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Sunday, April 05, 2015

Australia is in one of the worst housing bubbles we have ever seen

Negative gearing Negative gearing Negative gearing is a form of leveraged investment in which an investor borrows money to buy an asset, but the income generated by that asset does not initially cover the interest on the loan (interest > income). In a few countries the strategy is motivated by taxation systems that permit deduction of losses against taxed income, and tax capital gains at a lower rate. When income generated does cover the interest it is simply a geared investment which creates a source of passive income. A negative gearing strategy makes a profit under the following circumstances: 1. If the asset rises in value so that the capital gain is more than the sum of the ongoing losses over the life of the investment; or 2. If the income stream rises to become greater than the cost of interest (i.e. the investment becomes positively geared); or 3. If the interest cost falls due to lower interest rates or paying down the principal of the loan (again, making the investment positively geared). The investor must be able to fund any shortfall until the asset is sold, or until the investment becomes positively geared (income > interest). The different tax treatment of planned ongoing losses and possible future capital gains affects the investor's final return. This leads to a situation in the countries which tax capital gains at a lower rate than income. In those countries it is possible for an investor to make a loss overall before taxation, but a small gain after taxpayer subsidies. Deduction of negative gearing losses on property against income from other sources is permitted in several countries, including Canada, Australia and New Zealand. A negatively geared investment property will generally only remain negatively geared for several years, after which the rental income will have increased with inflation to the point where the investment is positively geared (the rental income is greater than the interest cost). Positive Gearing occurs when you borrow to invest in an income producing asset and the returns (income) from that asset exceed the cost of borrowing. From this point in time, the investor must pay tax on the rental income profit until the asset is sold, at which point the investor must pay Capital Gains Tax on any sale profit.[citation ------- Australia is in one of the worst housing bubbles we have ever seen http://news.domain.com.au/domain/real-estate-news/australia-is-in-one-of-the-worst-housing-bubbles-we-have-ever-seen-20150327-1m8vao.html DateMarch 27, 2015 56 reading now Comments 155 Lindsay David Australia's latest property doomsday author, Lindsay David, has returned from a decade in the US with some frightening theories. Australia's latest property doomsday author, Lindsay David, has returned from a decade in the US with some frightening theories. COMMENT By all accounts, Australia is experiencing what is one of the greatest credit-fuelled real estate bubbles in modern times. On the back of a collapsing mining sector, we can thank the RBA, APRA, ASIC and the political elite in Canberra for creating a flawed household wealth-creation strategy that shares all the hallmarks of a predictable economic disaster. In plain English, since the mid-1990s, Australia's strategy is for home buyers and investors to borrow heavily from lenders and flip houses to the next buyer who has taken out even more debt to speculate. Today, all this country has to show for it is a $1.9 trillion mountain of household debt that will make the US credit-fuelled housing bubble of the last decade look like a walk in the park when our housing bubble bursts. The unfortunate victims of today's "wealth-creation" strategy are young home buyers and middle-income earners who are either completely priced out of the market or leveraged through the roof. While our society lacks a meaningful and open debate on the toxic and rising levels of household debt, new home buyers in Sydney and Melbourne are entering the market and taking upon the most illogical sums of debt, courtesy of our over-leveraged banking system. Based on median multiples, new home buyers in Sydney will spend the better part of 6.54 years savings (using 30 per cent of their income) for a 20 per cent deposit to buy a median-priced home. When it comes to servicing the first 12 months of a 25-year/80 per cent LVR mortgage, it will cost roughly 65 per cent to 70 per cent of household income to service that debt at current record-low mortgage rates. Melbourne is not too far behind. So what have our leading economists, regulators, public executives and politicians done to stop this debt-induced folly? Nothing. In fact, they have bent over backwards to inflate prices via stimulants such as housing grants and allowing retirees to tap into their life savings. These powerful stimulants have been implemented, not to improve home ownership rates, but to boost prices for the benefit of existing owners, bankers' profits and government balance sheets. If new home buyers cannot access (or are not willing to take on) a greater sum of debt compared to previous buyers, Australia's wealth-creation strategy will collapse just like it did in Ireland. Rest assured, our society is definitely caught up in the same irrational exuberance they experienced. From 1996 to 2014, housing prices and mortgage debt significantly outpaced economic fundamentals like inflation, rents, incomes and GDP. Yet, our central bankers are more concerned about whether we will pay less tomorrow for a can of soda than new home buyers in Sydney borrowing $50,000 more than last year to buy a home. Where is the logic in that? If the RBA factored in the expansion of debt required for a new home buyer to enter the market, inflation would officially skyrocket through the roof. Regardless, our political and economic elites are now stuck between a rock and a hard place. Unfortunately, that is the price a country pays when it builds an unsustainable property bubble while avoiding a debate on the most important topic when it comes to housing: debt. With Australia having the world's most indebted household sector, the seemingly unending price rises in Fool's Paradise will eventually slam to a halt. As I argue in my new book Print: The Central Bankers Bubble, having the largest housing bubble and mining boom in Australia's economic history going down simultaneously will cause a severe economic and social catastrophe. Lindsay David is the author of Australia: Boom to Bust and Print: The Central Bankers Bubble. David recently founded LF Economics and holds an MBA from IMD Business School ============================ Apr 1 2015 at 5:14 PM Stamp duty an 'unfair and inefficient' tax and should be replaced In ACT the buyer of a $500,000 house will save $4700 if stamp duty is not applied. by Rebecca Thistleton Raising the GST or introducing a broad-based land tax are two ways the state and federal governments could replace stamp duty revenue and abolish conveyancing duties entirely, the property industry has said, in a push to overhaul property taxation. Property Council of Australia chief executive Ken Morrison said the federal government's tax discussion paper confirmed stamp duty was one of the worst, most growth-inhibiting taxes and called for government leadership on reform. "South Australia has already shown its willingness to take on tax reform, including stamp duty. The other states and territories should now step up to the mark. Stamp duty is an inefficient, volatile tax – contrary to all best principles of taxation – and the states should not be relying on such a volatile income stream to fund essential services like health, education, infrastructure and transport." "The most obvious solution would be to broaden and increase the GST, but we are open to discussion on a broad-base, low-rate land tax or other revenue options." Over the next 20 years, stamp duty will be abolished entirely in the ACT and the territory is moving to a broad-based land tax. Tax on insurance is also being phased out over five years. ACT Chief Minister and Treasurer Andrew Barr said the territory was the only jurisdiction which had begun moving away from duty on property purchases. "Stamp duty is an unfair and inefficient tax. It distorts investment decisions, and makes the cost of buying a home more expensive," he said. "This has already made buying a home cheaper – the buyer of a $500,000 home is already saving $4700 in stamp duty. We have also significantly cut stamp duty for commercial property – and as a result there has been an increase in transactions in this sector." The discussion paper identified the ACT as the only jurisdiction willing to tackle reform and Mr Barr said he would encourage other state and territory treasurers to consider introducing a similar land-tax regime. Phasing out stamp duty will take two decades but Mr Barr said the ACT would have a fairer system in place long-term, and would also remove distortions on investment and spending. "The ACT has a finite supply of land, the sale of which makes up a significant portion of the Territory's own-source revenue," he said. "Transitioning away from taxes on property transactions will ensure our economy and fiscal position is well placed to address the transition away from land revenue." The Urban Development Institute of Australia's national president Cameron Shephard said the total tax burden on a new home could make up as much as 44 per cent of its total cost. "Stamp duties are also highly inequitable, as they burden home buyers – a small section of the community – with a tremendous amount of tax, which is used to provide services for the benefit of the broader community." "Revenue from stamp duty is also dependent on the level of property transactions, making it a highly unreliable source of revenue for state governments," he said. ======= Wondering which districts have the highest rate of home-ownership? Check your local area in this nationwide map of Australia to see the percentage of home ownership. By Kenneth Macleod Thursday, 8th April 2015 This map shows regional estimates of home ownership. Areas are shaded in proportion to the estimated rate of home ownership. The areas shown are ‘Statistical Area Level 2’ (SA2) standard areas as used by the Australian Bureau of Statistic. SA2 is a general purpose, medium-sized area, which is used to represent communities that interact socially and economically. SA2 generally has a population range of 3,000 to 25,000 people, and about 10,000 people on average. There are 2,196 of these areas covering the whole of Australia. Zoom (+/-) and drag OR click on the below links: Australia | Sydney | Melbourne | Brisbane | Adelaide | Perth | Hobart | Darwin | Canberra Percentage of occupied private dwellings owned (with or without a mortgage) as of Census 2011 for SA2 region. n/a0%30%40%50%60%70%80%90%100% Notes & Cautions: The Census provides a snapshot of housing tenure in Australia on Census Night. Analysis here is based on private dwellings which were occupied on Census Night. Mortgage repayment levels reported in the Census are difficult to interpret in terms of assessing housing costs. Households may be accelerating the repayment of principal on their mortgage (a form of saving), or reducing their repayments if they are already ahead of the payment schedule, or drawing on the mortgage for holidays, for school