Australia has been one of the best performing property markets in the world in recent years, but is it now over-priced?
If you listen to the media, they will tell you that it is. Eight out of ten economists will tell you that it is. The man in the street who has never bought an investment property will tell you that it is.
They all know shit about real estate investing. So what I'm going to do now is go really heavy-duty on you. It took me 4 hours of research and 2 hours to write this bloody article. I didn't go to bed until 3am in the morning.
No, I'm not a slow researcher or writer. I just had to think this through.
This article will take you 7 minutes to read. But you might need to read it a couple of times to actually get it… After all, it took me 7 HOURS and a lifetime of investment experience to piece together.
Let's get cracking… Here's how all of this happened.
Someone sent me a link to the Economist Magazine the other day. They have an interactive tool up on the website that pulls together a bunch of housing data from a bunch of different countries and lays it out in these nifty graphs.
Aint technology something.
Anyway, I thought it’d be interesting to take a look, and recap how the Australian property market is doing on an international scale. Particularly now that we hear all this talk of a ‘bubble’ brewing and unaffordable housing. Is that really what’s going down?
So first up, this chart here compares house prices for a bunch of countries, setting 2000 as a common base. It’s a mess of spaghetti noodles so let me break it down for you.
First up, let’s look at the underperforming countries – strip out the ones that haven’t boomed in recent years.
What you’re left with then is the US, Ireland and Japan.
Japanese house prices peaked sometime back around 1991, and have been on a downward run since. They’ve pretty much halved in value since the peak… I don’t pretend to understand the Japanese economy, or why it can’t get going again. I don’t think anyone really does. Let’s just lob that one into the too hard basket.
Singapore is the flat purple line. It’s had some wild rides, with a boom and bust in the 90s, and again around the GFC. These days its tracking slow and steady.
The other two countries are our classic ‘bust’ markets. The US and Ireland. Both markets are still in the process of picking themselves up off the floor.
The important thing to note here is that US house prices peaked in the middle of 2006 – a full year before the GFC. You hear a lot of people say that it was the GFC that caused the bust in US property, but the causality runs the other way. It was falling house prices, which exposed a whole bunch of dodgy lending practices, that put the financial system under such pressure.
And what caused the falling prices? Simple supply and demand. The US had gone on a building binge and had simply built too many homes. That glut in the market eventually put downward pressure on prices.
It’s kind of a similar story in Ireland. They’d also gone a bit crazy with the bricks and mortar. That was fine until the GFC put a freeze on credit, and a lot of people were caught with their pants down. Without credit fuelling growth, it came back to simple supply and demand, and when it did, it saw that there was a massive glut in Ireland too. Prices started falling (and again, thanks to some dodgy bank lending practices) got a bit of a run on.
Anyway, the take-home message for me is that a glut of housing is the most common trigger of a housing bust. I take comfort in that thought because I know there’s no glut here. In fact, I know we have a major shortage, so I’m not worried about a price collapse.
Anyway, if we strip out the under-performing countries instead, we’re left with a peloton made up of Australia, NZ, Canada, the UK and Hong Kong (and if we want to be picky and focus on this kind of arbitrary indexing point, Australia is winning. Yay.).
We can see that there’s not all that much separating the pack here, though Hong Kong has seen particularly rapid growth in recent years. Why?
China. Chinese hunger for foreign property hit Hong Kong first, before it started flowing out to the rest of the developed world, including Australia.
So if we’re winning here, does that mean Australia is expensive?
Not exactly. The Economist also provides ‘real’ house prices – house prices adjusted for inflation. This gives you a sense of the true value of property.
If we look at this group through the real prices lens, we can see that three countries – Australia, Britain and New Zealand, are still below their most recent peaks.
Three countries are still heading north – Hong Kong and Canada in particular, and to a lesser extent China.
So it seems to me that if you were worried about bubbles, China and Hong Kong would be your first port of call. But what do we know about these markets? Well, we know they suffer from under-supply (I’ve written about Canada, and Hong Kong is an island…), and they’re getting a big kick from China.
Just like we are.
Seems to me like there’s good reason for the recent price increases.
The Economist also tries to get a feel for affordability, by comparing prices against incomes and against rents.
On the incomes measure, we’re about bottom of the leader group, but there’s not a whole lot in it.
But on the rents measure, we’re quite a way off the pace. We’ve seen much starker divergences from rent in Hong Kong, Canada and New Zealand.
So is the Australian market expensive? Well, these measures aren’t perfect, and have no way of accounting for what’s happening with interest rates and mortgage serviceability. Never-the-less, it seems that we’re in good company, and actually doing better than a lot of places.
At the end of the day, it’s worth remember that the stellar markets of recent years, including Australia, have all been driven by fundamental dynamics. Supply is constrained, and demand (thanks to low interest rates and China) is spiking.
In that scenario, rising prices are exactly what you’d expect to see.
Sue says
Rising prices may be the way real estate is heading, but how is this sustainable when the average wage hasn’t kept pace with the CPI? My wage is the same rate per hour as it was in 1995, whereas house prices have risen in comparison. Why are rates of mortgage default rising? Without wage parity relative to house price rises there is an obvious lack of sustainability looking forward. Pricing is driven by the banks who are the winners in a housing bubble which is fundamentally why for our smaller population compared to other countries our banks are the wealthiest.
Jason says
Good point but never forget the true fact that China will collapse eventually. When that happens where will Australian property market go, that’s the real question.
Phil says
This may help with generating some more money to be able to afford the rise prices in Real Estate.
