AFG confirms inter-generational property war

AFG has released its November lending figures and although the headline numbers aren’t bad, with the number of loans up 1.5% on October and 4.5% on last year (unadjusted, Nathan Webb will provide seasonal adjustments in due course), AFG is howling about a collapse in first home buyers in QLD and NSW:

Demand for home loans by first home buyers has collapsed in New South Wales and Queensland, according to AFG, Australia’s largest mortgage broker. Last month, AFG arranged just 96 home loans worth $31 million for First Home Buyers in Queensland, compared with 265 mortgages worth $79 million the month before.

This follows a similar trend in New South Wales where in both October and November the company arranged fewer than half the 219 home loans worth $83 million in September. State Governments in both NSW and QLD have withdrawn $7,000 first home buyers grants in the past two months.

The proportion of the company’s home loans arranged for first home buyers has slumped in Queensland from levels around 15% in the months leading up to the end of the first home buyers grant, to just 5.5%. In New South Wales, first home buyers comprised 13% of new home loans up till September, dropping to 5.7% in October and 5.4% in November.

Mark Hewitt, General Manager of Sales and Operations says: ‘This trend is both significant and very concerning for the market going forward. First home buyers are the lifeblood of the property market – when activity stagnates at the entry level, it affects everyone up the property chain. By contrast, both New South Wales and Queensland are enjoying strong support among property investors right now. We could be seeing the transition to a generation of renters unless more is done to help people onto the property ladder.’

New South Wales leads Australia with 41.1% of all loans in the state arranged for property investors. In Queensland this figure is 33.4%. By contrast, WA leads the country in the first home buyers market with 23.6% of all new home loans arranged for them.

Fixed rate mortgages rose as a proportion to 21.6% of all home loans arranged.

This is higher than in previous months but still well below the peak of 25.4% reached in March 2012.

Just let that sink in for a moment. That’s 41% of the residential property in the nation’s largest state being sold to investors, at least according to AFG data, which has its biases. As we know, property investment is dominated by older demographic cohorts. Meanwhile, just 5% are first home buyers. No doubt FHB demand will have been drawn forward before the removal of the grant and will recover in time but it is still difficult to see this as anything other than an inter-generational war being fought over the great Australian dream.

Here is the key table:

And the full release:

Mortgageindex December 2012 National

Houses and Holes

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the fouding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

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  1. Really shocking. I know of a number of instances of retired “gomers” with multiple properties, including luxurious main residences (in one instance on the Sydney harbour foreshore). These old fossils are hogging living space purely by virtue of being born while opportunities existed to buy cheap real estate; a “squatocracy”.

    Meanwhile young 30-somethings, even professionals, cannot afford to buy homes and start families.

    It’s a situation ripe for tension and perhaps even revolution 😕

    • Its a lousy situation, I can confirm as one of the ’30 somethings’ you mention.

      Revolution never results in a better situation than previously existed sadly, so the fix will have to be something external. I suspect when large numbers of the BB generation start to die off, if not just retiring, it will be a fairly savage blow to the land/housing industry.
      Also, the potential for some fairly shattering world events certainly exists, that is traditionally what corrects screwed up societies and economies.

      • “Revolution never results in a better situation than previously existed sadly”

        Perhaps we should still have slavery?
        And how about no voting for women?
        Would you still like to live under feudal lords?
        Have kings and Queens burn you at the stake for believing the Earth is not flat?

        Revolutions move humanity forward, not all of the time of course, but most of the time.

        • Military revolution.

          Science and social revolutions (non violent) are not the same as military revolutions which is what I was referring to. Perhaps I should have been more specific. Violent revolution is clearly the OP’s point.

          In some ways not accurate even, there have been a few dictatorships and revolts that ‘have’ resulted in far superior societies than originally existed (ancient Greece had a few) however the chances are so slim this will occur that ‘no chance’ is near enough.

          • I believe you’ll find a few shots were fired in the revolution against slavery.

            Same also for many other of the revolutions which brought us here.

            I suspect the next will revolve around the resources as the growth of humanity sees itself curtailed by ‘natural forces’

            sadly we saw it coming and did nothing anyway.

        • You don’t need a revolution to get rid of slavery or give women the vote you twit.

          Every single country managed to get rid of slavery without a war.. except for the Americans. Lincoln was a complete tyrant.

    • RE “These old fossils are hogging living space purely by virtue of being born”

      On page 5 of the Australian, under the heading “urban sprawl as housing leaves workers stranded” there is a graph titled
      ‘National average occupancy’.

      It shows total dwellings unoccupied at over 10%.

