Sydney house prices rising $1,000 per day

That's what channel 9 said. And we don't even have Chinese competing this year.

Why are house prices going up so fast?

C'mon, heaps of angry experts have opinions on this!

WTF is going to happen next?

www.google.com/amp/s/www.domain.com.au/news/house-prices-could-rise-17-per-cent-this-year-locking-some-first-home-hopefuls-out-anz-1038587/amp/

Bad for future generations. My children will be stuffed without help. No one really wins unless they downsize or switch to another asset that is currently underperforming . Higher prices means higher taxes as bracket creep kicks in . Land tax has to be the worst tax of all. Besides rates being low I cannot see any other reason why this is happening . Maybe retirees want the full pension so they switch all assets into having a "better home" so that they can still qualify for pension . Cash rates are useless so they are gambling on surviving on the pension ?

Low interest rates, and being rewarded in Australia for having debt. Plus over regulation that makes investment in commercial ventures less attractive. Our politicians will not change anything, because they all like to flip houses to, and they always seem to be entrenched in scandals unable to focus in the big stuff anyway. Meanwhile, 5km down the road, a small ghetto of homeless people have formed and are sleeping rough under a railway bridge. There is a homeless person that sleeps in the power distribution easement next to my block sometimes. I betting I will be seeing more homeless people around my outer suburb as time goes on. The greed and the government mismanagement must stop.

It could also be that this is how they prop up the banks. Cash is dead and if properties lose values and mortgages don't get paid the we could see a bank "bail in". There is no way the government can guarantee $250k per person per institution . In order to meet this obligation we would need to become Zimbabwe . Inflation will go through the the roof .
So if a bank "bails in" there is no need for the govt to guarantee . This has been snuck through over the last few years . A bank bail in saves the banks but will screw deposit holders . The political fallout would be untenable . The banks have the government by the kahunas

The benefits of property investment (when it's going up) are the opportunity to leverage . Without leverage equities are better. But with leverage property is way ahead . What I hate about property is that for most people it is "all or nothing " and transactional costs are huge . Liquidity is also pretty poor
. You have to hold for awhile. Land tax is also a nightmare . But the "tangible" side of property is what is also very attractive . Personally I can't play this game at the moment . I can't chase these crazy prices and I simply don't feel I have the time to go house hunting on weekends (when would an surf ???). Life is crazy

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jn1 said..
Low interest rates, and being rewarded in Australia for having debt. Plus over regulation that makes investment in commercial ventures less attractive. Our politicians will not change anything, because they all like to flip houses to, and they always seem to be entrenched in scandals unable to focus in the big stuff anyway. Meanwhile, 5km down the road, a small ghetto of homeless people have formed and are sleeping rough under a railway bridge. There is a homeless person that sleeps in the power distribution easement next to my block sometimes. I betting I will be seeing more homeless people around my outer suburb as time goes on. The greed and the government mismanagement must stop.

If you read a few of the articles about this, the current government has actually removed a few of the controls and wound back restrictions on lending after they were tightened after the royal commission. The strict rules that were meant to be there to protect people have been removed again! and it seems, very quietly.

At the moment, those with good jobs still, see the very low interest rates and the expectation that they will be low for a decent amount of time, so instead of telling the government that they have screwed them. they are getting in there and trying to buy when they can.

A young couple have moved in next door and they think its great, but I look at it and think that they will not be as happy if interest rates get back to 8% again. They are in good jobs and can't see the potential of problems in the future.

Our current government have been lucky that Covid came along. They were/we were in a recession before Covid and the spending they had to do in response to Covid has propped up the economy in a way that their Liberal belief system would not normally allow them to do.

Also, don't always believe in the headline of 'going up $1k a day'. As always it depends on the area, and the house or apartment. Sometimes when prices are good, good quality places become available which distorts the perception a bit. The crap places are still there, but not increasing at the same rate.