Get paid to post pics…
https://www.leafit.biz/PhilBrown
jarrod says
The house prices are being pushed up due to, foriegn investment, short supply and high demand, low interest rates, government grants both stamp duty and first home owners and local investment.
wages havent rises because retail and small business is doing it harder than ever before and simply arnt making the profits needed to pay higher wages, if anything they are looking to cut back lowering their overheads ie wages staff etc and putting an end to bonuses and perks due to market conditions.
we are in the ideal invester market buying, building, selling and things alike.
those who’s borrowing capacity that isnt going up are going to have to make trade offs location vs block and house size as prices rises and blocks shrink.
this is just a reality and will become the normal and accepted in the years to come, thats sydney for you.
Graeme says
I watched Dick Smith talk at the Australian Press Club this week and he said that the biggest single problem that we have here in Australia is over population due mainly to immigration of net 400,000 people a year. He said he is not anti immigration but the facts are that we cannot responsibly sustain growth of 400,000 people a year here in Australia. We do not have the ability to maintain infrastructure and housing for that many people and that we should not be trying to grow our population at such a huge pace! We had 19 million people in Australia in 2000 and in just 14 years we have increased that by 25% to 23 million. At this rate we are well on our way to having 30 million people by 2030. Where will they all live and where will they all want to buy? I’m sure that the biggest majority of them want to live in Sydney no matter what the price!
pradeep says
Hi Mate,
I think best place for foreign investment is in India compared to any other country, again there is need based growth there and smaller investment needed compared to doing it in Australia.
kind Regards
pradeep
Frankie says
Sue: If my wage had been @ the same rate over the last 20 years, I would be looking at other opportunities within a larger organisation (Possibly with a supporting Union or Enterprise Agreement). As the saying goes, “The squeaky wheel gets the oil” & some companies only make change when push comes to shove. Time to give them some stick.
Troy D says
Sue: I’d agree with Frankie here, if your wage hasn’t moved since 95, I would be looking for another job. Companies I have worked for that fail to provide at least a 2 to 4% wage increase due to thier supposive wage freeze due to rough times need a wake up call, I’ve done it a few times.
In terms of Australia being over priced? you can run all the graphs you like but IT IS over priced. The fact is as a first home buyer your only hope is a new development about 45mins from the city.
I blame overseas investors as well as homes being advertised by dodgy real estates at prices 100-120k below reserve. I think unless your a citizen, you should not be able to own a property in australia. You can rent like everyone else. All people who are not citizens will need to sell their properties within 12 months. Then you will start to see housing drop to a price that’s affordable for the average home buyer.
Until then, most people will rent. Even on a combined wage of over 200k a year you would find paying off $8k a month for 30 years unachievable for a nice house close to the city.
Danny says
So let me ask you Troy D, if you were selling your home at auction and the highest bidder was an overseas buyer. Would you go ahead and STOP the auction and advise this bidder to stop bidding on your home because he/she is causing your property to go over value. GET real about what your writing and put your feet in both shoes, buyer and seller.
How can any real estate agent be held accountable to a bidder who wants a property no matter what and keeps bidding against other bidders to find the price going over it’s reserve, but they want it and the bidding keeps going and going up. Do you want the real estate agent to stop the bidding and tell all the bidders that because your going over the price guide we have set we must stop the bidding. Imagine if this is your home being sold. You would be waving your arms at the agent to just let it keep going up. Again put your feet in both shoes…………………Property is all about supply & demand.
Troy D says
Danny, obviously as a seller you want to sell it to whoever is going to pay the most. But the government needs to step in..
It’s like if Australians found that growth in percentage was higher in Vietnam or Thailand and came in to buy up all the property.. The locals couldn’t afford anything to what we could pay but their government has measures in place to protect that.. Ours doesn’t. Do you get my point?
Jason says
Your point is valid but all the banks in Australia will go bankrupt because the market is not a little overpriced. Will Australia accept that?
Ken says
Troy D., Mate, take me to the planet you live on. If I had a combined income of $200,000 pa, I wouldn’t be worrying about anything. For most people, paying $8,000.00 pm for a house, at any time, would be living in Dreamland. Well said Danny. But good luck to you and well done if you can achieve this.
Stephen mullan says
Hi Jon
Your article is interesting but I feel way off the mark,I have been to 20plus property conferences in the last 2 years and have been informed by them all Sydney is way overpriced but will continue to rise and rents are seriously high therefore I don’t know what your basing this information.Im from Ireland and lived in the Uk and yes they did have a boom and a bust however,even at the peak in 1994/95 they were no where near the prices in Sydney,I don’t know who told you otherwise with all that research you say you’ve done,I have lived in all 3 and apAustralia is expensive in property period.
Eileen says
Good point Danny! Troy, I agree….. real estate is overpriced in Sydney for sure! Frankie, you beat me to it! Pradeep, I don’t know the building standards or markets in India but I don’t doubt you may have a point there.
Stephen, I have been to Ireland many times and have watched the economy in good times and bad. I recall asking relatives where all the money came from when they were building new houses (or extending the ones they had). It was obvious to me that something was going on back in 1997. (the party had already begun).
I don’t think Ireland is a great country to compare with as the hangover is still being felt and the economy has only just paid back the EU for the massive loans.
My husband is into vintage bikes and he’s often asked what a particular bike might be worth. His answer’s always the same………..a bike’s worth what you can get for it! It’s the same answer for houses, you can blame many things for the price of real estate in Australia (Sydney in particular) but a house can only be sold if someone’s willing to pay the asking price, or near offer.
Until someone says that’s too much, I’m not interested ……………….and a succession of people follow suit, the price of property will continue to rise. You can’t blame banks or FHOG or anything else. I bought a bank reposession property in February and it was below the price reached at auction, (where it was withdrawn due to being below the reserve price). it was re-listed at a lower price and I was the first to see it. All the evidence suggests that it’s the buyers who are prepared to offer the asking price and there’s not a damn thing anyone can do about it!
