House prices
https://www.abc.net.au/news/2023-12-04/why-we-need-jobkeeper-scheme-for-...
I'm sitting here with popcorn by this stage. When this is all written up it'll be a tale for the ages.
every lesson in the economic history of mankind being left in the dust
it's a brave new world free of the weight of onerous things like economic theory or looking to the past. Quite exciting times, really
The Australian housing market STILL is a Market affected by the age old fundamentals of Supply and Demand .
It is a BIG market ( around 8-9T by some figures same as Japan ) and an Old market .
China is 65T , US about the same , UK , Germ and France combined , the same .
The markets are linked .
Australians trust property , so are willing to borrow BIG , to buy .
The Banks that lend the money are experts at it .
None are showing ANY sign of stress .
They don't lose .
Then homeowners Spend Time In The Market ( a great strategy ) , years .
Italians and Greeks love property ( not just houses ) as do most of the newcomers .
Australia is an attractive place for people to move to .
China , not so much .
As is usually the case , people will pay what they can afford .
Like most markets , the Last Trade , is a tiny percentage of the volume of the WHOLE market .
Change a major tax rule and Volume will hit the market .
Gosh , watch prices change then , it will be terrifying imho ( I don't own property atm ) .
The Media will love it :(((
Property , Residential and Commercial , are all linked .
Markets are voting machines in the short term and Weighing machines in the long term .
In all markets , there are ripoffs AND bargains .
To meet demand , governments , need to provide the Supply , or prices , eventually , go up .
No movement.. looks like a hold on rates today..
https://www.asx.com.au/markets/trade-our-derivatives-market/derivatives-...
Capital gains tax change in the UK, maybe something the Government here will look at: https://www.telegraph.co.uk/money/property/buy-to-let/avalanche-landlord...
I doubt it though they'd lose the next election.
MB - as u would know , Hawke/Keating had a look at changing tax rules for property .
Both men had True Grit imho .
They saw or heard , SOMETHING , that made them , quickly , change their minds !!!
Some rules , are NOT for changing .
Not worth the trouble .
edit - One thing I have learned , is to NOT fuck with markets .
If mistreated , they can turn into a Wild Animal !
Andy - most Australians own property .
THEY don't want the Trouble of their Main asset dropping by half its value .
U and I have NFI what the Trouble even looks like .
Don't play with what U don't understand .
Another good OLD rule .
Definitely worth the trouble, it's a matter of how do you communicate the necessity of the change in a country that has become so selfish and greedy.
monkeyboy wrote:Capital gains tax change in the UK, maybe something the Government here will look at: https://www.telegraph.co.uk/money/property/buy-to-let/avalanche-landlord...
I doubt it though they'd lose the next election.
This one wouldn’t solve as much as people think in my opinion. Looking at it long term, people might be even more reluctant to sell when facing a large tax bill. It’s much better to hold the assets and then borrow against them for other purchases.
There's been so much tilting of policy in favour of property over the last 40 years that we've reached the stage where it has devoured much of the real productive economy, and has begun to destabilise the society. Add in a period of 5000 year low interest rates, too. It's not just supply and demand.
Further, we've just taken out this infamous ratio:
https://www.news.com.au/finance/economy/australian-economy/australian-re...
It's at a point of great deviation from the historical averages, what will the policymakers of today do to make sure the dream never reverts-to-mean? How long can they extend it?
A good time to repost this old classic, human psychology often rhymes:
velocityjohnno wrote:There's been so much tilting of policy in favour of property over the last 40 years that we've reached the stage where it has devoured much of the real productive economy, and has begun to destabilise the society. Add in a period of 5000 year low interest rates, too. It's not just supply and demand.
Further, we've just taken out this infamous ratio:
https://www.news.com.au/finance/economy/australian-economy/australian-re...
It's at a point of great deviation from the historical averages, what will the policymakers of today do to make sure the dream never reverts-to-mean? How long can they extend it?
They can extend it for a very long time, especially as we are a low-debt nation with plenty of tax firepower left in the cannon. Population growth is driving real estate prices and we haven't caught up with that from either a planning or policy perspective.
