Getting reforms in the public interest of all Australians can be difficult when vested interests have too much to lose.
The Sydney Morning Herald has today reported on figures published by the NSW Office of State Revenue showing a record $356.8 million was made from Stamp Duty receipts last month as the Sydney property market goes gang-busters. This is the highest monthly figure since records began in 2005-06.
The booming property market has done wonders for the NSW State Government’s September quarterly budget. The June budget had forecast a $374 million deficit, but a surplus of $239 million was actually achieved.
But booms can quickly turn into busts as then NSW Treasurer, Eric Roozendaal found out in 2008.
In November 2008, we reported the NSW government was forced to join the Federal government and give first home buyers free money to help plug a collapse in revenue:
With plunging house sales and dwindling prices in NSW, the NSW Government today announced it will throw in another $3,000 to first home owners building new dwellings under $750,000, effective next Tuesday. While this is better than the Federal Government’s increased grants across the board, it’s hard to see what $3,000 will do in a market with falling prices. Quite possibly that $3,000 will evaporate in less than a month.
But is the governments really concerned so much about construction workers? Why not prop up the ailing automotive or retails sectors as well? Why is there such a vested interest in housing?
The answer may be in the NSW’s mini budget. NSW had a projected surplus in the June [2008] budget of $268 million. However in the mini budget to be revealed on Tuesday, it will show a deficit of between $900 million and $1 billion. This will be the first deficit since 1997 and the biggest since 1992.
So how can this position change so fast? NSW Treasurer Eric Roozendaal said “The impact (of the global economic slowdown) on us is huge, in terms of a reduction in revenue from duties generated by land transfers”. It’s been reported stamp duty receipts were down by $270 million alone in the first three months of this financial year.
Looks like NSW Government income was as “safe as houses”.
Maybe removing stamp duty and introducing a broad based land tax could help the NSW state government with a more predictable and dependable revenue source? But why would you do that in a booming market?
» Sydney property boom delivers record stamp duty receipts to NSW’s coffers – The Sydney Morning Herald, 23rd November 2013.
» NSW Government to join Federal in encouraging young first home owners to take on large debts. – Who crashed the economy? 8th November 2008.
Here is another waste of taxpayers money to prop up the real estate bubble in Australia. The only country in the world to offer such a ludicious scheme. So much for “targeted” welfare payments for the “needy”.
http://www.moneyhelp.org.au/managing-bills-debt/home-loan-payments/mortgage-relief-scheme/
I just read in todays Sunday Telgraph even more propety bubble madness, for example a burn out house in Sydney’s west went for $640K. As the house is obviously uninhabitable, you will need another $150 to $250K, to build a house on it, but I suspect it’s some investor who probably will build a duplex on it and will rent them out.
Once again (and my apologies for sounding like a broken record player), how can people afford these insane prices, when job security is out the window, decreasing wages and rapidly rising unemployment? I realise much of this money is coming from cashed up overseas investors and people with large superannuation balances, but for the investment property to work, you need people with secure jobs to pay the rent. With the mounting job losses, where are the investors going to find people to live in them?
Everything across the economy, including taxpayer money, is being sacrificed at the alter of housing and all the associated vested interests.
Will be a humdinger of a collapse when it eventually comes and it will.
On another note, a close friend of mine told me that a friend of his who had only worked in the mines in WA for about a year, was made redundant without any notice (he was basically told to pack up his stuff, and handed his “pink slip”). He mentioned that job losses in the mining industry were mounting, and given Australia’s heavy reliance on mining, this is very worrying and has serious consequences for the Australian economy.
I don’t think a week goes past, where you here about some large corporation or government department intending to either lay off staff, or outsource them to some low cost labour country like China,India etc. A few days ago, I read the the oil company BP was intending to outsource 600 jobs to India, Toyota Australia has stated that if they can’t bring down the costs on producing cars in Australia, they will pull the plug on manufacturing cars on their Australian operation. Ford are going in 2016, and GM Holden are on shaky ground, and if the VF Commodore is a flop (so far sales are ok), then bye bye GM, and what’s left of the car industry in Australia.
My apologies for the alarmist tone of what I am saying, but you cannot deny that the Australian economy is in deep trouble, and the so called low unemployment rate of just under 6% is a joke, where the real figure is probably close to 13% (once you factor in underemployment, youth unemployment, and the hidden unemployed). The foundation for a strong economy is manufacturing (you know making things), but with that virtually wiped out, is Australia going to be a nation of professional landlords participating in a massive Ponzi scheme that does not produce anything of any real value?