      This is a huge number, and if/when these houses come to the market as our living standards drop then there will be blood in the streets in the property market.

      I agree with your sentiment.

        • GunnamattaMEMBER

          Yes, tax the shit out of them……

          and make it retrospective from the moment of purchase for all properties after the initial place of residence.

      • Does the unoccupied include holiday houses? One would assume these should be stripped out only because they are an oddity (from our times of credit growth and grandiose expectations for one).

      • It shows total dwellings unoccupied at over 10%.
        This is a huge number, and if/when these houses come to the market

        They are unlikely to come to the market (so as to speak). It is normal for about 10% of all dwellings to be unoccupied. This has been the case since 1970 and has nothing to do with the housing crisis.

        • 1971 is the year monopoly money was created by the banks. This is where thefalse prosperity started so I think the occupancy rates are relevant.

          • The Claw, (aka naked sock puppet) if you look at the graph I refered to which goes back to 1850, occupancy rates are at an alltime high. I cant be arsed plotting it for the sake of a troll. If the rates were to resume to the historical average then it would be aprox. halve and there would be alot more houses on the market.

          • Vortex (aka shortage-denier). If things revert to their historical average then half my teeth will rot and I will be travelling by donkey or perhaps living in a cage.

        • agreed.

          I will be going overseas next year in Feb and will leave my home untenanted. I calculate the returns on having a tenant in there to be lower than the amount needed to make it ‘tenantable’ (people are just so fussy these days) + the possible costs incurred from tenant damage.

  2. Meh, it’s just another example of the property industry trying to persuade the government to prop them up through idiotic interventions like the FHOG.

    That said, I’m not convinced it is an inter-generational war. I know plenty of Gen X and Gen Y who are piling into property because “it’s a great time to buy” and “property always goes up”.

    I’ve got to say, I kind of share there enthusiasm. I like the idea of retiring at 40 and living of rent from my property portfolio. I just don’t think it’s going to happen.

    • You’ve missed the boat, Monkey. Those Gen Y and X folk don’t actually -own- their property and with out 7% growth p.a they won’t be able to build mega portfolios like their “financially savvy” parents. I would defiantly bet there is a lot of resentment from the younger side who can’t afford a home or their house price hasn’t moved (if anything, gone down) while their parents sit on several properties calling them lazy and jealous.

  3. The investment war in Aus has always been a war between productive investment vs non-productive investment.
    Policy has always favoured non-productive investment.

    This has played out in various ways
    1.A continuous boom in house prices for 50 years
    2. The destruction of the economies of regional and rural Australia in favour of the concentration of cities (where all the votes then are…self-reinforcing loop)
    3. A chronic CAD and resultant asset sales and foreign debt.

    • “always been a war between productive investment vs non-productive investment”

      Yes. And the root cause of this? The ready availability of excess money credit debt.

      And who benefits most easily from the ready availability of money credit debt.

      The ISSUER of the money credit debt.


      Because the issuer has a near exclusive licence to earn a rate of USURY on their creation and lending of the money credit debt that is in turn “invested” in NON-productive activities. SPECULATION, in other words.

      Yes, the speculator is greedy.

      But the ISSUER of money credit debt is by definition, a societal PARASITE of the most insidious kind.

    • I would add
      4. No care or interest in Industry Policy. Who needs to work in the shangri-la of free and abundant credit (debt actually)

  4. Oh, but listen to them brag and boast over at Aust property forum. About how – having cleverly done the next generation out of the ability to reasonabley afford ownership of the basic human need for shelter from the elements – they will now punish their children and grandchildren’s generation with eternal sky-high rents.

    Intergenerational war is a very good description.

    Monumental stupidity might be another.

    • Monumental stupidity is more correct I think Leftee!

      Mind you i don’t go near any Aus property forum so I can’t comment on that!

    • Lef-tee that simply isn’t entirely correct, is it? If you read this thread, there are also some inelegant sentiments being offered.
      There are many insensitive posters on both sides of the argument.

      • What’s incorrect about what I said Peter? It certainly is correct that there are prolific posters there who conduct themselves in such a manner – I am pleased to be able to say that you are not one of them.

        Whilst the banter may go back and forth between housing bulls and bears and some of the bulls comments may have been in response to inflamatory language from some of the bears, I think it obvious that taunting others about how you have cleverly done them out of the ability to reasonabley afford a roof overhead and then having done that, will squeeze high rents out of them forever – that’s pretty low isn’t it? Kind of like the bully taunting his victim that having knocked him down, he’ll now take his lunch money every day as well.