Also, comparisons to Japan and even the US are not always valid. Japan's population hardly moved over the last 40 years while the US is a lot more liberal in terms of economic policy. What I mean by that is that the US lets things crash. There are whole towns full of empty houses, you would need to pay people to live there. We don't let things crash like this down here (good!).
Finally, we live in ultra globalised, complex economy. We can't always draw parallels to the ancient times. Yes, there is a mean but mean also moves over time.
johnno - What BIG tilts/changes have been made to property in the last 40 years ???
It is the market Australian's TRUST .
Any major CHANGE will show Money , more change is coming .
Money will then MOVE , as it always does .
The Smart Money first !!!
In times when Trust in world governments is fading , money will move into hard assets imho .
Property prices seem too high now , and I don't think the asset class can perform in the next 20 years , like it has done these last 20 .
Property prices are not a drag on Australia's productivity or allocation of capital , yet .
Higher energy costs are causing MUCH more problems for our Productivity !
The other big difference between USA and Europe and Aus is that they have entire continents with inhabitable areas.
We have a thin strip around the outside.
So inhabitable land with water, amenities etc etc will always be at a premium compared to USA/Europe.
You can move inland to any large USA conurbation and buy at a discount.
Where are you going to move to in Australia?
Burke? Winton? Coober Pedy? Meekatharra?
Sure, it's cheap as chips but what are you going to do?
There's nothing there.
Another simple supply/demand issue from my very unsophisticated economic perspective.
Freeride 76
Outsmarting a 30kg , man sized , sophisticated , Jew fish , is very Sophisticated and would require both patience ( luck ) and perseverance imho .
Saw a 12kg one once .
Caught ( by someone ) early evening off New Brighton beach in the 70's . Blue pilchard , I think .
There's the hold.
Nice and reasonable. Looking at the historical charts, we are roughly in the same place as 10 years ago. So, we just went through a decade of super-low interest rates. My forecast for the next decade is medium interest rates paired with stagnant real estate prices (on average and keeping up with the inflation) with some plus/minus single digits here and there.
flollo
My head wanted one more now ( get them , hopefully , done and stop the worry ) but heart is happy ,
I would be very happy if your forecast for next next decade comes true .
Everyone , needs Property , to be somewhat stable in price and going Up in the long term .
There will be the usual booms and busts , in certain areas .
Office Property can , perhaps , FINALLY find a bottom and do some refinancing .
Property is Australia's Wealth .
Alan Kohler from last night with OECD thinking RBA done:
Pop Down wrote:johnno - What BIG tilts/changes have been made to property in the last 40 years ???
Neg gearing on, off/on 84-87
CGT 50% discount (late 90s or early 2000s)
Population tailwind late 2000s on
Property in super from memory incl SMSF
FHOGs from 90s, beefed up in 2000s, beefed up in 2010s
5% deposits at times (banks, not gov policy)
Gov co-ownership scheme (Vic)
QLD just upped FHOG from 15K to 30K
stimulus measures
& that's off the top of my head. A real free market would have none of that with exception of perhaps having a much more competitive tax rate in the first place, say 7-9% flat.
Edit: add covid stimulus, allowance of renovations to be claimed (I think) to 150K, allowance of construction industry to keep going to work as protected species. If anyone else has more, feel free to throw it in the thread.
2nd edit: delay in implementation of of Tranche 2 AML from 2000s, still not required today, foreign ownership permitted
I do not disagree that property ownership is the cornerstone of wealth, best stat I ever heard was 7%pa from the time of the Domesday Book.
VJ - U have a good memory :)
I don't rate any of these as big changes to our Tax Fundamentals for Property , sorry , I wasn't clear .
An On/Off Neg gearing by Hawke Keating I already have mentioned as two wise men , quickly , changing their minds = no long term affect .
Changing CGT on Property to 50% , made it the same as other Asset Classes .
Simpler , fair and predicted by the market .
Prices didn't ratchet up , long term .
Super ? Yes , some rules changed but it is too hard imho .
