Society/Culture The housing crisis. How is it fixed?

[Purple7x08_24]

Seriously. You just have to listen to most politicians talk to know that they didn't get to where they did on brains. Come on, most of them can barely string a coherent sentence together.

If politicians are loading up on property, I'm more than happy taking the other side of a risk free bet knowing that 2026 is fast approaching.

My old man was a pit trader in the day, years ago now. So I know a thing or two about markets and sentiment.

I think Aussie property is primed for a bust. The entire market has been distorted, land markets are so high no one can dare start a business to make a quid. The only growth is from public spending and public sector jobs.

This bubble is gigantic and it will be absolute carnage when she pops. The government of the day won't know what to do. Ipswich, west of Brisbane, is currently trading at price levels comparable and higher than Melbourne.

I mean look around. Look at the data. This is going to be yuge. Absolute carnage incoming. Scary in fact. We won't know what hit us.

I think Adelaide has exploded to the point that a lot of investors can't make money on development properties because sale prices have gone through the roof.

Problem is the RBA will likely drop rates by 1% by the end of '25 and my belief is it may stall the economy because those people already stretched are going to be less likely to spend the money they recoup. I think this will potentially stall the economy resulting in job losses but the RBA can't afford to reduce rates too fast either.

I think it's more likely that people won't sell their properties which will increase demand for those that need to buy a property. I could see 10% falls in Adelaide but doubt we're going to see any doomsday crashes given the need and want within the government for migrants and the lack of properties.

If people stopped spending money then the RBA is going to reduce rates again and investors will flock.

I think for a major crash to come we would need to see a number of key industries fail on the global market.

 

[imtall]

I think Adelaide has exploded to the point that a lot of investors can't make money on development properties because sale prices have gone through the roof.

Problem is the RBA will likely drop rates by 1% by the end of '25 and my belief is it may stall the economy because those people already stretched are going to be less likely to spend the money they recoup. I think this will potentially stall the economy resulting in job losses but the RBA can't afford to reduce rates too fast either.

I think it's more likely that people won't sell their properties which will increase demand for those that need to buy a property. I could see 10% falls in Adelaide but doubt we're going to see any doomsday crashes given the need and want within the government for migrants and the lack of properties.

If people stopped spending money then the RBA is going to reduce rates again and investors will flock.

I think for a major crash to come we would need to see a number of key industries fail on the global market.

The prices of rentals especially will push people to innovate to escape the higher prices - whether that is group housing or moving in with their folks or even living in their car. That is how markets work - if you price the market out, then the market will innovate - which in turn leads to corrections in pricing. This is the inherent beauty of markets and why they should never be tinkered with.

People forget that markets are dynamic - they will soon learn that lesson.

 

[peetoo]

The prices of rentals especially will push people to innovate to escape the higher prices - whether that is group housing or moving in with their folks or even living in their car. That is how markets work - if you price the market out, then the market will innovate - which in turn leads to corrections in pricing. This is the inherent beauty of markets and why they should never be tinkered with.

People forget that markets are dynamic - they will soon learn that lesson.

Markets are rigged to monopolise. Wealth gap gets bigger.

 

[peetoo]

How to fix housing?

For one make it a 6 day process for a building permit not 6-12 months. That is an easy start.

There’s plenty of approved developments not being built

 

[imtall]

Markets are rigged to monopolise. Wealth gap gets bigger.

That is not how it works at all mate.

Markets are built up and then crash....allowing buyers to buy assets on the cheap and then the market builds again.....and the cycle repeats.

 

[Purple7x08_24]

The prices of rentals especially will push people to innovate to escape the higher prices - whether that is group housing or moving in with their folks or even living in their car. That is how markets work - if you price the market out, then the market will innovate - which in turn leads to corrections in pricing. This is the inherent beauty of markets and why they should never be tinkered with.

People forget that markets are dynamic - they will soon learn that lesson.

While that's true, it's having a minimal impact. To some degree it's having an impact in some areas around Sydney where demand is too low both from those factors and there has been a level of overdevelopment, but also people leaving NSW.

We're expecting +3Million people in the next 5-6 years, plus a forecast growth in tourism and we're not going to cover that through development and innovative thinking alone.

