealth, per see ( unless it's illegal or inherited) Seminars by the score, and attended by packed fee paying audiences learn the strategies of buying and selling Property, from the ground up. The gurus make a lucrative living from these specialized courses.

The Housing bonanza is about to erupt once again, after the GFC. Property sales on the Gold Coast have spurred RE Agents to employ more sales staff to meet the resurrected boom. Values on Sea frontages, Canal blocks, and even the hinterland, have doubled, despite recent Govt evaluations.

Many investors are buying run-down properties bull-dozing, or renovating for quick sales. People in the building trades are inundated with work to build 6/9 story Units on 16 perch blocks. There are no shortages of genuine buyers, particularly among Architects, Builders, RE Agents and Investors. The Housing bubble is taking on a new meaning, for M & D, who invest in reverse moprtages to gain a foot hold
cont..
Posted by dalma, Tuesday, 13 April 2010 4:27:21 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
in the boom, and expand to full advantage the Govt's negative - gearing impact, where the taxpayer foots the ' make-belief ' losses. Currently @ $ 33 B, claims Mr Sayce.

The Economics isn't hard to fathom. The Banks create the finance from investors, with exorbitant lending margins, abetted by the RBA, which has up the ante 5 consecutive rises. The borrower is rewarded by the Govt for claiming all his expenses, real and imagined for 30 plus years or more. The RE Agent either buys the property at an inflated price, do a quick spruce renovation, and resells, or gets into the rental market, where he can claim NG, and prepare for his next acquisition. One RE Agent in Surfer's sold 20 properties to her family alone. Her tax bill was picked up by the ATO, which allowed deductions for advertising, auctioning, and promotion to wit ?

The elusive benefits become apparent when elderly persons can still draw the Pension, health card and carer's pension, and still benefit from owning several properties which return $ 470 /500 pw rental, pay nil tax, are eligible for a disability pension, house cleaning/ fixtures, seniors discounts. nursing aides, and a variety of rental allowances, supplements, and bursaries to enhance their incomes. Even their travel and internet expenses are subsidized.

Builders, brickies, electricians, plumbers etc all derive an income from the Housing sector, and other pursuits. They are obliged to pay income tax, which go into Govt coffers, which boosts Rudd's credibility, and from which he provided a stimulus to all and sundry i.e Labor and Union mates. Some have convenient infinite short memories.

The State's derive income from Property sales, stamp duty, land tax, rates and water charges etc. Property is registered at the Land's Office which requires a nominal fee.

No economic benefit ?

One has only to cruise the Gold Coast Canals and Broadwater, to see where the wealth of the Nation lies.
Posted by dalma, Tuesday, 13 April 2010 4:59:02 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
The govmint could supply both sanity and stability to the marketplace simply by replacing the 21k first home owners grant with fixed (low) rate first home loans, capped at say $200k.
Posted by Grim, Wednesday, 14 April 2010 5:24:38 AM
Find out more about this user Visit this user's webpage Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
Grim >>The govmint could supply both sanity and stability to the marketplace simply by replacing the 21k first home owners grant with fixed (low) rate first home loans, capped at say $200k.

The interest rates are just some of the problem. The real issue of affordabillity is the spending habbits of many wishing to own a home.

If they address this, then many of them would afford a home. After all, if one borrows say $300K, they need to find an extra $60 odd dollars per week per 1%, or, one less night out a month, or, four packs of fags a week, or, a carton of grog each week.

Now on the other hand, if you make buying a home easy, they will most likely find another way to waste their money.
Posted by rehctub, Wednesday, 14 April 2010 6:52:19 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
So Bryan Kavanagh and the author.

Do you still think that esculating land prices do not contribute to employment, or do little to stimulate the ecconomy?
Posted by rehctub, Thursday, 15 April 2010 6:38:47 AM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
So where is the author on this topic. It's becomming quite common for authors to start a thread, then vanish. But why?

They author says>>There's no more productivity in buying and selling houses than there is buying and selling shares.

Utter utter crap!

When one buys/sells shares, there is the broker, the registery office and that's about it.

On the other hand, when a house is sold,bought, there is the agent, the lawyer, the inspectors, the cerifiers, the removalists, the cleaners, the repairers, the maintanance workers...the list goes on.

Why don't these authors come back and defend thier submissions?
Posted by rehctub, Monday, 19 April 2010 5:42:21 PM
Find out more about this user Recommend this comment for deletion Return to top of page Return to Forum Main Page Copy comment URL to clipboard
  1. Pages:
  2. 1
  3. 2
  4. 3
  5. 4
  6. 5
  7. All

About Us :: Search :: Discuss :: Feedback :: Legals :: Privacy