The rest are not tax changes but DO make a big difference .
Whenever governments REALLY try to encourage First Home Buyers , I get VERY worried .
Some of them are really struggling atm , with much higher interest rates than 2 or 3 years ago .
I like Planned Immigration and want Australia to get to 50m people .
Melbourne is , nearly , full .
ps - Dan decided to try a negative property tax as a departing gift .
My sources are saying there are some big problems starting as a consequence .
Someone will get a call , from someone they REALLY know that NEVER calls them .
They will be told what is happening in the Real World .
Then the Rule will be changed like Hawke and Keating did imho .
Good stuff Pops, I think you have a good amount of knowledge on these things. Some of those things are beyond my adult memory and I have to put it together in retrospect. It all adds up, every bubble or mania has a bedrock of something tangible, and then a series of policy settings that are favourable, and then the flows intensify.
Bob Carr in 2002 had a stamp duty increase iirc that bookended that Sydney run, then Adelaide/Perth etc went on the boil... do you mean Dan's/Vic Gov's recent vacant property taxes? Melbourne is nearly full but it can always expand to the Vic borders and make the state into a city-planet like Coruscant in Star Wars lol
VJ - I have not much experience buying or selling property but have seen a fair bit of investing in stuff over a fair time .
The emotional side of it is interesting .
My ex , didn't feel like she belonged in a suburb , unless we owned the property .
Very strange imo .
U gave me a laugh with your thoughts on Melbourne becoming a City-Planet .
We are a big city , think U guys are often on another Planet , but We don't like traffic !
We will really think we will Rule The World , if as big as U suggest .
No thanks :)
Please tell me where your place is and I will think of a reply :)
I also know Fear kills Greed in the powerful emotion race .
Yes , Dan the Man .
Not at all like Hawke or Keating .
freeride76 wrote:The other big difference between USA and Europe and Aus is that they have entire continents with inhabitable areas.
We have a thin strip around the outside.So inhabitable land with water, amenities etc etc will always be at a premium compared to USA/Europe.
You can move inland to any large USA conurbation and buy at a discount.
Where are you going to move to in Australia?
Burke? Winton? Coober Pedy? Meekatharra?
Sure, it's cheap as chips but what are you going to do?
There's nothing there.Another simple supply/demand issue from my very unsophisticated economic perspective.
After 9 months of travel from rainbow beach in QLD to SA along the coast, there is affordable real estate on the coast. Just not anywhere in QLD/NSW. Mallacoota, bass coast, Phillip island and West of Cape Otway are cheap.
Renting is still affordable in nice NSW locales though, especially compared to buying.
Oh the great irony..
...wishing for interest rates to fall so houses become more affordable.
"On a per-person basis, GDP shrank in the September quarter by 0.5%, adding to a revised flat outcome for the December quarter and a 0.1% contraction in the June quarter."
"Gareth Aird, head of Australian economics for CBA, noted that interest paid on housing debt was up 70.6%, or $12.3bn, over the past year while income tax payable jumped an “astonishing” 23.4%, or $17.2bn, over that time."
"Consumption too, was, funded in part by a falling savings rate, with the household saving-to-income ratio falling for the eighth straight quarter to 1.1%, or the lowest level since the December quarter of 2007, the ABS said."
https://www.theguardian.com/australia-news/2023/dec/06/australia-gdp-sep...
All smoke and mirrors to make it look like we're not really heading towards a recession!!!
Yep. I reckon it won’t be long until they start cutting rates again.
With the Australian economy almost at a 'standstill' in the September quarter and consumer spending totally stalled, has the RBA over-done it in its efforts to reel in inflation?
Has it misjudged the lag time considering that the Reserve Bank itself estimates that it typically takes somewhere between one and two years for the maximum effect of a monetary policy move to be felt?
And I understand that there's also another lag, the one between a household's mortgage rate rising, its savings buffers being eroded, and it falling into financial distress.
So if household spending has stalled now and there's almost certainly significant lag effects yet to hit the economy, where does that leave us?