fees, or for investment elsewhere. Care should be exercised in the use of Census income information, particularly when using imputed household income information in comparisons of geographic areas with differing socio-economic characteristics. ========= “ Banks are too big to fail we saw that in the GFC - the reckless lending will continue unabated as the taxpayer bAres the downside risk. Policies to promote housing made by baby boomer policy makers for baby boomers. Hockey's suggestion to allow young borrowers access to their super was more about protecting boomers asset prices than making housing more affordable. FHOG has done nothing but transfer payments from the public purse to vendors. Commenter: Pop Date and time, March 27, 2015, 11:17AM “ Dwelling supply has simply not kept pace with population growth and the under-supply of both properties to rent or to buy has hauled up both rentals and sale prices to ridiculous levels. Yet in the face of this, the state government and many councils (such as Ku-ring-gai) remain resistant to increasing housing supply by retaining restrictive land zonings, including those in the immediate surrounds of railway stations, where car dependency could be reduced. Why are they allowed to get away with this instead of acting in the interests of Sydney-siders as a whole? Commenter mac Location Date and time, March 27, 2015, 12:08PM “ One should also be asking why we have a massive immigration program which is giving Australia the highest population growth rate in the OECD. There is no logical reason for this other than to help keep the housing bubble inflated. Just how many rental properties do our pollies own ? Commenter, Tony McIntyre Location Lower Mitcham SA Date and time March 27, 2015, 12:45PM “ Yep. By the way is anyone familiar with that story titled 'The little boy who cried wolf'.? It's gone way past the point where the vast majority of people pay any attention to warnings about a property bubble. Additionally, the opportunity to make money out of doing absolutely nothing is way too tempting for most. It has an effect of drowning out any cries of danger. My sympathies are with the young and the future young, as it's from their pockets all those profoundly lazy profits come. But don't go too hard on the baby boomer generation, aim your venom (poisonous secretion of an animal, such as a snake, spider, or scorpion, usually transmitted to prey or to attackers by a bite or sting.) squarely at the leadership and lazy policies of the Liberal and Labor parties over the past few decades. Property value escalation is precisely what they wanted. Commenterkanga Location Date and timeMarch 27, 2015, 1:06PM “ This is the greatest misallocation of capital in Australia's history. Debt and capital, all borrowed and sunk to make banks wealthy. Most if not all of these rises could have been invested in businesses, education, healthcare, you name it. Gone to debt and gone forever. CommenterMike W LocationSydney Date and timeMarch 27, 2015, 1:18PM “ Housing supply and demand, and house price, these problem does not need a lot of people to solve. (As Sir David Attenborough once said about the population growth) Commenteryour vote Location Date and timeMarch 27, 2015, 1:35PM “ Why introduce baby boomers? Most of us have one house that we live in and are too old to be negatively gearing anyway. CommenterEffie Location Date and timeMarch 27, 2015, 2:40PM “ They will always get away with not rezoning while you can claim negative gearing on established dwellings. The people who dominate these areas are baby boomers. You wont get anywhere with supply until you are only allow a 5 year period on new dwellings in which you can claim negative gearing. This would ensure negative gearing did in fact increase housing supply and there would be a larger push to develop new dwellings. It would also ensure this is sustained as the capital is redirected back into new property every 5 years due to the loss of NG on their current investment. Now, in order to establish give a 5 year period in which those currently invested in established dwellings can sell with no capital gains tax or stamp duty (the redirection of capital every 5 years will ensure you reclaim losses on no CGT after the first 10 years. Which you wouldn't have had anyway because the investor would simply hold). By allowing the investors an out, they will then also vote for you at an election. They will feel they are getting something out of you and now have a true option to reinvest in whatever is most tax advantageous without penalty. Commenter Jester LocationSydney Date and timeMarch 27, 2015, 2:51PM “ Banks certainly did fail in the GFC, just not Australian ones. Those that did were bailed out by the US. Hockey's proposal of first home buyers accessing their super for finance smacks to me an attempt at postponing the inevitable so it happens under someone Else's watch. We have been watching in Australia for nearly twenty years one of the biggest "pyramid" schemes in history unfold. Do you remember "flying planes" in the eighties? Our housing market is no different. Commenter David Locationvic Date and timeMarch 27, 2015, 2:56PM “ Rezoning and planning and public transport of middle ring Sydney. It's really not that hard. Commenter Yoghurt LocationSydney Date and timeMarch 27, 2015, 3:18PM ----------------------------------- What people need to understand is that this boom is essential because Boomers are completely without superannuation. Studies show an average of $3000 per person. The govt knows this and is cleverly forcing up the value of houses to help avoid Boomers voting themselves enormous pensions watch this space - the govt will cleverly (??) introduce a ceiling on the family home. If your house is worth more than $1m, sorry no pension. You can either do a reverse mortgage and whittle (To reduce or eliminate gradually: whittled down the debt by making small payments.) the asset to nothing over 10 years, or sell out now and get something cheap outside Sydney. Buy you'd better do it before you retire, Boomers. Once you're 65, you can only give away $10k every 3 years to your children. Best move is ... set up a family trust where YOU don't own it but you get to live in it. Then put in a granny flat and your kids can rent the main house, which goes into the trust as a nice little earner. And when they get divorce, that scumbag partner has no claim on anything. Commenter Axis Location Date and timeMarch 27, 2015, 3:19PM “ The one thing everyone seems to avoid mentioning is that almost every auction in some suburbs is being won by asians, some who don't even live in this country. Every house for sale in my area has had asian buyers. The prices are going through the roof because asians have the money to buy and our kids don't. The other point that no one realises is that if you don't have negative gearing you wont't have investors, you won't have anywhere for young people to rent, and you won't have developers building properties because they won't make money. This will also affect councils who rely on developers to build roads, parks and other facilities. This will lead to an undersupply which cause long rental queues and push people even further out of town which will all be dependent on govt bulding new suburbs. It just doesn't work!!! Commenter Shaz Location Date and timeMarch 28, 2015, 10:19AM “ Shaz, Just because they look Asian doesn't mean they aren't citizens, or are even migrants. They're probably more Aussie than me I was born overseas but I'm white. I don't know where you think these "asians" are getting their money from. Probably the same place as wogs (Chiefly British Offensive Slang Used as a disparaging term for a person of color, especially a person from northern Africa or western or southern Asia.) in the 70's. Through hard work and savings. Lucky for me those dreaded Asians are buying my parents house and the money is going to be invested in more Aussie property/businesses as I bought a reasonable house and used milk crates & 2nd hand items for furniture as my parents did before me. Hopefully you did the same before the property booms of the 70's, 80's, 90's or the last boom in the late 2000's. Commenter Immigrant LocationGuildford Date and timeMarch 28, 2015, 3:21PM “ I use 'Soda' Also, I think this property bubble will burst despite our politicians propagating a population ponzi for profit. (Most of that alliteration=(The repetition of identical or similar sounds at the beginning of words or in stressed syllables, as in "on scrolls of silver snowy sentences" (Hart Crane). Modern alliteration is predominantly consonantal; certain literary traditions, such as Old English verse, also alliterate using vowel sounds. ) was accidental) Commenter Rachael LocationPerth Date and timeMarch 28, 2015, 4:41PM “ The point about including the increased debt associated with house prices is a good one. Furthermore: 1) As young people have to save more to generate their deposit, they will spend less on other parts of the economy which is bad. 2) When they do buy their house at inflated prices, to service their high debt they will continue to spend less on other parts of the economy. Its an equation that the RBA fails to understand unfortunately. They think that increased house prices will lead to construction jobs, but it ultimately causes losses in retail and food industries as people (mostly young) have less money to spend. Commenter Sunil Location Date and timeMarch 27, 2015, 11:25AM “ Good points Sunil. Unfortunately for us, we invested our money in a retail business rather than real estate. We were going well for a while & paid a bucket-load of tax. Today, people are not spending & our business is closing down. It's sad, as we employed people, paid tax & (for a while at least) made a contribution to the economy. Housing, on the other hand, doesn't add much apart from a bit of stamp duty revenue (unless it's new construction - but more most investors seem to opt for non-productive established properties). Then there's the tax rorts of GCT discounts & negative gearing. So many businesses are struggling as more & more money is being wasted on the insane price of housing. Commenter Swanny LocationSydney Date and timeMarch 27, 2015, 1:03PM “ Young new home buyers only make up a small portion of the market. Their loss of purchasing power was previously more than made up by the expansion in purchasing power of those that borrowed against increasing home values. It appears that not as many people are borrowing against increasing values today as previously, so perhaps the boost in consumer spending is not occurring this time round. Indeed, many of us with a mortgage have instead gotten addicted to seeing the mortgage debt plummet at an amazing clip due to low interest rates. Not a single one of my peers has lowered the repayments on their loan, and quite a few have decided that the next couple of years are the years to go hard and make a big a dent in the loan as possible. If interest rates stay very low for 5 or maybe even 10 years, I wonder whether those that have shocked themselves by paying off most of the mortgage far earlier than expected, will switch to consumer spending or instead decide to upgrade their housing with more debt. CommenterPaul Location Date and timeMarch 27, 2015, 1:43PM “ It's pretty obvious when you look at the retail and services sector - patronage is down, everyone is struggling, major chains all posting losses. The diversion of productive