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wherebee

An Australian Guessing Game

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So - one of the really odd things in Australia is that many times the price of a property is not shown in adverts or listings. For some reason, agents think that this forces people to contact them so they can show they the real crap the agent wants to push out the door. (not for me - we refused to look at anything where a price range was not shown up front).

Now, I happen to know what price this house

http://www.domain.com.au/35-sycamore-street-malvern-east-vic-3145-2012385846?sp=5

is looking for.

It is a virtually identical layout to the place we bought for 720,000 AUD a year ago. Commute time to the city 30 minutes (ours is 50).

Let see how many of you can get it right

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I don't know Melbourne at all, so my vote was just a guess (> 1.9M).

I was perusing Sydney auction results this morning and my jaw hit the floor when I saw a place that had sold for AU$3.4M. It's a new build on a 500 m2 patch of land on the road next to where we used to live. Nice area (Chiswick), the plot of land I believe sold for 700k in 2008. The house looks decent enough - a modern 5 bedder - but there is no water frontage or even sea view. By my reckoning that puts this area of Sydney higher than most parts of London in absolute terms (higher again relative to earnings), and this is by no means one of the most expensive parts of Sydney. I don't know if or how it is going to end there, but "ridiculous" or "insane" are not sufficient adjectives any more (apparently Sydney has increased 270% in the last 5 years).

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So - one of the really odd things in Australia is that many times the price of a property is not shown in adverts or listings. For some reason, agents think that this forces people to contact them so they can show they the real crap the agent wants to push out the door. (not for me - we refused to look at anything where a price range was not shown up front).

I guess scumballs are a universal constant wherever you are in the world .. even if the exact nature of the scumballiness or the area of endevour to which it is applied does vary. Out of interest do you have the same housebuilding problems in Australia as in the UK? if not then there would be good reason to hold at least a glimmer of hope some sort of sanity might be restored through official channels as it would indicate a basic understanding of the moral and ethical consequences of actions ... something clearly hidden behind self delusion of the worst sort in the UK. Useless investment properties designed to be held in offshore containers rather than lived in .. and priced well out of normal people's range blight the skyline while basic housing is not built to avoid blighting the skyline ... you couldn't make it up!

Edited by Kinky John

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but I thought the UKs problem was a lack of space? yet australia has ******ing loads of space? even if you just count the coastal bits its ******ing massive.

I turned down a good job in aussie cause when i checked the price of living there like london it just wasnt viable.

The years are gonna show a serious brain drain on these places, itll end up with 50 folk in it swapping houses to earn a living all convinced there houses are worth billions long after everyone else has pissed off somewhere else.

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but I thought the UKs problem was a lack of space? yet australia has ******ing loads of space? even if you just count the coastal bits its ******ing massive.

Whilst that is technically true the lack of space is created by arbitrary constraints on planning regulations. For example, London is the flatest major city in the world and is constrained by a generally hideous green belt. Granted the odd small section of the green belt is genuinely worth protecting, but the rest is just grade 1 listed storage units and abandonded warehouses.

The rest of the country is similar .. a succession of spineless governments unwilling to be accountable for their own actions has led to planning by no-decision ... those of you who are capable of actually doing things (or god forbid have done things), will realise that no decision is as much a decision as any other. The atrophy and self interested belief in the atrophy is astounding.

Edited by Kinky John

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London is the flatest[sic] major city in the world

Source?

Flatter than Copenhagen, Amsterdam, or St Petersburg, to take just a few Northern European examples?

Or indeed, in this thread, Melbourne.

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Whilst that is technically true the lack of space is created by arbitrary constraints on planning regulations. For example, London is the flatest major city in the world and is constrained by a generally hideous green belt. Granted the odd small section of the green belt is genuinely worth protecting, but the rest is just grade 1 listed storage units and abandonded warehouses.