I think it would deeply shake public confidence and be a terrible look politically for interest rates to do a sudden about-face and be dropped, surely there'd be a long period of stasis before this was considered.
Maybe donweather's stopped clock is finally going to chime.
Andy - I agree it would be a Bad Look for the RBA ( not political ) to quickly reverse the rate cycle .
Their last call , No rate rises until 2023 or 4 , was so silly and wrong .
The RBA has NFI how a lag might work as Government has been working against it eg Min wage rises .
The RBA's ONLY job ( like the FED ) is to keep Inflation under control ( 2% target ) .
In both Australia and the US , governments are Blunting Central Bank policy .
With Inflation over 4% and fuel at low levels( $2 p/l for diesel is still high imo ) , a LOT more Distress may be need to get demand and prices down .
Way too early to call imho .
This is exactly what we need. Good on this government for giving it a go, I hope they succeed.
https://www.abc.net.au/news/2023-12-06/nsw-government-housing-plan-roseh...
If rates come down next year (they've already come down if you are a bond issuer and it is a US election year) then we continue to rhyme with the 1920s. Uncanny in some respects. Given where financial markets are at we're potentially looking at the grandmother of the mother of all financial asset booms.
Some important numbers released yesterday .
Productivity ( I always watch this ) down 2.1% yoy .
This is terrible and the theme is we are falling backwards as a Nation .
Energy transition from a very Low Cost Energy producer to still to be a drag on productivity .
Our GDP went backwards !!!
Government activity ( spending ) up 4.4 % yoy .
Blunts RBA policy .
Consumer spending STILL very weak ( figures were much worse than expected ) .
Travel , dining , cars ( a lagging indicator ) still strong .
Inflation strong .
I don't think Increasing rates will help , much , with Inflation , in the current world .
Central Banks will need to look a raising the target to 3% , too much shit happening atm imho .
This NOT being even discussed , yet , so a long way off .
I REALLY hope , Australia has a happy and safe Christmas !!!!!!
I don’t really understand how they measure productivity?
No one has surveyed me as to how long it took me a year ago and how long it takes me now to do my job?
And if productivity really is shit ATM then why are so many companies making record profits?
monkeyboy wrote:If rates come down next year (they've already come down if you are a bond issuer and it is a US election year) then we continue to rhyme with the 1920s. Uncanny in some respects. Given where financial markets are at we're potentially looking at the grandmother of the mother of all financial asset booms.
Melt up coming then one all mighty bust like the world has never seen before!!
Bing bong says don :)
Financial markets talking of a "near certainty" of an interest rate cut by September.
monkeyboy wrote:If rates come down next year (they've already come down if you are a bond issuer and it is a US election year) then we continue to rhyme with the 1920s. Uncanny in some respects. Given where financial markets are at we're potentially looking at the grandmother of the mother of all financial asset booms.
Sounds very cool. Care to expand?
I found this article showing the Fed's (and other markets') interest rate path in the 1920s
https://newworldeconomics.com/the-federal-reserve-in-the-1920s-2-interes...
QLD for 1920's Florida land boom proxy? People could dance the Charleston again and it would still be better than planking in the last decade.
1920's singing and dancing (and promise of rapid wealth) theme: the singing frog. Here are a couple of excerpts - the whole cartoon is still hilarious, watch it in full if you can:
This frog will ruin ya.
AndyM wrote:Financial markets talking of a "near certainty" of an interest rate cut by September.
Are these the same financial markets saying a year or so ago no interest rate rises until 2024?
Exactly.
Taken with a dirty great big grain of salt.
velocityjohnno wrote:1920's singing and dancing (and promise of rapid wealth) theme: the singing frog. Here are a couple of excerpts - the whole cartoon is still hilarious, watch it in full if you can:
https://www.youtube.com/watch?v=6OCzxCHMrpU
https://www.youtube.com/watch?v=lfrJzkpzCyg
This frog will ruin ya.
Still the best cartoons ever VJ.
When I was a kid, I used to get around the house singing that first song.
