The tale of one first home buyer’s success

Cross-posted from The Idiot Tax.

Beauty is clearly in the eye of the beholder. On Saturday, up a rapey alleyway, in the inner-city Sydney suburb of Surrey Hills, first home buyer, Doi, with mother Gina by his side (and a little of Gina’s money in his pocket), duked it out with six others at an auction to secure his first home. Doi said of his purchase “it’s a beautiful little house.” And more on that later. Sadly, like many first home buyers in Australia though, Doi won’t be living in his first home. He’ll be renovating it before renting it out.

The reason Doi won’t suffer the indignity of opening his front door to the sounds of late night alleyway hand jobs is because he, like most first home buyers, likely can’t afford to. Something sick and twisted has happened in major Australian cities – first home buyers have no incentive to live in their first home any longer. Because of incentives like negative gearing, an investor will likely put zero down, take an interest only mortgage because the rent still won’t cover the costs and claim a tax deduction on the loss at the end of the financial year – the hope is the capital gains will eventually make up for the rental losses.

First home buyers have little chance to compete with this madness. So their response is join the party. Buy something, rent it out and stay at home with the folks. If that’s not sick and twisted enough, Doi paid $840,000, $140,000 over the reserve, for his first home (the sick) and it looks like this (the twisted).

sydney million dollar crack shack

A beautiful little house, ain’t it? Even a new coat of bright yellow paint to cover up the rust stains.

63 square metres of the Australian dream. 1 bedroom and an external laundry and bathroom to remind you of colonial times. The good news is, despite Sydney property prices tearing upwards 14% in 2013 and another 12% in 2014, after the Reserve Bank cut interest rates 1.25% in 2012 and another 0.5% in 2013, in February this year, the RBA saw fit to cut another 0.25% into this lunacy without any lending restrictions in place. But this is totally cool because in their words, “the Bank is working with other regulators to assess and contain economic risks that may arise from the housing market.”

And what are those other regulators up to? APRA or the Australian Prudential Regulation Authority used all of their authority to write Australia’s banks a letter.

APRA’s new mortgage standards focused on quality, not quantity of lending In its letter to the banks, APRA indicated that it will increase the level of supervisory oversight on mortgages given recent developments in the housing and mortgage markets. That said it does not propose to introduce across the board increases in capital requirements or caps on particular types of loans.

The financial terrorists at APRA must be pleased with themselves that they’d managed to write a letter to the banks about their lending standards by December 2014. After the Reserve Bank knocked 2% off interest rates starting in 2012. See if you can pick where the RBA started cutting interest rates and Australian property investors in Sydney and Melbourne (represented by NSW and Victoria on the chart) started getting horny with cheap money and ploughing it into Australia’s two largest cities?

sydney property bubble

I know. It’s a total shock that maniacs who borrow nearly 100% on interest only terms to lose rental money to speculate on housing capital gains would love low interest rates. And with the lowest mortgage rates in Australian history, coinciding with the sloppiest lending standards in Australian history, combining with the highest property prices in Australian history, added to the highest household debt to income ratio in Australian history, what would you expect the biggest idiot of a treasurer in Australian history to do?

Start talking about letting first home buyers raid their retirement accounts, so they can get over the angst of missing out on this lunacy and ensure they’ll blow their retirement savings and push the housing market up even further.

…such changes may include using superannuation savings for things that Australians do not use them for now, he said, including using super to buy first homes. “I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home, on their first home,” Mr Hockey said. “I am concerned about rising house prices and the accessibility to homes and homeownership for younger Australians, but we’ve got a limited pool of savings. We need to have these conversations.”

This is innovation Australian style from treasurer, Sloppy Joe Hockey. If it’s not enough to dig up resources and sell them to China and then use that money to borrow more money to to bid up house prices no-where-else but Australia. Why diversify? When first home buyers are lucky enough to dodge this bullet (whether they understand it or not) the man who should be offering caution, sympathizes with them by suggesting they should be able to grab their retirement money and jump into the housing market when it’s never been hotter.