Stephen mullan says
Eileen I take your point,Jon uses the Irish example himself of economiccrisis,indeed use almost any European country to visualise similar values of economic bust.Your correct,Sydney is overpriced,however it will continue to be overpriced until enough is enough,that has not occurred in the last 20 years and present circumstances with masses of immigration influx is unlikely to change that,Sydney will be dominated by Asians in the next 10 years,they are pushing prices up as they pay over the asking privacy to own property.
Uk again still in recovery,do we compare this to Sydney?
If bust occurs in Sydney,it will be as significant as that in the Uk as prices I’m told by various agents are on average 65% overpriced here,surely the sky is the limit?
Alan says
Hi Jon,
Interesting view and use of statistics and I’m sure very close to the mark on a number of conclusions. I have a similar view to a previous reader in that I’ve lived in the UK (Wales and England) and now in Melbourne. In terms of affordability when I first arrived in Melbourne (1987), I was told by many people that it was a one-way ticket with regards property – what they meant was that the gap between the UK and Australian prices was significant. They were right, we put all the money we had from our sale in England into a house here and were very happy with the step-up in “living standards”. We’ve returned to the UK a number of times and up until around the time of the GFC we realised we could not afford to sell our house here and purchase anything near it’s equivalent back in the UK. However, having just returned from the UK last month, for the first time in over 25 years I can say that we could now sell our property here and purchase an equivalent or even better property in our old town from a sale here.
This is the first time this has been possible so must say something about the cost of housing in Austrlia (also taking into account that the current exchange rate is similar to 1987)
James Glanvill says
Economics 101 When supply is short and demand is high, prices go up! Simples!
I have a mate who told me in 2006 that he was waiting for prices in Montmorency to drop, then he will buy a property there, to live in. I told him to buy it now, as prices were going up, not down. He didn’t do it and prices have more than doubled since. When I reminded him of this recently, he did what all ‘Property Experts’ do……….he denied ever saying it!!
Jason says
Unfortunately supply and demand does not really work in today’s market. Speculation is the real factor to determine the price but the textbook still hasn’t changed anything to reflect that.
Alvin Purple says
What’s a house worth? Is it too expensive? Or is it too cheap? None of that. So-called “property experts” may argue for weeks when the solution is just so simple. A property is neither too cheap nor too expensive. It is worth exactly what a buyer is prepared to pay for it at any given time. No more, no less. There is little need for sworn valuers, real estate agents and all the other “experts” in this scenario. The market, and the market alone will determine the true value of any property at any given time. And, remember, the market is always right, even when it’s wrong.
stan says
I have read the replies with interest. Although I have to say with regard to Alan’s reply,it just depends where you buy in England. I sold my house near London 23 years ago for 320k sterling and saw it recently for over 2.3 million ! That is growth. In Brisbane I bought for 350k and today worth is about 1.3M so dollar for dollar growth,London far outstrips Brisbane. Sydney CBD maybe not. Brisbane over North England yes. So in conclusion we shouldn’t say Australia,England China etc. We must be specific on areas i.e London,SydneyCBD Sydney west and so on
Stephen says
Reading the various comments here,there is no doubt about a few things
1)the economy here is strong and house prices are unprecedented
2)the weather is fabulous and a big attraction
3)The quality of life is high however you do pay very well for that
4)Huge influx of various immigration cultures have pushed up property demand,Asians more specifically
5)there will be no property crash for the next few years as Australians and immigrants are obsessed with property hence massive demand,often very poor quality housing Still is grabbed by both hands
6)By 2018 Sydney will be the million dollar city,average house price,currently $825k
7)By 2016 there will be no affordable property in Sydney for the average worker,survival of the fittest will prevail
Sydney is the 2nd most expensive city on the planet,those that believe property is reasonably priced have not watched the news on listened to an economist.
Eileen says
Stephen, as an ex pommie who has lived with rain, snow and sleet for nearly 24 years, I would rather pay double to live in Sydney than any part of the UK! No wonder people are breaking their necks to get here!
I understand that while there are many asian buyers out there, they are still driving a hard bargain with purchase prices. I read today that there are currently plans to build 425 units in Liverpool. If more councils did this, it would take the pressure off as far as supply and demand is concerned.
If you believe the forecasts, why doesn’t everyone reading this buy another property? It’s safer than the stockmarket! My daughter just got a valuation for her property, (for CGT). In just two years she’s made $50k……it’s better than money in the bank!
I’m sitting here wondering where the MOST expensive city in the world is? lol
Stephen says
Well Eileen you are correct about paying at least double for a Sydney property than anywhere else in England,this is what Jon commenced the blog about,saying its not expensive and he has made money like a lot of people here in Australia but speaks like a politician who is clueless about the facts as most comments here disagree with his research.
No doubts you are happy to be here compared to England,I’m from Northern Ireland so appreciate your comments.
I am currently searching for an investment property in Sydney and cannot find anything below a million dollars that my dog would live in.0,now that’s what I call expensive,maybe we all have different ideas of what expensive is,personally I believe if your paying a million bucks for a respectable family home,the titanic must hit an iceberg at some stage!