        The bears attacks on the bulls are by and large stemming from the fact that they feel cheated – and reasonabley justifiabley IMO.

        Those who have done so well from this situation are not merely clever little individuals who simply took advantage of some law of the universe that is bigger than us all, or something such – that’s rubbish. They each had a hand in CAUSING it by virtue of their individual courses of action combining in a collective effect.

        Most probably do not realise that they have done this – they just joined a mass-trend that promised them wealth. But for those who do understand the collective result and openly skite about what they have done… is difficult for me to not find such behaviour somewhat dispicable.

          • That’s a more curt response than I normally get from you Peter. I trust you read the line that made it clear that I was not accusing yourself of such behaviour? You have always been – and still remain – one of the most polite and balanced posters I have ever come across.

            The truth may be unpalatable but it is the truth nonetheless – we have basically robbed our own children and grandchildren in our short-sighted greed for personal wealth.

            The vast majority of us bore no ill will toward the next generation – we were simply not noticing that large numbers of individuals all doing the same thing at the same time does not really constitute thoughtful individual action but rather, the following of a mass-trend. And that when so many individuals seek to maximise their own self-interest in the same way at the same time, the collective effect may end up being undesirable for all.

            We now appear to have reached a situation whereby the “housing rich” need prices to continue rising, while a steadily growing pool of houseless young people need prices to fall. Or at least interest rates to keep falling. And then stay very low forever.

            The two groups are pitted against one another – both cannot prevail.

            But it’s a complicated situation – it’s not hard to hang one’s head and say “I did the wrong thing, though I didn’t realise at the time” when that’s all there is to it. But when we realise that allowing natural justice will require us to lose perhaps large sums of money – if housing becomes more affordable it will drag down the value of investment property – I think most people will immediately convince themselves that they are not in the wrong. Why should they face large losses so that someone else can reasonabley afford ownership of their own home? After all, they invested in good faith – they intended to do no harm to anyone. The thing is, the boomers and gen X have benefitted from the same social progress (affordability of home ownership at least for those who work) that we must now continue to deny our own children in order not to lose.

            I see a sad, dysfunctional situation that should never have been allowed to happen, but that’s just my opinion.

          • Lef-tee I did read your reply in full, and I thank you for your kind words. We have had many exchanges over several blogsites, and I thank you for the courtesy that you have extended in those exchanges – it’s a rare event on the internet.
            I wasn’t being curt – I was being brief. It was my way of saying that I don’t want an argument about it.
            You are convinced that there is inter-generational warfare, but it only exists here – not in the real world. No one did anything to their sons and daughters out of malice, they just did their best at the time to provide for their families. When did it become a crime to provide shelter for our family?
            In modern history we have seen some of the most barbaric acts ever commited by humans against humans, and now you tell me that people can’t afford to pay for housing with money created on an excel spreadsheet in a country where we all enjoy a very high standard of living – well I don’t accept that we won’t have a solution, even if that solution takes time.

            Then we can find something else to blame an earlier generation for.

          • I’m sorry Peter, I misread the tone of your post.

            I’m not implying that most people did anything out of malice, though there are a few who like to gloat. I think that most people simply have not looked beyond their own situation to the broader trend that they have participated in and given thought to likely eventual outcomes.

            I hope that you are right and that a solution is found.


        • Completely true, Let-tee. And now many of those “brilliant” old housing investors are finding their children cannot leave home because they cannot afford it.

          What goes around comes around.

      • It’s a question of degree, Peter.

        APF is dominated by trolls, aggressive posters and those who have signed up as footsoldiers in a ludicrous war between “bears” and “bulls”, incapable of sensible analysis, seeing anything objectively, or ever admitting they are ever wrong.

        Pity the poor newb who wanders onto APF seeking impartial advice or with a sensible question.

        By complete contrast, Macrobusiness does have the odd spat and the odd paid PR poster, but conversation is generally polite, often backed up by sensible arguments, and very frequently carried out by people with some interest in learning and sharing credible information as opposed to “winning a flame war”.

        • Very often yes. Alas exceptions exist: Greedy Robber Baron Miner Vampire Banker Mortgage Mug Denialist Teaturd Wing Nuts.

          • What! You want us to use Frank Luntz approved phrases instead?? LOL

            * “resources sector” instead of “mining”, “digging dirt” etc,
            * “Affordability of mortgages” to refer to financial repression via low interest rates,
            * “Global warming alarmists” to refer to climate scientists.
            * “Job creators” to refer to rich people who pay very little taxes and create fewer jobs.
            * “Red tape”, “Green tape”,
            * “Green left weekly”, “communists”, “socialists” to refer to anyone moderately centre-left.

