Daggett, to me all knowledge is tentative. I will change my mind tomorrow, if you
can put up some convincing arguments. So far you have not, but I can’t argue
every point, given the 2 post limit. I tried to change that, but Graham and the majority
of posters were not in favour.

Yes house prices have risen strongly, but many other variables have also changed.
Women have burnt their bras, most want to work today. Interest rates have halved,
population has increased, all these things have affected house prices. Thirty years ago,
people still signed up for a thirty year mortgage, much as today. Usually for a much
smaller, simpler house, with less mod cons.

Australia is nearly the size of the US, with around 7% of the population, so has land
to waste, including farmland. If land is limiting home ownership, why should
converting farmland to housing land be a problem?

Jobs are anywhere where there are people, for they need services. Large cities
are more a product of cheap oil, then anything else. Look how people lived before
mass transport and cheap oil, in regional communities. Switch the power off in
a big city and you have disaster.

The people that I see struggling for houses are in fact the divorced,
who lost their homes. Its harder for singles to buy, as they are
of course competing with two income families for the same houses.

Wiz, I think Country Gal is correct, some Australians seem to have lost their
pioneering spirit. To insist on living in a big city, on high value real estate,
within 30 minutes of your family, is quite unreasonable. Have you never
heard of email ? :)

Fact is that you can’t just keep squashing more and more people into limited
real estate, unless of course you enjoy apartment living, as some do.

If you do insist on these things, then paying high real estate prices is to be
fully expected, unless of course you live in a regional area along with your
family.

Yabby - you seem to be ignoring the study that started this topic. More than 10% of the inner urban area is vacant and unused. That doesn't seem to describe 'packing people in'?

Yabby,

'"Thirty years ago'"? "A much smaller, simpler house"?

Most Australian houses were built before 1977 but they are ALL far more expensive now in relative terms. Most are the same size they were then & the older ones, on average are the dearest.

In your own inimitable way though you made an interesting point earlier on. I do concede that home-ownership represents something of a grey area between the tenant, who is a consumer in a pure sense & the investment property that is purely a business.

Then again, as grey as you paint it home-ownership is still not a business. It is not formally enterprise nor an operating source of income. Regarding those ‘sea-changers & tree-changers’ you mentioned, good point – except that they aren’t making a capital gain strictly speaking, they are ‘trading-down’ to a cheaper location.

If they’d moved to a similar place near their original location there’d be no gain. Now, here’s the rub. The cash benefit that they realised by trading down to a cheaper residence is increased by the general rise in property prices & that money is worth more in the broader consumer economy than it is the housing market.

In these circumstances there is an advantage in converting equity to cash because inflation in the housing market is far greater than it is the broader economy.
The situation is the reverse for the first-home buyer whose net income is now worth far less in the housing market.

The advantages gained by these ‘sea-changers’ (& other passive windfall-earners) are no magic-pudding. They’ve benefited at the expense of first & future homebuyers who are effectively bearing the cost.

That said, it would be nigh impossible to devise a credible way of taxing those that have converted home equity to cash on the time/value differential between the two – quite unworkable & quite unnecessary.

Good policy would draw the housing market closer into line with the broader consumer economy. It would ease volatile demand pressures by discouraging speculation in established homes. It would improve supply by rewarding quality construction & long-term investment.

Daggett,

I am pleased that you think my posts are mostly ‘spot on’. As regards population, I am not suggesting that population isn’t a factor. It is.

What I am saying is that the increase in population relative to housing supply cannot come remotely close to accounting for a 200% price rise within a few short years.

I am pleased to say that we haven’t had that sort of population increase. That is the sort of increase that is almost invariably associated with a speculative price bubble in an investment market.

Its a different dynamic & restraining population won’t essentially fix it, although it would help somewhat by easing immediate pressures.

By the by, assume most anything the real estate industry says to be misleading. Their interests are in higher prices/greater turnover (higher commissions, more commissions) & a lower rate of home-ownership (more investment, more tenancies, more rental commissions).
_______________________

Further regarding Supply-side:

Published research by Rory Robertson of the Macquarie Bank, an interest rates analyst, confirmed (the obvious) that falling property values in Sydney’s outer-metropolitan areas had no impact on prices elsewhere in the city.

They are different markets. We now have a so-called “2-speed property market” here & that is a social divide made manifest, quite unprecedented too. The falsehood in the idea that land-supply alone will resolve a property bubble is all too apparent. The sub-text, the real truth is that the proponents of this idea don’t want policies that would discourage excessive demand. They want to protect & maintain inflated property values.

They accept the idea that many among the current generation of buyers have been locked out of the main market & their solution is to relegate them all to the worthless, neglected outskirts of nowhere in particular.

Like it or not however, this solution simply doesn’t work. As large sections of the metropolis are restricted to older/ higher-income home owners, the younger / lower-income workers in local services face increasingly arduous commuting or near-permanent tenancy. The social & transport implications are intolerable.

Eventually, something has to give.

- Mr Smith

Freddington, I’m not ignoring the study, simply looking at the bigger picture.
When those 10% are full, then what? Fact is if more people want to live near
the centre of a city, it will push prices upwards. People sit on vacant land for
all sorts of reasons. In my experience, often its to eventually cram even more people
onto expensive land, by combining blocks, then building duplexes, units, apartments
etc. Sometime one has to wait until the little old lady next door falls off the proverbial perch
to do that, as she refuses to sell at any price.

Obviously Yuppies and Dinks will be able to outbid most single income families with
kids for prime city real estate. Similarly expats with fat wallets, returning to Australia
from low tax places like HK, Singapore, or the Middle East.

Mr Smith, when people buy houses these days, they worry about future values,
ability to renovate and add value, they stand to make or lose hundreds of thousands
by their decisions. Some get it right by being at the right place at the right time,
others by careful planning about the future. It might not be somebody’s full time
employment, but its still the largest investment that most people make and people
in general aim to make every single Dollar that they can, when they sell. These
are not business type decisions? I can buy and sell things without formally registering
a business name. That does not mean that what I am doing is not
making business types of decisions, therefore its a business of some sort.

Inflation in the housing market is only greater, in areas where there is a shortage
of land, when more people decide to live in a certain area. Otherwise house prices
are governed by building costs, which are pretty similar to normal inflation.
Smart people bought cheap houses in regional areas, whilst regional areas were
declining in population. Houses were selling for well below their construction
costs. Now that many regional areas are booming again, house prices have
lifted significantly, to reflect population shifts.

"Wiz, I think Country Gal is correct, some Australians seem to have lost their pioneering spirit."

...er...no, it's now the 21st century. Do you honestly think that there are still significant options for making a living by staking out a claim in the middle of nowhere?

"To insist on living in a big city, on high value real estate,
within 30 minutes of your family, is quite unreasonable. Have you never heard of email ? :)"

I'm sorry to hear you value your family so little...even if you were joking.

"Fact is that you can’t just keep squashing more and more people into limited real estate, unless of course you enjoy apartment living, as some do."

The population density of Australian cities is extraordinarily low by international standards (Sydney = ~340/km2, London = 9360/km2, Paris = ~24000/km2, Manhattan = 25,846/km2) - there are plenty of opportunities to increase it without having to be squeezed into apartments. And at any rate you're ignoring the fundamental problem that a significant percentage of prime real estate is owned by investors and speculators would are competing in a hopeless mismatch against first-home buyers. I'm willing to bet that if purchasing an existing second property was illegal, property prices would be half what they are now.