Kohler feeds youth housing shit sandwich

SHIT-SANDWICH

From Alan Kohler today:

… a large part of the foreign buying of local real estate is not from Chinese citizens flouting the local regulations in the apparently correct belief they won’t get caught, but because of “Business Innovation and Investment visas”.

…At the same time as it has stopped the boats, the Abbott government has opened the airports – to business and investment migrants. There is apparently a quiet flood of it.

…There are three main effects of rising property prices, two of which are good and one is bad: The ‘wealth effect’…Under-funded retirees are able to sell their family homes…young people can’t afford to buy a house and have to keep renting.

…most young families will spend what they have over that if it’s not going on a mortgage, probably on education.

But then again they won’t have to support their parents, and in fact their parents can probably support them instead, because the houses that are too expensive will fetch a good price for their empty-nest parents when the kids move out and rent.

It is true that a bubble followed by a crash would be undesirable, to say the least, but is that what we have coming?

…There is a shortage of housing, especially inner city, and plenty of demand, augmented by foreign investment, business migrants and SMSFs. It looks to me like the market at work.

Are you for real, Alan? This is the future you want for your kids? Property impoverished dependents and barristas serving corrupt Chinese and lazy old farts getting fat on rents?

Dry reach…it’s not “the market” at work. It’s the baby-boomer’s politico-housing complex at work, including:

  • widespread tax distortions advantaging old over young, as well as speculation over investment,
  • guaranteeing banks and destroying budget options in the process,
  • laundering dirty Chinese money while pretending to care,
  • not questioning the durability of the economic model (ie all three of Kohler’s positives are actually negatives),
  • hollowing out tradables,
  • relying on mainstream media apologists like Alan Kohler.

The very extremity of the measures now needed to keep the bubble alive is your clue to the future. I do believe Mr Kohler is ringing the bell at the top here, as he does so well.

David Llewellyn-Smith
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Comments

  1. ‘Are you for real, Alan? This is the future you want for your kids? Property impoverished dependents and barristas serving lazy old farts getting fat on rents?’

    The babyboomers are already handing over an economy where the employment options for those coming after them are most vibrant in the aged care sector…….

    I tend to see AK’s thoughts as essentially representative of an entire generation which is trying to tell itself that it is OK, and what they are doing for those coming next is perfectly well and good, but deep down not quite believing it. My guess would be we will see similar bilge being spouted by the Rupertarians and the club Domain crowd with increasing vigor in the lead up to the next election.

      • Kohler’s vision for young Australians – generations of geriatric bum wipers, dutifully looking after their wealthy parents while pitifully waiting for whatever hand out that the boomers magnanimously dole out all the while quitely accepting the status quo, least they be disinherited.

        Disgusting – Boomers ARE evil

      • At least Kolher has the guts to say how he sees it. He is a first in that respect. I don’t agree with everything he says – but you have to admit he is worth reading. Much like you H&H…

      • Here we go again.

        No contributions on anything else, but the minute an opportunity to spew hate against his mum and dad comes up…there’s disco stu.

        I would like DS to at least acknowledge that since Gen X has been around for years (some are approaching fifty FFS) that they too bear some responsibility for where we are today.

        I would also like DS to at least acknowledge that many of the issues listed have solid roots in Thatcherism – and she and here ilk were not Boomers.

        The reason for this is NOT to defend Boomers, who certainly do have to take some responsibility. However, ignoring other real impediments to reform (ie unwinding Thatcherite neocon economics for one and getting Gen X to face up to the fact that they are in the boomer boat) is just going to perpetuate the problem.

        Just popping up like Disco Stu whenever it is ‘attack boomer time’ and then dropping out of sight on almost all other discussions is just a stupid pointless attempt at bullying. I am sure that Disco was a terror to the grade two kids when he was in grade 7, but it hardly made the school run better. Same here.

        (I look forward now to Disco Stu making a few token posts on other matters, not to really contribute, but it would be an improvement).

      • Hey emess, how many Xers own their houses outright? My boomer parents did 15 years after they took on the loan in their early 20s.

        I’m an Xer and i own my house outright, and it cost me time and life that my parents didn’t invest.

        The boomers have bequeathed a more rotten, a more inequitable, a more greedy, a more environmentally degraded place to their kids. They need to have the courage to admit it.

      • aj, as I said, I don’t wish to deny that boomers bear plenty of responsibility.

        However, in the example you gave, one of the reasons that housing is so expensive is the demolition of the Housing Departments that all States had. This was a Thatcherite policy. This slashed supply. It also meant that without a strong Housing Department committed to increasing housing supply, Planning Departments had no counterbalance whatever, and insane planning controls were instituted that never would have been countenanced pre-Thatcher. This further stunted supply. Thatcher, her Cabinet, and imitators in government round the world were NOT boomers.