            3d, I would, if I was also paid to do that 🙂

            PS: BTW “climate change” instead of “Global warming” was also a Frank Luntz recommendation in the good old days when Republican John McCain was for carbon emissions reduction.

          • 3d’s comment was approved by Australia’s own self-made Dad-made squillionaire, Sheila Whinehard! 😉

          • Well, it was a rare special occasion where you have used the word “mining” in your post.

            It really gets your goat when people refer to mining industry as mining industry and not as “resources industry”, doesn’t it ?

            I can mine your mind, minebot 😉

        • Arrow2 – I don’t always see it that way.

          Watch what happens when someone’s comments divert from the concensus. Everyone is always polite when all are in agreement.

          Violent armwaving and yelling loudly is just as much the order of the day here as it is anywhere else when there is disagreement.

  5. Being a baby boomer myself I frequently wonder why people of my generation take comfort that the wealth in their house is a retirement asset.
    There is huge expectation that they can pass the baton to the next runner, put simply the next runner ain’t got the stamina to keep up with this race. The takers for these old family homes are diminishing by the day.
    30 +year olds stay away from this crowded trade and patience will be rewarded.

  6. Damn right it’s inter-generational.

    One way of thinking about this is to say that debt represents a tax on the future. And the big accumulation of debt that we’ve seen over the last 20 or 30 years in the Western world reflects a breach of contract between the current generation and the next generations. And these debts represent a big burden on the future. And that is one reason I think we’ve seen a slowdown in the Western world because these burdens of debt act as a major check on economic dynamism.

    • Dystopian Yes Debt, and its associated resource mis-allocation, is the problem. Has it resulted in excess type living standards for many of the older generation? Most surely! Is it a burden for coming generations? You bet!

      However to view it as an inter-generational war is not correct and leads us to further wrong conclusions and away from solutions.
      There are many within the older generation , and those who work in rural areas, who have suffered more than the younger people living a comfortable urban life.
      The comfortable urban life is itself, in many ways, a part of the problem.

      • In agreement flawse. I heard of a boomer who apologised to his son for leaving the world in worse shape but added it was like a Juggernaut and as he looked at his grandson he challenged his son to stop it.

      • “The comfortable urban life is itself, in many ways, a part of the problem”

        Agree. It used to be easy and cheap to grab a nice piece of Aussie urban space.. but everything else eg holidays, cars, consumer goods, eating out was expensive. Now its reversed.

        But the simple point is that an entire generation is choosing to rent an maintain a lifestyle instead of “investing for the future” in whatever marginal place they could actually afford. This is because the gap is so damn big – rent in a nice place close to the action, or buy 15ks further away in a marginal area. And IR cuts will make very little difference to this because they also put downward pressure on rents.

        This drying up of FHB (and upgrader) demand is a mega-trend that can only be fixed by far greater optimism (not likely) or much lower house prices. Or eventually, by even tighter rental markets. But in many places thats further away than people think, despite low vacancy rates.

  7. “We could be seeing the transition to a generation of renters unless more is done to help people onto the property ladder”


    In other words, we need more grants from the government……

    I look forward to the impending blow the Australian economy is about to receive. Its slowly but surely filtering into the MSM, check out the front page on today’s AFR.

    • I’m with you on this one. The blow will not be good, but its come to the point now where it seems necessary.

      • reusachtigeMEMBER

        Totally agree. And I want it to be big and hard! Unfortunately a lot of these boomers etc will be taken out but meh. Needs to happen. Reset time.

  8. I think that in time frustration with BB could really become a ground swell that they should worry about.

    It was on their watch that this happened and 30-40 group will demand they take ownership of it and rightly so.

    If there’s pain to be taken it should be upon the greedy. Let them loose the third home! Prise it from their grip via tax, isn’t two enough?

    One to live in and maximum of a second to bank as a retirement and that’s as a couple!

    Don’t try and counter with what you perceive as “thats not fair!” I’ll tell you what’s not fair, house prices jumping over 70% in three years in some estates.

    If it can go up like that then be prepared for it to reverse in the same manner.

    • I do wonder what will happen to BB generation in their old age. Are the generations they shafted so mightily on a basic need (shelter)going to look after them with any dignity? If I was a BB this would honestly worry me. You might have money for retirement but what about when you can no longer look after yourself? I foresee some kind of giant “burden on society” tax…

      Also older people seem to lament the behaviour of later generations but honestly if you believe you will never get a fair deal in home ownership, can not see a time when you will ever be able to afford a home, then why would you have respect for the communities you will never properly be part of? There is no need to step up and be responsible if you are transient.

