The politics of housing

[pietillidie]

With 3 people per square kilometer, you'd think we'd have plenty of room for 'big blocks'.

The failure to utilize our land has been a big driver in the cost of housing, along with the influx of international buyers. Cashed up Chinese are buying up in my suburb.

Why we have never harnessed the 125 cubic meters a second (average) of water that flows from the Ord River will baffle me until the day I die.

There is absolutely no incentive to do anything that puts sane, rational downward pressure on housing prices to stop the what is basically a handout rort. As I say, it's a completely fake market based on planning supply restrictions, trapping and misdistributing capital that should be put to work across the economy.

The slightest hint of competition, and wait for the entitled tantrums and fantasies of the past, when instead of working harder and being more moral, as they fantasise, people actually just got the massive free kick of cheap and plentiful housing.

It's a complete disaster, much like having one bank that's too big to fail (The Bank of Gross Over-Valuation), no matter what damage it does to society.

Ironically, it's virtually the inverse of the sub-prime mortgage problem that caused the GFC. Instead of the risk of borderline loans being rolled into indecipherable collateralised debt obligations (CDOs), the openly, readily seen, idiotic inflated pricing of housing was purposely caused by under-supply, and must now keep rising no matter what, with all the pain going onto younger generations and renters who pay more but gain absolutely nothing.

Young people have essentially been told to go eff themselves as the elderly live longer.

[stui magpie]

^

Some oversized monstrosity that takes up the whole block, usually 2 story, that looks completely out of place in the neighbourhood, except when you get a whole suburb of them like some of the newer estates.

The actual definition is " McMansion is a disparaging term for overly large and opulent mass-produced homes without architectural authenticity or class."

[think positive]

^

Some oversized monstrosity that takes up the whole block, usually 2 story, that looks completely out of place in the neighbourhood, except when you get a whole suburb of them like some of the newer estates.

The actual definition is " McMansion is a disparaging term for overly large and opulent mass-produced homes without architectural authenticity or class."

Ah well we still have a decent sized backyard, and I designed every inch of it, with a fair bit of reference to porter Davis, so all good! The beach house stands out a mile away, not many 2 storeys there, but it’s the shape ofthe roof and the fact it’s black brick and white boards that smacks you in the eye! And the layout is something else, if I do say so myself! I asked because my sister always disparages McMansions! Square boxes! I still love both except the cupboard handles in thos kitchen, I’ve just replaced the laundry ones, kitchen next! The bastards take your skin whenever you clean the doors! If I had my time again I’d havea swim spa instead of a pool, but that’s about it.

[Skids]

This discussion made me think about when I first got into the housing market.

First house (duplex) was purchased in 1987 with my ex-wife, she still lives there.

Osborne Park - 10k North of the city, 1km to the freeway and about 8k to the beach. It cost $57,500. I was just out of my apprenticeship, clearing (without overtime) around $400/wk on wages. I can't recall the mortgage payment, but if I didn't do overtime or a cashy, we'd have no money between paydays.
Anyway, I lost the lot when we split.

Me 'n Kel bought in Greenwood - 13k North of the city 7k from the coast, for $135k in 1994. The mortgage repayments were $400/wk. My wage, without OT was just under $500/wk and Kelly was bringing home around $300/wk. Again, without me doing cashies or OT we would have only enough for essentials.
I've posted this before, but, the furniture we had was all hand me down stuff or things I'd picked up from verge throw outs in the yuppy areas that I refurbished.

So today, the house next door sells for $865k, repayments on an $800k mortgage are $1200/wk, 3 times what we were paying.
Our combined income now is more than 3 times what we were earning when we started.

So, in summary... nothing has really changed, other than interest rates are lower now.

[pietillidie]

^Sorry, Skids, but from a *national* POV that's meaningless. The ratio might not have changed for you, but that's not even close to the national average ratio shift. And no, the folks from the three biggest cities in the country can't all move to Dimboola. Only a very small percentage of people can work favourable angles (high incomes and low house prices in low-demand locations) without the economy collapsing. That's why economists don't care about some bloke on Facebook who's beaten the odds by living on a houseboat on a lake in Tasmania.

There were a few good years from 2014-2019 when interest rates dropped, but they dropped for a reason, i.e., to help economies recover from scarring from the GFC and deflation associated therewith. A brief window in a rubbish economy when everyone was still recovering from the worst financial crisis since whenever was barely a ripple in the pond. Better than nothing, but interest rates don't go to near-zero to stave off deflation for fun; rather, to keep economies on life support while GFC debt overhang was dealt with.

Here's the actual overall Australian equation (Aus Fin Review Sep 2023). It's also crystal clear that higher past interest rates don't come close to bridging that gap, with the proportion of income spent on housing far lower even when interest rates were 17% in 1990 (see: https://www.datawrapper.de/_/1TwJx/). Furthermore, spending needs make the situation far worse when the decline in support for lower-income earners (including government housing), increase in job acquisition costs and years lost to job preparation (i.e., education and training, mandatory for many more jobs, hence the student debt and later career and earning starts), and distance from employment centres for even potentially affordable homes is taken into account.

Why the odds are stacked against first-home buyers, in six charts

1. Property prices have massively outpaced wage growth

2. The time it takes to save for a deposit is growing … and even if you do buy, it’s harder to afford repayments

3. For those trying to buy, rent is taking up more of our expenses

4. Even if you do manage to save enough, your borrowing capacity is limited

5. All of these hurdles have led to fewer people owning homes than before

6. But if you make the transition and can survive the repayments ... then you’ll probably end up wealthier

https://www.afr.com/property/residentia ... 914-p5e4sl

In 1984, when Bruce brought his first home, the average income was $19,188 while the average cost of a property in Australia was $64,039. This means people needed to borrow 3.3 times their income to afford the average property, according to financial comparison site Finder.

In 2023, by contrast, the average income is $90,896, while the average home costs $920,100, Finder says, which means buyers now have to borrow 10 times their income.

In 1984, a 20 per cent deposit was two-thirds of a year's income. Today, it's just over double.

University of Sydney economist Gareth Bryant says while homebuyers in the 1980s and 1990s such as Bruce were plagued by high interest rates (in January 1990 the official cash rate was 17.5 per cent) and unemployment levels significantly higher than today, the challenges first homebuyers face now are very different.

“Previously it was more of a challenge of income: ‘Do you have enough money to cover your mortgage?’ Rather than actually being locked out of home ownership,” he told Insight.

“Now it’s more of a problem of wealth and actually being able to access the wealth needed to get the deposit.”

He says experiences like Ashley’s are becoming increasingly common among Millennial Australians who are being shut out of the housing market in never-before-seen numbers.

"House prices have increased over the last two decades at a much faster rate than wage increases," he said.

"So we're seeing a structural change where, rather than renting being something that's a temporary phenomenon, people are starting to confront a situation where they'll become lifelong renters."

"Even when [Millennials have] decent jobs and decent incomes, they're finding them locked out of the housing market."

https://www.sbs.com.au/news/insight/art ... /t8y9wgmnh

[stui magpie]

So the auction was this morning for the joint just down the road. $1.207M

Big crowd, mostly white but a few Chinese and Indians. Bidding started at $880k and went up steady in $10k increments. Most of the bidders were blokes 30-40, likely looking for the family home. Got up to $1.80M then some bloke who was channelling Dany from the Block started chucking in odd numbers and just steam rolled the last 2 bidders. Hard to get a read on him, short, tubby middleaged bloke in an Hawaiian shirt who looked like he'd struggle to afford a Big Mac meal.

Caught up with the previous owners for a chat prior to the auction, haven't seen them for about 20 years. They moved away and have had the place rented out until now, they're retiring and want the cash.

[think positive]

Um, sold for 1.207. Got up to 1.8? Huh

[stui magpie]

^

Read it again, steady bidding got up to $1.8M then a wildcard drove through and took it to $1.207M.

The sellers bought it for $78K in 1987.

[Pies4shaw]

1.08?

[stui magpie]

^

Yes, slipped a 0. $1.08M.

Still a lot of money for what it was, largely original 60's floor plan, 1 bathroom, tiny rooms and a quick slap of paint and rented furniture to display it.

[think positive]

gees, thats P4S, i read it 5 times then saw your post!! they are buying the land Stu, id lay odds they will knock the house down.

the tiny 514sqm block in indented head cost us $165k in 2017, there is a couple of blocks across the road for sale, 1 larger, the rest smaller, starting from $500k. and then you have to build a house! in total ours owes us about $380k. and this is a not particularly well know tiny bayside town! I reckon the vacant block in our street which is 640sqm would be at least $800k, because there is no land left around here. we bought this is I think 2007ish for 93K.

[stui magpie]

Dunno what will happen. The place next door got bulldozed and a Mc Mansion built there, next door to that a younger couple bought it and are renovating, opposite me a woman bought it and moved in with her two early 20's sons.

The location is good, dead end street, 5 minute walk to shops, cafes and a train station.

Guess we'll see what happens.

[Skids]

I get that PTID and if I hadn't worked OT, repaired old furniture and done cashies, we wouldn't have been able to afford our mortgage in the 90's.
I work half as much as what I did back then.

It depends how hard someone WANTS to work. We have a young bloke here. He works in the store and his salary is around $120k. On his time off, he drives an Uber and earns another $100k a year doing that. He is paying off the house he lives in plus an investment property.

If someone sits on their hands and thinks the world owes them a living, of course, they'll get nowhere.

You get out what you put in.

[stui magpie]

^

There's a bit in that. I was renting my house for $100 a week in the late 80's. I got first offer when the owner decided to sell and even though it only cost $100k, that doubled my payments to $200 a week.

I relied on that I had a good job and my earning capacity was only going to increase as I got older, so suck it up and go without nice things for a few years.

What people pay to rent a house in the Melbourne suburbs these days, the same repayments could just about pay off a $400k mortgage.

The myth is that our generation had it easy because housing prices were low. We still had to work and save and go without to get there though. Life is about choices, you can't have everything.

[eddiesmith]

A $400k mortgage wouldn’t even buy you a house in regional Victoria these days though!