Alistair Brownell says
If you can’t find anything under a million, you either aren’t trying hard enough or are looking in the wrong suburbs. Simple fact is, prices are going to continue to rise. Construction costs will continue to rise as more and more expensive design requirements are added to the building codes and more and more expensive OH&S rules are imposed on all parts of the construction industry and it’s supply chain not to mention ever rising manufacturing costs. As new houses on the outskirts of every city become bigger and more expensive per square metre on smaller, more expensive blocks, new housing places less downward pressure on the more desirable middle suburbs and in turn the inner suburbs and then the centre. Let back to Jon’s article where he compared major cities to sandcastles becoming higher and higher in the middle as the base expands. It would be interesting to do an analysis on the cost per square metre of new outer suburban builds compared with median price of inner suburban. I am sure once you found a factor for increased travel times to the city centre, you could create a fairly reliable equation for the longer term trend of those various price groups. Until many more houses are built than is required by the growing population at cheaper prices then prices will continue to rise indefinitely.
Troy D says
Alastair, ok so you can find houses under a mill but they are still close to a mill.. Take a $850k house which is pretty much the cheapest you will find within 10km of the CBD it’s still a loan of close to $5,000 a month plus around 45k in stamp duty..
Even houses advertised for about 600ish go for around 700-750 and need about a 50 to 100k Reno.
We ended up giving up on buying for ourselves and renting where we want to live and buying where want to invest. At best anywhere near a state capital your ROI is about 4.5%.
Only a few years ago, million dollar houses were mansions.. Not a house barely big enough for 2 kids and a dog..
Ken. says
Hi Steve, Your comments here seem pretty practical and making a lot of common sense. I, personally wouldn’t live in Sydney if you paid me to. Have recently met some long lost/new found rellies, from Sydney, and agree that, unless you inherit a Sydney house, you’ve missed the boat. But why do people want a life like that when you can have it all for a lot less. Not Melbourne either. Cairns, N.Q. never freezes your nuts, and doesn’t smoke you out with boiling bush fires. There was a time when all came to the north in winter to escape the cold. Maybe the price and cost of living down there keeps them at bay. We will have a new multi billion dollar Casino and resort here soon, thanks to the Chinese. All welcome, so what are you all waiting for. Sell your Million dollar house and buy the same here for less than half that and live like a millionaire for the rest of your life. Cheers, Ken.
Stephen says
Troy I have read your article again,you say your not an economist,that I believe,what you write makes absolutely no sense whatsoever,I appreciate your time in research however if you were doing a masters degree and came up with for your research,I’m sorry,I would fail you miserably.
Simon says
as long as Melbourne maintains about 20,000 people homeless, and most of vacant land is snapped up by speculators, prices in the big empty land should remain high
peter says
Sydney prices arent high. they only become high when people start to compete with eachother for the classier ritsier wealthier exclusive suburbs. A lot of Syd people are competetive and want to outdo one another. Hence the silly prices paid. The second reason is simple. When immigrants come to Au they only know Sydney and some might have heared of Melbourne I suppose. So they all land here. For prestiege for jobs for family for the Sydney dream they have had all their lives. Hence why Sydney will always be the dearest in AU. As for jobs the high paying jobs are mainly in Syd also. Want to live in Syd. Be prepared to pay for the privilege.
Graeme says
I watched Dick Smith talk at the Australian Press Club this week and he said that the biggest single problem that we have here in Australia is over population due mainly to immigration of net 400,000 people a year. He said he is not anti immigration but the facts are that we cannot responsibly sustain growth of 400,000 people a year here in Australia. We do not have the ability to maintain infrastructure and housing for that many people and that we should not be trying to grow our population at such an huge pace! We had 19 million people in Australia in 2000 and in just 14 years we have increased that by 25% to 23 million. At this rate we are well on our way to having 30 million people by 2030. Where will they all live and where will they all want to buy? I’m sure that the biggest majority of them want to live in Sydney no matter what the price!
Stephen says
Peter you Say Sydney prices aren’t high in one sentence and in the next say Sydney will always be the dearest in Au?im confused,so it’s cheap or expensive?
You then mention prestige jobs,do you mean lawyers,judges,politicians?if so and that is your basis for calculating the value of a house you have either too much money,are a politician or have collected a few properties and doing well and lost the run of appropriate housing costs!
peter says
maybe I didnt write it clearly enough. Sydney isnt expensive. Anyone can buy a house in Campbelltown or Busby or a unit in Lakemba they are just as cheap as other parts of AU. The problem that ppl come across is they all want to be in the best suburb in the best house. that creates pockets of expensive suburbs. its the same everywhere in AU but the extreme is more evident in Syndey because of the high incomes earned by a lot of those industries u mentioned.
Stephen says
Peter I like next door to Lakemba,I stick out like like a sore thumb as I’m Caucasian and a professional,if I bought a house there,I wouldn’t be alive long enough to pay off the mortgage,and I don’t own a gun or have a stash of grenades handy!
Why did you choose the 2 most dangerous suburbs in Sydney then say Sydney isn’t expensive?
Eileen says
Peter, if you are familiar with Lakemba you would know that even a unit there can cost up to $400k……….a house double that! There are NO house prices listed on realestate.com (all auctions). The only other listing is a townhouse @ over $685k. That’s not a cheap suburb in my opinion.
Sow says
I think we are forgetting a fundamental fact – if China is helping fuel our growth and in the future if China’s bubble bursts then what do you think will happen to our own growth? Burnt Chinese investors will drop aussie properties like a rock to recuperate their losses. What will happen to prices then?
Ken. says
Chinese will stay. Indians may leave any time they like.
Sow says
Ken, based on all the other comments your leaving here I would agree with others and say you don’t sound like well educated person who, quite frankly, is very vocal with comments not particularly regarded among the KS community. I would keep your slander to yourself or ideally move them over to another forum or blog.
Ken says
Pot calling Kettle black if you can understand that. If you don’t like what I say, don’t talk shit to me you uneducated moron.