  9. Good luck if you have the means, by way of partner, to leave the country too.

    Just found out even if you leave permenantly, you still can’t access your super until preservation age if you’re an Australian citizen.

      • That’s actually what I was reading. Know someone whose son lives in Canada now, he’s got about $1500 in an account and she was trying to get the ATO to release it to him.

        It was being frittered by fees, but there is a sickening positive – after 31 Dec the government holds it for him till 67 (until that’s changed again).

    • Of course. Compulsory superannuation merely another tool of enslavement. As government finances go to hell a la the rest of the West, that will only become ever the more clear.

    • dumb_non_economist

      Manfin, what’s to say prior to leaving for good you start a SMSF all in cash and then send it o/s just prior to leaving. Illegal? Yes, but my guess is it’ll take until the next EOY audit to disclose this and are they going to go to any bother to chase you o/s?

      • 45% tax (retrospective) and I suspect potential disqualification if you ever want to set up a super fund.

        Should be noted that those who currently can take their super when going overseas (those with the right kind of visa) pay 35% tax on it. and if they don’t claim it in time, it goes to the ATO- and no interest paid on that one.

        There are also some residency rules on trustees- but not sure how those work.

        Depends on how much tax you take away as to whether the ATO comes chasing I guess

      • Reminds me of one of the ways suggested to avoid paying HECS, just stay out of the country for 7 seven years or don’t file a tax return for 7 years..

  10. “First home buyers are the lifeblood of the property market”

    That’s an unfortunate turn of phrase.

  11. It’s no wonder that young buyers are on strike – forced to compete with “investors” who get tax breaks and have large deposits behind them.

    But time is on their side. Baby boomers will die first. And some won’t need to die – they just need to hit retirement age and realise that negatively-geared properties are not much fun when you don’t have an income to offset against.

    Here comes the flood.

    • People keep saying that but I know of quite a few superannuated fossils who happily hold on to all their properties long after retirement. They mostly own them outright.

    • just how many houses are sold to overseas buyers?

      I understood some nice real estate was being sold to Chinese buyers? Perhaps the slack will go to other places who (s wealthy) wish to buy into a place which is nicer to live in (than where they come from).

    • All the usual carrots being offered by the government and developers are not working:

      * Crisis level super low interest rates on mega mortgages.
      * Increased FHOG for new homes,
      * Stamp duty concessions,
      * Vendor financing,
      * “free” cars,
      * “discounts”,
      * the Kitchen sink.. erm.. free white goods. 🙂

      Is the politico-housing complex (PHC) finally running out of FHB bait to reel them in? There is one trick still left in their book – overseas investors.

      For the high-end property market, PHC is now looking at overseas ponzi investors with its 888 visa for rich, queue jumping boat yacht people. Even the vampire squid Goldman Sachs got interested in acting as an intermediary in the baiting.

      For the lower end of the market, FIRB is resorting to the oldest trick in the book – playing blind, looking the other way and fobbing off any Freedom Of Information requests.

    • Yes DE

      That little red-circled number gives me some hope in the ability of gen X&Y to distinguish sh!t from Shinola

      • That said, one month of data on the wrong side of a FHB grant change should not be used to justify a rate cut.

        I have no doubt it will be.

  12. I have some doubts on this. As an AFG broker, there is no box or button to differentiate between a FTB and a non FTB – it has always been the FHOG that has made the difference, but as we now have states where the FHOG can only be claimed on new builds, then the data is going to become more difficult to categorise when an existing house is being purchased. There is one box that caters for a stamp duty rebate, but it’s not an important function so many overlook it.

    I have some doubts on the FTB data provided by AFG on this occasion.

    • I guess you know your own company. Otherwise though, in my experience “is it your first home” is one of the first questions brokers (and agents) ask.

      Even if you don’t have a tick box (which seems odd given that FHOGs and stamp duty concessions are still a factor in many states) you can probably figure it out broadly by proxy – say by looking at the number of non-investor buyers with only a small deposit.

      • Arrow2 – I would expect the number of FTB’s to decline in states where assistance via the FHOG has been withdrawn on existing homes, however I still have doubts as to the accuracy of the differentiation between new buyers and upgraders, they are treated the same by the software, except for the FHOG application. Both receive stamp duty compensation up to certain levels.

        Mav – I think that the AFG stats are good, but I consider that interpretations made by Mark Hewitt are made quickly and without in depth analysis.

        Nice to see you give such staunch support of the AFG stats though – keep it up.

