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skomer

Australia - Most Unaffordable English Speaking Housing Market

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Nice article summing up the problems HPC is causing in Australia.... described this trend as Neo-Feudal :unsure: undermining Australian society...

Also that London more affordable than Geelong (Small city west of melbourne - Australian equivalent of a place like Bedford

, Northampton or Ipswich) - remarkable :blink:

http://theage.domain.com.au/melbourne-housing-now-severely-unaffordable-20110123-1a17l.html

"MELBOURNE has scored near the bottom of a global ranking of housing affordability, raising fears that runaway house price increases in recent years have made Australia a less equitable country.

The Demographia International Housing Affordability Survey, which ranked 325 markets by affordability, listed Melbourne as the world's 321st most affordable city, more reasonably priced than only Sydney and a handful of other locations.

London is more affordable than Geelong.

Advertisement: Story continues below The ratio of house prices to median yearly household income was 9 in Melbourne, versus 9.6 in Sydney - the second least affordable city in the world, in spot number 324, according to data produced by the US-New Zealand anti-regulation group Demographia.

The group put the median Melbourne house price at $565,000 with the median household income at $63,100.

Hong Kong came in last at number 325, with an income-house price ratio of 11.4, while Saginaw, in Michigan ranked No. 1, with a multiple of 1.6. Demographia considers markets with a median multiple of 3 or less "affordable", while those with 5.1 or more are considered "severely unaffordable". Australia's major markets were all considered "severely unaffordable''.

US-based geographer and author Joel Kotkin said that even after the housing bubble implosion in the US and Britain beginning in 2008, the ratio of home prices to incomes has grown in major cities such as Los Angeles, San Francisco, Boston, London, Toronto and Vancouver.

"Perhaps most remarkable has been the shift in Australia, once the exemplar of modestly priced, high-quality, middle-class housing, to now the most unaffordable housing market in the English-speaking world," he said. "The real issue is affordability and Australia has gone from a middle-class paradise in that regard into a more stratified society - just as we find in Britain and parts of the US."

Mr Kotkin, who has visited Australia extensively, described the trend as "neo-feudalism" that unravels the social achievement of spreading property ownership.

Demographia's report comes as Australian home prices are expected to show little growth in 2011, after double digit yearly growth as recently as 2010, driven by the slow pace of construction approvals, strong immigration, and an economy that hasn't experienced a recession in nearly two decades. House prices plateaued in mid-2010, amid interest rate rises and a weaker pace of sales. The national city dwelling price fell 0.2 per cent in November, to $466,000, according to RP Data-Rismark information. Six in 10 Australians live in major cities.

The third quarter 2010 rankings were compiled from national housing reports and estimates drawn from census data on incomes, with calculations made in local currency.

Sydney-based real estate research and investment group Rismark believes Australian homes will become more affordable through 2011, as incomes remain strong and house prices flatten out.

"As Australia's business investment and export boom drives strong household income growth at the same time as interest rates keep dwelling prices in check, we are likely to see a substantial improvement in residential real estate valuations," said Rismark joint managing director Christopher Joye.

By Rismark's calculations, the ratio of price to disposable household income ratio has dropped from 4.6 to 4.4 between the June and September quarters, as the median quarterly Australian home price fell from $418,000 to $405,000.

Rismark includes homes outside capital cities, apartments and attached units, and draws on income data that captures wealth generated from investments and multiple sources of revenue, when calculating house-price to income ratios.

Melbourne-based innovation research agency 2thinknow, which compares the social and commercial advantages of 289 cities worldwide, agreed with Demographia's assessment on Australia's affordability.

"Anything [with an income-house price ratio] above 5 is a high multiple - based on two incomes and the lifestyle flexibility to have children," director Christopher Hire said.

The impact means Australian cities receive low benchmarks in the world on 2thinknow's property prices in the Innovation Cities Index. Sydney ranks among the least affordable places, with a 0 out of 5 rating, on a par with San Francisco and Hong Kong, while Melbourne, Brisbane, Adelaide, and Hobart have a rating of 1. "High property prices mean investment that should be in productive infrastructure or capital is spent on property," he said, leaving the country unprepared when the mining boom ends.