capital in what should be the new economic engine of Australia after the collapse of the mining boom into unproductive price speculation in real estate make us the poorest wealthy people in the world ... with the caveat that the wealth is paper wealth, and liable to collapse when the next generation of buyers realise they won't be able to get a reasonable capital gain if they buy (a point of time that is inevitable - although they do say the market can remain irrational for longer than you can remain solvent). CommenterJon LocationSydney Date and timeMarch 27, 2015, 6:15PM “ Excellent article. Blind Freddy can see this is going to end in tears. A housing market and commercial property market crash will send this country into a nasty recession. Unemployment rates of 6% will pale into comparison against the 9-10% that's on the horizon. Commenterblack swan Location Date and timeMarch 27, 2015, 11:30AM “ I think you will find the spike in unemployment preceeds the drop in housing prices as ability to service debt declines. Housing prices wont "crash" unless there is a large jump in unemployment producing forced sales or a magical increase in housing supply. CommenterSmakca Locationmelbourne Date and timeMarch 27, 2015, 1:30PM “ Smacka, I'd go further and say there won't be a property crash unless triggered by a world wide recession that hits Australia hard, pushing high unemployment and drying up credit. If those things happen, first home buyers will be no better off even if house prices fall a lot. Their main worries will be holding on to employment and keeping a rental roof over their heads. Commenterguy LocationPymble Date and timeMarch 27, 2015, 2:59PM “ But it shouldn't end in tears but in joy, if the govt. got to work planning and rezoning significant parts of middle ring suburbs, and caught the wave of the high housing prices to generate new supply. CommenterYoghurt LocationSydney Date and timeMarch 27, 2015, 3:19PM “ Axis..March 27, 2015, 3:19PM Great comment. You must be an unsung financial guru. Commenter4Mountain Location Date and timeMarch 28, 2015, 5:03PM “ this have to happen. housing prices cannot gp up forever, and soon or later the bubble will burst,as ithappened in spain about 5 years ago, and now its australia turn so be warn. the current economy is weak.unenployment is all time high, mining boom gone bust i suppose if all fail we can sing que sera sera sera. Commentergospeltruth Locationwog wog Date and timeMarch 27, 2015, 11:35AM “ Not just Spain - housing bubbles burst and brought down the economies of USA, Portugal, Ireland, UK and many others. But.... in Australia I think the market is fragmented - what's going on in the last year appears to be a redistribution of wealth rather than a bubble. We have Perth, Adelaide and Brisbane posting small or declining prices while Sydney and Melbourne are gaining. In the overall Australian market, housing has only increased by less than 1 per cent for the year. So you could say Sydney and Melbourne households that own are getting richer while Perth, Adelaide and Brisbane are getting poorer - this is an outcome I like. Just take a look at clearance rates in Perth, Adelaide and Brisbane for the last week - almost all 3 are below 50% with pitiful volumes. CommenterNick LocationSydney Date and timeMarch 27, 2015, 2:36PM “ Nick March 27, 2015, 2:36PM What you call the 'housing bubble' at least in the US had nothing to do with artificially high prices. It was mainly due to the structure of the loans - light at the front, but loaded more and more heavily as the loan went on, predicated on annual wages increases that never eventuated. CommenterBillR Location Date and timeMarch 27, 2015, 3:31PM “ You make many good points Lindsay. I wonder whether you think that a massive economic catastrophe is inevitable or whether prices will stagnate to below inflation growth rates for a prolonged period. I'm a homeowner in central sydney and luckily bought in 2009 and again in 2012 - so I hope that the equity I've amassed will buffer me. On the other hand, my younger brother wants to enter the market with me as guarantor. I'm not sure whether he should bite the bullet and buy in Sydney or pick some other market (like Hobart) and buy in Sydney later on when things normalise. CommenterJPV Location Date and timeMarch 27, 2015, 11:38AM “ Don't be his guarantor. Just don't. Let me put it another way: don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't don't. Whatever you do, just don't. CommenterRobert Location Date and timeMarch 27, 2015, 1:52PM “ This one doesn't end in a recession, it looks like the dreaded d word. You forgot to mention China having the wobbly boot. Cue property investors to tell us how this will keep going forever. CommenterDan Location Date and timeMarch 27, 2015, 11:45AM “ There's also a lot of other things going on in the economy - namely iron ore prices down and coal prices down. I tend to think a few of the stars need to be in alignment for the d word to eventuate - declining capex, iron ore at $45 or below, unemployment at 7% or above (bad debts would probably start increasing at that level), business confidence continuing to decline, PMI at 47 or below for the next 3-6 months - if all of this happens, we would definitely see a crash in housing and economic depression. In defense of this, the RBA has a little wiggle room with interest rates but past 1.5%, I don't think interest rate cuts will have any effect so they need to play their hand VERY carefully. In my opinion, the RBA will try and jawbone housing down and the dollar down and use interest rate cuts only if necessary - we saw it in yesterdays report with the RBA trying to jawbone investors - its an oft plyed hand of Glen Stevens. CommenterNick LocationSydney Date and timeMarch 27, 2015, 2:44PM “ Property prices can keep rising, but not in a straight line. There will be brief falls and longer flat periods over a decade or so, but the trend will be ever upwards, as 200 years of history show. Furthermore, there will be no Australian property crash without a worldwide recession first. Plenty of cheap credit + unemployment <7% + high population growth + low AUD as an attraction for foreign investors + housing supply in Sydney not keeping pace with demand are all pretty good fundamentals for a continuation in housing price growth. Commenterguy LocationPymble Date and timeMarch 27, 2015, 2:54PM “ I think if prices get to the point where only incredibly wealthy foreign investors are the only buyers, there's bound to be some backlash. I was watching ABCNews24 a few days ago with an interview of a man selling his waterfront Brisbane property circa $3million and he was lamenting that he was unable to find a buyer (and hence wanted the government to relax rules in relation to foreign investors so he could sell for a higher price as Brisbane is weak at the moment). You can see where this is leading.... imagine the domestic market becomes weaker in Sydney and Melbourne.... imagine we bring in foreign investors to keep pumping the prices up. Imagine the huge backlash CommenterNick LocationSydney Date and timeMarch 28, 2015, 4:21AM “ They need to urgently review two things; 1. Supply. And by supply, I mean supply in areas where public transport links exist - not outer areas where no transport links exist. People wont move there in sufficient numbers to take stress off inner west, north shore prices. Why? because all the land in the world wont attract people if it means a 2 hour drive each way, each day, to get to work. So they can either take a cement pill and go hard at big density increases in established rail corridors, or they can go hard with raising debt at below inflation levels and building massive rail infrastructure. with high speed links to the city, parramatta ,chatswood, etc... Either way. It's critical that quality supply ( rather than supply) be fast tracked. 2. Negative gearing - it needs to be allowed to continue, because its unwinding would create a catastrophe. But it isnt delivering what it should be delivering - new supply . Starting from July 1,2017 for example, neg gearing should only be available to dwellings that are brand new. Existing arrangements will have to stay in place, but it will change the landscape immediately if speculators cant use the tax man for a leg up when they trade and re-trade established stock. It will drive capital to new stock - or it will reduce the number of investors - both of which will help enormously. And that brings me back to Point 1 - above. Its actually really simple - if we accept that chronic undersupply of infrastructure paired with a tax system that rewards speculation are the two issues contributiing to our property prices - address them. Amend the policies so that the position is unwound and a soft landing is engineered. CommenterThomas LocationSydney Date and timeMarch 27, 2015, 11:45AM “ Forget supply. If we didnt have the western worlds highest immigration rate, driven by government, then supply is not an issue. Our economic model is a complete shambles. And Abbott and real estate agent hockey, supported by small target shorten will absolutely ensure this thing explodes from gross negligence. CommenterJoe LocationSydney Date and timeMarch 27, 2015, 12:51PM “ Thomas are you running in the election tomorrow? Actually you sound too smart to enter politics but you would get my vote! CommenterElle LocationSydney Date and timeMarch 27, 2015, 1:17PM “ Currently negative gearing has very little impact on the stock number of new dwellings. Can't remember where but a couple of weeks ago I saw a chart on the ABC that showed stock levels of new dwellings vs existing and the vast majority of new dwellings were bought by owner occupiers. The majority of investors bought existing dwellings in high growth areas. The problem is that the price increased in the high growth areas have a follow on effect on other areas pushing prices up there as well. More interestingly the prices for rentals have actually stalled or gone down in the past 18 months. Again seen it on an ABC chart but can remember when and where. Commenter steve Locationsydney Date and timeMarch 27, 2015, 1:43PM “ "neg gearing should only be available to dwellings that are brand new." Back in the 80s, Rolls Royce realised they couldn't sell new cars because their resale was awful. They lifted their resale values by supporting the 2nd hand market (a new concept for RR), and voila, their new sales went up by leaps and bounds. Lesson? You can't separate new and used sales, their values are inexorably linked. The idea that you lift new sales only through market manipulation is bound to end in tears. Case in point, if you succeeded in implementing tax breaks only for new property, it would just cause developers to charge more for new property, leading to a mismatch between new and used property. Actually, this already exists because capital works deductions are much greater for newish property, but this would make it even worse. CommenterJohn Location Date and timeMarch 27, 2015, 1:51PM “ John you effectively have this situation by allowing housing investments to be negatively geared and not an owner occupier mortgage. You have separated the housing market into two sectors for the same products. CommenterJester LocationSydney Date and timeMarch 27, 2015, 3:01PM “ John March 27, 2015, 1:51PM "You can't separate new and used sales, their values are inexorably linked." Lesson - you can't extrapolate availability of