very interesting Q&A about housing tonight

Hi, isn’t it clear to all there is a crude attempt by certain forces to divide the Australian public into opposing camps, renters and landlords? We shouldn’t fall into their trap and we should call it out.

These people make outrageous statements purposedly to provoke us into reacting in the same extreme ways. Why would they want to divide us? To stop the problem being resolved so they keep getting all the attention they crave. Their very existence in politics and the media feeds on this attention.

But renters need landlords as much as landlords need renters. We’re on the same boat. Society needs both to be happy. So let’s rack our brains and think how society could serve the interests of both. As some have already done here, let’s look at all the contributing factors, from cost of construction, materials, land, to labour availability and training, cost of debt, population, household formation, tax, public policies, mindsets and beliefs,… even features in our economic system that have led to the current situation, not only in this country but in many parts of the world.

Let’s do good rather than falling into their useless, self-serving rhetorics.

 

True however it remains that neither landlords nor tenants are the ones that have to provide the solution.

 

Spot on. Same as this “blame the boomer” script.

 

Anything but the policy makers. Mate it’s done worldwide and for a long long time with many people still getting sucked in.

 

The problem is that landlords and tenants benefit from different economic outcomes, so their wants aren't aligned.

I listened to a Michael Yardney podcast a few days ago, where he said that property investing in Australia is a game of capital growth. Rents don't cover holding costs, so you need price gains to make it worthwhile.

In contrast, a renter would want property prices to grow more slowly than they are, or even fall, so that they could eventually afford to buy a place. That would be disastrous for a negatively geared investor.

The real problem with the Australian property market is that prices are two or three times as high in real (wage and inflation adjusted) terms as they were in the late nineties. Either you make housing cheaper, which hurts the older generation, or you keep it expensive, which hurts the young. There's not a magical outcome where everyone wins.

And if you want to bring prices down significantly, that's going to be deeply unpopular with the two thirds of the population who'll lose out, making it political suicide for the government...

 

Yes, the current debate is atrocious due to the us vs. them attitude. “Leave it to the market” on one side and “punish the rich” on the other. Wealthy, heartless landlords vs. poor, suffering tenants. As long as this finger pointing is going on, there will be no solution in sight.

Sometimes I feel politicians don’t even want a solution. They are bereft of ideas but can’t listen to ideas.

Once I wrote to MPs from all parties, including the Greens, to ask whether the government should consider leasing instead of selling Crown land for home building to reduce the initial cost of land. Not one of them replied.

Another time I wrote to MPs asking them to consider an improved, on-going version of NRAS. Again, no response. And they say they care!

But we should continue to come up with ideas that are middle ground and serve the whole rather than one side of the fence. Hopefully one of these ideas would stick.

As far as negative gearing is concerned, I’m over it. The debate has become too toxic and prejudiced that it will only waste oxygen while distracting us from effective solutions. Anyway the government missed a golden opportunity to reform it when interest rates were below 2.5% and the pain to investors was minimum.

 

Nobody really cares about your well-being besides your family and yourself. Least of all government.


Everyone is busy ensuring their own survival and futures.

The rumblings from all sides of the population is the absolute last thing on any pollies mind.

 

I agree with your analysis.

And there is the conundrum. This change can happen, but it takes a voting public AND political parties to look at things on a 20 year time horizon, not a year election cycle.

I don't know if the dichotomy is as black and white as you say (but it's definitely there). If you phase in the policy change over the course of a generation, then the construction industry has time to adjust, and supply and demand dynamics shift at a pace that has a much more moderate effect on the 'haves', and eventually creating a more cohesive society, where people in society can innovate more, because fewer people are enduring the stress from debt servitude.

I fear that if we keep voting for the status quo now, then once enough of the 'haves ' die off there will be so much remaining generational ill will amongst the voting population, that a far worse/more extreme 'solution' would be voted in.

 

I don't think the tipping point is all that far off. You don't really need the majority to be in favour of lower house prices. A fervent minority, plus a big enough portion that are ambivalent, is enough. Roughly 1/3 of people rent and 1/3 don't have a mortgage. The first group would be in favour of lower house prices. A decent portion of those without a mortgage are likely either in favour of lower house prices (they see the issues, want their kids to afford property etc), or just don't care all that much if house prices decline a relatively modest amount (they are older, have no intention of moving, marginal impact of a change in net worth isn't as impactful etc.).

Couple that with the fact that if you ran (properly) on a platform of lower house prices, you don't need to win parliament, you just need enough seats to be disruptive so that you can block some legislation and get some other legislation through in exchange. I really think if you ran on an anti-immigration, YIMBY platform now you would win decent support at election time.

 

Planning, tax changes, government social housing - they all have a part to play in the whole housing crisis.
No 1 lever you pull will change the outcome for lower house prices.
You need all levers to be pull in the same direction to achieve "meaningful" outcome.

 

The third element is that although affordability affects all states, it's a state issue not federal.Tenancy legislation is state based, development controls are also state. The only levers the Feds have are interest rates, inflation, wages policy, bank controls.

 

65% of property has no mortgage, given about 25% of those are investors with more than one property , people with a property mortgage would be under 30%. The average LVR I think is about 30%. That is why the mortgage Cliff was a delusion.

 

Interesting, didn't know it got so bad.

So the kiwis can't do the "equity out for shares" anymore? No debt recycling? Pretty restrictive

 

Yeah, very draconian.

 

Wouldn't that lead to more competition in the lower end of the market? If investors are restricted by how much they can leverage, then they can't spend as much. So they'll buy in the price range they can compete.

 

Australia is a society that cut's down tall poppies with a chainsaw, they will also quite happily salt the soil so nothing grows there again. There is one thing that is 100% certain, the moment the have nots become government makers it's game over for mum and dad property investors.
Personally I can't see NG, CGT Discount, PPOR exemption from Pension Asset Test, resembling anything remotely close to what they do now within the decade.

 

The point is greens and various activists will use terminology that isn't correct but seems to bamboozle or sway most people. A cash handout, like welfare payments vs not collected like NG.

 

That assumes your mortgage is less than 30% of your take home pay, unfortunately that’s not realistic for most first home buyers. But over time your income increases so the commitment as a percentage of your take home pay reduces.

It also assumes you only pay a 20% deposit. Most first home buyers can start with a villa unit or townhouse, build equity and savings and later upgrade.

I do think it’s exceptionally hard, I’ll likely never own a house in the area I currently live in. But that’s just how it is, I get to live in one of the best suburbs in one of the most liveable cities in the world.