Our real estate ( houses) are getting cheaper in Australia? Let's take a home that now is priced $1000k AUD. One million dollars.
converting to USD it means $660k USD.
exchange rate 0.66
But a decade ago the same home may have been priced AUD 800k which means USD 880k
conversion ration 1.1
Summarizing., the Same home is now worth $220k less in USD currency.The conclusion could be such that not the case that houses./ real estate is gaining any value but our currency - Australian dollar is losing purchasing power rapidly !!!
As we live in Australia, and purchase in Australian dollars, its irrelevant what anything is worth in US dollars.
If a home is now worth a million dollars, 10 years ago it was worth a lot less.
All purchased with AUS $$$.
So in fact our dollar, and the real estate we purchase with it, has increased dramatically.
This is interesting. Although maybe the European cities had already reached unsustainable heights and had nowhere left to move.
I understand your point Macro, and it does hold for people who directly generate income from exporting goods/commodities priced in $US ............. but for the rest of us who buy imported consumer goods and use locally sourced goods/services
"Catch up?!
Isn't the definition of catching up that one gets behind but then finishes about level? I see neither of these cases in the graph.
Gotta remember, our wages are stagnant so it makes the ratio worse.
Yep you are right macro.
We have been robbed of 30% odd of our net worth on an international basis (take the TWI not the USD as a better cross economy proxy though) but like the frog in the hot water we think we are richer because our house prices have gone up in AUD terms.
We arent. We are going sideways at best and thats only if your house is in the right parts of sydbourne or melney.
If you factor in the eye watering debt levels many have taken on to "get on the property ladder" we have gone sideways and massively increased our economic risk profile. Thats so dumb as a nation its criminal.
Yeah our net worth on an international basis is less concerning to someone who just stays in oz and works in the short term but in the long run the drop in purchasing power affects nearly everything we buy (imports AND export competing goods and services eg the food we grow) and destroys our standard of living.
boil on frogs.
It's steered primarily by fiscal policy so even though it's not criminal ................ it should be. Criminal dumbness is a pretty good description I reckon Bara.
Hey Moby, I'm talking the fiscal policy associated with negative gearing allowing individuals to claim investment expenses against taxable income every year, instead of delaying it and making them rack up the expenses and claim them against the capital gain when they dispose of the investment. It let's more people into the real estate market sooner (it was supposed to help first home buyers) but unfortunately promotes speculation by high income earners looking to minimise their yearly tax bill and creates inflation of market values.
The effect of negative gearing diminishes as I type this. The combination of increasing rent and reduced interest rates have made many rental properties positively geared.
In Sydney at least most buyers are not investors. The high cost of real estate plus little possibility of capital gains means most buyers of residential property are owner occupiers.
^ Makes complete sense.
The thing is, it was NG that partly fuelled the major price rises in the past 20 years but we've only had low interest rates in the past five due to an economy surviving on life support, including stagnant wages. So do we keep a policy that encourages price rises but delivers little overall benefit to the economy other than increase stamp duty tax receipts (not that good hey) or ditch the policy because it's only leading to ill effects in good times?
I still see no sound economic reason for NG on established real estate. Makes sense for new development because it encourages investment, but makes no sense for established property. All it does with established property is fuel price rises when times are good, making housing far less affordable for average Australians and pitting cashed up investors against owner occupiers.
Agree to disagree perhaps?
All true Moby, in the current climate negative gearing may not have much impact but it's in the booms that it does the damage when people are motivated to reduce their tax bill by speculating on real estate and the values balloon out and household debt gets piled up to unsustainable levels for the slow times like we are experiencing now.
If income taxes were not so high perhaps taxpayers would not be seeking ways to reduce their taxable income. If one was just say paying 15 cents on the dollar tax, perhaps they could not be bothered to seek ways to reduce their taxable income.
When money is wasted chasing gold medals in Olympics, car racing, stadiums, art galleries & all this other stuff people should pay for out of their own pocket, plus wasteful spending in the name of defence, there must be a buck or two that can be saved in government spending & not taken from tax payers.
Macro, you need to come back to earth.
The cost of houses is the sum of material and labour cost plus outrageous building approval fees. There will be headworks contributions in a lot of cases as well.
The real increase in housing affordability is due to increasing land values.
Why don't you split your house off your farm on an acre or more, sell it and build your ultimate eco friendly home somewhere else on the farm??
If macro does subdivisions he will be required to give 66% of his land back as a green space .
In Sydney they are making my sister do this .
This is certainly a factor driving house prices up .
Actiomax, it's certainly a factor in not making as much profit, but at the end of the day you can only sell your land at the price the market is willing to pay and hope that it's well above the cost to actually develop it (which is actually a lot more than a lot of people might think)
Moby, people will always be looking for a way of reducing their tax bill no matter what they are already paying. Tax ix quite reasonable I reckon for what we get, as long as they don't waste it.
Unfortunately Moby, it's a necessary evil that you're going to need to get used to, it's how the system works