But as Sloppy Joe says, “I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home, on their first home”. Note Sloppy says he gets a lot people saying that young people should be able to use their superannuation, instead of alot of young people saying that they should be able to use their superannuation. Which is really the key because this dopey plan has been done before in Canada and who came up with it? It wasn’t first home buyers, it was the Canadian Real Estate Association, in the midst of a recession and housing down turn. And those guys don’t ask for money to flow to the real estate market to help first home buyer affordability.

If this ain’t bad enough, Australia’s China fueled boom is all but over. And a guy named Crispen Odey, who likes to have photos taken with his hands clasped together, thinks we’re toast. Australia is heading for recession he says. He’s dark on the banks, who keep lending to the maniacs who’ve been bidding up house prices. And he’s short on Genworth who does some of their mortgage insurance. The downturn is already being felt in mining towns where formerly hot housing markets have turned to dustin the space of 4 years.

Will Doi feel a cool breeze at his new inner city shed? Well that’s assured. If he wants a bath or needs to take a leak, he has to walk outside to do so, but that’s someone else’s problem. His tenant. Doi’s lucky, if Sydney’s looney housing market falls apart, he’ll never suffer the indignity of foreclosure, eviction and moving back in with his mother.

Australia’s bizarre obsession with real estate speculation meant he never had the opportunity to leave mother’s house in the first place.

Comments

    • Doi will be chuckling on the other side of his little chubby face when he sells it for a 30 % return in 3 years and we’re all still sitting on the sidelines laughing at the losers who don’t know about the imminent apocalypse we’ve been predicting every year since 2010.

      • David McWilliams?

        check out Morgan Kelly Irish economist, YouTube, circa 2007

        (Morgan Kelly PrimeTime 20070417)

      • You write this even though the graph above depicts very clearly that house price were declining 2004 through 2010, and from 2010 through 2013 they were flat and therefore losing money in real terms.

        Same for Alby. Graphs not your strong suit ?

      • I think thats annual cumulative prices increases – house prices did not decline during that period at all…

      • Great article pointing out the absurdity of our housing market, but unfortunately, Thickly Sliced is probably right when he/she says, “when he sells it for a 30 % return in 3 years and we’re all still sitting on the sidelines laughing at the losers.”

    • Just an idea, but probaly not a bad spot for a brothel, instead of the red door, it’s the yellow house!.
      Likely clear say a grand a week, hence on an attractive yield of 6.2%, likely tax free also.

      • Optimus, don’t know where you were during 2004-2010 but Australia it obviously wasn’t. Reality, not your strong suit?

      • The idea had been growing in my brain for some time. True force. All the king’s men cannot put it back together again.

    • Yes, another sad story of a horrendous supply shortage.

      “The world fundamentally does not produce enough tulips.”

      – Herman Joseph Hockey, Dutch Florist (and Joe’s great great great great grandfather)

      • Love your work dude! There’s a shortage of investment properties there is no doubt. Build em and they will come (especially the aliens).

  1. Let him burn… there is no limits to stupidity indeed. How on earth would anyone with a single brain cell purchase something like this as an IP or a home!

    • Its genius. Just a block away from central station. Welfare and support agencies offering food nearby.

      There will be 6 international students living in that place by the end of the week.

      Edit: What is going on with the two doors? Must be able to put in another two bunk beds in there.

      • Second door?

        Separate entrance to the shower room when coming in from the pool so you don’t mess up the parquet with wet feet

      • Thanks for confirming my suspicions about the door.

        The man has a bright future then. Most Aussies only aim to be SlumMasters but this man has potential to get his sisters friends from the homeland over on sham education visas and graduate to SlumMaster Pimp in no time. Kind of economic development required to sustain our political class.

    • @ paulF “How on earth would anyone with a single brain cell purchase something like this as an IP or a home!”

      But Paul, if things continue the way they have been, and there’s no reason why they shouldn’t, this guy will double his money in a few short years, and then double it again a few years after that. It’s actually the single brain cell of successive governments getting us to this ridiculous situation you should be questioning.