The rest of the country is similar .. a succession of spineless governments unwilling to be accountable for their own actions has led to planning by no-decision ... those of you who are capable of actually doing things (or god forbid have done things), will realise that no decision is as much a decision as any other. The atrophy and self interested belief in the atrophy is astounding.

No that's straight out of the landowner lobbybook. Aus supply is constrained by building and windfall gain politics, not planning - just like here.

Builds track transactions: http://www.savills.co.uk/research_articles/141280/187750-0

~80% of applications are approved, and even an extra 20% every year wouldn't account for 'arbitrary constraints' impact: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/462195/Planning_Applications_April_to_June_2015.pdf

Exploring housing land supply myths (Town Planning Institute, 2007): http://www.rtpi.org.uk/media/7056/Opening-up-the-debate-June-2007.pdf

8 Lessons on Planning & Housing: http://www.fresheconomicthinking.com/2011/04/8-lessons-on-planning-and-housing.html

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I just bring it up becuase lack of land is always cited as a reason for high houseprices but we all know "housebuilding" land is rationed to keep the value up and to keep the plebs competing to spend there lifes labour on a house where the raw materials probably not worth as much as a years salary.

keep working, keep consuming, keep competing. Its just more laughable when you see australia becuase its ******ing massive and empty

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No that's straight out of the landowner lobbybook. Aus supply is constrained by building and windfall gain politics, not planning - just like here.

Builds track transactions: http://www.savills.co.uk/research_articles/141280/187750-0

~80% of applications are approved, and even an extra 20% every year wouldn't account for 'arbitrary constraints' impact: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/462195/Planning_Applications_April_to_June_2015.pdf

Exploring housing land supply myths (Town Planning Institute, 2007): http://www.rtpi.org.uk/media/7056/Opening-up-the-debate-June-2007.pdf

8 Lessons on Planning & Housing: http://www.fresheconomicthinking.com/2011/04/8-lessons-on-planning-and-housing.html

Just because 80% of planning applications are approved does in no way mean that there is no issue with land availability. People and companies only bother making planning applications when there is at least some reasonable chance of success. There is lots of land which is covered by so many restrictive policies, that it makes no sense to even contemplate making an application for development.

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Just because 80% of planning applications are approved does in no way mean that there is no issue with land availability. People and companies only bother making planning applications when there is at least some reasonable chance of success. There is lots of land which is covered by so many restrictive policies, that it makes no sense to even contemplate making an application for development.

What lots of land covered by so many restrictive policies? And how/why would hypothetically unrestricting it make land or housing cheaper?

In the context of approvals and existing permissioned land it's one thing that highlights the issues, among others linked. Why should more land be granted PP with consequent windfall gain to the owners rather than non-owners (prospective buyers, taxpayers generally) when so much already permissioned land sits un- or under-developed?

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I guessed 1.5m. I really have no idea just how crazy the market down there is. So wherebee, whats the answer? Is it really more crazy down there than in London!

Edited by renting til I die

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I guessed 1.5m. I really have no idea just how crazy the market down there is. So wherebee, whats the answer? Is it really more crazy down there than in London!

I mentioned on another thread my friends have just moved to Melbourne from Cambridge a few weeks ago.

They knew the housing market was crazy there but the rent they pay is almost double what they paid in England for a much smaller house.

As they are both doctors they do get paid a ridiculously high salary though so it is more affordable.

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So - one of the really odd things in Australia is that many times the price of a property is not shown in adverts or listings.

You know what they say, "If you need to ask the price, you can't afford it."

I went for 1.1-1.3m, classic 15x multiple but it's probaly too low.

Anyway, I'm just interested to see what happens to a market bid by foreigners when the currency has a big de-val as that's my base case for London.

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What lots of land covered by so many restrictive policies? And how/why would hypothetically unrestricting it make land or housing cheaper?

In the context of approvals and existing permissioned land it's one thing that highlights the issues, among others linked. Why should more land be granted PP with consequent windfall gain to the owners rather than non-owners (prospective buyers, taxpayers generally) when so much already permissioned land sits un- or under-developed?

