I find myself agreeing with Yabby that house prices need to come down quite significantly.

On the article itself though, I have long been unconvinced that there is a real physical shortage of dwellings in this country. I think it is more a matter that there is a shortage of AFFORDABLE dwellings. Wasn't so long ago that Costello was bribing us to go forth and reproduce because our population growth had stalled. OK, so we know that he was handing out pork but as far as I'm aware, he was correct about stalling population growth. Housing was booming before than and has continued booming since, yet somehow there is supposed to be a critical shortage?

I spent a few months travelling around NSW,VIC and SA last year (I am from QLD) and saw no shortage of new housing developments wherever I went. What I have noticed is the stark difference between homes built in the last decade and homes built earlier. Compare the two and you will appreciate the term "Mcmansion".

I think a sense of affluence and easy credit has combined to motivate Australians (in general, certainly not all) to demand ever larger, flasher and therefore more expensive houses. This had had the effect of bidding up prices all round.

Howard's slashing of capital gains tax encouraged a boom in investment housing as greater numbers of people than previous bought cheap houses, rennovated them and on sold them for profit, pushing up prices. Many people got in on the craze to do likewise with their own house. Remember every channel being swamped with lifestyle shows like "Rennovation rescue"?

So until I see plenty of hard evidence from multiple sources, I will be more inclined to think that rapidly expanding material desires and the tendancy to regard houses as a mere commodity to profit from combined with an era of easy credit to produce what we have today.

I too agree with Yabby’s reflections on housing and house prices

Fozz “Howard's slashing of capital gains tax”

No Howard did not slash CGT, he simplified CGT.

He halved the rate BUT he countered the impact of that by removing the index linked inflation adjustment from the calculation.

As to “affordable” dwellings, I find all discussion to “affordability” almost silly.

Banks ‘conforming’ lending is conditioned, among other things on the basis of an earnings multiplier, which translates to earnings equating to at least 30% the sum borrowed.

That standard has prevailed for years. Non-conforming loans “Lo-Doc” loans can vary to this but they are much the minority and still require sound alternate credentials.

And Australian housing prices are “constrained” by peoples ability to afford them.

So, something else must be changing in peoples expenditure mix / discretionary expenditure priorities.

Australia has always had a significant “investment housing stock” available for rent so I doubt the attraction of negative gearing is making a difference.

GST has changed the composition of taxes but was offset by other taxes being removed.

Things like TVs and electronic gadgets have multiplied in their range and use but their unit prices have fallen greatly over the past 3 decades.

The only material change which springs to mind is the demand of successive recent governments for people to save through superfunds, which has the effect of diverting / reducing disposable income.

Maybe some people are just not prepared to do the “hard yards” and budget, which previous generations always endured when trying to buy their first house?

So if anyone can show me how housing is less ‘affordable’ these days, compared to say, 3 decades ago I open to being persuaded.

Yabby,

Because it would wipe-out thousands of thirty-something YUPPIES with $600K mortgages.

O.

Yabby

Once the current calamity fully hits the fall is likely to be closer to 55% and it'll affect all those negatively geared properties most.

*Because it would wipe-out thousands of thirty-something YUPPIES with $600K mortgages.*

Oliver, but surely they can still live in their yuppy houses and
pay the mortgage from their yuppy salaries. The way I see it, its
only the heavily negatively geared ones with short term loans, where
banks might hold back future finance and they could be forced to
sell.

Its a bit the same in the share market, where people with margin
calls have had to sell, as well as hedge funds, as many people
are pulling their money out, so they have no choice but to sell.

Anyway, I pinned my ears back today and bought some BHP shares
for my super fund. They might go down lower and they might not,
but to me at around the 25$ mark, they are pretty good value at
that sort of price. Now to sit back and expect a dividend cheque
twice a year, and no pesky tenants to deal with :)

Yabby when they fall again why wouldn't you simply buy some more and average them.