Troy D says
Graeme, Sow: Great points.. the prices will plummet for sure but is China’s bubble going to burst? I doubt anytime soon… Cheap labour and large exports will keep it going for many years to come..
In order to sustain the 400k growth per year, they should look at embracing skilled migrants or even upskilling migrants in the building industry and provide incentives to move and work out in rural australia.. we have enough land to expand a few cities and create new ones.
Ballarat VIC has nearly a population of 100,000 people and is a large country city. Now given that perspective of 400,000 people a year coming in, thats 4 lots of Ballarat every year.. Thats 4 potential cities that could be established and then those cities would make great investment areas wouldnt they?
All this would require is government intervention and incentives to make it happen.. the first few hundred people who get sent out to a rural city will be wondering ‘what the hell’ but if they work hard and establish a career in building then they would own their own home with an investment growth rate higher than any other city.
Eileen says
Troy, the last time the government intervened, the vendor tax drove investors over the border, they’re still there!
Stephen, many people think only to invest in Sydney, but you can pick up some great little properties near Wollongong. I prefer the northern suburb of Woonona as it’s the furthest north with the lowest prices in the suburb I want to invest in, (there are cheaper suburbs south of it, but not as much potential).
My daughter has had more than one tenant who works in Sydney…….. and lives by the ocean. The rent is on a par with some outer Sydney suburbs and the land is locked by the ocean and the escarpment. Have a look online and let me know what you think?
Keith says
Jon
I look forward to your articles and find them very interesting. I very seldom comment but would like to thank you for writing them
Ken. says
Sow, IF the Chinese economy busts, which I doubt it, they will want to live in Australia. Other wise they wouldn’t be investing here like a lot of Indians are. The Chinese have been doing big business all over the world for many centuries and sometimes are seen to be a little slow compared to westerners. As they have the patience of Job. They are very shrewd business people and make sure they have all their i’s dotted and their t’s crossed before paying up, if YOU know what that means.
Sow says
Ken,
1.) Just because an economy bursts doesn’t mean people want to immigrate. Did the greeks immigrate out of greece in the last few years? They don’t immigrate unless conditions are REALLY bad. They just stop buying which slows the economy and increases jobless-ness and reduces growth and demand.
2.) Indians are not investing in Australia, they are immigrating here for work opportunities. (I know because I’m indian and seen the western suburbs boom with immigrants in the last 10 years – although lived here for the last 25years)
3.) Your basically saying Chinese are just ‘too smart to fail’ which is incorrect and most likely irrelevant. This is simple supply and demand dynamics which has no relation to intelligence.
Ken. says
Sow, Jealousy is a curse and rottenness to the bones. Some people are just too dumb to come in out of the rain. If things were ok in India they wouldn’t come here for work if they were worried about bubbles bursting or economies crashing, eh?
Sow says
I’m not sure what your trying to say exactly. However, the point I’m trying to make is that Sydney is very obviously an attractive place to live for anyone due to lifestyle and job opportunities. But we are currently seeing housing growth to ultimately due to high offshore demand, once those economies stabilise/decline, we will definitely see the impacts here too.
Eileen says
I’m not sure how things would pan out if the chinese investors came into hard times. They are buying here and leaving their properties empty. They are ‘parking’ their money here. What’s the scenario if they themselves are keeping their money out of ‘harm’s way’ in their own country?
Troy D says
The reason why Chinese are buying up in australia is because in china, you don’t own the land, it’s only 70 year leased from the government. Least here you actually own something..
On the contrary to what is believed, it’s actually cheap to get apartments and stuff in china.. Outside of shanghai and Beijing, apartments are about $80 to $110k…
In shanghai I saw a few advertised for about $150k..
Ken. says
Intentions in China sounds about right. A perfect example would be some Russians used the free education system to be come qualified in Russia, and then went to America with their new found skills to make a fortune in the west. I think Australia is a pretty good place to start if you have big money, and why not. I think anyone should have the right to go where ever they want if they have their own money and behave themselves, unlike some idiots we allow into this Country.
Ken. says
Sow, I’ll try to put it in layman’s terms.What makes you an expert on China. Everyone knows the jealousy between China and your Country. Did you get the golden handshake from our Government, or were you one of the wealthy Indians that don’t invest in Australia. Disagree with your Sydney knowledge. A fool and his money are soon parted.
Sow says
@Ken. Lol! Why are Indians jealous of Chinese? This is news to me. Don’t need get personal now, it’s only opinions my friend, you can relax. The reality is that nor you or I can ever predict the future with any certainty, we can only take position ourselves based on our opinion. If you wish to disagree, then fine. Let’s leave it at that.
Steve says
No one is jealous of chineese,they are disliked due to
1)they are the most unfriendly people on the planet
2)they may be good business people in looking after themselves,they don’t care about you
3)they drive prices up and laugh at Aussies moaning about it
4)they will screw you as quick as you let them
5)they are taking over the major cities in Australia and there’s nothing you can do to stop them
Ken. says
Every one is entiteled to their opinion, even you and I. I think you are bias, prejudice and probably a whingeing pom or an indian minded bigot too.
Steve says
Hi Ken
You could not be further from the truth,I’m an Irish Dr and simply stating facts.
Harry Grime says
The main reason that the Chinese investors are buying real estate in Australia is in 2009 the Chinese government responding to increasing property prices overnight issued a conition that provided a person was only allowed to purchase a property on the condition they live in it. they were forbidden to rent out the property. The Chinese with money to invest turned to overseas markets and the property prices in China stabilised. They nipped it in the bud. If the politicians here indulged in corruption in China as is the case here they would face a fireing squad, fairly quickly, no court case, no appeal. That helps to focus their attention to detail. The low wage earners can afford their daily rice, electricity and cooking oil and rent. They can sleep well at night confident that their politicians and public officials will be brought to account if they are caught stealing or selling out the countries assets.
Eileen says
Troy, from memory, England has 99 year leases on land. I don’t see a queue of pommies with money in their hand investing in Australia!
Stephen says
Guys,ultimately the fact standsAustralia is expensive,prior to my coming here 3 years ago we were informed by agents to have a good savings package behind us as the cost of living in Australia was not on par with European markets.
Those of you who say Sydney is not expensive have either too. Yech money or have never been out of Australia,I work in the Medical profession and by no means on a standard wage however I sincerely must extensively carry out my research before endeavouring on the project of house buying.
I’d say there are few cities on the planet where a standard home tops a million dollars,if readers feel that’s inexpensive they earn a hell of a lot more than me and I’m not joe soap!
Moral of the story,a mortgage is 2.5 times 1 wage and twice the second.
Average wage $60k x2.5 =150k
$60 x1. =$210. Total=210. Average Sydney house $825
The maths don’t add up
Average buyer is well out of the market
Eileen says
Stephen, you’re running the risk of becoming a ‘whingeing pom’! Northern Ireland justs scrapes into that category! lol Everyone wants to live by the water, (especially Sydney) but we can’t afford it. So we set our sights a little lower and decide on what we can afford. If the harbourside property is too expensive, you have to start moving away from the city and keep going until you can afford the area.
Comparing house prices versus wages over the years obviously isn’t getting you the investment property you desire. Why not accept the fact that real estate prices, like shares don’t make any sense?
Use your time checking real estate sites and the best mortgage interest rates and you’ll be a lot happier! If I were looking at a $1m investment property – v – $500k, I’d buy 2 x $500k places instead. Not many people can afford the former property, whereas many more can afford the latter. The chances of them both being untenanted at the same time is remote, so you don’t lose out on as much rent.
Good luck with the search!
Steve says
Hi Eileen
Anything but a whinging pom,you know the Irish don’t exactly rub shoulders with the Pommes.
All I was pointing out was,house prices are astronomical,yes that’s not news,I live in the western suburbs at the moment where even a shack that requires a bulldozer sells for a cool mill,that was the whole point of the conversation.
I feel slab because I lived in Dublin,same job,3 luxurious properties I owned,big houses and the standard of finish was high.
I’m finding here the cost s a million and should be knocked down and rebuilt,supply and demand has gone to the moon.
Eileen says
Well Stephen, you know what they say: If life dishes out lemons, make lemonade! lol
The fact that you’re looking for an investment property, not a home to live in, tells me that you’re not on your ‘uppers’ (worn through your only pair of shoes). You also mention that you’re a doctor, so you now qualify to live in Strathfield……….(lots of doctors live there)!
An estate agent told me a year ago that any property near a mosque, (especially where you live) fetch enormous prices. It would appear that it’s true. I don’t know what you have in mind, but I wouldn’t be thinking of selling your place just yet, (or did you say you’re renting)?
I still maintain that it’s better to buy two cheaper places than a dearer one (even if the purchases total the same) as you get slightly more rent (combined) and they’re not vacant at the same time.
I don’t compare annual wages with mortgage costs, I compare the rent – v – the return. If you can buy a property that pays for itself, buy it! Naturally you have to factor in interest rate hikes, expenses etc but that’s where negative gearing comes in. Whatever you are comfortable with should be the deciding factor.
The TIC (The Investors Club) will tell you ……………never, never, sell! It makes sense as you pay so much in CGT (Capital Gains Tax). I’ve only ever sold one property as it was a unit, (no land = slow to appreciate).
Stamp duty is very expensive when buying a place, so you need to think very carefully before you do. I think I’ve paid about $36,000 stamp duty in the last year with two properties. You need to sit on them for a while before you can cover that type of expense!
Ken. says
Hi Eileen, You are pretty much on the money their mate. Please keep your comments coming. By the way, you’d think the Irish would fix their own Country up first before commenting on others, eh?
Eileen says
The wonderful thing about a democracy Ken is the freedom of speech that we all enjoy. I’m sure that Stephen isn’t responsible for the economic nose dive in Ireland, any more than you are for the Labor government’s handling of the economy in this country.
Stephen, as a direct descendant of ‘The Pirate Queen’ and ‘The Islandman’, I know only too well how the Irish feel about pommies! lol
Ken. says
Hi Eileen, The best thing that came out of the Labor party’s time in power was the lowest interest rates in 60 years. Another thing is I’ll bet the new Gov. won’t help to bring down the interest rates on credit cards.
Eileen says
Ken, I see you are crediting Labor for the low interest rates…………they have been on hold (from memory) since the Liberals won power. Can we now credit the Liberals? I agree the Liberal party won’t lower the credit card interest rates if the Labor govt weren’t willing or able to tackle it either. I have the highest in Australia as an incentive to pay it off each month!
Home loan interest rates the world over are at an all time low, I don’t remember Kevin 07 being in charge anywhere else in the world. The Labor government had the (Liberal) money and opportunity to do something BIG whilst in power. They lost the chance of a lifetime.
I heard China undertook major infrastructure and delivered something of a legacy for the people during the GFC. What did we get? Smaller school halls, pink batts and full detention centres!
Ken says
I see how you or anyone can twist things around. If you or I done something stupid, we can’t blame the Gov. Like Liberal business owners trying to rip everyone off doing shoddy work. Read what the most intelligent, but honest reporter, Laurie Oakes said, “Kevin saved us from the GFC,” and he even supports the Torries. AND SO HE DIDN’T HAVE TO CONTROL THE REST OF THE WORLD. The money the Libs. saved up was at the workers expense to pay for their retiring M.P’S super, but Kevin gave it back. Confuscious says “watch results) to put it politely. Politics is a nasty business. I think we should stick to Jon’s INVESTING ideas.