It is not uncommon for land surrounding may of Britain's major towns and cities to be classified as Greenbelt, Areas of Outstanding Natural Beauty with conservation areas overlapping from smaller dispersed settlements. Many areas of land suitable for development could easily end up being classed as all Three, when in reality the parcels of land are often wasteland with corrugated iron sheds standing them. Even if they are more pleasant, they are often far removed from what most people would imagine constitutes unspoilt countryside. The more land that receives permission, the less of an increase it will obtain, as there will obviously be more choice for those buying land.

It is this land which would obviously be in highest demand as it is closest to where many people want to live. As has been said many times before, it is not specific numbers that matter, but where the planning permission is. You can buy a plot of land in Scotland for much less than you can buy a plot for just outside London. There is not much demand for the plot in Scotland relative to the plot near London though. If building land was in much greater supply near London, prices would likely reduce over time.

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It is not uncommon for land surrounding may of Britain's major towns and cities to be classified as Greenbelt, Areas of Outstanding Natural Beauty with conservation areas overlapping from smaller dispersed settlements. Many areas of land suitable for development could easily end up being classed as all Three, when in reality the parcels of land are often wasteland with corrugated iron sheds standing them. Even if they are more pleasant, they are often far removed from what most people would imagine constitutes unspoilt countryside. The more land that receives permission, the less of an increase it will obtain, as there will obviously be more choice for those buying land.

It is this land which would obviously be in highest demand as it is closest to where many people want to live. As has been said many times before, it is not specific numbers that matter, but where the planning permission is. You can buy a plot of land in Scotland for much less than you can buy a plot for just outside London. There is not much demand for the plot in Scotland relative to the plot near London though. If building land was in much greater supply near London, prices would likely reduce over time.

Sure, little of the country is built on but that doesn't explain how granting more PP would lower land prices and increase housebuilding rates. Do you have any evidence that 'the more land that receives planning permission, the less of an increase it will obtain' because I haven't found any and it runs counter to land and monopoly economics - where planning has little to zero effect on end pricing but a massive effect on owner capital gains.

Building more in the most expensive areas obviously wouldn't reduce prices because doing so increases rates of agglomeration and average wages and GDP per capita where demand is highest, which increases demand further - it's all captured in land values.

I've tried before on this with no response, but I'm still interested to know where I'm wrong because it's important. Housing supply is inelastic meaning supply rate in response to price changes is less than the rate of price change. The extent of inelasticity is greater when prices rise than when they fall, and supply is at a rate that matches the rate of sales of new housing. Therefore supply is offered only to intersect demand at the greatest possible price point, and expectations of higher price demand may advantage sellers by delaying supply for a higher future price (in the context of and explaining relative inelasticities). Land is a monopoly/cartel as derived income far greater than any holding or production costs, and the value of land/housing derives from the highest and best use with no incentive to compete on price.

* Why would a landowner forego option and incentive to maximise return and minimise risk by increasing supply beyond what optimises profit, whatever the planning?

* If government decides to relax planning regs because housing costs are becoming a contentious social issue, how would the land price gain arising from the relaxation translate into lower prices rather than greater profits for owners?

* If they change planning regs regardless, why wouldn't that result in even greater incentive by other landowners to delay construction, supply and sales further in the hope that relaxations will also offer them price uplift gains?

* Unless government intervenes by either explicitly saying there will be no planning law relaxation thus consigning any delay-hopes to the dustbin and perhaps bringing future supply to the present, or by the State building and supplying to undercut private landowners, how does any of the above hold as not correct? (Or in the case of price demand the government un-intervening their price props).

* Even assuming your planning/supply claim is correct, how would building loads more private housing where people can borrow and pay £X result in that supply being offered at <£X?

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What's the point of this thread? Is it a thinly disguised haven't I done well from HPI?

No not at all. It's a 'not just London / UK is broken in terms of housing, so it's not the simple UK supply/demand argument some shills try' thread.