parts for older cars to housing market trends. "The idea that you lift new sales only through market manipulation is bound to end in tears." " Case in point" is the present negative gearing for ALL housing properties and the First Home Owners' grant. "if you succeeded in implementing tax breaks only for new property, it would just cause developers to charge more for new property," Good argument for scrapping NG altogether. CommenterBillR Location Date and timeMarch 27, 2015, 3:40PM “ I totally agree with your first paragraph Thomas. I live almost directly opposite Gordon Railway Station, a so-called transport node. Yet Ku-ring-gai Council will not even allow medium density development here, let alone high-rise. Pru Goward said on her first day as NSW Planning Minister that Ku-ring-gai would not be exempt from increasing the housing supply. Nothing seems to have happened since then, presumably because it is a Liberal Party stronghold. Ku-ring-gai Council is still acting with impunity, misusing heritage classifications as an anti-development tool. CommenterOla Location Date and timeMarch 27, 2015, 6:28PM “ It is an issue of supply and demand in Sydney. We heard all this bubble talk in 2000-2002 , yet the sky didn't fall in. Yeh but this time it is different ! How ? Like it or not Sydney is an international city and property prices reflect this. Rates aren't going up in a hurry . Good plug for a book , no doubt appealing to all you chicken littles or people that don't own property. CommenterBaz Location Date and timeMarch 27, 2015, 11:46AM “ In Sydney, sit back and let the capital growth flow on. Me happy CommenterBob Location Date and timeMarch 27, 2015, 7:20PM “ a peasant with a million dollars is still a peasant Commentervic Locationmunster Date and timeMarch 28, 2015, 1:33AM “ "a peasant with a million dollars is still a peasant" But rather more well off than a peasant without a million dollars. CommenterPP Location Date and timeMarch 28, 2015, 7:15AM “ PP Or not. Commentervic Locationmunster Date and timeMarch 28, 2015, 8:20AM “ Great article. Its too bad the RBA has been left flat-footed by the dynamics of the over-leveraged housing market and has been willing to blow the property bubble higher to try to deflate what it perceives as the AUD exchange rate bubble. It was clear when the RBA started easing rates in 2013 that the property market was taking off. A well timed rate rise immediately after that would have killed it in its tracks. Instead the RBA has allowed things to get much worse. http://www.afr.com/opinion/columnists/rba-must-choose-between-housing-and-currency-bubbles-20150325-1m791y Commenterfrankenfurter Locationsydney Date and timeMarch 27, 2015, 11:48AM “ interest rates @ all time lows leverage @ all time highs legislature most conducive to investment in history (foreign investment, supers gearing into property) rent + house prices rising quicker than incomes (this is the most important metric there is) economists predicting possibility of australian recession, possible hard landing in China and continuing eroding of tax base through commodity price crash. entering the market now is a fools errand. it could work for 3 months, 6 months, hell even a couple of years, but every metric is showing that we are in bubble territory. Commentergaz Location Date and timeMarch 27, 2015, 11:48AM “ Most young people I know with any acumen are looking to move overseas at the earliest opportunity - High costs of living are sucking the life out of our economy and the Boomers expect the young to pay for their asset rich retirement. It will not last. CommenterStomper LocationSydney Ponziland Date and timeMarch 27, 2015, 11:53AM “ The young people you know will quite possibly not be young anymore by the time your 'it won't last' prophecy comes true - if it ever does. Commenteralto Location Date and timeMarch 27, 2015, 4:53PM “ Not that it will matter. As per a report released from the RBA, you are just as well off investing your money in other asset classes and renting, as you are investing your money in real estate. Only other asset classes are more liquid, and carry less risk, so I know where I'm putting my money. I'll sleep well in my rented house, knowing that I'm not emotionally tied to bricks and mortar. If I never own a house in my life, so be it. CommenterJA LocationBrisbane Date and timeMarch 28, 2015, 5:52AM “ Same here Ja. This isn't the time to put down roots in this country. I'll happily rent here while theres work. If it all dries up when the mining boom dies, I'll happily leave. Why would I pay a million dollars for a suburban box of bricks in an Australian capital city when the same money could buy a mansion or penthouse in the states? The Australian dream might be long dead, but our airports are still open. CommenterDeb LocationPerth Date and timeMarch 29, 2015, 11:18AM “ Let's put our three best economists in a room and ask them to give us their definitive opinion, and a plan of action. Then all we have to do is choose one of the six different solutions they give us. CommenterGno LocationSydney Date and timeMarch 27, 2015, 11:55AM “ So we are in a twenty year housing bubble thats going to end one day, what if it lasts for another twenty years? Commenterjt Location Date and timeMarch 27, 2015, 12:01PM “ Good question, I would say most young people would just party and not care, rather than be taken for mugs. Commenteryoung & clever Location Date and timeMarch 27, 2015, 2:41PM “ Not only are home prices skyrocketing, but construction quality in many cases is diminishing. Take a look at any number of apartment buildings around 5 years ago or so, and the shoddy work is there for all to see. Peeling paint, cracked render. These represent major ongoing costs for the owners, while many developers merely pay lip service to the issue. . Why anyone is interested in forking out hundreds of thousands of dollars to developers who produce such low quality work is incredible. CommenterMaster Blaster Location Date and timeMarch 27, 2015, 12:02PM “ You had me up until the "can of soda" comment, after which all credibility flew out the door. CommenterJon Location Date and timeMarch 27, 2015, 12:05PM “ Hi, If you look at prices over the last 10 years in most cases they haven't doubled as they did for our parents in the 70's & 80's. People used to say that prices doubled every 7 years. There has been a recent long period of high growth but this obviously makes up for long periods of inactivity. 80%+ clearance rates suggest vendors and purchasers are very happy with the current prices. House price growth has always outstripped wages and a $800k house with just 5% growth will be worth over 1m in 5 years. I use this formula. Where P2/Date2 is current date and price. P1/Date1 is last trade price and date (P2/P1)^(1/((Date2-Date1)/365))-1. Obviously you'll also need to allow for any capital improvements. CommenterSky is falling LocationGuildford Date and timeMarch 27, 2015, 12:05PM “ The problem is in your comment - house price growth has always outstripped wages, the only way that occurs is by the next buyer taking on greater debt/leverage so when either people go i'm not paying that or bank won't extend that debt prices come down. And they will unless people are pulling money from under their magic mattress, no they are just in debt to their eyeballs CommenterBrett LocationSydney Date and timeMarch 27, 2015, 1:42PM “ That's not true in the 1930's my grand parents (& great uncle) moved from the eastern suburbs to bankstown as they couldn't afford the house. In the 80's my parents migrated (dad back) to bankstown but moved to morisset for the house they wanted. I bought a unit in Guildford with my wife (after she sold a 1/2 share of a house in Quakers hill). EVERYONE makes choices about where they live and the debt required. While houses continue to trade the prices are accurate. Investors have a lower tolerance for risk than owner occupiers they actually fund a renters lifestyle IE the rent doesn't cover interest on required loan, rates, strata land tax etc. If they're out of pockets 80k (deposit) and 5k (yearly) on a 800k place they need it to clear 300k just to beat a lazy salary sacrifice into super over 10 years more if you add CGT etc. I don't care if we have zero growth. Personally I'm liking a move to Wellington :) 120k average price means 680k smaller mortgage. Commentersky is not falling Locationguildford Date and timeMarch 27, 2015, 9:14PM “ sky is not falling March 27, 2015, 9:14PM OK, but why should taxpayers fund the difference with negative gearing? CommenterBillR Location Date and timeMarch 28, 2015, 8:25AM “ But whatever we do we mustn't touch CGT or NG. Blowing more air into the bubble by unleashing super money makes much more sense. CommenterRedsaunas Location Date and timeMarch 27, 2015, 12:06PM “ Increasing supply in one of the lowest density cities in the world might not be a bad idea. CommenterYoghurt LocationSydney Date and timeMarch 27, 2015, 4:04PM “ The sad thing is that those that have caused it still don't see. They are still running faster and faster around those few remaining chairs whilst the music lasts. There will be tears and tears like the middle class aspirants in the major cities have never know. It will be interesting to see how they handle it when the crash arrives, I'll bet they will be the first to stick out their hand to government after crying lower taxes and less welfare for decades. They will get what's coming to them whether government will come to their rescue will depend on how marginal the government is. CommenterRTP LocationSawtell Date and timeMarch 27, 2015, 12:06PM “ The problem is that the policy makers themselves are geared in property. Just when there was no money left to buy expensive property they allowed people to use their Super to buy property. How can we expect policy makers to make changes if it is going to bankrupt themselves? CommenterRK LocationSydney Date and timeMarch 27, 2015, 12:14PM “ They are indeed heavily invested in property. A study done in 2013 on the pecuniary register of federal parliament showed an average of 4.7 investment properties per MP and senators. With a (very) few having zero, a majority having between 1 to 6 and a few having between 6 to 100+. That is right, 100 plus properties. Does anyone really believe that they are about to pass laws regarding negative gearing that could in practice, depending on levels of leverage, bankrupt many of them? Keep in mind a bankrupt could no longer serve in Parliament. Why do you think you never hear a word on that subject. CommenterJordan Location Date and timeMarch 27, 2015, 1:42PM “ exactly Commentersteve Locationsydney Date and timeMarch 27, 2015, 1:44PM “ The flaw in your thinking is the fact that asset prices for income producing assets are not merely influenced by interest rates they are legitimately caused by interest rates. In other words, if interest rates are 2%, it is entirely reasonable to pay up for a property that only gets 3% yield. The reason is obvious, you can borrow at 2% and get 3% back and profit. The question then becomes, where are interest rates headed? I had a thesis 20 years ago, which is that interest rates are inexorably headed down. My thesis has been proved in the last 20 years. Nothing can now push up rates, because of the structure of the economy. Therefore high asset prices are entirely rational. Sorry to break the news to you, but its not a bubble when you can profit on this trade from yield, not just by flipping to the next guy. CommenterJohn Location Date and timeMarch 27, 2015, 12:15PM “ I concur. There is no way any government will raise interest rates ever. It will cause a recession and they will fall and so none will do it. To the point they will pressure, cajole and take over the reserve bank if required. If anything when the bubble bursts the government will print money to reinflate it and drop rates to 0. The dollar will crash and buying goods will skyrocket. But when will this happen nobody knows. 