      • No question about that MD, successive governments/regulators are the ones to blame for our current situation but at the same time some common sense goes a long way… If he’s done his due diligence and thinks that he’ll make a buck out of this deal than all the best but i really doubt it… 140ks above reserve…

      • But that’s what I’m saying. Only a few years ago prices were getting out-of-hand. Now they are cheap by comparison to the insane prices now. In 2007 I thought prices surely couldn’t go any higher. They were already at 8 and 9 times average wages. And sure enough, prices did start falling during the GFC but Rudd made sure that the bubble would be not only reinflated, but inflated to the stratosphere. And they’re still going higher.

        And sure he paid $140K over reserve. But his mother probably has several other properties (I’m guessing). He’ll be ok. As will a lot of others who are paying over-the-top prices now. In any case, there’s a never-ending supply of immigrants and foreign investors ready to pay top dollar. Not to mention all the Australian baby boomers who have made a killing with all their properties going to prices never imagined. And the government and powers-that-be will do everything to make sure the bubble keeps going.

    • Sadly, those of us with any of our wealth in this stupid nation are all of Dois’ guaranteurs, regardless what that contract of sale actually says. When it hits the fan there will be so many levels of assistance rolled out to these poor souls ‘who could never see it coming’ at the expense of the prudent.

      Just look at NG – it’s a constant, endless bailout mechanism, so the mindset is permanently etched into this country’s culture.

      • ‘ When it hits the fan there will be so many levels of assistance rolled out to these poor souls ‘who could never see it coming’ at the expense of the prudent.’

        Yep that’s something somebody can see coming.

  2. What a magical country Australia is.

    King Midas walks the streets turning humpies into gold.

    Citizens become landlords with a deposit.

    The Treasurer calls “Proceed!”

    And the RBA cuts interest rates again.

    This is indeed the promised land.

    • Did you miss out David? You shouldn’t have listened to that “don’t buy now” dude and bought when he first called it. Done the right way you could have retired right now from the mega profits!

      • Exactly.

        As they say, if it’s stupid but it works, then it isn’t stupid.

        The whole thing is a great big mess, but if you can’t change the rules then you may as well make the most of them.

      • The Worlds best Treasurer actively encouraged the growth of the parasite while collecting the accolades and plaudits. He should never be forgotten in this whole mess.

    • “Citizens become landlords with a deposit.”

      The way things are now I don’t think there’s really many buying with much in the way of a deposit.

  3. I know that house. It’s shittier than it looks in the photo.

    Australia has lost the plot.

      • Nope. Exploitative investment the Australian way. His idea of a refurbishment will involve at least three double bunk beds.

        International students each paying 130 pw in all in cash. He can and probably will declare whatever he likes as rental income in order to claim negative gearing deductions.

    • Position position position
      Goes well with its alleged former life as a house of pleasure, n’est pa?

  4. Meanwhile at the country’s’ biggest lender:

    “Commonwealth Bank of Australia chief executive Ian Narev …quietly sold his mid-sized home in Sydney’s trendy Paddington”

    Not so quiet, and why is he selling if prices are going up? Even if he’s re-bought, at that level, he’d hold-and-refinance if he really thought they are?

  5. This is a good news story about a chap who has got himself onto the property ladder and who will eventually become rich and well serviced!

      • +1 and add to that, he should be a labeled a hero since he beat the aliens trying to buy our property!!

    • Absolutely correct Reusachtige.
      Looking at it, it’s obvious that by paying a small cash consideration to the planning authority, representative, two more floors can be added to the property. Now THAT’s a different letting proposition. A whole class of students can be moved in. Why, you wouldn’t even have to add the bars to the windows on the ground floor (protecting pedestrians from the bottle-smashing parties inside) as they have already been thoughtfully provided. You just come in once a month and hose the joint down.
      A jewel of an investment, with negative gearing the icing on the cake.

  6. the hope is the capital gains will eventually make up for the rental losses.

    This is a very popular mistruth.
    The truth is that capital gains are not relevant or not significant in the plans of many buyers.

    Some buyers hope to live in the house and hope/expect that rents will eventually rise above repayments. i.e. buying now will be cheaper in the long term than renting.

    Also some buyers intend to keep the property forever and collect the rising rents. They hope/expect rising rents will make the property cash flow positive and a nice little earner for them. It is true that many of these types would like the ability to borrow against any capital gain for future purchases. However capital gain is not essential for their plans.