Edited by skomer

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Nice article summing up the problems HPC is causing in Australia.... described this trend as Neo-Feudal :unsure: undermining Australian society...

"neo-feudalism"

Exactly! Excellent!

Very good article skomer, thanks for posting it.

And well done for zooming on the "neo-feudalism" concept. Brilliant.

Mr Kotkin, who has visited Australia extensively, described the trend as "neo-feudalism" that unravels the social achievement of spreading property ownership.

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.... described this trend as Neo-Feudal

Modern days highland clearances. Here in Britain the planning system blocks people access to even the most modest piece of land as building plots = for shelter, FGS.

"Neo-feudalism" is perfect to describe that.

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Modern days highland clearances. Here in Britain the planning system blocks people access to even the most modest piece of land as building plots = for shelter, FGS.

"Neo-feudalism" is perfect to describe that.

That, and there are no penalties to hogging land. In fact, the recent bubble meant it was profitable to hold back land out of use awaiting higher prices.

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I can just imagine this story if it were on the BBC

A newsreader such as Jane Hill : "There is some really good news for Australians today, their houses prices are the highest in the English speaking world"

Expert from failed mortgage broker : "This is what we could have in the UK if we saw a return to normal mortgage lending"

British Banking Association spokeswoman : "Our members will find that extra debt and resulting larger bonuses very attractive. They might leave the UK"

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That, and there are no penalties to hogging land. In fact, the recent bubble meant it was profitable to hold back land out of use awaiting higher prices.

We don't even have proper property tax, just a regressive and capped Council Tax.

And capital gains from one's main residence is tax free.

And the more restrictive a local planning system is, more expensive the local properties become. Perverse incentive or what? (Please see my sig., below.)

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At least with our piles of bricks you can assume it will still be standing by the end of the mortgage term.

Australian softwood and plasterboard boxes? Nope.

Ditto the US.

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We don't even have proper property tax, just a regressive and capped Council Tax.

And capital gains from one's main residence is tax free.

And the more restrictive a local planning system is, more expensive the local properties become. Perverse incentive or what? (Please see my sig., below.)

Provided you're not doing stuff like making kiddie porn or dumping nuclear waste in your backyard, I don't see the need to interfere with someone's use of land. What I do object to is 90% of the land being owned by a handful of oligarchs while we peons fight over the remaining 10%, productive activities taxed to the hilt without a viable means of exchange other than central bank usury.

I think the following quote on Victorian era economics is still highly relevant today:

This imperfect policy of non-intervention, or laissez-faire, led straight to a most hideous and dreadful economic exploitation; starvation wages, slum dwelling, killing hours, pauperism, coffin-ships, child-labour -- nothing like it had ever been seen in modern times....People began to say, perhaps naturally, if this is what State absentation comes to, let us have some State intervention.

But the State had intervened; that was the whole trouble. The State had established one monopoly, -- the landlord's monopoly of economic rent -- thereby shutting off great hordes of people from free access to the only source of human subsistence, and driving them into the factories to work for whatever Mr. Gradgrind and Mr. Bottles chose to give them. The land of England, while by no means nearly all actually occupied, was all legally occupied; and this State-created monopoly enabled landlords to satisfy their needs and desires with little exertion or none, but it also removed the land from competition with industry in the labour market, thus creating a huge, constant and exigent labour-surplus.

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I always thought the shortage of land and the fact that they are not making any more in the tiny island of OZ was the reason prices will always go up there.

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I always thought the shortage of land and the fact that they are not making any more in the tiny island of OZ was the reason prices will always go up there.

Sorry my apologies for the off-topic, let's get back to the Australian market.

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I always thought the shortage of land and the fact that they are not making any more in the tiny island of OZ was the reason prices will always go up there.