Its not only houses that have gone up. Cars have gone up. People have money to spend and no overseas holidays to waste it on.

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saltiest1 said..
Watch the arse fall out of it when inflation hits.

No. Prices rise when "inflation hits". That's why it's called inflation. Otherwise it would be called deflation.

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AUS1111 said..
No. Land tax is very effective at reducing intergenerational inequality by increasing the cost of property ownership (reducing prices) and making property more affordable for those who have income (young people who work) and less affordable for older people who have accumlated unearned and untaxed wealth simply by sitting on property. Likewise land tax when used as a replacement for stamp duty makes the marketplace more liquid by reducing frictional costs, so it's much easier to upsize, downsize, move closer to where the jobs are etc.

Nobody seriously disputes that land tax is preferable to stamp duty. The question is how do we transition to that arrangement in a way that is as fair as possible to everyone, particularly those who have made significant investment decision based on the current tax regime.

This is the hard part.

Do what any good government does and just add it on top. Solved!

What is possible solution for Sydney?
1.Increase inflation to cost and price doesn't matter much .
2.Increase earning for Sydney dwellers at the cost of the rest of the country. Now poor Sydney citizens are disadvantaged and need to pay more of their income that other parts of the country. Obviously Canberra should now introduce pay rise for all their citizens and get the money from Hobart and Adelaide where the life is so cheap.

Obviously there is another utopian option. Sice you could buy brand new acreage 4 bedroom house near Brisbane at $325,000, means that building new isn't much more expensive that always was. Government could release some land for residential construction and market force will take care for the rest ( means: when you have high price and huge demand- then market economy will spring and deliver. But in highly regulated economy like ours market forces are restricted bty land supply to keep prices high.

Statistically population density for Australia is 3 person per 1 km2. For Hong Kong the number is 6500 people per same square km.But we still lack space to build new houses ! or people unwilling to move a bit?

If you listen to channel 9 Sydney unit prices are dropping at the same time & are being sold at a loss .
This COVID & working from home now means people want bigger living spaces and a yard for the kids to play in & now we have just lost a lot of houses due to the flooding

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Macroscien said..

Hey Macro,

The chart shows average house price vs annual salary / pay ??

But doesn't take into account interest rates ? I don't know but I recon if you added interest rates to that graph they would be almost the inverse of the lines ?

Wouldn't a more interesting and relevant chart be the % of monthly income required to repay a mortgage ??

I mean if interest rates are low then people can generally afford bigger mortgages, pushing up the average house price, but not making housing particularly "less affordable".

I know when I was younger (in the good old days when Werther's Orginals were just Werthers) you wouldn't be able to get a mortgage more than 3.5x your annual salary.

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AUS1111 said..

Gboots said..
Land tax has to be the worst tax of all.

No. Land tax is very effective at reducing intergenerational inequality by increasing the cost of property ownership (reducing prices) and making property more affordable for those who have income (young people who work) and less affordable for older people who have accumlated unearned and untaxed wealth simply by sitting on property. Likewise land tax when used as a replacement for stamp duty makes the marketplace more liquid by reducing frictional costs, so it's much easier to upsize, downsize, move closer to where the jobs are etc.

Nobody seriously disputes that land tax is preferable to stamp duty. The question is how do we transition to that arrangement in a way that is as fair as possible to everyone, particularly those who have made significant investment decision based on the current tax regime.

This is the hard part.

But at the moment people pay both land tax and stamp duty . Even if you don't earn income you pay land tax . The new proposed NSW land tax regime has grey areas . Eg. if someone dies and it transfers to other owner will land tax be charged even if Stanl Duties have already been paid ? Will than be deemed a new transaction ?

I think we are deviating away from the original question, which had a very simple answer;

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myscreenname said..
....Why are house prices going up so fast?....

House prices are going up so fast because smart people have hyped bitcoin up so much they can now sell nothing at a stupid price and take other peoples cash to buy investment properties.