1 5 10 20 30 years I have no crystal ball. Make hay when the sun shines. CommenterTim Location Date and timeMarch 27, 2015, 5:31PM “ Memo to self... must sell our home in Sydney now at high point in market & clear all debt so we can buy at low point for a bargain price in 18 or so months... CommenterSir Rex LocationTurramurra Date and timeMarch 27, 2015, 12:25PM “ Nah mate.I wouldn't if I was you. This article is has been writing itself for 5 years now. When will the housing bubble pop? was being written since 2009. The bubble will keep on expanding for a long time longer. To think that housing prices will drop in 18 months is ridiculous. Price growth slowing down is very different from actual prices dropping. Just a heads-up. Commentergazzzzza Location Date and timeMarch 27, 2015, 2:51PM “ Well, it is up to everyone to decide how they play this but I can tell you that a real estate agent friend of mine is saying that those in the know in the real estate industry are getting ready to offload their own investment properties and in some cases their homes. You have to remember that the population is aging and so many people are just waiting for the chance to sell now when prices are high and downsize or in many cases move to Queensland or wherever. You will see price rises for a little while but as usual it will be the ordinary man in the street who suffers when sentiment changes. It is not about interest rates, negative gearing or anything else, just sentiment. I was at an auction the other day and despite all the hype it is clear numbers were down, real bidders were few, people are getting sick of agents' bullshit (apologies to my friend) and gradually deciding to wait. I would not advise anyone to buy in this market, as soon as people think prices will even stabilize the market will be flooded with properties and that will be the start of the landslide. I am still not at an age where I can downsize but if I could I would cash in on this boom before it is too late. People who follow the herd always lose out. Decisions made in panic are the worst. I could be wrong....as could my agent friend....but I smell a downturn. I have to say that I don't see the horrific outcome this article predicts but definitely the market will come down 20% in the fairly near term. CommenterTokyoJoe Location Date and timeMarch 28, 2015, 1:21AM “ This sounds very one-dimensional. The RBA is required to keep inflation within the specified two per cent to three per cent range and must balance a range of factors in doing so. It is not a housing price regulator. You do not discuss the supply side causes of housing unaffordability, particularly the failure of governments to properly plan for development and build effective infrastructure. The impracticality of living more than 10 kilometres from the CBD drives many people to cram into the inner-city suburbs, driving up prices accordingly. This will remain the case until outer suburbs are effectively serviced by public transport and other services. CommenterRichard LocationBrisbane Date and timeMarch 27, 2015, 12:33PM “ @Richard: 'The RBA is required to keep inflation within the specified two per cent to three per cent range ' You are aware that inflation target of 2-3% correlates to money created as debt by our banks and is used almost solely to inflate a singular asset class? The 2-3% 'requirement' is central bank initiated, so calling it a requirement is kind of circular logic. That is to say worldwide, central banks created a debt money system that required constant growth in the money supply simply to pay back the interest on previous growth. Don't forget this newly created money is not being used on productive output. It is invested in the same asset over and over. The modern economy is a classic Ponzi scheme! It's inflation or economic collapse but that does not make the 2-3% target sound, just necessary to prevent collapse. Unfortunately all Ponzi schemes collapse with a 100% success rate. That's proven. The pretend science of neo classical economists like Glenn Stevens and their sound target inflation rate will be disproven. The clue to this is in the deliberate omission of housing from the inflation calculations. The inclusion of housing would immediately reveal the debt-created money, money requiring repayment, is not used for productivity, but is constantly recycled in an asset bubble. Think about it. Would 10% yearly inflation represent a sustainable economic system or something akin to the Weimar Republic? Commentercalsa Location Date and timeMarch 27, 2015, 1:36PM “ It gets worse than this, a credit bubble crash will see bank stocks fall, causing a run on the stock market. This will trigger super funds to fall and incomes to contacts for our retires. Our largest retail sector (home wares) will contract and forcing many peoples hours to be cut or simply lose their jobs, This will push up unemployment, At the same time the RBA will lower our % rates, but this will set of a fall in the AUD$ at the same time the USA raises theirs, this will result in inflation rising as the cost of imports (already up 25% in a year) will increase another 25 - 40%. With zero % on personal savings, increasing unemployment, deflationary housing, rising inflation on imported goods, and a contracting china economy. We are going to end up like Ireland or the UK in 2007- 2009. Commentergatto101 LocationQLD Date and timeMarch 27, 2015, 12:34PM “ We can consider ourselves very lucky if that is the worst we experience, but imo, it will be much worse, as a comment above alluded to, it will start with a "d". If you look at a historical chart, our housing bubble actually started in 1950, but it is only the last 20 years that the move has been parabolic. All good things must come to an end one day. CommenterHouso Locationin my lounge room Date and timeMarch 27, 2015, 1:08PM “ I wish this bubble would pop, then we can start fixing up this mess (http://housing-bubble-australia.blogspot.com.au). CommenterHB Location Date and timeMarch 27, 2015, 12:37PM “ Meh, over indebt yourself at your own peril. FHOG was great. Even if it pushed up prices by as much as it's value that was irrelevant for me. It gave me the deposit and the start I needed, and I didn't outlay any extra as the grant covered it's own inflationary effect. I bought something small, rough and far away. Let it appreciate then sold to step up the ladder, keeping my debt/income under control (sub 30% of combined household income) I also think the median income to median price comparison is misleading. There will always be the low income sector who can never afford to buy and will rent with government assistance their whole life, or those that share accommodation, or live with parents while earning the low income. This skews the comparison. Housing affordability should not be assessed against all income levels. It has never being the case that as soon as you earn income there is a house you can afford to buy. CommenterPaul Location Date and timeMarch 27, 2015, 12:38PM “ The biggest wonder is why aren't the young home buyers and middle-income earners protesting on the streets (http://housing-bubble-australia.blogspot.com.au). CommenterHB Location Date and timeMarch 27, 2015, 12:39PM “ We're too busy working to save up for deposits ;) Actually, my husband and I have been very busy indeed. Our first-home deposit savings have just cracked six figures. Anywhere else in the world, that would be a substantial outlay for a home suitable to raise a couple of kids in. But instead, we find it's not even a 20% deposit for a crummy little flat within 10km of the city. So what do we do? Leverage ourselves to the hilt, borrow nearly 7 figures and pay back well over 7 figures for a property not remotely worth it? Or buy what we can afford, and raise a family like sardines, paying excessive strata to own no land but still be told we can't have dogs/BBQs/music on our own property? Nah, bugger that. We, and many like us, are just going to sit on the savings and watch them grow instead of p1ssing them up against a wall of debt. Boomers think we're going to hang ourselves by the thumbs to keep them solvent... what a laugh. Increasingly, we're just opting out in droves. And THAT, mate, is why the bubble will pop eventually. Because the next generations are happy to save and rent, or to move interstate or overseas, or do just about bloody anything to avoid having a $750k+ mortgage around our necks like a millstone for houses that cost 4-5x average salary when we were growing up. CommenterNest Egg Location Date and timeMarch 27, 2015, 4:18PM “ Exactly, in the same position as above commenter. Just investing savings in other asset classes and waiting for the bust. Baby boomers are kidding if they think they can fund their retirement by selling me their investment property at 7-12* median earnings. People under the age of 40 who think they are going to get rich using the same method as their parents are kidding themselves. CommenterJA LocationBrisbane Date and timeMarch 28, 2015, 5:47AM “ "Nah, bugger that. We, and many like us, are just going to sit on the savings and watch them grow instead of p1ssing them up against a wall of debt." Good luck watching them grow at current interest rates below inflation so they are in fact shrinking. CommenterPP Location Date and timeMarch 28, 2015, 8:11AM “ "LD just recently founded LF Economics and holds an MBA from IMD Business School"...does LD have an economics degree?? Just asking. CommenterScott LocationSydney Date and timeMarch 27, 2015, 12:43PM “ Does it matter? He sums up the situation precisely, and certainly better than any economist would. Commentermd Location Date and timeMarch 27, 2015, 6:56PM “ I hope that when the property bubble finally bursts (as it will) we have the ALP in government. I would hate to hear what Bill Shorten would say if he was still Opposition Leader. And of course the ALP will provide relief to those who have lost their life savings, their house and their job all in one hit! CommenterBillnix LocationWestern Sydney Date and timeMarch 27, 2015, 12:45PM “ Yet another flawed assessment of the property situation in Australia by someone who views the world through the US-led GFC. Firstly, the words "supply" and "demand" do not figure anywhere in the article, thereby reducing the discussion yet again to a pure affordability argument, which ignores the other factors that drive the market. Secondly, there is no "Australian property market". The Sydney property market is not the Perth property market etc. The can go in different directions at the same time (usual Sydney up and flat whilst Perth/Gold Coast go up and down). Thirdly, having recently bought a new house in Sydney, I can tell you that getting a mortgage in Australia in 2015 is a hell of a lot harder than it was to get a mortgage in the US before the GFC, where people with 2 casual fast food jobs could secure a 100% mortgage etc. Population growth, high incomes, SMSF investment and tax breaks will continue to keep the Sydney market strong. Only a huge recession (which woudl affect the incomes side) or changes to the investment and tax benefit rules can bring this party to an end. CommenterSir Noddy LocationErko Date and timeMarch 27, 2015, 12:48PM “ Absolutely agree with all of the above. Not only is Sydney in one umbrella also. A suburb like Hurstville will experience higher property price growth than say St. Marys for example. Having absolutely outrageous levels of demand though will always keep prices high. CommenterGazzzzzzza Location Date and timeMarch 27, 2015, 3:18PM “ It will be 'one' market when the banks are forced to say 'NO' to mortgages. Not just up to fickle speculators you know. This may be forced on them for numerous internal and external to Australia reasons. CommenterSteve LocationMelbourne Date and timeMarch 27, 2015, 9:18PM “ Using your logic, there is no "Sydney" market, just a "Surry Hills" market, a "Vaucluse" market etc. CommenterTN LocationOz Date and timeMarch 28, 2015, 3:56PM “ Sounds like just another American telling us a load of "baloney" based on what happened in their part of the world some years ago. 1. We are not in America. 