I've said before - I wish I hadn't been forced to buy and being a landlord, but the game is so stacked in Oz that if I had refused, I would have been threatening my families long term security.

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Sorry for the delay in responding - timezones.

Anyway - so the answer is 1.5 million. Add to that legal fees, stamp duty, mortgage fees, plus the expected overbidding and you could be looking at a basic family house - not large - a fair commute from the job centre of Melbourne, costing 24x the average wage in that city. Even if you were on 150k (a significant salary in melbourne) you'd be over ten times pre-tax income.

when Australia blows (which could be next year, could be 25 years), it will be fantastically, amazingly huge and - I have no doubt whatsoever - will take down one or more of the Big 4 Banks balance sheets to a level where the government will have to step in. Printy Printy. Currency collapse.

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but I thought the UKs problem was a lack of space? yet australia has ******ing loads of space? even if you just count the coastal bits its ******ing massive.

I turned down a good job in aussie cause when i checked the price of living there like london it just wasnt viable.

The years are gonna show a serious brain drain on these places, itll end up with 50 folk in it swapping houses to earn a living all convinced there houses are worth billions long after everyone else has pissed off somewhere else.

Believe me when I tell you that people here and not just EA scum often say 'we are not making any more land you know' and they really do believe it. With a massively expanding population over the last 15 years or so the land bankers in bed with the state governments are making a massive meal out of drip feeding the market, A whole massive area with residential zoning will put maybe 20 - 50 bits of land onto the market at a time and people will flock to it in a frenzy before it disappears and then the next bit will come up for sale but then you have to wait 6-12 months for the land tiltes office to get off their a-holes. This is land on the very fringes of our cities, maybe 30-70kms out from Melbourne depending on which direction. A tiny 400sqm piece of scrub land with a new road and half a pavement installed will cost you a minimum of around $200k which is more than the cost of building a house. you also need 2 cars in order to do anything more than taking a crap. (and it takes a minimum of 10 years to put a new bus service to nowhere in)

As for higher density living closer to the city, well the established properties near a rail station and with a few trees around are London prices or thereabouts and the new build city flats are for foreigners to buy and hold only as the service fees and tiny space are a total deal breaker unless you have a minimum of $1mill for something decent and a good income to boot to keep up with the infinite costs of being in such a big building.

Just like London and much of the UK, Housing is not for people to live in, just for speculative investment and more importantly international money laundering of which Australia is one of the easiest countries in the world to do so. Also like the UK the entire media in all its shallow forms is full on house price mania being good for us all.

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Sorry for the delay in responding - timezones.

Anyway - so the answer is 1.5 million. Add to that legal fees, stamp duty, mortgage fees, plus the expected overbidding and you could be looking at a basic family house - not large - a fair commute from the job centre of Melbourne, costing 24x the average wage in that city. Even if you were on 150k (a significant salary in melbourne) you'd be over ten times pre-tax income.

when Australia blows (which could be next year, could be 25 years), it will be fantastically, amazingly huge and - I have no doubt whatsoever - will take down one or more of the Big 4 Banks balance sheets to a level where the government will have to step in. Printy Printy. Currency collapse.

Sounds like basically the same economics as greater london then?

34k average salary (eerily close to Melbourne) vs. 690k house price is 20x plus stamp and fees.

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Sounds like basically the same economics as greater london then?

34k average salary (eerily close to Melbourne) vs. 690k house price is 20x plus stamp and fees.

yes, and sydney/melbourne have been used as a capital haven via property by the chinese, just as London has by the russians/europeans/arabs.

however, I think one difference is that in Australia, the HPI meme is not even beginning to weaken, whereas in London I know more and more friends who see that more HPI is really really bad news for them and their family.

SO - in conclusion, I wanted to give an example of how we have a Aussie housing market where i) you can't see the prices transparently ii) prices in some cities are just as insane as SE UK and iii) Australia is royally fecked when this one blows.

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