They are now doing this. Anyone who hasn't already cashed out and bought property has missed the boat. These people are probably sooking at this. Upset they didn't get in earlier. I am not here to explain it to them.

Property is here to stay. Blocks and mortar are the future. If you ain't in now then you are at the back of the brickchain. Not many crumbs on to byte back there.

But don't panic, not all is lost. For $50K I can sell you a street address I mined. It has 15 zeros in front of the number, so it is worth loads. It is 0000000000000007 Pleasant Avenue, Sydney. Not the house, or land, or title, or occupancy, or anything worth anything - just a copy of the street address on a floppy disc.

Oh, its just gone up to $60k. Imagine if you buy it now, it might be worth $70k tomorrow.

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Gboots said..

But at the moment people pay both land tax and stamp duty . Even if you don't earn income you pay land tax . The new proposed NSW land tax regime has grey areas . Eg. if someone dies and it transfers to other owner will land tax be charged even if Stanl Duties have already been paid ? Will than be deemed a new transaction ?

If you built the system from scratch you wouldn't have stamp duty, you'd have a land tax and that would be much better. That's easy.

The fact is that we have a legacy system and getting from where we are to where we should be is politically very difficult, and the concern you raise is very valid. Still we should work towards moving away from stamp duty and towards a land tax. How to do it equitably is the question.

It just doesn't strike me as very fair that if you're born without rich parents, and all the land is already owned by someone, that you should have pay 20 years salary for something someone else bought with 3 years salary, just because they got in first.

If you want to enjoy a prime slice of harbourfront real estate you should have to continually compensate society for that, not just get richer and richer, tax free, because you or your parents paid F-all for it decades ago. Or am I being unreasonable?

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myscreenname said..
Sydney property is a Ponzi and a scam. Don't force your grandchildren to live a miserable life on the wall in Darlo to scrape an existence.

There are other places in Australia where life is quite enjoyable, real estate affordable and income opportunities abound.
Open your eyes.

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AUS1111 said..

It just doesn't strike me as very fair that if you're born without rich parents, and all the land is already owned by someone, that you should have pay 20 years salary for something someone else bought with 3 years salary, just because they got in first.

If you want to enjoy a prime slice of harbourfront real estate you should have to continually compensate society for that, not just get richer and richer, tax free, because you or your parents paid F-all for it decades ago. Or am I being unreasonable?

The bit I disagree with is if 'you' or someone else lives in a house, raises their kids, and generally lives most of their life there, why should they then find they have a huge tax bill because the value of their house has gone up. Not something that they can really sell, and not something they want to move from, but someone somewhere else deems it so expensive that they owe society a tax on it.

When I think of this, I think of my parents. They struggled to buy their house from the housing commission, paid it off, and I expect them to live there as long as they can. Should they be penalized because its now worth ten times what they paid for it? I would hope not.

I also think this should apply to 'rich people'. If they spent the last 50 years in Vaucluse, why should they be ejected now because its so much more expensive? Maybe tax them at the next transfer as a death duty?

I think the government has now woken up to the fact that property transactions can make them more money and they are looking at how to increase that slice of the pie. What was stamp duty on houses originally for anyway? A nominal tax on property transfers, but now it seems it its a grab for more cash.

In NSW at least, there is land tax on housing and you get an exemption for your PPoR. Sounds fair to me. Investors pay land tax, (and initially stamp duty) and the state government get their yearly dividend in your investment. From where I sat it was a pretty big slice of the pie too and not aligned with the income potential of the property but the land value which can be a very different thing. Last time I think I was paying $4000 a year on land tax that was only earning $30,000 a year, and when you took rates and interest rates into the calculations the returns were minimal.

I have not looked at it, but I think land tax in NSW is based on the land value, so investors in apartments pay a very small amount as their share of the land is small. I think this should be changed if the government is set on taxing 'property'.