2. Australia does not have a sub prime leading situation (which fueled the crisis in the U.S). 3. A very Sydney centric article and what happens in the rest of Australia does have an impact (either positive or negative) in the long run as well. CommenterAJA LocationPerth Date and timeMarch 27, 2015, 1:05PM “ Sub-prime lending in the US only accelerated the outcome. The fundamentals are the same for what happened in the US, UK, Spain, etc. and it would appear Australia is faced with the same problem. The reality is that Australians have over-committed to debt repayments (not just for housing, but across all lines of personal credit). You are right that Sydney is not Perth is not Brisbane. However, if Sydney suffers, then the banks will shut shop and the resulting liquidity crunch will affect all Australians. Commenterbio logical Locationperth Date and timeMarch 27, 2015, 9:43PM “ I can see this bubble bursting within 2 years, when you have an average house even in Sydneys supposedly affordable South West requiring 2 incomes to service the mortgage you know we are in for a big fall. The economy is slowing, soon unemployment will rise and a lot of people will be handing the keys back to the bank. Unfortunately we may need the bubble to burst and a recession to get us back on track. Only 8 years ago I bought a New Duplex with land near Moorebank for $375,000 sold it 3 years later for a little over $420,000., Now here's the real kicker the same property today only 5 years later is worth over $600,000. That is a 60% increase. Now I know my wage has not gone up anywhere near that amount to service that type of loan I do feel for people if they are buying now as I can see a lot of them losing their homes because they paid to much in the first place. CommenterMark LocationSydney Date and timeMarch 27, 2015, 1:21PM “ It's going to take a lot before housing prices in the capital cities fall. Quite apart from investment, governments will ensure that new house building is insufficient and population increase is comparatively rapid, ensuring that underlying the price increases is a shortage of supply. I suspect that the single biggest danger to the Australian economy in the short term is actually that immigration slows down for some reason. I'm fairly certain that the role of new arrivals as new borrowers and renters is important in maintaining the current situation. Commenterbut... Location Date and timeMarch 27, 2015, 1:24PM “ When our population is growing at the fastest rate of any developed nation and faster than many third world nations as millions clamber to get out of China for clean air and blue skies it will only go higher. 1. Insufficient stock of housing that falls ever further behind. 2. Massive but stealthy immigration program to the tune of approx. 10,000 new citizens arriving p/w in all categories of immigration. 3. Tax incentives to invest in housing. Housing is expensive but it is going to get even more expensive until all three of these stimuli are removed. And don't forget we are currently in the midst of a baby boom in Australia the likes of which far surpasses the baby boom generation. In fact the birth rate is twice as high as that era. All the babies and young children you see everywhere are going to require housing as they age. We will be living 2 and 3 generations to a household within my lifetime as population pressures force it upon families. If you think this will change you are like me 5-7 years ago. I have news for you all, it isn't going to change. The rich set the agenda and increasing poverty and a large population benefit them greatly even as it degrades the quality of life for the majority. Your life has already been degraded if you are around 40-50 years of age. Have you complained about it? Your masters KNOW they can do what they like. Most of us are too busy and too lacking in information to speak up and be heard. Most people have fallen for the myth that an ageing population is bad and we must have an ever increasing populations for growth. Growth for whom exactly? CommenterJordan Location Date and timeMarch 27, 2015, 1:33PM “ What bubble? you can't see it if you are inside one. CommenterBauble LocationSydney Date and timeMarch 27, 2015, 1:43PM “ If the bubble deflates slowly, it could mean stagnant housing prices and the banks refocusing their lending. People will look for other investment venues. A moderate deflation will see some foreclosures but if done properly, we can avoid a downward spiral. The doomsday scenario would be where the housing prices go downhill fast, and as the lenders scramble to foreclose and limit their losses, the prices go even lower until you can't even sell some properties for a dollar. People's SMSF's will be devastated, bank stocks and majority of our superannuation assets will be worth very little. Direct home investors will either have lost everything or have much less equity in their property investments than they're put in. CommenterKnee Jerk LocationSydney Date and timeMarch 27, 2015, 2:07PM “ waiting for the "it's all about supply" comments to pop up. No doubt supply plays a part. But this article is spot on, and something i've been saying for years. We've created a CULTURE of "wealth through property". THERE is your problem. Supply is a secondary cause - greed is the first. CommenterTechHead Locationin your base Date and timeMarch 27, 2015, 2:08PM “ I am a partially self funded retiree. I am renting. I have no debts at all. When the bubble bursts I will be laughing. No, not all the way to the bank. Just laughing. Why is there no English word like 'Schadenfreude'? Too well mannered, are we? CommenterWayne LocationCanterbury Date and timeMarch 27, 2015, 2:24PM “ Well, you might be laughing at first. But if the bubble burst only occurs, as I predict, only in the event of a world wide recession that hits Australia hard, I doubt you'll be laughing for long. Self funded retirees are a vulnerable group in times of recession. Without a recession, there will be no property crash because most of the fundamentals that are currently holding prices up will still be operating. Commenterguy LocationPymble Date and timeMarch 27, 2015, 3:05PM “ With Australia's commodity income gone. It started disappearing in 2010 when the decline in prices started to nose dive,With no other industry capable of filling the resource curse void, The recession is inevitable.In some areas already upon us. What should be put in place is a plan the will force the banks to pay, when the bubble bursts. CommenterFucmal LocationHelbourne Date and timeMarch 27, 2015, 2:25PM “ The main culprits are the big banks who have thrown out all rules of real estate valuation. When I bought my last house 8 years ago and asked for a valuation the bank replied that they simply consider the purchase price to be the correct valuation. Now, this has recently happened to another buyer in our area except that the prices have more than doubled in the past 8 years. Cash buyers can pay what they like for real estate as it is their money but for banks using our money to match the excess in the market is plain irresponsible and almost fraudulent as they most certainly know better. The Australian banking is so overexposed to the real estate market that nothing will save them if the crash finally happens. Ironically, loans for business ventures are much harder to obtain as the banks shy away from such risks. Perhaps they truly have lost all their senses. CommenterMike54 LocationSydney Date and timeMarch 27, 2015, 2:27PM “ These politicians seem more concerned with fake business stimulus than the real thing. The economy is close to recession. In a recession the government should INCREASE its debt and spend. Instead it opens the floodgates to 1.3 billion cashed up chinese who need citizenship, visas, fresh air, a home for their kids AND a house, while the ozzies only get the house. So the Chinese are prepared to pay more. Can teh SIV program Can Negative Gearing Get Realtors to report the names and details of all purchases. IN some US states this must be published in tne PRINT papers. Do these things and the bubble will be gone. The Politicians seem more interested in doing deals with rich people and lining their pockets than doing right for Ozzzies. CommenterJake Locationsydney Date and timeMarch 27, 2015, 2:40PM “ There are 1.3B chinese, but calling all of them cashed up would come as a surprise to at least 1 billion of them. Commenterguy LocationPymble Date and timeMarch 27, 2015, 3:00PM “ Great article: I think Thomas sums it us, but would add that the "grandfathered" provisions for negative gearing should be "reduced" on an annual basis to zero say after 5 years for existing buildings. Negative gearing should only be for new developments. CommenterDermot LocationSydney Date and timeMarch 27, 2015, 2:44PM “ No, negative gearing shouldn't exist at all. The taxpayer should not fund an investor's poor choices. Pure and simple. Don't socialise losses and privatise profits CommenterTechHead Locationin your base Date and timeMarch 27, 2015, 2:55PM “ Negative Gearing is only accelerating an existing problem. You are dealing with the symptom not the cause. The only way to solve this problem is to increase supply. Supply where it is demanded, in the middle ring suburbs, by rezoning to 3-6 storey terraces, spacious, wide, well designed, the sort of thing yuppies and Foreign INvestors pay $2 million+ for in the inner west. CommenterYoghurt LocationSydney Date and timeMarch 27, 2015, 4:03PM “ Why is the author titled a 'doomsday author'? Drawing attention to housing affordability shouldn't have a negative or dramatic connotation and to suggest so implies more about the editor's opinion than the author's views. CommenterFairDebate Location Date and timeMarch 27, 2015, 2:45PM “ Let's look on the positive side for a change: Future politicians will have something else to screw up. Future politicians will have something to talk endlessly about. ("...for families...for families...") Future non-homeowners will be able to lie to themselves and their kids about those terrible dark days of irresponsible prosperity, home ownership and carefree happiness when anyone could afford anything. Future lunatics will be able to use the present as a model of