    • If what you say is true (I’m not convinced it is so), buyers are nuts. They might break even – with luck – in oh… 2060?

      • Not necessarily. If a buyer chips in a good 20% or more into his IP or tries to pay of his mortgage ASAP the same way you’d do with a home loan(many don’t because they want to negatively gear the property…), it can be cash flow positively and negatively geared(although not by much) at the same time so not a bad outcome.

      • @PaulF

        it can be cash flow positively and negatively geared(although not by much) at the same time so not a bad outcome.

        That is a very narrow band. In any case, if you had the cash and weren’t just making use of leverage, there are better investments out there.

      • Good news for the NSW government as the stamp duty on this little beauty is a staggering $33,290. With a 20% deposit (excluding conveyancing) one would therefore need to pony up a tad over $200,000 in cash just to secure the legally enforceable right to repay the capital plus interest. Liv’n the dream.

      • PaulF – you are talking accounting break even whilst I am talking economic break even. And even in your accounting break even scenario, that occurs within a ‘reasonable’ number of years only because of the additional principal repayments they are making.

        The economic return (without capital gains exceeding inflation) would be exceedingly poor.

      • I’m not kidding anyone.

        Your survey is interesting but it was not detailed enough to discover what investors were expecting or relying on over the long term.

        All readers should review my comment here:
        http://www.macrobusiness.com.au/2014/12/the-history-of-australian-property-values-redux-2/#comment-966348
        showing how rents more than trippled in 30 years. Rent went to 3.4 times. Let’s say selling price went to 6.8 times with yield halving and PE ratio doubling. If I told you that over the next 27.25 years, rents would again rise to 3.4x but yield would double and PE halve, I suggest that the property would still make a superb investment if:
        * Interest rates will stay low enough over this period AND
        * The investor can make up any shortfall until the property becomes cashflow positive

      • Agree with BB

        NG + CG were central considerations for most of my friends with IPs. Even those that aren’t NG are still depending on capital gains for a decent return.

      • Agreed that many investors buy for capital gains. Many believe that property prices in Sydney only ever go up.
        Many also believe negative gearing is a wonderful way to reduce tax. They don’t understand the loss aspect, or how much their tax is reduced. They simply know that many others are doing it, and that buying property and negative gearing has resulted in huge gains for previous participants.
        However my point is that many other investors are not concerned by capital gain and are buying to secure a rising rental return.

        I object to the untruthful claim that all investors depend on capital gains to justify their strategy. The truth is that a considerable percentage of investors depend on rent rises (and continuing low interest rates) to justify their strategy.

      • Haha I was going to link to the same survey.

        Claw has to claim that investors are buying for yield and not CG. Because if they aren’t buying for yield expected returns are not dependent on choked supply and his whole theory stops working.

      • Claw has to claim that investors are buying for yield and not CG. Because if they aren’t buying for yield expected returns are not dependent on choked supply and his whole theory stops working.

        What a lot of nonsense. The fact that rents more than trippled in 30 years is clear evidence of the shortage.
        What is inside the mind of an investor buying now has little relation to the real problem facing our community – shortage of housing, long commutes and high rents.

        Get real.

      • I guess you missed the AFR link on declining real rents?
        Or are they wrong as well? Like the ABS?

      • I guess you missed the AFR link on declining real rents?
        Or are they wrong as well? Like the ABS?

        You are very unclear in what you are posting.
        I have consistently campaigned for government to solve this shortage. I hope that one day it will be solved. When that happens rents will decline a lot, and I will be happy with that. Rents are still very high and have a long way to fall before they indicate shortage solved.

      • High relative to what? Not incomes; as demonstrated by the ABS, as denied by yourself.

        Rents are very high relative to an ordinary person’s income. The rent for lower-end shelter is extremely high relative to a lower-end person’s income. For example a tiny granny flat in Mt Druitt rents for 70% of an old person’s pension. These rents are unprecedented in Australia.

        If you have some ABS statistics that prove that tiny Mt Druitt dwellings have always been unattainable to pensioners then I would like you to post them here and now.

      • I agree with you Claw that rents are very high. It’s just that prices have risen so much more.