    • LOL.. It is amusing to watch the former champion advocate for usefulness of AFG statistics as a leading indicator, now casting doubts on it.

      Keep it up Pete.

  13. And NSW and Qld are the main states affected by a change in the FHOG – AFG should have asked me first. I expect a correction on this analysis – there simply is no tick box for an FTB – there is for a FHOG application, and that has always provided the information in the past.

    • That’s a good point PF. A pretty big oversight if they haven’t taken this into consideration when collating the data. Do you have a contact at AFG who can clarify how they are differentiating the data?

      • BB – it’s a logical oversight – the people at the top in AFG don’t sit at their computer all day entering data for new home loans. There is no reason for them to believe that all data has not been caputured, and being in WA they are less conscious of FHOG changes in Eastern states.

    • PF that may well be the case in the data collection, however they then want to use those figures in the analysis.

      “This trend is both significant and very concerning for the market going forward. First home buyers are the lifeblood of the property market – when activity stagnates at the entry level, it affects everyone up the property chain”

      If that statement isn’t actually true then it is a bit embarressing for AFG as it could easily been seen as rentiering given the timing of the release.

      However, as you say, it could be an honest mistake and we’ll see a future correction.If that is the case I hope it’s handled a little better than their previous incident.

      • I doubt that any error would be intentional. I’ve just gone into the program. When FTB’s received the FHOG for existing homes it was critical data, as their FHOG entitlement was part of the “Funds to Complete” equation, and we have to show that borrowers have the funds to complete at settlement.

        Now that they don’t receive the FHOG brokers won’t be ticking that box as it isn’t applicable.

        There is a new FTB box that can be ticked at a much later stage in the process, but it’s new and isn’t critical. I wasn’t aware that it was there, and it was probably added in the upgrade from a couple of weeks ago. Software is in an ongoing state of flux.

        With the FHOG being withdrawn from FTB who purchase existing homes in NSW and Qld I would expect a fall off in those numbers, but I also have some concerns about the accuracy of that particular aspect of the data.

        If it is accurate, I expect that the states involved may have to make some changes. Sales of existing homes to FTB’s is an important part of the market.

        • “If it is accurate, I expect that the states involved may have to make some changes. Sales of existing homes to FTB’s is an important part of the market.”

          The unmitigated self-interest in this statement should be called for what it is.

          • I’d say Peter is speaking the honest truth there – FTB are the most important part of the market – its the impulse upon which everything else is priced.

            Without this “torque” applied to the market (similar to the SGC that fundies receive each week from your paycheque to buy the ASX200), the property market, as currently constructed, would no longer work. (which equals price falls…sorry)

          • I expect that the states involved may have to make some changes.

            Yes, for a start, States can remove market distortions such as non-existent tenants rights, developers obligation in strata buildings, abolish stamp duty in favour of land value tax etc.

            Is that what you had in mind, Pete? 😉

    • I wonder if the ABS may have the same issues with calculating the number of FHBs… how do they calculate their figure (does anyone reading know?), I would have assumed from distribution of the FHOG as well.

      • Yes I was think the same. Until now it has been easy. FTB’s do get a higher stamp duty rebate in mosts states than an upgrader, but it’s going to be a challenge getting that data if the difference isn’t collected correctly.

        The FHOG made this easy before.

  14. I don’t see high priced housing as an inter-generational wealth transfer, frankly I see it as a reflection of other effects:
    1)Dramatically reduced growth potential for western nations(partly demographic / partly West to East wealth& power transfer)
    2) Disillusionment with the security and fairness of other asset classes. (read ASIC completely abandoned its job), there should be at least a dozen “financial engineers” sharing cells with their bogan brothers.
    3)Corruption (lets be honest corruption is endemic in Australia) I could easily think of 100 examples of collusive behavior and more than a dozen examples of NSW gov’t ministers self dealing. Against this background ordinary Aussies are deciding to keep it simple and just buy property, logic being: They cant steal RE with fancy magical incantations muttered behind their backs at directors meetings.

    Unfortunately it will take a whole generation of corporate and Gov’t honesty before other assets / opportunities are viewed with the same security as RE. In the mean time RE will remain over-priced.

    • China Bob – most of our corruption has been legitimised through legislation. other countries call it graft, we call it statutory fees and charges.

      • Absolutely right Peter.

        I was looking into a business opportunity in Plumbing fixtures about 6 months ago. There is a standard for the metal compounds to be used in Aussie plumbing that was created under a Government Standards body that is now a private company. This company (SAI global) under the auspices of maintaining the existing standard charges a licensing fee to add a compliance stamp called “Watermark”. Plumbers in Australia will not install non watermarked fixtures.