economic management. Future historians will be able to explain how one of the richest countries in the world deliberately and in full knowledge sent itself broke for no reason at all and didn't even notice. Future Australians - There won't be any. Too expensive. CommenterPaul Wallis LocationSydney Date and timeMarch 27, 2015, 2:49PM “ What is Lindsay David's track record in predicting the future? CommenterMG LocationSydney Date and timeMarch 27, 2015, 2:50PM “ He called the mining bust that is happening as we speak. Should read his book CommenterThommo LocationN. Syd Date and timeMarch 27, 2015, 3:09PM “ inner sydney and inner melbourne are part of australia, not australia Commenterhouses Locationbrisbane Date and timeMarch 27, 2015, 2:51PM “ I think David Gonski in the AFR yesterday makes some vary salient points. We are already experiencing reduced living prices/costs due to low petrol and interest rate prices, so don't lower them anymore. If interests rates reduce - be ready for a burst bubble. No matter what people think about supply increasing/constraints, if it is unaffordable, people will make other arrangements - living at home, buying outside of Sydney or moving out of Sydney. That will moderate/depress (especially if we have a Government that decides to eventually have fast rail to the regions) Sydney housing prices. CommenterDermot LocationSydney Date and timeMarch 27, 2015, 2:54PM “ No one disagrees that Australian house prices are massively inflated. The massive difference here is that while we have immigration running higher than housing increase and wealthy foreigners wanting to come here it will continue. Oh there could be a 10% correction or two along the way but the fundamental people/house ratio is in favour of maintaining a high price in general for some time to come. CommenterPhilistine LocationSydney Date and timeMarch 27, 2015, 2:59PM “ So... if there is a housing market crash and the doomsday scenario plays out, I imagine the RBA would drop interest rates close to 0% in response which would be great for those people who just want to pay off their house. Bad for investors but if you have no plans to sell or leverage the equity it won't be too bad provided you keep your job. This article is starting to make me feel all warm and fuzzy :-) If property keeps going up, all property owners win. If property crashes, the not-so-greedy property owners who just want a home win! After all, if the property market does crash, it's not like I can suddenly rent for free... SP CommenterSpace Place LocationNSW Date and timeMarch 27, 2015, 3:00PM “ The thrust of this article is that rates shouldn't be cut any more, if anything they need to be raised because real inflation including housing is much higher. And to that end it makes sense. A lot of non housing costs are import driven, and cheap chinese imports along with a strong dollar have been the real drivers in keeping prices down..not low interest rates... low interest rates have actually raised housing inflation too much higher levels. A case for higher rates. Has the RBA gone the wrong way? Well it depends. Housing construction has boomed too, creating more work - but enough people to do it? I would argue that Supply is the big problem in Australian housing. We have a LOT of migrants and we have a slow supply of land and new dwellings. Long said we need to be importing builders and releasing land to rescue this country. NOT ACCOUNTANTS/IT WORKERS....who really just move information around.(they in fact contribute to the problem). Blame the building unions perhaps, I don't know how the government decide immigration policy...but I bet lobby groups have influence. CommenterBarney LocationSydney Date and timeMarch 27, 2015, 3:09PM “ Sure raise interest rates, because housing is the only part of the economy that will be affected.....oh, wait.... Commenteralto Location Date and timeMarch 27, 2015, 4:55PM “ You can't raise interest rates to fix a centric and possibly Melbourne problem. The majority of the country isn't having a major property bubble. CommenterAdam Location Date and timeMarch 29, 2015, 8:48AM “ There is no question a combination of high population growth fuelled by immigration, job insecurity and massive borrowing to service debt for a home, will be Australia's upcoming catastrophe. This will be a catastrophe for the hard working men and women, who accumulated debt to educate themselves, debt to provide for a higher than necessary cost of living, debt to educate their children because of a perceived failure of the public education system, and debt to house themselves. Their governments at every level have lied to them over successive electoral cycles. When found to be corrupt their politicians get away with it. The bureaucracy and red tape strangle them, coerce them and harass them. Yet, the education system has argued that by working hard they'll prosper. They bought it because they've been conditioned to believe government are acting on their interest. After the meltdown they'll be taxed to the eyeballs when the losses of the big banks are socialised while those reaping huge profits and salaries get away with it. Their relationships will break down, their children will grow up in broken families, the gap between the rich and poor will grow worse. But worse of all will be the despair, because working hard will not provide opportunity to better their lot. We clearly live in a fair society with good governance. Aren't we lucky? CommenterMaddoc Location Date and timeMarch 27, 2015, 3:11PM “ The high housing prices provide a perfect opportunity to allow development of Sydney through rezoning to medium density 3-6 storey terraces, rows of houses and apartments. Instead we just sit back and watch the housing market inflate ever higherm, while most of the middle and inner ring suburbs remain low density individual one storey houses on big blocks. What a wasted opportunity. But true to form though. We blew the mining boom, now we're going to blow the housing boom, and after that we'll blow the agriculture boom. CommenterYoghurt LocationSydney Date and timeMarch 27, 2015, 3:16PM “ Yoghurt, On the other hand, we could just curb population growth instead of caving in to Liberal/Labor political donor vested interests who make a motza from the population Ponzi scheme - namely property developers, real estate agencies, private training colleges, the mining industry, employer unions, the labour hire industry. It would start with breaking the direct link between fast tracked permanent residency and skilled, semi-skilled and unskilled immigration rorts and vocational, visa factory, private college rorts, and Significant Investor Visas. We would also need to cull hundreds of unskilled, semi-skilled and skilled occupations from Scott Morrison and Michaelia Cash's skills shortage list. We can start fining and prosecuting migration agencies, real estate agencies, properties developers, accountants, lawyers involved in helping foreign investors bypass Foreign Investment Review Board regulations, and naming them on a dedicated website. Penalties can include deregistration and relicensing requirements to ensure that they comply with the rules. We can apply a nationwide ban on overseas donations, property developer donations at council, state government and federal government level, caps on political donations, timelier and better disclosure of political donations. We can implement a national ICAC corruption commission modelled on the NSW version. We can start a retrospective national register of foreign investment purchases. We can stop property developers and real estate agencies exclusively marketing properties only to overseas buyers. All of these measures will dampen the demand for housing and make housing and rental more affordable for Australians. CommenterTristan LocationMelbourne Date and timeMarch 27, 2015, 3:42PM “ Low Interest rates created by idiotic Government Policy has driven this insane housing bubble. It's no different to the US. Easy monetary policy creating artificially low interest rates driving unsustainable housing prices. Pure madness. Keynsian stupidity that will driver us into the brink of disaster. So called capitalist Banks getting fat and lazy from Socialist Government money printing presses!!! How mad can we be? Great article by the way. CommenterPaul Horn LocationAdelaide Date and timeMarch 27, 2015, 4:00PM “ No supply in middle ring suburbs where people actually want to live owing to archiaic zoning and a complete absence of metropolitan planning. The thing is, with house prices being what they currently are, there would be no NIMBYs as anyone selling to developers to develop an entire row of houses is going to make an absolute fortune. CommenterYoghurt LocationSydney Date and timeMarch 27, 2015, 4:01PM “ The pollies - past and present and on both sides - have a lot of skin in the game this time. There will be a soft landing, not a crunch of the kind that occurred in 1987-1988. CommenterLuxo LocationWaverton Date and timeMarch 27, 2015, 4:03PM “ Stop blaming baby boomers and negative gearing. I have four investment properties, all with 20% deposit, three in Sydney and one in Brisbane CBD. They are all positively geared and I am definitely not a BABY BOOMER, I am only in my early thirties. Negative gearing sux. Why would you invest in a business/asset that is loosing money? No, I did not inherited a windfall or won the lottery. My portfolio has been built by our savings. Stop whinging, stop spending money on flashy cards, stop going on your gap year contiki holiday and start to work smarter, plan your money and budget better. CommenterPositive Gearing LocationSydney Date and timeMarch 27, 2015, 4:55PM “ Yo may not be negatively geared but you are claiming a tax deduction on your interest costs. These are the deductions the government needs to stop. CommenterAdam Location Date and timeMarch 29, 2015, 8:52AM “ If you're voting in the NSW elections tomorrow, make your voice heard, at least a little. Write on your ballot paper that the government needs to do something to make housing affordable. You can say, "limit immigration," "reduce or at least foreign investing", "negative gearing for new builds only" or "include family home in pension means test." Doesn't matter what you write - just tell the govt that we don't want to prop up the housing bubble any longer. The government, RBA, banks etc will continue to ignore the warning signs and will continue to pander to the vested interests which means doing everything in their power to keep property prices inflating, even if it means totally destroying Australia while they're doing it. Commentermd Location Date and timeMarch 27, 2015, 4:59PM “ Agreed. Why has the state Liberal Party not forced councils to rezone more land for apartments so that young people don't have to live in sheds, garages, laundries & on their parent's couches? CommenterOla Location Date and timeMarch 27, 2015, 6:33PM “ Because, Ola, both parties are committed to the housing bubble. It is not in their interests to make housing affordable. And in any case, even if they did approve more land to be made available for dogboxes, these are for foreign investors to park their money in. Commentermd Location Date and timeMarch 27, 2015, 7:01PM “ You do realise the only people who read the ballot paper are the AEC staff. So exactly how will your message get to the candidate or politician? Commenterbio logical Locationperth Date and timeMarch 27, 2015, 