        But lobbying the government to solve the shortage? That’s their desired aim – why would they want to solve a shortage? It’s the very reason they keep the immigration rate so damn high, at the same time as allowing unfettered foreign buying.

  7. I don’t know the restrictions on this piece of crap but I could demolish this and build quite a nice three-floor townhome here for around $350k.

    So we’re at A$1.1mm for a brand new luxury townhome with land next to the train and walking distance to Sydney CBD. That’s $825,000 USD. Even in MB’s beloved Houston (my home town so I know what I’m talking about and I have several friends who build and sell these types of urban townhomes) this is the price of a brand new townhome in the inner core. Minimum. And that’s in shithole Houston, with 2.3% of the appraised value in property tax per annum on top, not NY or Los Angeles.

    Married young professional couple each earning $100k with good savings or perhaps earnings from selling their previous unit could afford this and get financing without issue.

    Or even better you demolish it and build two spacious units stacked atop and sell them for $700k each.

    I thought this was an economics blog? Any half-wit knows the value of a property is not in the depreciating building improvement but the land it sits on. This is a nicely shaped piece of land.

    At least you’re in a country where young people can save any money! Here in the US we’re all in debt just from uni!

    This is a good investment and I’m the last person to be a property spruiker. He can save up and even build on it himself later on.

    I agree that negative gearing needs to go, though. That’s a no-brainer.

    • If he sets it on fire he “may” be allowed to knock it down but he’d have to make sure a lot of the brick work was blown out in the explosion.

    • Doesn’t it have party walls with two other houses? I don’t really see how he can demolish it?

      • Are you saying this is not permitted by regulation or that it’s not logistically possible? The latter is absurd, skyscrapers are built in New York with walls shared with old 3-story buildings.

    • Given the location, I would have to agree with you to a certain extent although I don’t know what can be built on 63m2. This can be made into a very smart investment however if the floor doesn’t fall out in the mean time.

      Married young professional couple each earning $100k with good savings or perhaps earnings from selling their previous unit could afford this and get financing without issue.

      I had this debate with a mate so I will try it here.
      200K gross household income puts you firmly into the top 5% of income earners. Say they have the 20% deposit and all up it will cost them 1.3M. They take out a 1M mortgage and are DINKS. Their take home pay is 75K each. Now at 5% per annum, they will be paying 50K just in interest which is 30% of their DINK income.

      For a 30year mortgage, one of their incomes is going straight to the bank. The other has to pay the rates etc and expenses. This is after saving 300K and they might be considering kids soon.

      Just remember these guys are close to the top 5% of earning (probably are now after the mining cream pie is melting).

    • Never be allowed. Would have happened LOOOOONG ago if it was as easy as spending a few $100K.

    • Is $350K quote to rebuild from Houston builders? Unfortunately in Sydney it would probably be double that amount. I have heard stories where people planned to build a house and they get quoted some crazy amount for something like ‘site access’ on a flat block somewhere in burbs. Sydney builders and trades people make more than heart surgeons.

      • Yes, and it most likely wouldn’t be a fixed-price quote for a job like that, they’d just charge what they thought as they went along, so you’d never really know how much the costs would be.

    • I don’t know the restrictions on this piece of crap but I could demolish this and build quite a nice three-floor townhome here for around $350k.

      Mate, you would struggle to demolish and rebuild a freestanding two-story 3/2 house on a flat block in the suburbs for $350k. And that’s in Brisbane, so I’m sure Sydney is a lot more, before we even get into the additional costs of shared walls and site access in a high density area.

      At least you’re in a country where young people can save any money! Here in the US we’re all in debt just from uni!

      Don’t worry, our current Government is working to fix this as well !

    • Hey Nor, 350k will not transform that into a nice 3 story townhouse. To rip that down and build a 3 story town house in the cbd in Sydney you are looking at 1 million + no exaggeration. Then for about 1.8 million you”ll have the best house in the worst street of the suburb

      • @AlbyMangles

        And it would take three years of council wrangling to gain the necessary permits.

        and hope like hell that someone doesn’t lodge a Heritage Order on that fine example of 1920s architecture.

        I’m looking forward to tracking this newbies pain over the next decade…….