...takes five hours to fly Sydney to Perth ....population approx 22 million @ 2010......it's not the lack of space ...the high interest rates result in high exchange rate and strong Aussie Dollar ....FTBs get a part deposit ...it's Brown's boom except many times bigger..... :rolleyes:

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I love it when this report is released each year and the bears start giving each other high fives and salivating over their new pot of honey. Never mind that trying to do an analysis across countries when there is absolutely no reason that they should be comparable. In my opinion the only trend that I can spot in this report is that in general places that people don’t want to live are extremely affordable and places where people do want to live are extremely unaffordable.

The reports title is questionable as they don’t use demographics in their analysis. There are so many other important factors that have been ignored, of the top of my head they would include, disposable income, employment rate, cost of living, credit, council housing, tax incentives, tax rates, exchange rates, economics, number of occupants, home ownership rates, population growth and urbanisation.

There are far more meaningful surveys around than this a simple Google search will reveal all eg:

Rankings: House Price to Income Ratio, Price to Rent Ratio, Gross Rental Yield, Loan Affrodability Index, ...

http://www.numbeo.com/property-investment/rankings.jsp

Funny thing is there was a guy on here from OZ not so long ago who was talking about the jobs siutation and said that it was dire , he said it looked good the way they meddle with the figures but his daughter like many of her peers was scratching around earning pocket money after doing her uni . He said the figures did not add up to what the people especially the younger people were earning and the cost of property .

We all know what happens when the figures do not add up around property don't we !!

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Just so you are clear and don’t make a national assessment based on some posters daughters unemployability.

The numbers from the Australian Bureau of Statistics and the Reserve Bank of Australia clearly show that disposable income and real income after loan repayments is increasing. How else would rents be rising.

That hit a nerve

There are the Australian Bureau of Statistics and the posters daughter he did not say she was unemployable but if it makes you feel better and ver only to the happy sats that you want to beleive thats fine.

Maybe the truth is midway between the two, really don't give a f--k myself as the OZ property market has no bearing on me I only posted somthing for devilment and to see your reaction lol.

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The truth is that we are very close to full employment so anyone that is not working is either a prostitue, pimp, drug dealer or surfer.

I thought prostitution was legal in OZ if it is not a job what is it ?

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We don't even have proper property tax, just a regressive and capped Council Tax.

And capital gains from one's main residence is tax free.

And the more restrictive a local planning system is, more expensive the local properties become. Perverse incentive or what? (Please see my sig., below.)

So, you'd suggest that we should put capital gains tax on primary residences, giving the government yet another way to steal via inflation.

Capital gains tax is fine, if what you are taxing is capital gains, rather than what has usually been the case over the past century - being taxed for the government bebasing the currency.

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So, you'd suggest that we should put capital gains tax on primary residences, giving the government yet another way to steal via inflation.

Capital gains tax is fine, if what you are taxing is capital gains, rather than what has usually been the case over the past century - being taxed for the government bebasing the currency.

I agree completely that capital gains - over ANY asset - has to be charged only over real gain, above inflation, of course.

I also agree that any government attempt to charge it over nominal increases is theft, pure and simple.

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From the Demographica report - the 23 least affordable housing markets:

Country, City, income ratio, houseprice, household income

Australia Brisbane, QLD 6.6 $447,500 $67,900

Australia Bundaberg, QLD 6.6 $272,000 $41,500

Australia Mandurah, WA 6.6 $397,000 $60,200

U.S. San Jose, CA 6.7 $566,000 $85,000

U.K. Swindon & Wiltshire 6.9 £192,500 £27,700

Australia Newcastle-Maitland, VIC 7.0 $361,100 $51,800

Australia Adelaide, SA 7.1 $400,000 $56,400

Canada Victoria, BC 7.1 $430,000 $60,900

Australia Wollongong, VIC 7.2 $402,500 $55,600

U.K. London (Greater London Authority) 7.2 £300,000 £41,600

U.S. San Francisco-Oakland, CA 7.2 $538,100 $74,300

U.S. Santa Cruz, CA 7.2 $448,700 $61,900

Australia Geelong, VIC 7.4 $382,000 $51,500

U.K. Plymouth & Devon 7.5 £188,700 £25,300

Australia Gold Coast, QLD-NSW 7.7 $454,800 $58,900

Australia Sunshine Coast, QLD 8.4 $455,000 $54,200

U.S. Honolulu, HI 8.5 $576,600 $68,200

U.K. Bournemouth & Dorsett 8.8 £225,600 £25,600

Australia Melbourne, VIC 9.0 $565,000 $63,100

Australia Coff's Harbour, NSW 9.1 $369,900 $40,500

Canada Vancouver, BC 9.5 $602,000 $63,100

Australia Sydney, NSW 9.6 $634,300 $66,200

China Hong Kong 11.4 $2,580,000 $225,400

That's right, Bundaberg Qld, is pushing the top 20. For most of the world who has never had the displeasure of visiting, Bundaberg is a sh!thole in the middle of nowhere.

The Sunshine Coast market is interesting at present. Only house under about 390k are going under contract. Anything else is just sticking on the books. One place we have an eye on, in the most desirable street in my district, has dropped from offers over $500k to $445k, in the past 6 months. My theory is that the foreign money isn't pouring in in the way it used to, and now the market is driven by local buyers who just cannot afford $400k no matter how desirable the property.

Edited by Tiger Woods?

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Let’s not forget that we need to be fair about this. So if the taxman wants a cut of the gain via CGT then he must allow deductions on the costs ie mortgage payments and all other holding costs.

..that happens in the UK ...it's netted of against rent received and not taxable ....does that not apply in Australia...?...

Edited by South Lorne

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It does for invetement properties your principal place of residence if you sold it is not subject to capital gains or in Tigers case lossses nor are holding costs dedcutible.

...yes true ...BTLs not OOs ...see your point on OOs ....

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Lets look at the 10 most expwnsive cities in the world to live:

Singapore

Geneva

Frankfurt

Helsinki

Zurich

Oslo

Copenhagen

Paris

Osaka-Kobe

Tokyo

Good to see that the city of Bundaberg missed out, as did every other Australain city, neither is Hong Kong one of them so lots of upside left for the ozzie market.

http://hubpages.com/hub/Top-10-Most-Expensive-Cities-In-The-World

...based on 2008 data and as it says "although this will most likely change in line with regional economic changes and currency fluctuations".

...think of the Aussie Dollar circa end 2008 and now.....

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Speak for yourself.

I came out in 87 on the proceeds of a dole cheque and now have a Motza. Most of my colleagues faired similarly apart from a good taffy mate of mine who lives in a modern council house in Fortitude Valley.

Which, after taking into account the money you have earned from a successful career, means you have had a windfall, like so many others in the past 15 years. Well done!*

However, such large windfalls of real assets are never free. Someone has to pay somewhere.

(A Motza, for those non-antipodeans here, generally refers to a large sum of money won gambling!)

(*)past performance is no guarantee of future performance.

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Good point ,here is more recent listing post GFC. Bundaberg doesn't appear on it, neither does any ozzie cities, How come Hong Kong isn't on it, if it was the most unaffordable by a country mile wouldn't you expect it to make the list ?

1. Oslo

2. Zurich

3. Geneva

4. Tokyo

5. Copenhagen

6. New York

7. Stockholm

8. Toronto

9. Montreal

10. London

Read more: http://www.digitaljournal.com/article/297645#ixzz1Bu0bf6qV

...this is an update of the 2009 report as at Aug 2010 doing adjustments based on exchange rates and inflation without further data gathering ...the next data gather is 2012 ....but this was highlighted with this adjusted model

Auckland and Sydney climbed nearly 20 places in the rankings

owing to the dramatic appreciation of the New Zealand (NZD)

and Australian dollar (AUD), respectively, versus the US dollar

(32% / 30%) to join the top third of the world‘s most expen-

sive cities.

...and Sydney was in fact number 12 on the adjusted list ....I feel there has been too much data tweaking too take these figures too seriously but the trends are there.... :rolleyes:

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