Who's to Blame for Australia's Expensive Property?

We all know it's a metaphor but should government policy be a set of pruning shears, a chainsaw or ring barking?

 

unless the tree stops fruiting, we should be just pruning as necessary.

to have people suggest that the fruit is out of reach so we should risk the tree's health by lopping the top off and hoping it re-shoots is just dumb.

dumb dumb dumb.

 

@sanj yes, that's correct. If you are looking at Australian GDP growth:
http://www.rba.gov.au/chart-pack/pdf/chart-pack.pdf --> page 4 it is declining slightly

Therefore it would be interesting to see in the next 2 years when the Interest rate increased further by RBA.

 

I agree with that philosophy completely.

 

I prefer to invest in what I know. For the first property or two that will be Adelaide and I'll branch out (continuing the tree theme) from there. I agree that things don't look great, I think the economic conditions over the next couple of years will bring about better prices and yields in Adelaide and that's what I hope to capitalise on when I do buy.

So what does a well pruned tree look like to you (in the housing sense)?

What level of investor activity in the market is healthy?
What price to income ratio would houses be priced fairly at?
What's a reasonable rate of price growth to accept from the current elevated prices?

 

Lazy folks will stand on the ground and only reach up as high as their arms will allow them to pick the fruit, but will secretly covet the higher-up fruit..

The doers will find a ladder and climb up to the better fruit higher up.

And the folks on the ground will whinge because it's not fair that those folks have bothered to get the ladder, or that they even have ladders.

A good idea for the folks on the ground would be to pick the lower down fruit, and plant the seeds from that fruit, and then grow their own tree/s with the really good fruit on it.

They will still need a ladder though, eventually.

 

Darn you guys I just went and grabbed some lemons from a tree before someone cuts it down! Going to make lemonade.

 

HI 2340.

If I'm being totally honest, I really don't care about that. A business doesn't care how high their profits are going before its fair to the consumer. The higher the better especially if there is demand for their product.

All I care about is that I am willing to work dam hard, make sacrifices others wont and create wealth for myself. Others can do the same thing if they wanted, no one is stopping them. Just my honest opinion.

 

Then you bring in different tools

Start off with a step ladder , maybe train a giraffe , then a cherry picker and maybe a guy dangling beneath a helicopter .

Plenty of scope to use your imagination

Cliff

 

The real thinkers will look at everyone fighting over one bloody tree and simply go to another one and reap much greater rewards. Or grow more trees and sell it to the fighting public

Ok enough bloody metaphors, my brain hurts

 

Reminds me of a comic strip I saw earlier today: http://www.zerohedge.com/news/2015-07-26/how-we-got-here-2008-financial-crisis-dummies

 

I missed this part of your post mate, (now @Aaron Sice post makes sense to me lol)

I don't believe people cant pick the fruit because of the government. To cut a long post short, its simply because they are not willing to do what it takes to pick the fruit. The fruit isn't the problem.

 

sanj you crack me up mate.

 

Haha thanks. I'm sleep deprived, procrastinating on PC today and kind of losing my mind. Good combo for the paying public

 

From my experience, this applies to most aspects of life.

The folks who do the best in any endeavor are invariably those who were willing to do the hard yards.

 

LOL, and that high tree is Sydney market while the other tree is Brisbane market which is sure going to be profitable.

 

Ok last metaphor, I'd argue theyre still the same tree. I get that this is a property forum but there's a whole world of investing opportunities out there, there's no need to restrict ourselves to resi property or property at all. That's what I'm referring to by looking at an entirely different tree/forest

 

We picked some fruit on the weekend and not using standard pruning .

Last week talked to agent about one property and he said that an investor was liquidating his portfolio ....

I asked how many ?

Answer , four .

I asked is there discount if I buy all of them ....

Last Friday pm I rang up and asked agent if anything was happening .

Answer .... Banks are moving in , it's a messy divorce and now they have to sell ...

So we had a hectic Saturday , doing searches , looking at pictures , valuations and made an offer for all four ( we let our daughter have one ) which was finalised on Sunday morning . Subject to inspection.

Look as though they're around 10 % undervaluation , which in a market thats warming up is good buying in my books .

If we'd made a low offer on just one , probably wouldn't have happened . Putting a decent deposit ( 5% ) instead of 1 k helped . Knowing a good deal when we saw it and moving quickly got us in ahead of the rest of the market helped .

When this was all organised , they weren't on the market . The one I saw had been taken off the net and others hadn't been listed . They were going to be listed today .

Cliff

 

All it takes is a very small "AXE" to cut down a very large tree,the only problem is which way does the large tree fall and on who?.

 

Hi BB, now that's an interesting response to the tree and fruit analogy. If I translate correctly you're asking whether government should be allowed to allow property prices to increase so high that many people can't buy the properties at the top [or even maybe an average property]?

If I leave the property "at the top" alone and even just focus on the market as a whole I have real concerns with the inference in your question. At its simplest level it appears you are suggesting that the government's lack of action has allowed property prices to rise to unaffordable levels. I take personal issue with that observation as I think it is fundamentally wrong. Joe Hockey may not be a good communicator and is obviously not an astute politician, but his point on housing affordability is still valid and that is "if property was unaffordable, noone would be buying it".

Property, like any market, is subject to demand and supply equilibrium in establishing price. I agree it is a luxury good and not a basic good so has a different demand/supply profile to elastic basic goods, but it is still a market.

Here's my key point: The price of the property market is a factor of BOTH Demand and Supply, not just Supply. It is clearly affordable or the prices established by the Demand side of the equation wouldn't be where they are. The market simply wouldn't achieve equilibrium. Of course, you can reduce price by increasing supply or reducing demand, both of which can be effected by government action, but that's not really the point I was trying to make (which I think Joe Hockey failed abysmally at as well)...

Property isn't unaffordable. It is emminently affordable and always will be. So long as there are buyers and sellers agreeing a price you have an effective market establishing what the equilibrium price is at every transaction. Referring this price to income multiples etc completely misses the point. If property was unaffordable there would be no equilibrium price established and no transactions occurring. But last time I checked properties were still selling, and selling at a pretty fast clip too!

Cheers,
Michael