@Master Yoda – Your observations are correct. I see news a couple hours ago, Newcrest will start chopping jobs at its Telfer Gold Mine next week to cut costs. It’s the same everywhere you look.
In the case of BP, management said Australia has become “uncompetitive”.
Last week the OECD released a report and warned house prices and labour costs leave our economy vulnerable:
House prices, labour costs leave economy vulnerable: OECD
Have a look at the table – Relative unit labour costs is up 54.1 percent in Australia since 2000, the highest in the OECD. “By contrast, labour costs have fallen 14.6 per cent in Germany, 20.4 per cent in the UK, 25.9 per cent in the US and 46.2 per cent in Japan.” Some of this is the high dollar, some the mining boom.
Australia certainly faces some challenges ahead. And I didn’t mention what the OECD says on our housing bubble and household debt levels…
Master Yoda, you ask how people can afford these insane prices. Anyone who bought years ago and saw their properties go up by factors of 10 or 20 times could easily have amassed property portfolios that are now worth millions. These are the people who can afford to buy, and likewise these are the people who are giving their kids big handouts and leg-ups into real estate. Those who “missed the boat” for whatever reason will never have this opportunity again. Most people who bought years ago could never afford to buy their own properties at today’s prices because as we all know they’ve been artificially pumped up way beyond wages and rental returns.
Then there are the new cashed-up immigrants flooding the cities specifically for the purpose of bidding up prices. And thirdly, we have the foreign investors, an issue that is far greater than we’ll probably ever know. The government deliberately keeps us in the dark and you can guess why.
And then you ask how they’ll find tenants. Another reason for the massive immigration policy – to keep a growing supply of tenants; and secondly, maintaining the housing bubble also keeps a steady supply of tenants; people that would ordinarily be buying but can’t afford to.
All policies are designed to keep the bubble going and growing. The many consequences of the housing bubble don’t matter one bit – both sides of government have made it very clear that they will do ANYTHING to keep the bubble aloft.
In your second post about unemployment – I would guess that the actual rate would be higher than the 13% you estimate. The amount of under-employment is probably grossly underestimated. And what about those who have simply stopped looking? There would be a huge number of older people who would be willing and able to work, in many cases part-time but cannot get a job, or can only get a job far below what they used to do or are capable of.
Not only that, there must be many thousands of people who have small businesses and are struggling, thwarted by taxes and red tape, competing with the multi-nationals and online retail – I’m sure many are finding it hard to keep their heads above water.
However, the bubble is the only thing of importance. You’re not allowed to call it a bubble though – there are daily articles in the media telling us there is no bubble, but whatever it is, it’s defying gravity as prices soar to unbelievably stupid heights. I will be cheering on a crash when it does finally happen, that is, if the government even allows it to happen.
I’m not so sure…
You all seem to be frustrated you didn’t get on the property ladder in time.
Eventually you’ll have to get a job you hate, spend 40 hours a week for the rest of your life to pay for a crappy house you didn’t want just like the rest of us.
Get over it. You’re going to be a slave. The sooner you submit the sooner you can start complaining about rates and capital gains tax.
I know a bloke who’s on 60k and he just bought a 450k house
Hardworking nose to the grindstone every day. That’s how you build a house. You don’t build it from doing a media and Asian studies degree. Or from playing in a band and being good at Xbox.
He borrowed 95%, put down he didn’t have kids(he’s got 2), and told them his wife had a job at kmart packing shelves(she doesn’t). They approved the loan. The land they got they now have chickens on with a home made greenhouse I helped him built with automatic retic and hey grow a TON of their own food. 80% of it. On a 450m2 block. They don’t go out to city cafés or restaurants or have Foxtel or computers and the Internet. He’s 22. That’s what I call real work and real reward.
You guys all sound pretty lazy no offence.
How corrupt and hypocritical Governments are cutting important social and medical programs for ‘lack of money’ but they have money to waste into propping up an already over bloated house price market. Maybe its time to punish politicians with the threat of a voter boycott?
DONT BUY NOW!!
Henry, some valid points but are you aware that there are people like your friend whose houses are now worth 60k (about 15-20 years after paying 450-500k for them) and almost impossible to sell? Not in Australia, but I’m just pointing out what is possible.