        What is amazing is that the license fee amount/ conditions is a commercial secret, so they charge whatever they want and revealing the details of your license is grounds to void the license. AMAZING For what possible reason have Aussies accepted this, it is fundamentally wrong AND it adds about $5000 to the average cost of a new Australian home (difference between cost of European standard fixtures vs Aussie (with watermark)) Its not just costs that are higher it also reduces choice and forces two levels of import wholesale distribution which naturally increases costs.

        • China Bob – I used to be a food wholesaler – one of our lines was bulk fresh orange juice. The government regulations stipulated that fresh orange juice had to have a certain vitamin C level, which was actually well above the level that it naturally has, so all O/J producers had to add vitamin C to make it natural. It’s a standing joke in the industry. Unfortunately there are too many jokes like that.

        • Bob, I do not think the issue lies with a company such as SAI Global, such companies exist the world over. But that we have our own standards for a nation of 22 million people. If one looks at the automotive industry this is why cars cost 150-200% more than other developed nations such as the UK and US. and even NZ cars are 15-30% less. AS/ADR talk about harmonisation but they are not serious otherwise it would break what is another form of protectionism. I would hazard a guess that the plumbing fixtures you could source could be bought with EU or US certification already undertaken. But since we are better than everyone else/we’re different/blah blah blah you have to certify it for yourself as an extra cost.

          • Rob101,
            I’m not sure why Australia is maintaining its own standards (with their associated monopolies), most small countries have accepted a larger regional certification and thereby leveraged UL or TUV or whatever. Australia is going the opposite way with certifying companies indirectly increasing their reach.

            Take for instance the actual Australian water Standard, I believe it refers only to components that come in contact with potable water (BTW I could be wrong Im not a plumber). Which is logical we need some standards for everyone’s safety. However today Watermark is being applied to everything that is in anyway associated plumbing (sinks, shower stalls, …) It appears that plumbers are enforcing this extended standards “watermarking” reach.

            Naturally the profit (and License potential) on a sink and tap set is more than the profit on a tap valve (actual part touching the water supply) Also there is a much wider range of products / styles (fashion) to which the license can be applied.

            My point is not that some private company has managed to somehow get this monopoly BUT rather that other Australian companies are accepting this development. Reminds me of Africa where people put up with this sort of formalized corruption because they want to keep their own market distorting practices, so everyone keeps quite about everyone elses questionable practices.

            Unfortunately any natural system infected in this manner will die a slow death because the parasites slowly kill the host organism. Low productivity is the first warning sign….

          • If one looks at the automotive industry this is why cars cost 150-200% more than other developed nations such as the UK and US. and even NZ cars are 15-30% less.

            No, it’s just manufacturers screwing us. Volkswagen prices the Golf the same in Australia as it does in the UK, despite its massive popularity here.

            That aside, I agree it’s absurd we do not simply adopt EU vehicle standards as our own.

        • Ofv topic I reckon but FWIW in agreement with what CjinaBob had to say…
          Everyone has problems with SAI. It’s a license to print money. In our game European and American standards are not enough you have to have all the testing done here.
          We have an item that costs about$6000 to $8000 to get approavals for and it takes about a year to get through it all. Note the quoted amount does not include charges for our time and expenses. I’d guess it would total about $20K.
          Our NZ cousins, for exactly the same article, used get the Approval in a morning at a cost of $300. We note of late the NZ Standards have realised the wealth potential and are following the route of their Aus counterparts.

      • Mav, we’re all greedy, BUT I believe that the market always determines prices.

        Am I greedy if I refuse to sell an equity until it reaches some momentum turning point NO I’m just stupid if I hang on to the equity as it drops. Greed in the Market is always balanced by Fear, it is this (greed/fear) balance that is missing from the Aussie RE market.

        If we ever see a 40% RE correction than real fear will return to the market, otherwise get ready for this illogical asset allocation to create an Australia version of the Japanese “Lost generation”

        • Yes, we are all greedy and/or fearful at times, but we shouldn’t rationalise greed or fear by blaming externalities. Externalities don’t cause these emotional reactions, because these reactions are precisely that – responses.

          The undercurrents of fear is creeping into the RE market.. you have to look for it between the lines and you can see it all around you.. in HRH Triguboff’s plea for a 1% RBA rate cut or hardcore property investors enquiring if Libs will relax FIRB rules.

      • Maybe not, Mav.

        I live in Mexico, and here the polity is a banana republic run by a tin pot dictator assisted to power by the United States. Government is totally corrupt and capricious. Real estate is the only safe harbor around, so that’s where all the ships land.

        But wait! I see where Australia’s government is perceived as one of the top 10 cleanest governments in the world, so maybe you are correct.

  15. “First home buyers are the lifeblood of the property market – when activity stagnates at the entry level, it affects everyone up the property chain”

    The ponzi scheme has run out of suckers! If property was a more liquid market, we would be seeing a ‘run’!

    “inter-generational war” that’s for sure! Baby boomers who bought houses decades ago for what would today be approx a years wage or less are convinced they’re all property millionaires just because they own a house! Problem with that is, if the younger generation don’t saddle up with the million dollar mortgage, then there’s no-one to pay these fools their million for their retirement!

    Boomers are the only ones who can get credit at the moment because they have equity. Banks aren’t approving FHB loans because the valuations drop between deposit and loan application!

    It’s already a falling market and with the boomer demographic meaning they will become net sellers … trying to sell to smaller following demographics and into a falling market where FHBers can’t get credit!

    A demographic property disaster looms, but not the way the AFG report predicts!

  16. I used to know a fella that stated that the generation born between between 1935 and 1955 were blessed.

    Too young for WW2 and korea,(might have been unlucky if you got drafted and sent to vietnam), free tertiary education, if you joined any of the public services state or federal extremeley generous defined benefit schemes which provides a CPI indexed pension to himself and 2/3rds to spouse upon death and cheap property. He saw his 250k beachside property jump to 1.2 million from 1990 to 2004.
    So yeah I can see how Gen Y and X are peeved, but in the big picture I suspect that might be better off than GEN Z and GenA.

  17. Bit of a sensationalist headline. It’s no war, both sides are complicit and cannot imagine anything other than property as the mainstay of their aspirations.

    I have witnessed parents selling real estate to their children at today’s prices. When I pointed out that this may be not the best transaction for families to engage in, literally mortgaging your childrens future, I was roundly critisized, by the children. The argument was if they want to do it then who am I to say they shouldn’t. Fair enough, but don’t cry when your working 20 years to pay off your brother and sisters inheritence for a worthless asset.

    And lets not blame the Baby Boomers for everything, the early Gen Xers (the Gillard/Obama demographic) are fairly cynical in their property expectations.

  18. I will say it very plainly to remove any doubt from the minds of those who wonder why potential first home owners are staying away from this market.

    “I do not want to pay 300% more for a property than it, or similar was sold for at the turn of the century.”

    It’s that simple.

    You can throw all the incentives you like at us and you’ll find that most of us who remain are cynical and see through your manipulative systems. To your incentives, I say: “Fuck you, I won’t do what you tell me.”

    We refused to buy into the FHOG stampede for this long, what makes anyone think we’re suddenly going to change our minds?

    We will wait until we believe we see a property at a fair price.

    If that means you have to default, or lose big on your gamble, then so be it.
    A 20 year boom cannot last forever. Unemployment cannot remain low forever.
    Interest rates cannot stay low forever.

    One day, a recession will come. One day a whole load of Australians will find out that their revenue suddenly cannot support their debt. They will sell. They will resist for as long as their superannuation, repayment holidays, income protection insurance, and cash in hand work can possibly delay it, but ultimately, many will sell.

    A bubble always needs a flow of income to remain stable at its peak.

  19. Sure this is THE political issue that the next election should be won/lost on – who is going to sort property prices out. The balance of voters who’s interests it is in to keep prices high cant be that much more than those who’s interest it is in to see prices come down (safely)

  20. This is definitely an interesting stand off. From the Gen X/Y perspective, linked to yesterday’s post on a similar theme, the thinking (amongst my crowd anyway) seems to be that these prices are simply unsustainable and that they HAVE to come down, even if its only 5%, which is not an insignificant amount of money for a FTB, in which case why buy now?!?!?

    There also seems to be a lot of change in attitude in 3 distinct but related areas:
    1) That you have to own a property before having children. Im now hearing a lot more of the “we’d rather not have a huge mortgage whilst raising a young family, coupled with a long commute and job insecurity, we’d rather rent with a young family even though it is not ideal”
    2) The commentary on MSM property related articles (not withstanding the content of the article itself is often garbage) has definitely shifted from the approx equal number of die hard bulls vs bears and a few people sitting on the fence to 90%+ bears and only the occasional RE spruiker/Mortgage Broker/over geared tool with multiple IPs trying to argue that property prices always go up/can’t go down
    3) The absolute confidence that property is a sure fire path to wealth and prices only go up has been replaced with a wait and see attitude and in some cases downright negativity towards property as an asset class