    • Even in MB’s beloved Houston (my home town so I know what I’m talking about and I have several friends who build and sell these types of urban townhomes) this is the price of a brand new townhome in the inner core. Minimum. And that’s in shithole Houston

      Oh Nor, please do tell more!

      Leith is always holding up Houston as a shining example of good housing policy and keeps telling us how cheap it is. When I point out its a quote “shithole” and no-one in their right mind would want to live there, and perhaps that might be part of the reason why its so cheap, I get shouted down.

      • You have never been shouted down. You claim “no-one in their right mind would want to live there”. This ridiculous claim is easily refuted by the statistics that show many people do live there, and the population is growing.

        Of course we can always learn more. A quick search of the Houston real estate ads should find an example to confirm what Nor has posted. Will he do this?

    • It’s obvious that the poster has never been to Surry Hills. The City of Sydney council always does everything in its power to maintain the ‘slum’ look.

  8. They say “markets climb a wall of worry, but at the very top calmness prevails”.

    I can’t be everywhere at once, but I think I can sense calmness now.

    Everyone knows about the Capex cliff; the impending mining and manufacturing job losses; the impending budget blowout; the overvaluation of housing, shares, and everything else – but people have stopped caring.

    Even articles on Macrobusiness, and Ian Varrender’s articles on ABC online seem a bit hollow and without convincing shock value any more – in a strange form of doublethink I know they’re right, but they wash over me.

    I think people feel calm with house prices the way they are, calm with the sharemarket valuations (it’s been over 3 months when two 1% down days have not been divided by a 1% up day), and just calm in general. Indeed, Doi the first home buyer is quite comfortable in the purchase he has made and the debt he has taken on.

    We could be close to the snap.

    • Who cares, buyer is on a 30-year horizon. In 30 years Australia’s population will be double and the super fee intake will move up along with it while Sydney will still have a very limited amount of land upon which to build, and even more limited in its flat walkable urban areas.

      • Sydney does not have a land supply problem – it has a planning problem.

        Boomers have NOTHING put aside for their retirement futures – they will be forced to sell as the govt seeks to pass on the true cost of health and welfare to them through CPI increases.

        Lack of job opportunities and rampant unemployment will curb the population growth.

        Negative gearing claims were $13billion in 2012 and will likely exceed $20billion in 2015 – it will need to be slowed to help with budget repair.

        Put those assumptions into your pricing model and let me know when he will break even….

      • Of course, nothing could happen in those 30 years, either at a macro or micro level, that could derail this.

      • Your inner Spruiker has awakened! You almost had us convinced you weren’t a spruiker in the post above! I was so convinced I started searching all the inner city Favelas for bargains like this one!!

    • Calm because people have been saying that sh1t will go wrong for years and those losers have been totally wrong therefore everyone knows that she’ll be right mate, that’s just how we roll !!

    • I’m debating whether we are in the “delusion” or “new paradigm” phase of the bubble – time will tell.

    • So you think that we are at that point in the 4th movement of Beethoven’s 9th just before the chorus comes in. It takes a long time to get there if you listen to the whole symphony, but man is it glorious once it all gets going.

      • So far it seems to have far more in common with Act 2 of Tristan and Isolde, where the expected resolution is denied over and over again, driving listeners mad.

        Notably, the final resolution only comes at the end of the opera, when the main characters die.

  9. Soros et al (Popper, Nagel, Foucault and Kant) describe this as a “reflexive relationship” with both the cause and the effect affecting one another in a relationship in which neither can be assigned as causes or effects. Rising prices attract buyers whose actions drive prices higher still until the process becomes unsustainable and the same process operates in reverse leading to a catastrophic collapse in prices.

    • Don’t recall where Foucault discussed property in the 17th in “L’Archeologie du Savoir” but maybe it’s there. Positive feedback is known in engineering and finance but not in property spruiking or APRA.

    • No no Lorax
      You’re right in that there’s only one Surrey, it’s south west of London. I assume “Surry” came from a mix of imitation being the sincerest form of flattery and a rather poor grasp of spelling…

      • The first land grants in Surry Hills were made in the 1790s. Major Joseph Foveaux received 105 acres (0.42 km2). His property was known as Surry Hills Farm, after the Surrey Hills in Surrey, England.