Try that today and you'd probably forced into gender re-assignment, sorry, gender affirming surgery :)
Yep those songs and then the croaks when anyone is looking are part of the ROM of my mind, and a parable too. Enjoy the remarkable things you've got, don't try to exploit them.
If you want other stories relevant to your last line, I've got:
https://news.yahoo.com/woker-woke-african-female-santa-124746237.html
Personally I find it highly offensive that she's not disabled in some way - discrimination and social prejudice against people with physical or mental disabilities is totally unacceptable.
I think it's fair to distinguish between markets, who always factored in inflation-inspired rate rises, and the RBA, who made the comments about rates not moving until 2024.
Barring some change in the demand/supply situation I'd reckon there'd be an even bigger boom if rates were cut.
"Barring some change in the demand/supply situation I'd reckon there'd be an even bigger boom if rates were cut."
That's definitely how it seems.
"Despite multiple interest rate rises and a cost of living crisis, home prices in Australia increased 5.5 percent this year to a record high.
And even though interest rates are expected to stay higher for longer, home prices are expect to keep rising next year as well. A new report from PropTrack is forecasting 3% to 4% growth in house prices through 2024."
https://www.abc.net.au/listen/programs/radionational-breakfast/australia...
Cutting interest rates seems, as they say in the classics, inconceivable.
Labour productivity is the output produced per worker or per worker hour worked over a given period. Labour is just one factor of production, so labour productivity is just one measure or type of productivity (think of things like financial capital invested, floor space, machinery, energy usage, etc). When productivity is mentioned in our media, it’s implicitly nearly always labour productivity. Businesses can be more profitable while experiencing declining labour productivity if they are more productive with respect to these other inputs or factors of production.
Labour productivity growth is critically important since it determines real wages growth and hence living standards. Australia has very low unemployment and positive output (GDP) growth, but declining labour productivity and declining real output per capita (per person), and hence declining living standards. This conundrum (low unemployment and ok output growth but declining productivity and declining real output per capita) is symptomatic of very low unemployment, forcing businesses to hire less productive labour (hire whatever is available), very high immigration (the economy simply can’t suddenly increase output in order to maintain output per capita ratios, and immigration has a large unskilled component), and high inflation.
Financial markets and the RBA forecasted inflation (hence interest rates) to stay low into 2024 since they didn’t see the Russia-Ukraine war coming and consequent energy/resources price spike. Did you see it coming? Take their forecasts with a grain of salt simply because unexpected events happen that no one sees coming.
House prices and rents started going up again due to high immigration and likely due to people, particularly property investors, believing that interest rates have peaked and will start falling next year, even if the decline is slower than originally expected (higher for longer).
My personal opinion is it would be socially disastrous and extremely irresponsible of governments if property prices were allowed to boom again and housing affordability got any worse than it currently is.
good post Oliver and agree with your opinion - think it will happen, though.
"My personal opinion is it would be socially disastrous and extremely irresponsible of governments if property prices were allowed to boom again and housing affordability got any worse than it currently is."
Short of some drastic intervention in markets, how could Govt stop prices rising?
freeride76 wrote:I think it's fair to distinguish between markets, who always factored in inflation-inspired rate rises, and the RBA, who made the comments about rates not moving until 2024.
Barring some change in the demand/supply situation I'd reckon there'd be an even bigger boom if rates were cut.
except you’re missing the reason why the RBA would be cutting rates.
AndyM wrote:"Barring some change in the demand/supply situation I'd reckon there'd be an even bigger boom if rates were cut."
That's definitely how it seems.
"Despite multiple interest rate rises and a cost of living crisis, home prices in Australia increased 5.5 percent this year to a record high.
And even though interest rates are expected to stay higher for longer, home prices are expect to keep rising next year as well. A new report from PropTrack is forecasting 3% to 4% growth in house prices through 2024."https://www.abc.net.au/listen/programs/radionational-breakfast/australia...
Cutting interest rates seems, as they say in the classics, inconceivable.
please don’t believe any property price forecasts from any organisations that deal with real estate. There’s a significant conflict of interest!!!
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers