It seems HIA believes NSW is in a "diabolical" situation with housing, according to it's spokesman, Graham Wolfe, in a recent talk to investors. Due to static wages, increasing median prices over the past 7 yrs (mainly during the last boom) and decreasing affordability for first home owners, Graham expressed the opinion that Sydney may have hit a threshold or ceiling price from which it may take time to recover. He pointed to the decrease in new building activity (with NSW far behind compared to other states like QLD) and a lack of consumer confidence as reasons behind NSW's poor growth compared to other areas of Aust in recent years. Though 2008 is forecasted as a turnaround year, in terms of NSW housing growth, his belief is that the govt will need to intervene in some way to stimulate investor confidence again and get the looming public housing crisis under control. With land heavily taxed by levies and state taxes (an example he gave was $120K taxes on a $320K block of land) it's small wonder our median price of $524K is so high. However, with Sydney still remaining an international city with a continuing influx of highly skilled overseas migrants wanting to move here, he believes this will keep values growing over the long term, as Sydney is more than one city - subscribing to the Five Cities analogy. The increasing pop of 20K p/a have to live somewhere, after all, and his belief is that the state govt will face a dilemma as rents rise due to the squeeze on new housing. Naturally HIA have their own trumpet to blow, as their association is made up of builders, trade contractors and suppliers to the building industry, so it's in their best interests to get housing moving - especially new, but it was worthwhile listening regardless. Thanks to David (Perky) for organising the evening
Thanks Jacque What I found interesting was affordability. HIA believes that although Sydney will take off in 2008 (due to the lack of new housing being built and subsequent pent up demand that causes) - long term Sydney is going to become unaffordable to most of the the people who need to work there. So what will happen - the cheaper areas around 20-25km from the city will become the place to live - places such as Cabramatta for example. Anyway, thanks to Graham I have a copy of some of his presentation - msg me with your email address if you would like a copy....
When living in the UK a few years ago this is exactly what we saw. London was an extreme example, but the same thing happened in most of the big cities - the average worker (teachers, police, 9-5 office workers, etc) all had to live a long way from the city centre, with 1 or 2 hour commutes each way to work. The same thing will happen in Sydney (if it isn't already), and will happen in Melbourne and Brisbane (and Perth?) in the future. I think people need to understand the reality of supply and demand, and realise that being able to afford to buy a house in a prime location in a big city like Sydney is simply out of reach for the majority of the poulation. John.
I'm sure most realise this anyway, but then again we do live in an international city. Perhaps purchasers and investors need to lower their expectations in terms of the type of housing they can live in rather than the traditional house on a quarter of an acre. After all, you can still buy some pretty swanky units in Sydney close to the action for a similar price to houses in suburbs 20km away.
Hey I'm an HIA member !! I don't think its so much a vested interest in getting housing moving, as it is about providing some meaningful feedback about the state of the housing ( crisis) in Sydney. All in all, the points they mentioned are just symptomatic of the state of affairs of the greater economy and thus how it impacts on housing starts in NSW. There has to be a certain 'dollars and cents' logic to all this. If its no longer affordable to live in the city or in Sydney, then ppl move elsewhere surely ? I have met a lot of burnt out ex Sydney dwellers who have said they will never go back to live there. Something to do with 'quality of life' as they put it. I'm sure the cycle will eventually turn for the Sydney market, but how long will it take ? And in the meantime, why wait for the signs that it is going to start turning, when there are so many other property markets powering ahead ? I don't get Sydney... Kevin
Hi Kev It wasn't meant as a criticism of HIA at all- just an observation. After all, most associations have their own agenda when it comes down to it. I empathize with your view on Sydney- and I live here and wouldn't have it any other way! However, with Perth's median perilously close to ours, it won't only be Sydney that will soon be lumped into the unaffordable basket. NSW state govt has a lot to answer for, as well, especially given recent errors of judgement in introducing silly and unnecessary taxes (eg vendor exit stamp duty 2.25% a few yrs ago) that affected the market and sentiment generally negatively. I feel for this upcoming first home buyers generation- after all, it's no secret that unaffordability is the worst now that it has been since the early 80's and with the deregulation of the finance industry making it easy to borrow to the hilt on 105% mortgages, and higher portions of one's income being needed to afford even a basic home and land package. Perhaps, as some experts are predicting, the generations coming after us will be the first to view the Great Australian Dream in terms of rental leases instead of mortgages. Time will tell.
Yes I did understand where you were coming from J. I'm not here to defend the HIA ( we're new members anyway, and members only because we had to choose between MBA and HIA ) Lots of bodies put out snapshot reports. Matusik ( heavy Qld bias), HTW ( eastern seaboard bias) Westpac ( all the banks I guess) with their property reports, finance and broking houses, etc. I spose they all have an agenda, but it not always directly related to their core business. Maybe its just the way they maintain market prescence by the regular 'in your face' reports. The old Coca Cola system. And by doing regular presentations days, breakfasts, dinners, ( talkfests ) to appear professional and expert in their field. I doub't HIA with their report will be able to single handedly change the number of housing starts that will occur anywhere let alone NSW. But enough about HIA. I not only feel for this current and next generation of first homebuyers, but am going to do something about it starting with my kids. All the mistakes and good/bad experiences I have had with property have been condensed into a idea that will turn into a plan ( shortly) whereby each will have a trust which will start out with one property in it. Whether this eventually becomes the deposit for their future first occupied home or the basis of a property portfolio will be up to to them. Next step is to run property discussion groups to encourage other adults to start or keep investing so they in turn can help out themselves and their kids. I don't believe 105% mortgages or 50 yr loans are the answers. They are band aid solutions to try and cover up the underlying problem. Some basic financial/investing eduacation would be a good start. Easier to get the message across by leading by example with real people examples than by preaching and theorising. If implemented in a sensible and planned way, the great aussie dream is still possible, if not then it will be consigned to being just a myth with a lot of crash and burn victims along the way. NSW govt have an uneviable and daunting task before them. If you treated the state govt as a business then its hard to imagine how you can keep operating by running huge defecits, and having to prop up necessary spending by increasing borrowings or increasing revenues via taxes. Losers will always be the good folk and residents of NSW. Logic dictates this...not emotional sentiment. Whole countries have collapsed economically under the burden of debt, let alone states within countries. And the ultimate losers and sufferers are the citizens of the country. Its not sustainable in the long term surely ? If you were a corporate entity and you knowlingly knew you were running running huge losses, and therefore probably technically insolvent, then you would be fined and locked up ! The burden of unproductive debt must be overwhelming. Choices are always going to be limited with the focus being on how to minimise the hemmorage, vs if they were running surpluses and therefore the choices could be on where you allocate the money along with some prudent gearing. Enough for a sunday. KEvin
Agree with you 100% about financial education for our kids- long overdue and necessary in this consumerism-driven nation of ours. Are you planning on actually writing or designing some courses in this vein?
Its done. More a presentation (figured how to use powerpoint) that will be used at planned 'discussion' groups. 'Seminars' have been done to death. After setting the tone ( intro) it will be a hands on warts n all in the trenches practical discussion using real properties and real property investors and detailing their results on individual properties and overall. Guest speakers included in their respective fields ( Broker to set up the finance, FP provided they are sympathetic to property, accountant for structuring, full time property investor as a real example, town planner and developer to explain commerical and subdivisions) Topics so far include: The Basic Principles and Lessons of Wealth Defining Wealth Trading Time for Money Keys to Successful Investing Keys to Successful Property Investing Three Key Elements of Investing World Wealth Report of High Nett Wealth Individuals Financial Freedom Anyone Can Do It So Why Choose Property So Why Not Choose Property Different Levels of Investor Self Education I guess it will get refined as I go along.. Kevin
Well please keep us informed of dates, venues etc. It would be great to follow your progress on this.
Back in the days before I turned 40, haha. Prediction time - Sydney house prices to drop by 15 % over the next 6 years and bottoming out in 2028
I am not a mortgage broker, their views are probably more informed than mine. My guess would be an RBA cash rate between 2.5% and 3% in 2025, but who knows?