  10. Janet 7:37 am.

    Narev (CBA) has “quietly sold” his Paddington home and upgraded to a much more expensive Paddington home. Stop egging on those wanting to justify a crash with cr*p.

  11. moderate mouse

    Easy money? Crazy tax breaks?! First home buyers being forced to the fringes by frenzied demand for second, third and fourth (and tenth) houses??

    What does this fool know? Hasn’t he heard it’s all a supply side problem? Amateur.

    Just ask Ponzi Joe Hockey: “Australia fundamentally doesn’t build enough houses.”

    See, it must be true.

    • A pointless rant moderate mouse. The ongoing enormous immigration requires us to either create some new cities or put many people on the fringes of our huge cities.
      I vote for new cities or less immigration. You appear to prefer to joke, deny and obfuscate.

      • The Mouse rarely rants and is never pointless. The Claw on the other hand, rants often and points in the same direction every time.

        “Hey look, over there everyone….shortage!” (Shhhhh….Don’t mention the tax breaks)

  12. “If it’s not enough to dig up resources and sell them to China and then use that money to borrow more money to to bid up house prices no-where-else but Australia. ”

    Not wishing to divert this thread but for crying out loud if we are to come up with some possible solutions we best get the problem correctly identified.
    The problem is NOT that we dug up resources and sold them to China. The problem is that WE did NOT dig up the resources and sell them. We We SOLD them to satisfy our over-consumption and then the foreigners we sold them to dug them up!

    We have NOT run a CAS at any point in this whole schmozzle – so excess exports were NOT the problem.
    The problem is flogging off every asset we have just to make bloody coffee machines cheaper!

    Get ir right!

    • In the old days, the colonial government is setup to exploit nature resources for the ‘motherland’. Wool were exported back to Great Britain, and Australians buy back the clothing made from it at inflated prices. To prevent competition, the colonial government bans garment manufacturing in Australia.

      So Australia is in the process of being re-colonized.

    • There is a disconnect here.

      State governments sold the minerals cheaply for the usual bad short term thinking reasons.

      This helped push up the dollar and the rest of us responded to lower prices with more demand for imports.

      If it was my choice I’d have either kept the minerals and paid more for my imports or at least gotten a better price for the minerals. But even with theoretical democracy I don’t get to make that choice.
      Maybe a majority would have been happy to trade cheap imports for gutting manucafturing and selling a pile of dirt but we don’t know because it’s not their call either.

  13. Location, Location, Location.

    That lovely yellow hovel is within a minutes walk from three knocking shops and some street vendors more than willing to negotiate.

    The buyer got a bargain.

  14. Buying an investment that is at all time highs, had a blow off price rise in the last 12 months with a poor yield to boot and a large initial outlay and relying on capital growth to get the necessary return on your money. Mmmmm, what could go wrong??? haha.

    Then again, by the looks of the place maybe Doi and Gina have some plans to import some girls from home to get the required yield.

  15. “Fire Water Burn”

    The roof, the roof, the roof is on fire,
    The roof, the roof, the roof is on fire,
    The roof, the roof, the roof is on fire,
    We don’t need no water let the motherfucker burn,
    Burn motherfucker burn.

  16. Locus of Control

    Mr Idiot Tax, if you’re reading this, let it be known that I think you produce some fantastic posts/ essays. I would say as much on your blog, but you have to create a blog account or something to comment on your posts and that always puts me off. Thank you for taking time to put your thoughts into words and allowing the rest of us to ponder/ enjoy. (I think as much of the broader MB team BTW).

    On the subject matter itself, wow, if I had 800k +, borrowed or my own, I certainly wouldn’t *squander* (is there any other word that suits?) it on THAT! There’s more to life (& much more attractive RE options) that can be had for that much $.

  17. Great Article great use of the term “Financial Terrorist” eloquently quoted by none other than Max Keiser.

  18. $900k (including the on-costs) seems an awful amount of money for young Mr Doi Kim, 25, and his mother Gina Lim to “invest”.

    Would love a background follow up story……..