What your friend is doing is admirable, especially at that age, and I have full respect for that kind of commitment, but the odds are against him. We are facing declining populations all over the world. Priorities are shifting, and will continue to shift. More and more people are struggling compared to the golden era, and the gap will only widen further and further. As much as you can guarantee that submission is our only path to our masochistic fate, I am happy to sit here and guarantee that what you experienced (your house going from 100k to 600k etc) will not be happening in anyone’s lifetime, and even if it does, I’d still be happier renting. Landlords/owners don’t laugh forever you know… actually, most I’ve met have a pretty bitter look on their faces… one that makes you wanna ask them if everything is ok and if they need you to go along with them for therapy you’re always there for em.
You know in movies when there’s a guy who is running away from a collapsing bridge from the centre and it gets closer and closer to him. Your friend is that guy. He’s one of the last guys who will survive. Many weren’t fast enough and couldn’t outrun the bridge. Maybe he is safe, maybe he already made it to the other side, or maybe not yet. Should he fail, the consequences are dire. The fall will be far greater than anyone will be able to survive. I hope he has a loving dad who is willing to sell his house/s to save him.
It is not lazyness which is stopping many people from buying, it is the awareness that the bridge’s cables have been cut, coupled with the knowledge of how much of a fall it is to the bottom, which will result in a bloody death.
I’m not a religious guy, but all I can say is, May God Have Mercy (if there is ever a crash/aka correction in Australia). The only things that will hold, if anything holds, is the creme selection of properties, and sadly, there are far more many people who haven’t put their head on the line who own one (or ten) of those.
Crashes of this magnitude result in huge increases in divorce and suicide, which have their flow on effects too. Like I said, I hope there is never a crash.
@9. Jj, in reference to 7. Henry, his friend had to tell a porky or two to the bank to assist his case for a loan. I don’t think he’s in a safe zone.
I think your response says that too, but boy! You’re quite diplomatic.
Henry, those lazy people you’re refereing to here, that aren’t lazy at all. Instead, I really hope they have a corporate-trust, proprietry limited company, overseas account combination set up of some sort. So their not left picking the bill up when the government, with the ATO, go around with a battle axe to siphon peoples wealth. Due to not only the Governments stupidity, but also the stupidity of those who bit off so much, they can’t even chew.
That’s not cataclysmic prophecy, its’ happening now.
@Henry, you have made many valid points, but what happens if the bloke you know who borrowed $450K, loses his job, or interest rates go up?
Every week, you hear of mounting job losses, so whilst I commend your friend or acquaintance for buying a new home, let’s pray he doesn’t lose his job.
And it’s not laziness that stops a lot of people entering the property market, many of them have done the sums and have worked out that it’s too risky to borrow money on something they may never be able to pay back.
Don’t get me wrong if you can afford to enter the property market, and you can comfortably meet the repayments (allowing for a rise in interest rates etc), then go for it, at the end of the day, you need a roof over your head. It’s when people get in over their heads, is when entering the property market is not such a good idea.
@7 – Henry, I am as far from lazy as you can get. I work very hard, I’m very well paid, have a lovely lump of savings and I thoroughly enjoy my job.
What I’m not, however, is stupid, and I’m not remotely interested on getting on the property ladder thank you very much. It’s a mug’s game, pure and simple, totally corrupt and utterly indefensible.
If you have willingly submitted to being a debt-slave on an over-priced, wasting asset, then no offence, but you sound pretty dumb to me. Again, no offence.
It’s funny because if everyone did what Henry did, then the economy would crash… not to mention the national standard of living would diminish…
A 95% home loan is ridiculously risky… one only needs to hear of the horror stories of ‘negative equity’ (coming to a suburb near you) to know it’s not a good idea. Perhaps putting that much faith would be smart if you bought your property before THE BIGGEST period of economic growth this country has seen… but I’m in Gen Y, and those days are over.
I’m just confused who the baby boomers think they’re going to sell to when they downsize, cause I don’t know if this next generation of travel junkies, erratic career changers and childfree singles are going to have the capital in the next 10-15 years, even for the kind of deposits needed.
Housing affordability can be ignored for some time, but at the end of the day, average houses are for average people, and they will cost what the average person can afford in the end. NSW FHBs make up only 6.8% of new mortgages, that is cause for alarm.
At 22 years old …. borrowing 95 percent on a 450k house with wife two kids and one income. Thats like a noose around the neck with a very rocky stool under foot.
This is a tragic story. Even if this very impressionable lad keeps his head above water, he will have spent the best part of his 20s, 30s and maybe 40s in debt.
What happes next is the guy who sold him the house will simply wait at the sideline until interest rates climb up, energy supplies fail, china slow, etc,etc … then he buys it back for half the price.