Eileen says
I haven’t twisted anything Ken………….I have reported the facts as I saw them. If you’re saying the Labor Govt did something stupid and I have highlighted that, then I agree with you!
Laurie Oakes is a respected commentator, he’s allowed to get it wrong once or twice! If the Labor Govt had been in office, (prior to the GFC), what does he think they would have had to dish out…………. to avoid the GFC in Australia?
I thank God that they weren’t, as the Liberals had left such a stockpile of money, (leaving Australia in a fantastic situation) that a drover’s dog could have managed the economy better than the Labor Govt did!
btw, I voted for both of the last two Govt’s. I cannot believe that anyone could defend the Labor Gov’t performance, they’re more interested in themselves than the country!
Ken says
Hi Eileen, You are entitled to get it wrong too. You sound just like the rabbit and the fat man. If Kevin wasn’t in power when we needed him, It would have been different. But tell me, what gives you the right to call some one a whinging Pom, when you are obviously an Irishwoman. With the way the Catholic Christians fight with the Protestant Christians, it’s no different to Iraq. you’d do better to stick to real estate than politics. Neither of us will ever change so let’s stop throwing shit. Good luck to your one hit wonders.
Jim says
Stockpile of money…you mean a Massive personal debt that fuelled those piles..
Eileen says
Firstly Ken, I didn’t call Stephen a whingeing pom, I said he was running the risk of becoming one! You should read my posts closely if you’re going to quote me. Stephen understands my sense of humour, you obviously don’t! ha ha!
Oh boy, talk about understatement……..if Kevin wasn’t in power when we needed him, it WOULD have been different! That’s exactly what I said!
It would have been so much better! If I saved all my money for years and then you moved into my house with all your mates and have a party…………….. and spend all my hard earned cash, don’t I have the right to be upset? That’s what Kevin 07 did!
I don’t know why anyone would have the nerve to support those jerks after what they did to this country……my great grandchildren will still be paying off the debt they incurred!
There’s nothing obvious about me being an irishwoman, other than my ancestors. The closest I’ve come to IRA bombs was when I was in between two of them when they went off (in two separate pubs) simultaneously ……………………while I was at the cinema in my home town.
Ken, you lose the argument when you resort to abuse!
Steve says
Ken you sound like a bit of an idiot,obviously not an academic,I think you don’t realise something,you tell the Irish to fix their own country before commenting here on economics.
Listen buddy,you sound like your born here,not highly educated so we well educated Irish come over here and take your good jobs as you lot are not educated enough to provide enough skills,bit dim really in many places,the Irish and English built this country so listen mate if you want to slag the Irish you’ll have to get a degree or 2,were way smarter than you lot,I have over 300 staff under me here because an Aussie could not be found to carry out my position,you want to give out,use more than 2 brain cells,I’m smarter than you in my sleep and did not cause an economic crash!
Ken. says
Steve, before you slag me as unintelligent, you should proof read your own blogs. In Australia we use spaces between words. Also, I’m more Pom than anything else. You lot get giddy in a round room looking for the corner.
troy says
Eileen, seriously.. Look I’m usually a liberal party supporter but in this case I voted for labour as I knew how much of an idiot this Abbott would turn out to be..
We are not in a serious debt. No more then we have been in the past, look at the NBN rollout they were doing, to bring Australia up to one of the fastest internet connections. Now liberal have canned it.. And acting like we have to make cuts everywhere to get out of debt, it’s bullshit… I have seen and done so many useless government projects in IT where it’s all consultants earning 1200 a day and they all drag it out so badly it makes me ashamed to pay my taxes.. There is so much of a waste of money in government it’s ridiculous.
Yet they are stripping back pensions and everything instead.. The other thing that K.Rudd did (which is partly the reason he got booted) was introduce the mining tax. So they were earning money rather than spending it
Eileen says
Troy, I’m surprised you’re in IT and yet appear to be a K Rudd supporter. IT professionals are usually ‘smarter than the average bear’ ! If you think we’re not in any serious debt, then God help your personal finances!
National Debt Clock: http://www.australiandebtclock.com.au/ $5,006,469,660,698 and counting!
I try not to follow a lot of what goes on in politics as it’s too depressing, but I heard on the radio this morning that the mining tax cost more to implement than it was worth. So how’s that bringing in money? Abbott’s desperate for cash, do you think he’d ‘can it’ if he thought the Gov’t would benefit from it?
I presume the consultants charge like ‘wounded bulls’ regardless of who’s in power? Looks like you’re in the right business! The NBN rollout has been a fiasco to date! How many workers have complained about asbestos exposure now? I hear people complaining on the radio about how it costs them money to be connected, (no choice) and it’s about the same as they had before, for less. Some can’t afford it. I’m guessing pensioners have to pay too? I will keep you posted on this as my suburb was ‘measured’ last week for the NBN.
An IT friend of mine agrees with you, (that it’s the best thing since sliced bread), so I bow to your better judgements. I happen to think that in this day and age why do we have to dig up dirt to lay cables when we have satellites and might be able to have a better system which we could update instantly in the future without having to touch a single cable? If this is the way to go, why doesn’t the US agree? But then I’ve already declared my ignorance on this subject!
I was surprised that Abbott didn’t go further with cuts as I’ve spent a bit of time researching how bad things have been overseas. People in this country haven’t got a clue how bad things could be if the Gov’t were as ruthless as the British Gov’t have had to be. By the time I qualify for a pension, there won’t be any money for me! Thank God the Liberals stockpiled our money prior to ’07!
Simon says
I say leave the minerals in the ground until the govt. learns to balance the books without it, Nauruans were worth a million $ each in the 70’s when a million could buy 50 houses, the govt. shot thru every cent, and now they beg for charity
Simon says
it wouldn’t surprise me, but was malcolm turnbull lying when he said he did an audit on the ABC and cut a bunch of useless spending, liberals are painfully embarrassing, but they seem to want to stop the river of wasted money that labour always creates
Ken. says
Eileen, you call me abusive. You started it with your fascist crap. Confuscious says, “Best to keep your mouth shut and be thought an idiot, than open it and be proven one.” Read my blog again and leave politics out of it. A moron is someone who can’t read between the lines of a newspaper. Especially your choice. Well said Troy. Eileen, you sound like everyone is an idiot but you, once again, stick to economics.
Eileen says
Ken, you lose the argument when you resort to abuse!
OzRealtor says
Ken is a cunt!
Ken says
So are you, moron.
Sowrabh Behl says
Jon Giaan – can yo ban Ken’s account. He has already caused a fuss amoung the community as it is
Ken says
Buzz off yourself moron, I haven’t commented here for weeks. Can’t stand idiots that think they must be right all the time. Treat me like shit and expect it back, up front, with out coming in the back door like a lot of other idiots. I have no time for shit stirrers.
sjoshua615 says
People who want to find better future offend tend to find it by working and eventually migrating in different country. The good things is that Australia is one place that people go into because they see big opportunity welcoming them here.
And giving the opportunity, those who rented before now wants to acquire their own property but is afraid because they might need some documents and will consume time.
I would suggest that you check
property development
to help you with that interest.
Robert Jongebreur says
Look at the last article on http://www.realestateviews.com.au/qa/ and you’ll see a sensible comment about Housing Property Bubble (or not?)
Simon says
if you can’t get a house near where the jobs are, you should buy an investment property in some country town, and make it hard for people to afford housing there too
RobertREV says
Hi Simon There are a number of small towns desperate for people to move there as too many young people move to the city. Buying a house in country towns for people to rent is a positive. Surely if you build a home in a country town for investment that’s a positive. Did you know that 1900 persons are moving into Melbourne every week (around 100,000 pa). That’s one reason why prices are going up. Why are they not moving to country towns? That would be a positive for the country as a whole. 60% of us live in 5 cities. Why is it so? But the bottom line remains that if you are looking for affordable housing buy an attractive 3 bedroom home in a country town.
Simon says
‘desperate for people to move there’ is rhetoric, not reality,
go on gumtree and find a country house for less than 200/ week in a place with no jobs,
when my business got destroyed by an arsonist I became a non person in australia, I can’t get rental property, the shortage is such that all housing goes to people with stable jobs, I live in sheds, last 6 months in someone’s living room, putting a mattress down every day, and working up to 5 days / week for my free rent, my friend got 30 G from the govt. after the brisbane floods put 6 inches of water thru his house, but I got fined for not putting a tax return in after the fire, because I was in the ‘wrong fire’ according to the tax dept.
RobertREV says
Hi Simon
sorry to hear about your bad luck;
hope life improves for you from here on
all the best
Robert
RobertREV says
Affordable Housing
OVERPRICED PROPERTY & AFFORDABLE HOUSING
Just about every day heated comments appear in our newspapers or on TV about affordable housing. The whole topic is a bit of a furphy. There is no shortage of affordable housing. Just put bedrooms at a minimum of 3 and price at a maximum $200,000 and location as QLD, VIC, NSW etc in realestate.com.au and you’ll get more than 100 results of homes for sale (some quite attractive) at less than $200,000 in every one of our 6 States.
The main problem of course is that the homes which are for sale are in regional towns where people, in general, do not want to live. Secondly, that’s not where the jobs are.
For those wanting to buy a home to live in but who cannot afford to buy in their preferred location at this point in time why not buy an investment property as your first property? There are always a lot of ifs and buts but it is invariably a good idea to create a plan and take action. Why not be creative? Buy an old property and renovate to create additional equity or buy a property and sublet some of the bedrooms to help pay for the mortgage.
If you can’t buy now where you want to live, do it progressively and buy a property a bit further out. But stay in areas on the fringes of the mainland capital cities. Some 60% of us live in 5 capital cities so that’s where the main demand will be. Some 50% of planning certificates in the greater metropolitan areas are for infill developments in established suburbs and the other 50% of certificates are issued in fringe areas. (Hint: use the Boomtown app to check demand in outer suburb locations).
Generally speaking, negatives outweigh the positives when buying off-the-plan properties as a first investment (mainly as price gains in the first 3 years can be on the small side). But then it can be a good way to start in property as out of pocket costs can be less than $100 per week and if selected in a growth corridor you can be on your way as a first step to property wealth (contact [email protected] to be referred to an off-the-plan specialist).
georgina says
Every country’s housing market is unique and while Australia keeps wages including holidays,super and other standard wage conditions , has large available land to expand ,rents under 50 % of salary ,good climate,unemployment under 9% all these factors unique compared to most countries ….property will continue to be a good long term investment and form of saving,no government will stop your place of residence being capital gain tax free….and outside Sydney and Melbourne inner suburbs our properties are very cheap considering the tax benefit and all the above factors…..even $500,000 for a 2 bedroom unit with parking in western sydney is very affotdable for a working couple and will appreciate in the short future……in this and the next generation a decentralized workforce will be more common as technology continues to expand so outer suburbs and regional areas will become more popular homes. We are very unique with high living standards and large available land..cant see property comparisons with overseas markets at all relevant.