10:01PM “ But we are assured again and again, that it could never happen here! Could it be possible that the sages of finance are wrong? How many of the "experts" will say I told you so in hind sight? I feel sorry for all those folks with SMSF's that have tied their retirement savings in the "never falling" house prices. I bet they won't be bailed out. But the banks will be. While those responsible for the loans will keep reaping their commissions. CommenterCraig Location Date and timeMarch 27, 2015, 5:42PM “ Roughly the price of property (or at least land) is inversely proportional to the interest rate. (Actually, interest rate minus growth rate.) So by halving the interest rate the price at least doubles, interest payments stay the same but there is twice as much principal to repay so it takes much longer. Put rates up and the situation gets much easier for first home buyers. Only problem is that the dollar will go sky high. Commenterruss Location Date and timeMarch 27, 2015, 5:46PM “ "Put rates up and the situation gets much easier for first home buyers." First you have to convince the RBA and the government to make housing affordable. Their first priority at the moment (and all the time) is keeping house prices rising. Commentermd Location Date and timeMarch 27, 2015, 7:04PM “ You're not listening. Smokin Joe has the plan. We now live to 150, and change careers at 70 to keep the Ponzi alive. Onya Joe. CommenterOracle LocationOatley Date and timeMarch 27, 2015, 6:12PM “ I call him 'Bubbles' CommenterRachael LocationPerth Date and timeMarch 28, 2015, 4:45PM “ How interesting. There are so many Australians with money, deposit or totally cashed up, who refuse to buy a first, second or any property in this unbridled, reckless property market. Boom crash as Abbotts LNP, federal & state, have obsolete, backward-thinking, proven failed economics, that is, the market knows best. Well it doesn't. It cannibalises itself to the point of no return regardless of product. boom boom boom crash Commenterpunch Location Date and timeMarch 27, 2015, 6:51PM “ The market doesn't know best? The problem is government interference in the market, zoning laws, negative gearing etc. that distort the market price. If it were a pure, unregulated market, then we wouldn't have overpriced property. CommenterJA LocationBrisbane Date and timeMarch 28, 2015, 5:58AM “ My fellow Australians: We are in pretty good shape. Ever been to Brazil( Petrobas,Batisita and all that...) Ireland, now emerging from a terrible ec downturn. Japan- still going nowhere. Our politicians and ec managers have done a pretty good job! CommenterBob Location Date and timeMarch 27, 2015, 7:25PM “ They felt the same way in Ireland, Spain and America (before their bubbles burst) CommenterRachael LocationPerth Date and timeMarch 28, 2015, 4:43PM “ The housing market and our whole monetary system are one and the same. You can't collapse the housing market without compromising the collateral on which the money supply rests on. That's why governments will bankrupt the country with housing grants, subsidies and super low interest rates before letting housing fall. If housing falls its because we have nothing left to throw at it. CommenterAk Location Date and timeMarch 27, 2015, 8:42PM “ Thats why the country should pay close attention to the Perth property market. When that fails, it'll be time to pull your money out of the bank and stick it in your mattress or safe. By the time the bubble bursts over east, it'll be too late. CommenterRachael LocationPerth Date and timeMarch 28, 2015, 4:47PM “ I'm young, I have a deposit. Am I going to enter the market? Yes. Where am I going to enter? Northern England via my Wife. This is where your demand is going to go. I simply cannot justify the cost to buy in Sydney at the moment. I have been shown around so many incredibly poorly built flats that I can afford taking into consideration future rate rises and simply do not see the value. I would rather rent, keep a good lifestyle close to a beach and keep my investments diversified and mostly offshore. Am I the only one from my generation thinking this way? The vast majority of my friends think the same way. The idiot gamblers unfortunately not. I know one guy who is on 80k who aims to have 20 investment properties in 18 months fuelled on debt. Absolute madness. CommenterSteve LocationSydney Date and timeMarch 28, 2015, 3:48AM “ Story is factually correct. Governments role is to legislate and unify people in all walks of life and in most of life situations. Its the premise of basics in a civil society. With regard to the property situation, they have done exactly the opposite, they have done everything possible to artificially and unsustainably inflate prices in the short term to avoid the issues of 08--14, and this is going to reap havoc on mainstream society , more than likely in the next 12 months or so. Essentially,, they've been kicking the can down the road, but we all know as kids that many times that can ends up accidently going down the drain. No one wants to make the tough decision for fear of criticism. I recall a similar situation with Al Greenspan in the USA not very long ago. Im not being critical of any individual or party, but see for what it is in black and white. This is only going to end well for people or have just recently or will very soon, sell out of their property holdings other than their primary residence. (So long as that isn't mortgaged to the hilt ). I recall back in late 80's, if your were getting a mortgage for an investment property, you paid AT LEAST 1 % higher interest rate and then a further additional rate was loaded on top of that to account for what the lender saw as RISKS in addition to the average surrounding market factors. Commenterwazza Location'Inside the bubble of Sydney' Date and timeMarch 28, 2015, 8:40AM “ Investing in non productive assets, no good for anyone. CommenterDVD LocationMelbourne Date and timeMarch 28, 2015, 9:00AM “ We need to stop non-residents and those on temporary visas buying property in Australia. We also need to wind-back the business migration scheme (anyone with a large amount of money is welcomed with open arms into Australia). When the Australian dollar is low, our property looks very cheap and is treated as an investment - not as homes. For those with long memories, this price bubble started back in the 1990s when large numbers of people from Hong Kong cashed in their highly valued HK property and moved to Australia... With the growth of the Chinese economy this is being repeated today. CommenterRusty LocationSydney Date and timeMarch 28, 2015, 10:51AM “ Cool story bro CommenterRachael LocationPerth Date and timeMarch 28, 2015, 4:49PM “ There is no doubt that some "back in the day" expectations have been turned on their head when it comes to housing and property. It's difficult not to wonder if the monetarist strategies over the past 25 years have contributed to this asset price inflation in a not insignificant way. To put things into a broad perspective : 1. between 1986 and 2014 the national established house price index out-grew CPI on average 70% per year fluctuating between around 3% and 13% compound annual growth in that time while from around 1990 CPI has been in the 2% to 3% band (with minor deviations) 2. between 1994 and 2014 average weekly earnings outgrew CPI by around 30% per year being in a 3.5% and 5% band 3. over the same period the national established house price index out-grew average weekly earnings by around 30% per year Between 2000 and 2005 house price growth was around 11.3% pa, CPI around 3.3% pa, earnings around 4.8% pa, so real earnings increase of around 1.5% pa as house prices increased 7.5 times that rate. Between 2005 and 2010 down to around 3 times, 2010 and 2014 down to around 2 times. I'm neither statistician, demographer, nor economist, but I understand enough about maths compounding to speculate that this can't be a Good Thing. House price growth can only outstrip the means to pay for it for so long, and house price inflation from cheap money and an obsession with controlling the price of other goods may well bite us very hard and very badly. Let's bring back the tradition of the sacrificial king for the roles of PM and Governor of the Reserve Bank. They'd have 4 years to get to equilibrium and if they fail........ Commentermanarch LocationPerth Date and timeMarch 28, 2015, 12:46PM “ Amidst all the commentary about the debt crisis, (or has it gone Tony Abbott?), you won't hear Joe Hockey mention the $1.9 trillion in household debt largely attributable to home purchasers by investors and affluent classes able to afford homes, but they're his constituency aren't they? Nor will you hear the treasurer acknowledge that allowing Non-recourse borrowing by Superannuation Funds enacted in 2007 by the profligate John Howard has contributed equally with negative gearing to vastly increase home prices. No Cigar Joe would rather point the finger at Chinese investors as a root cause, scoring with the electorate both on grounds of xenophobia and racism. CommenterPedantic Balwyn LocationBalwyn Date and timeMarch 28, 2015, 3:48PM “ So the RBA wants the economy to 'rebalance' from productive assets such as commodities, to building big overpriced McMansions. Wow. What genius. This really is a house of cards! CommenterDr Oz LocationHouse of Cards Date and timeMarch 28, 2015, 3:59PM “ You are completely wrong. Our good clean living, altruistic, all seeing, all knowing politicians dont want an economy of building McMansions, no. What they want is an economy of increasing house prices, now that is a real economy of benefit to all of us 'Lifters' after all if we built enough housing for the extra 400,000 inhabitants every year then how would we be able to push prices up for the benefit of the lifters. They want restrictive house building unless it is in the city building 'bitcoin' flats for foreigners, they want the rest of us renting houses off the 'lifter. Landlords' Now that is a real economy, just ask Smokin Joe CommenterSteve LocationMelbourne Date and timeMarch 29, 2015, 10:53AM “ There is an easy fix to our property bubble and tax receipt shortfalls and that would be to cancel negative gearing. This would stop investment level properties from being unaffordable for 1st home buyers as this artificially inflates housing prices. CommenterAdam Location Date and timeMarch 29, 2015, 8:18AM “ There are lots of easy fixes. Release more land. Scrap NG and CGT concessions. Scrap SMSFs buying IPs. Enforce FIRB laws. There are lots of ways to solve this problem...but THEY DON'T WANT TO! Our politicians personally own about three investment properties each! They answer to a baby-boomer electorate that couldn't give a stuff about the generations to come. They simply want you to pay for their retirements with rent. Given the opportunity, they'll take even more... maybe the kids should sacrifice their superannuation to the property bubble! Liberal, Labor, RBA, APRA... none of these abbreviations actually mean anything. They're all in it together. This is not a 'problem' they are failing to solve, it's their design. If you're young and you're holding an Australian passport, LEAVE. The current system is designed to suck all of the blood from your system to feed the elderly. Leave, and don't come back till it collapses. CommenterDeb LocationPerth Date and timeMarch 29, 2015, 11:30AM

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