This is how it had always worked poor henry.
And now we have a county with the very rich, the poor pretending to be rich and the poor.
Sell up and get out while you still have a chance…
@ henry.
Yep. Im lazy. I would rather have weekends to myself and rent than pay every spare dollar to the bank in interest. So some banker can call himself a philanthropist.
Oh hang on…..Because I dont have a massive mortgage I’ve been able to build real tangable wealth. I dont need anyones money to ‘buy’ a home. I can do it outright in cash.
Henry: I dont own a house or property. But I will tell you this: our accountant who sees quite a few things tells me and my wife (I was best man in their wedding so it is a no BS relationship) that she knows no-one in our financial position. And the reason is because we get to keep our income. We arent paying loans to banks making the bankers rich. We use our income to produce more income. Simples.
Albert Einstein said compound interest is the greatest invention of all time. It’s ironic that such a small percentage of the population can use compound interest to their advantage. Sad, really sad.
I have to say, that guy about working hard to own seems to know what’s going on.
A loan lasts 30 years so he’ll be debt free and in a house when he’s 52? 13 years before retirement.
He’s got all the food he can eat.
Because rates are low I’m guessing he would get a pretty nice house. Two stories.
I didn’t live in a two story house growing up and he’s got a greenhouse with food.
Sounds like the guy has an awesome place and if he ever loses his job he he can get any other job at minimum wage and still pay for the house. He’s set for life.
Someone commented that he’ll be in debt till he’s over 40… That’s the point of a 25-30 year loan. Has anyone here built a house? It’s hard and takes years. From what I’m reading you guys basically want a house and land package for free. Using other people’s money. And not having to contribute back to anyone for borrowing their money that they had to work for.
I’m guessing he doesn’t have a hecs debt. Saving 5% at 22 with a wife and kids. But he’s supplied security for his family. Forever. That’s pretty fkn good and all you guys seem to complain about is how he must be an idiot to have a family and a house and kids and to look after them. You guys are the ones who sound like idiots bagging him out. You sound pretty selfish and pretty stupid becuase now a 22yr old kid has more than you guys do. You might need to step back and check yourselves. He’ll be 40 and his kids will move out. He’ll probably have a higher wage and sink more into his house. He might even shave 10 years off repayments and be debt free if wage growth tracks inflation. Retire at 40… That sounds pretty smart… Why should he care about negative equity in a house he owns. He might even have a govenment job and never get fired in which case he’ll pay off his house and retire at 50. That’s a lot sooner than most. Especially uni graduates who come out 50k in debt at 22 with no savings or job.
^ 60k a year is not minimum wage.
Sam, is that you? You gave us a quote for 400 with 5% down a couple years back. Hope the kids are doing well.
@ Sam
“A loan lasts 30 years so he’ll be out of debt…”
You might want to research the definition of “compound interest”.
After 30 years, he”ll probably owe 2-3x the price he paid, not to mention the fact that he probably won’t be able to afford his repayments once the interest rates hit the moon.. And that is if he’s fortunate enough to keep his job!
Oh and I forgot, by that time, his property will probably be worth 50-70% less…
Just in time for those “lazy folk”, like myself.. to snap up a bargain or two or three.. FREEHOLD.
Check out http://www.larryhannigan.com and read an article called “What is a bank loan?”
Brace yourself… You won’t like what you read!
Society need to educate yourself and stop listening to all the propaganda. Take control of your own financial affairs..
@sam
Good luck with the kids moving out;)
@16. Sam, the only thing he has, right now, is a massive debt. That means, especially in his situation, he has nothing. I can say with certainty his mortgage will not be the only debt he will apply for.
Growing your own food will help a family of 4, but not having a coins worth for an internet connection, well, this guy isn’t going forward or getting ahead. Sure its’ his choice what he buys or doesn’t, but those coins are being allocated to help his mortgage payments. He is far from security.
Having to tell the bank a fib or two to help with your loan application, borrowing 95% of the loan, borrowing $450K on $60K, thats 7.5 times his salary… It’s a good thing he isn’t lazy, but then again the 8-ball is so far away from him, he isn’t even behind it yet.
I do wish him the best.
Hi All,
For well over five thousand years the price of the average house could be paid for with 500 ounces of silver. About five years worth of work.
Only in the last eighty years this measure is no longer the case…
Today in Australia it takes 60 years of work to pay for that house. Yes two signature’s on the 30-year loan…
prepper