What I think we're going to see is more people with higher levels of income price out those middle income earners with 2nd and 3rd properties to set themselves up in turn creating continual growth. Yes we will have ups and downs along the way but at least for the next 10-15 years we're not going to have a crash. We're also going to see foreign investors prepared to pay top dollar given the exchange rate. Even a 2 bedroom apartment in Woolongong is out of reach for many reasonable income earners. Someone is still out there buying these properties.

It's going to be the apartments that suffer in overdeveloped areas but no more than 20% reductions. Land will still achieve growth.

Having said all of that, if you've got more than 80% LVR you're not leaving yourself much room to move. I think I'm about 65% RN and I have some freedom so in the end it's all about long term.

Another point worth making is back in the year 2000 I had these discussions with colleagues and the same comments about a market crash were said back then. We had a rapid level of growth between 1997 and 2003 and people kept saying that the market can't keep going up or noone will be able to afford a property and here we are. We had some blips in 2008, 2012 etc. I think my house at one stage went from $250K to $230K in that period so perhaps a 10% decline, but that house now is worth at least 400K.

 

[peetoo]

Owning a property to rent is not economic without the gearing etc. in too much of the sector.

Come back with success stories etc but there’s also pain.

 

[imtall]

While that's true, it's having a minimal impact. To some degree it's having an impact in some areas around Sydney where demand is too low both from those factors and there has been a level of overdevelopment, but also people leaving NSW.

We're expecting +3Million people in the next 5-6 years, plus a forecast growth in tourism and we're not going to cover that through development and innovative thinking alone.

What I think we're going to see is more people with higher levels of income price out those middle income earners with 2nd and 3rd properties to set themselves up in turn creating continual growth. Yes we will have ups and downs along the way but at least for the next 10-15 years we're not going to have a crash. We're also going to see foreign investors prepared to pay top dollar given the exchange rate. Even a 2 bedroom apartment in Woolongong is out of reach for many reasonable income earners. Someone is still out there buying these properties.

It's going to be the apartments that suffer in overdeveloped areas but no more than 20% reductions. Land will still achieve growth.

Having said all of that, if you've got more than 80% LVR you're not leaving yourself much room to move. I think I'm about 65% RN and I have some freedom so in the end it's all about long term.

Another point worth making is back in the year 2000 I had these discussions with colleagues and the same comments about a market crash were said back then. We had a rapid level of growth between 1997 and 2003 and people kept saying that the market can't keep going up or noone will be able to afford a property and here we are. We had some blips in 2008, 2012 etc. I think my house at one stage went from $250K to $230K in that period so perhaps a 10% decline, but that house now is worth at least 400K.

So what is driving up property prices of noone can afford to buy the house?

 

[Kram]

I said it back on page one. Demand greatly outstrips supply..

 

[DangerousD]

We will see how much balls the Labor party has in relation to changes to negative gearing and then we will see the millions of Australians fear mongering any changes to protect their own interests not knowing that any changes will likely be grandfathered and any changes to investing laws wont necessarily drop prices but more likely just slow the rate they grow.

 

[DangerousD]

A simple fix to increasing the supply of property and land would be cutting council red tape or even speeding up building permit applications, sub division approvals or removing criteria before you can sub divide land.

Im currently trying to sub divide a block and it’s been such a long drawn out process that will cost a fortune.

Being able to sell a block at a lower price and then the buyer can do the work would get a lot more land on the market a lot quicker.

 

[peetoo]

A simple fix to increasing the supply of property and land would be cutting council red tape or even speeding up building permit applications, sub division approvals or removing criteria before you can sub divide land.

Im currently trying to sub divide a block and it’s been such a long drawn out process that will cost a fortune.

Being able to sell a block at a lower price and then the buyer can do the work would get a lot more land on the market a lot quicker.

The Victorian govt is going exactly that with ‘activity centres’ right now.

But make no mistake developers want lower standards of property with better profits. There’s literally thousands of approve projects right now. Developers hoarding them.

The properties are then climate inefficient which costs much more over the lifetime. But hey, someone made a nice profit so all good