        If you ignore the contribution of Thatcherite policies to the very real problem you outlined, how will you fix it?

        Similarly, if Gen X continues to go along with such policies, how will it be fixed? With some Gen X entering their fifties, the ability to blame mum and dad is very very diminished, and at some point, their kids will start to be saying, “…hmmmmm…”

      • In that sense i agree emess.

        It’s time for the Xers to act, my point is that pure survival has been a distraction for most up to now, and many i know (even in their late forties) are still in pure survival mode with mega mortgages and don’t even own their own home.

      • I would also like DS to at least acknowledge that many of the issues listed have solid roots in Thatcherism – and she and here ilk were not Boomers.

        I think the voting demographic is more important than the originator of policy.

      • So Emess, you would like me to acknowledge… what, that I’ve been a very naughty boy and should be nicer to my brother?

        Gee, just like Kohler you really can’t let go of being in charge.

        From the point of view of anyone other than a Boomer, the cost of housing and the amount of economic rent that the Boomers have extracted from everybody else + it’s distorting effects on the economy, IS THE ONLY REAL SUBJECT WORTH TALKING ABOUT.

        As for accusing me of only popping up here and posting whenever the subject is on housing or Boomer Greed…. isn’t that a bit of a case of the pot calling the kettle black?

        Can’t seem to recollect seeing you posting anywhere recently other than to defend your precious cohort.

      • I would also like DS to at least acknowledge that many of the issues listed have solid roots in Thatcherism – and she and here ilk were not Boomers.

        Maybe she wasn’t of the Boomer generation, but they still voted for her. Blaming it on the rise of Thatcherism, as though the voting generations around during the rise had nothing to do with it is simply ridiculous!

        The Boomer generation is the epitome of the ‘fuck you, I got mine’ mindset.

      • When would you realize that it is not the boomers, the bankers, the FIRE, the stupid politicians etc, it is something much more fundamental and you know what it is. The fear to say it says it all.

      • You are right disco stu – for boomers the cost of housing is the giant herd of elephants in the room on just about everything.

        How can a boomer politician honestly keep a straight face when talking about superannuation and saving when the trivial little changes they make are massacred and bled by politico housing complex?

        How can they talk about wages and salaries when the trivial differences would be offset a thousand times over if the cost of housing and land was to go down.

        The boomers are lying, they have no interest in the country and they have no interest in their children or grand children.

      • While I understand the concerns about BBs etc and realise how stereotypes form; it’s generally unhelpful to present an argument in such a fashion.

    • He isn’t saying that he likes the situation, he is trying to explain it to readers/viewers who may not understand.

      There are some days that I shake my head in disbelief at the poor quality of work posted here masquerading as journalism.

      • He isn’t saying that he likes the situation, he is trying to explain it to readers/viewers who may not understand.

        He said “it looks like the market at work.” Is that not a tacit endorsement?

        If he were really explaining the situation he should be giving more than lip service to the potential negatives.

        Seems like sloppy journalism is running rampant.

      • PF, this is a blog.

        Blogging is about objective analysis not pretending to be objective like journalists.

        Kohler is very clearly endorsing the model by not questioning it. The full article makes this quite clear.

      • As someone who goes though an awful lot of media I can tell you that everyday I shake my head at poor quality work masquerading as journalism – the Australian mainstream commercial media is one of the worlds great ore bodies of utter bilge. And on no subject more than real estate.

        There aint no masquaring journalism taking place here though. There is comment being passed on someone elses comment.

        The comment being made from here relates to the complete inability of those in the MSM here to recognise their narrative has implications for those forward of their position, and indeed the present, which they cannot and do not comment on. It is a narrative by omission. Typical of an entire mainstream media’s narrative by ommission.

      • Ah PF, true colors coming through … There is something that can easily be done for all the ails that Kohler highlighted.

        He is not explaining anything. He is just choosing to look the other way.

      • HnH

        Gen X are now starting to enter their fifties. Many of them are in it up to their necks.

        Much of the problem can be traced back to the policies of Thatcher and her generation. For example the unwinding of government building houses on a massive scale and keeping up a decent supply of dwellings.

        It simply is not one generation that is involved. Many of the things you have listed had their beginnings in Thatcherite policies, and many of them have been willingly carried forward by Gen X. It is not just one generation.

        If you want to ignore two major inputs to the problem, then do you really think you are going to be able to solve it?

      • Thatcherism only gained popular support because it appealed to the Boomer generations ideological underpinnings of “Self over Society”.

        The ME generation was the enabler, sure members of GenX have benefited from the policies championed by the boomers – but take a look at the stats, by every meaningful lifetime measure, home ownership, age at commencing family, etc the generations that have followed the Boomers are worse off.

        There will be no solution to the problem until there is a broad realisation that the values of self interest that the leading cohort hold so closely to their chest, are the root cause.

        As much as you’d like the blame to be assigned to a specific element, eg Thatcher, they were only able to succeed because they appealed to the core nature of the dominant cohort.

        At best the Boomers dropped the ball, at worse as a generation they flushed their integrity down the toilet at a chance of aligning their interests with the 1% and hitching a ride along with them.

      • Hey emess, who voted for Thatcher?

        You’re trying to shift blame around. Rather than passing blame how about we look to the now – WHO benefits from existing policy and WHO is obstructing policy that will bring down land prices?

      • Jason, outside of a few forums like this, who is voting to unwind any of that Thatcherite excess? Certainly no Gen x or y of my acquaintance.

        We could start up a massive house construction programme today with the engineering, surveying, trade and construction skills and equipment coming off the mining boom. With an industrial scale effort we could crush house prices, and ameliorate the effect of the mining cliff.

        The skills are there, so is the bloody land. So is the need. So is the precedent- it was done after WW2 and crushed house prices then.

        All that is lacking is the will. Bloody silence right now. ALL who are silent now are complicit. Now is when we could do something with all those engineering assets becoming available.

        If Gen X and Y are silent at this point, they are just as guilty.

        If Gen X and Y make a big noise now when this big opportunity has presented itself, and boomers oppose it, then your resentment is well justified, and I would concede your point. However, if you don’t make the effort now. Meh. The opportunity is now.

      • Yeah Emess – so many GenX commentators in the media right now, or more to the point so many GenY.

        Sam Brito and Jessica Irvine writing Boomer lite for the SMD, careful never to upset the SMD’s main readership with anything too confronting.

        Everyone else of that age or younger simply has their name attached to whatever Company bi-line that the SMD is choosing to publish as an ‘article’ on the day…. frankly I am doubtful half of them exist other than as ArticleBots spewing out paid for news content.

        As I’ve said before GenX aren’t going to amount to anything more than being unwilling handmaidens or stooges for the Boomers – they’re the generation that are damned if you do and damned if you don’t (wow – critical of of my own generation as well… there is one difference between us already)

        Gen Y – well they’re just damned, and change, when it comes, will come from them. Besides – there’s heaps more Ys than there are Xs.

        The best that GenX can hope for in terms of being agents for change, influencers of opinion – which is what I like about MB.

    • Again. Please stop the “representative of an entire generation” stuff. Many 50+ people do not support this Kohler model at all. I would like to see Australia develop a smarter business model than houses and holes. I avoid investments in mining and real estate. Many of my friends working in the technology sector do likewise. Please do not tar us all with the brush of “lazy old farts getting fat on rents”.

      • +1

        My parents are the same. What’s going on isn’t a generational issue, it’s a self-interested twat issue.

      • That’s Kohler’s vision but it also belongs to the baby boomers, like it or not. And it is a generational war:

        boomers built the PHC
        boomers benefit from the PHC
        boomers run the PHC
        boomers defend the PHC
        youth gets fucked by the PHC

        Doesn’t mean boomers are all guilty and there are always conscientious objectors. But that doesn’t mean there’s no war.

      • The most popular Baby Boomer commentators are the ones who get the most airplay, and the ones who get the most airplay are the ones who appeal to the broadest segment of the demographic to which they purport to represent.

        Like it or hate it, fact is commentators like Kohler get the most airplay because their views are broadly representative of most boomers.

      • At the likes of Lorax wonders why there is a rising segment of the population who are wishing for a recession – it is the only way that the PHC stand a chance of being destroyed.

      • Well said HnH. Not all boomers are evil sure, but whether you like it or not they are voting as a block to protect the PHC.

      • At the likes of Lorax wonders why there is a rising segment of the population who are wishing for a recession

        I don’t wonder, but be careful what you wish for. I completely understand the frustration, and I have advocated repeal of NG and CGT concessions, macroprudential and supply side measures (if required).

        None of things have been tried yet, so how about we try that before engineering a thumping recession?

      • they are voting as a block to protect the PHC

        Over 65s vote 60-40 for the LNP. That should tell you everything you need to know. Take note Bluey.

      • Lorax
        And what is due to happen to the over 65’s?
        Oh, that’s right, massive growth in numbers over the next few decades.

        On Boomers, a record number are heading into retirment in debt and 80% of the 5.2 million will require full or part pensions.

        The boomers will vote NG out as they no longer need it as they did free higher education and death taxes.

        It is time to lower the voting age to 16 to balance the demographics slightly and also many of them work full or part time and pay taxes.

        It is also time for a boomer group to stand up and say sorry and actually do something constructive as they need to kove from success to significance.

        Generational Theory is not the study of the individual, rather the cohort.

    • That’s the way these geezers intend to stay relevant.

      They hold all the cash, hold all the power and want to keep their kids dependent on them in order to maintain control over their lives.

      And the likes of Lorax wonder why there is a rising segment of the Australian population who are cheering the Australian economy into a recession – that is the only way we’ll be able to shatter the housing wealth/power base that is the foundation for DH’s like Kohler vision for the future of young Australian’s as a generation of geriatric bum wipers.

      Boomer ARE evil (well the likes of Kohler and his ilk are)

      • I don’t know where this post has appeared from – it was the first rant for the day and never posted, and now it magically appears. I do repeat myself but try not to this extent (apologies Lorax – not having another go)

  2. “a large part of the foreign buying of local real estate is not from Chinese citizens flouting the local regulations in the apparently correct belief they won’t get caught, but because of “Business Innovation and Investment visas”.”

    Is it Alan? What data do you rely on to make this claim?

  3. Truth is that most of the grey beards that explain the conundrum do so in the full knowledge that they will be able to assist their kids well above the average in buying a home…

    So they are never really talking about “our kids” because their kids will be just fine thank you very much…

    There is no doubt that a property crash ultimately is undesirable for the great majority of Australians… But allowing the bubble to continue to inflate, rather than allowing it to deflate by assisting nominal prices to go sideways for a long time (as Gov Glenn was intimating a year or two back), is dangerous for all but the very, very few that know that the grey beards seriously understate (because they misunderstand?) the risks that they are ramping up for the country, and have enough property to offload so that it is a net positive for them even though the country endures a great deal of pain…

    As I said in a post a week or two back, we were all screwed the moment our politicians began to inflate the bubble and cheer house price rises…

    All each of us can do is attempt to develop the best strategy for ourselves and our families in the knowledge that it must incorporate emotional/sentimental factors as well as financial..

    I will say again, as a Brisbanite I am very pleased that the southern mania has not made it here once again (as in 2003 and 2007), and my sincerest hope is that the authorities enact macroprudential tools to manage stable house prices before the speculators arrive once again en masse driving our prices up to the point where we get fully caught up in the aftermath…

  4. It’s not hard to imagine Kohler fronting Russian State owned television extolling the capability of the nation’s glorious armed services to eviscerate their enemies. What an absolute f***ing muppet.

  5. Kohler’s view is not to be taken seriously although it will endorse some views and be used in ways it shouldn’t. Kohler is a cunning media player and knows how to spin a story for a few hours. MB should move away from highlighting the Carrs and Kohlers who create click bait for the hoi polloi.

      • And he’ll do what he has done for the last 10 years on this subject, publish a slightly different view in a week or a month. He plays prevailing winds.

      • He might blow a bit with the wind to suit his boomer market, but the one consistency with the boomer finance cheerleaders is that they have ridden the private debt funded asset boom, they have benefitted from the sell-off of Australia’s assets and businesses and they never raise a peep to the environmental and social mess they have left behind.

    • The shortage may be changing into an oversupply in some areas, of some accommodation types.

      In the meantime Lorax, just worship any God of your choice, it won’t matter.

      • Andy I’m interested in the ratio of willing sellers to willing buyers. If a seller is priced above the market then he isn’t willing enough.

        If someone owns a property that is unoccupied and not on the market, then he isn’t a seller.

        In any market where there is an equilibrium then the power is with the buyer, because the buyer has choices, he doesn’t have to buy but the seller has to sell.

        In a market with a shortage the power is with the seller.

        Who has had the power for the last 40 years?

        Frankly I don’t blame the boomers or the generation before them or the ones that have come since. OPEC delivered an oil shock in the seventies that pushed high inflation on us and we haven’t recovered since.

      • More conflating fundamentals with market trends. They’re related but they’re not the same thing.

        When a share’s price is increasing no one thinks it’s caused by a ‘share shortage’. There is no perceived fundamental problem causing the price to go up. For shares we recognise that it is merely about a majority thinking the shares will be worth more tomorrow than they are today. Fundamentals influence those expectations, sure, but (extreme examples aside) the day’s supply and demand levels (and hence price) move purely on expectations. Given property is such a huge investment asset it follows the same rules:

        If you expect asset A to be worth more tomorrow, you only sell it if you have to, and you’ll probably buy more if you can. If you expect asset A to be worth less tomorrow you sell it as soon as possible and you hold back any buying until it has hit its lower price. Today’s supply and demand for A are nothing more than a function of the aggregate expectations of tomorrow’s price.

        This argument that we have a shortage because today demand for A outstrips supply for A is nothing more than an observation that we are in an upward price trend and that the majority of Australians expect houses to keep rising in value (amazing revelations these..)

        The mismatch in supply and demand ‘problem’ will persist as long as people continue to expect more price growth. Maybe enough new houses could be built to change peoples’ expectations for price growth, but there are a million things that could change expectations and the actual building of houses is not the most significant of them (fiscal, monetary policy, AUD:USD, ToT, unemployment, ASX index, for instance). Any crisis hits and the perceived ‘shortage’ evaporates (just like it has everywhere else).

        The fundamental ‘shortage’ story is a self-confirming one that our FIRE sectors tell us to keep our collective expectations in line with the best interests of their pockets. Demand only outstrips supply because we expect demand to outstrip supply. Brilliant piece of meaningless doublespeak that gets swallowed hook, line and sinker.

        Quite separate to this observation of an obvious trend that is the perceived ‘housing shortage’, is the case of an actual ‘housing shortage’ where there are literally not enough houses to service a population. Maybe that is the case – i actually don’t know cause no one bothers to look at it – but i know that an upward price trend or the mere fact that we have more demand than supply today is not enough to provide evidence of a fundamental housing shortage (although they certainly can coincide).

        If you were really looking to see if there was a fundamental housing shortage you’d look to things like homelessness, increasing occupancy per residence and rising levels of extreme poverty. And you’d get some bright maths guys/gals to do a real study on it – not some dumb college grad touting ‘I did economics 101 and i understand that price increases can be related to shifts in the supply curve aren’t i clever’.

        But I know better than to expect that – the game is really about pushing the shortage line to maintain expectations of price growth.

      • If you were really looking to see if there was a fundamental housing shortage you’d look to things like homelessness, increasing occupancy per residence and rising levels of extreme poverty.

        1) homelessness is increasing – tick
        2) increasing occupancy per residence. No, you would only expect this to be found amongst the victims of the shortage:
        * people who did not already own housing
        * people unable to flee the shortage (eg move overseas)
        * people who did not choose to come despite the shortage (eg rich immigrants)
        Indeed amonst the victims it can be found that occupancy per residence has increased markedly.
        3) rising levels of extreme poverty – tick. But this is more related to welfare systems than housing.

      • Where’s the report showing any statistically significant findings Claw?

        And for point 2, you could easily control for that in the study.

        And again, I’m not saying there’s not a shortage – I actually don’t know because I’ve never seen anyone look into it – I’m just saying the fact that there are more buyers than sellers today bears no relevance.

  6. AK – like Joe Hockey, another Bubble Denier who trots out the supply shortage diversion to befuddle the casual observer, and obfuscate the true horror of the situation. Property prices are NOT reflecting ‘market fundamentals’ Alan, and cannot be justified by any rational analysis. They have simply been pulled into the sky by a team of my little ponies carrying the greedy dreams of a nation that has gambled its future, and now finds itself snookered.

    Don’t Look Down Australia.

    • Property prices are NOT reflecting ‘market fundamentals’ Alan, and cannot be justified by any rational analysis.

      Try this:
      Consider the weekly rental for a 3 bedroom dwelling in the Fairfield/Liverpool area
      In March 1987 this cost $128
      source http://www.housing.nsw.gov.au/NR/rdonlyres/7F9FB343-E887-4A4E-BF24-18CADCEEC14B/0/RentReport1JUNEQuarter1987.pdf

      In June 2014 Fairfield cost, $420 Liverpool cost $440, so let us call it $430 for comparison’s sake.
      source http://www.housing.nsw.gov.au/NR/rdonlyres/9E59396A-F829-4D7A-8AD2-4FC6F2E23309/0/RSReport108.pdf

      So rent went from $128 to $430 in 27.25 years. 2014 rent is 3.4 times what it was in 1987. I figure this is a 4.547% compound increase. A 4.5% compounded increase in rents over 27 years is huge.

      This increase in rents goes a good way to explaining and “justifying” current selling prices of housing.

      If an investor believes the following:
      1) The next 27 years will see a similar growth in rents AND
      2) Interest rates will stay low enough over this period AND
      3) The investor can make up any shortfall until the property becomes cashflow positive
      THEN
      Buying property at today’s prices and yields is sensible and rational based purely on rental return with no consideration given to capital gains.

      So the challenge is to run a discounted cash flow calculation using a low yield like 4% rising by 4.5% yearly. Then try a few discount rates and determine a net present value for the property.

      • The last 27 years saw women enter the workforce in a much bigger way, it saw changing demographics more and more workers per dependent, and it saw huge productivity improvements through regulatory reformation processes.

        Is it rational to expect the next 27 years to see a similar growth in rent given a complete turnabout in these factors?

        I suppose time will tell, but I wouldnt be banking on that assumption..

      • I do not expect the next 27 years to mimic the previous 27. The point I was making was that merely by looking at current rents and their current trajectory, it can be argued that current prices are rational and supported by these fundamentals. There is no need for any capital gain.

        To me that is not a bubble market in that narrow sense.

    • Property prices are NOT reflecting ‘market fundamentals’ Alan, and cannot be justified by any rational analysis.

      Try this:
      Consider the weekly rental for a 3 bedroom dwelling in the Fairfield/Liverpool area
      In March 1987 this cost $128
      source RentReport1JUNEQuarter1987.pdf

      In June 2014 Fairfield cost, $420 Liverpool cost $440, so let us call it $430 for comparison’s sake.
      source RSReport108.pdf

      So rent went from $128 to $430 in 27.25 years. 2014 rent is 3.4 times what it was in 1987. I figure this is a 4.547% compound increase. A 4.5% compounded increase in rents over 27 years is huge.

      This increase in rents goes a good way to explaining and “justifying” current selling prices of housing.

      If an investor believes the following:
      1) The next 27 years will see a similar growth in rents AND
      2) Interest rates will stay low enough over this period AND
      3) The investor can make up any shortfall until the property becomes cashflow positive
      THEN
      Buying property at today’s prices and yields is sensible and rational based purely on rental return with no consideration given to capital gains.

      So the challenge is to run a discounted cash flow calculation using a low yield like 4% rising by 4.5% yearly. Then try a few discount rates and determine a net present value for the property.

  7. Sadly Kohler knows better and must understand his responsibilities as a journalist. yet he is happy to spruik his own interest.
    Truly appalling.
    I can only hope ABC gives him the punt and he is left to write for the benefit of his handful of subscribers.

  8. Kohler (to me) is an ‘apologist’ for media, big business, govt and self interest.
    Not the first time he’s sprouted/made up biased crap.
    BS is all downhill and who would accept Youknowwho media from obfuscating the broader truth.
    To ameliate the gross injustice of govt promoted foreign investment (which directly undercuts the internal market prospects) is just despicable.

    Tax distortions, foreign housing investment and SMSF housing totally wacked policy -don’t need further vested promoters; plus shame on Govt and vested promoters.

  9. Business Spectator went to the dogs long ago. However, Callum Pickering has turned out to be one of the best financial journalists in Australia. He is well worth reading and about the only reason to read Bus Spec.

    • Callum is gold. I only read him and Rob Burgess. Interesting that BS’s free content trumps the Kohler and Gotti “premium” content.

  10. So ” Houses could be overvalued for a very long time”.

    I’m taking this as Aussie housing’s “Permanently high plateau” moment.

  11. Are you for real, Alan? This is the future you want for your kids? Property impoverished dependents and barristas serving corrupt Chinese and lazy old farts getting fat on rents?

    I imagine in the kind of circles he and his wife float about in it probably isn’t an issue because they’ll be supporting their children. But Kohler has totally ignored the effect of entrenched wealth on the fairness and productivity of an economy.

    Not everyone has parents who made a motza out of the housing bubble.

    • 25% are immigrants, thus probably without parental help.

      Though these immigrants can always aspire to be like Eddie Obeid.

      That’s what the last NSW Labor government resembled..

      Mediterranean style names, Mediterranean style government

  12. Alan Kohler is suffering from a major bought of cognitive dissonance.

    With a straight face, he claims the benefits of the so-called ‘wealth effect’, while ignoring that his ‘wealth’ is merely increased debt for his offspring’s generation. It’s not a ‘wealth effect’, it’s an Intergenerational Transfer Effect. Or, lets just call it the ‘Debt Effect’.

    I love this one: “…money left over after rent will ‘probably’ be spent on education…”. What utter drivel. That is a statement made by an entitled baby boomer to make himself feel better about shafting a whole generation – because, hey, it makes their grandkids more educated. I wonder if it ever struck Alan Kohler to look at the data, rather than spewing unsubstantiated bullsh*t?

    Rental payments in the June quarter (national accounts data) are at their highest share of employee compensation Australia’s history. 24.8% to be exact. When Alan was a kid trying to break into the housing market (lets say, in the early 1970’s), this ratio was just 13%…. oh, and houses were a mere 5% of the price they are now (no exaggeration).. On the contrary, education spending is only 5.3% of employee compensation.

    Pre-Baby Boomers, dont worry about having to support your parents any further in retirement. You’re already paying them rent, which soaks a a quarter of your pay – and if you’re the unlucky few who take the plunge, you’re paying them 10-15 times the price of a house (capital gains tax free)

    Get stuffed Alan Kohler. You, and everyone in your generation with the same views, are an irrelevant joke. I look forward to the day that GenY (and younger) get into power, and give back to you what you gave to them.

    • Rental payments in the June quarter (national accounts data) are at their highest share of employee compensation Australia’s history. 24.8% to be exact. When Alan was a kid trying to break into the housing market (lets say, in the early 1970′s), this ratio was just 13%

      Please explain.

    • Dividing ‘Rent and other dwelling services’ (at current prices, as opposed to chain volume measure) by the equivalent figure for ‘Total compensation of employees’. Compensation of employees typically being the method employed to fund their housing costs (as opposed to other measure of income, which include things like dividends – not something that people pay monthly rent payments with)

      The proportion of Rent to Compensation has never been as high as right now (the data only go back to 1959, but you get my point). The 24.8% figure I quote is an aggregate -> keep in mind that many households dont pay rent, but receive a wage, suggesting that those who actually rent give up much more than 24.8% of their incomes on rental payments.

      This ratio spiked in mid-2008 from 21-22% to where it is now, driven by surges in the price of rent (as opposed to more people chosing to rent). Prior to that, the ratio had stayed fairly constant since the early-90s recession. HOWEVER, prior to that, we had 20-odd straight years of meteoric increases in the share of employee compensation funnelled into rent.

      This surge began in the mid-70s, where only 12-13% of compensation was used to pay for rents. Alan Kohler has been at work since the early 70’s, so I guess he was one of those aspirational kids who was renting and saving some money to buy an average ~$30,000 house.

      Ironically, the price that charlatans like Kohler payed for their first homes doesnt even cover today’s stamp duty. Let alone the x20 increase to buy a modest $600,000 shoebox.

      Source: Rental figures are from Table 8, while compensation of employees is Table 11 of the National Accounts (ABS 5206).

      edit: at your next summer bbq, when you come across a smug baby boomer harping on about the virtues of property investment & tax free capital gains, smack them upside their heads… they are nothing but theives of opportunity (lets not even start with free health/education & an environment worth having)

  13. How long until renting becomes out of reach of young people? Then what? Also, it’s off topic, but how much do the unemployed get in rent assistance? $70 a week? If house prices and rental yields keep rising how long until we see a spike in homelessness? If the market was working, and wasn’t corrupted, we would have seen a flood of supply years ago!

  14. Apologies for the cross post but perhaps I thought it might be helpful to get the message across more directly.

    http://www.businessspectator.com.au/article/2014/9/17/property/houses-could-be-overvalued-very-long-time#comment-750016

    As there is a pay wall on this article on BS here is what I wrote

    “It looks to me like the market at work.”

    That is absurd – if it wasn’t meant as a joke.

    If you would like to see the market at work the solution is quite simple – especially when the Big Australian population ponzi fans are driving migration policy.

    1. Reduce all unnecessary zoning and other restrictions on how land is used. At the moment this makes the supply of new land slow and a happy “corruption” hunting ground for ICAC and others.

    2. Get rid of the “first user pays all” approach to financing the servicing of new land.

    This can be done having government return to its tradition role of funding these costs and recovering the cost via rates over decades. Alternatively, provide the legal frameworks required so developments can do the same thing via bond issues that are repaid by levies on the developed lots over 20-30 years.

    There is no sensible reason for forcing first home buyers to pay up front (with a larger mortgage) the cost of services that will benefit the property over a period of decades. It was not done until the 1980s and it is about time the plug was pulled on this poor policy.

    3. Stop our taxpayer guaranteed big banks from borrowing money off shore for residential lending. Wind it down to zero over the next 4-5 years.

    Borrowing money off shore for residential mortgage lending not only puts upward pressure on the $AUS but the low interest rates it enables combined with supply blockages due to poor policy results in the unproductive investment involved in simply bidding up the prices of existing houses.

    If foreigners wish to invest in our housing they can do so by non-government guaranteed RMBS issues. Of course without the government guarantees implicit when lending to our big banks few foreigners will touch our residential real estate market as they know it is over heating.

    4. Reduce capital gain concessions for residential property held for less than 10 years.

    5. Remove stamp duties and replace with a modest increase in the rates charged on all properties.

    How about championing a few of these simple measures Mr Kohler and then we can see how a functional market for land and housing works.

    No wonder your children are frustrated.

    • There were some very good reasons for the developer paying up front for infrastructure. If you are serious (and you are at least putting positive ideas up), then the problems I forsee are:

      1). Developers used to develop hard-to-service lots (swamps, hills zones requiring blasting etc) which raised costs for everyone in “the good old days”. People on cheap-to-develop sites paid for sites which cost six or seven times as much. With up front charges, developers are much more careful.

      2). Payment of services by government meant that local services constituted a large part of public debt. It was literally a mountain. Taking that on again will be a big ask.

      3). In those days, government Housing Departments constructed mega amounts of housing stock. The public sector agencies now do not have that market power. So what is to stop developers maintaining the price, and pocketing the money, leaving new home buyers paying the same up front, and then facing whopping land taxes as well to pay? Put another way, how is reducing up front infrastructure charges going to act any differently from a First Home Owners’ Grant?

      4). What or who would stop developers gouging by overcharging for infrastructure? Government no longer has the expertise to check on this. So, who would do it? More public servants? Or regulators? Haha, that’s worked well elsewhere. Or consultants with interest conflicts because their next job might be for the developers? For all anybody knows they might be doing this now, but at least it shows up in the price. If it gets buried in government land tax, wait for the rorting. And we all know who will end up paying.

      I am not against what you say in principle. After all, people will end up paying for infrastructure either way, but the issues above are traps that could easily make things far worse for new home buyers.

      • emess,

        Fair questions.

        1. A good reason to prefer the use of utility district bonds rather than have the govt fund. Bond holders will not want to fund lemon projects which is what will happen if the lots end up with levies that are uncompetitive. If the bonds holders do then the sale price of the lots will be lower due to the higher levies.

        2. Another reason to prefer the MUD approach. The problem with govt funding the services is the one you allude to – dumb decisions to fund services for difficult sections.

        3. Housing departments should get back into the game of buying raw land, servicing it and selling the blocks to home buyers at cost. They can package the servicing costs as MUD issues if keeping the balance sheet clean is a concern.

        4. Another reason to prefer the MUD approach if the govt ability to manage a project is doubted. A developer who gold plates on services will need a larger MUD issue which will mean larger levies on the lots – which means buyers will think twice. Efficient servicing will result in lower levies and easier to sell blocks.

        All that the MUD approach requires are some basic laws that allow a MUD levy to stick with the title and be a first claim on title. That will give the bond holders security and subsquent buyers of the title certainty.

        It also will not undermine the value of neighbouring non MUD properties as they will not have a levy on title for 20-30 years.

        The MUD bonds can be traded like any other bond.

  15. http://www.watoday.com.au/wa-news/brendon-grylls-slams-wa-opposition-over-pilbara-luxury-apartments-20140917-10i1et.html

    Just to illustrate the intellectual quality and selflessness of our political overlords here in WA.

    “Pilbara member Brendon Grylls has blasted the West Australian opposition for attacking government investment in luxury apartments in Karratha.

    Labor accuses the Liberals and Nationals of wasting taxpayer money by paying $30 million upfront for 50 high-rise units in the Pelago East tower in 2012.

    The government has struggled to sell 28 of the units since putting them on the market 10 months ago, and is now offering them under shared equity, a scheme usually aimed at struggling first-home buyers. ”

    Grylls and the nationals are a bunch of ass hats and extortionists, having rorted and wasted billions in WA into pointless projects in rural areas.

    • Someone needs to go to jail for that. That is just appalling. How low can we go? Seriously….

      Wake Up Australia!

  16. http://www.news.com.au/national/breaking-news/aust-luck-beginning-to-run-out-costello/story-e6frfku9-1227061315635

    “AUSTRALIA’S longest-serving treasurer warns the country’s luck is beginning to run out as wages fall and consumer pessimism grows.

    PETER Costello says while Australia is “far” from recession, the economy was undergoing big changes, leaving people with a sense of uncertainty about the future.
    “(Australia’s) luck’s beginning to run out,” he told a property forum in Sydney on Wednesday.”

    Speaking at a property forum !!!
    Well done, catering to the specufester parasite elites.

    • “Between now and then there will be enormous adjustment in our society. Those that are nimble and those that are quick will take advantage, but it’s being ahead of the curve is what matters.”

      I say that is a SELL call from Peter Costello.

  17. Alan Kohler is no better then those individual and organisations (including the one that employs Kohler, News Corp) spreading pseudo-science about vaccinations and or global warming.
    Why the ABC continues to allow this dis-informer to spruik and be paid for, is beyond belief.

  18. Kohler is shrewd on this topic – he tries to dumb down his delivery in an attempt to sound convincing presenting the most self serving analysis, while deep down you can see it in his eyes he knows what is really going on; he just doesn’t want to reveal the truth on his broadcast because it’ll spill too many baby-boomers’ beans

  19. Headline should have been:

    Multi-millionaire says “Expensive property is not necessarily a bad thing…..simply the market at work.”

  20. Robert Mugabe’s Zimbabwe manipulated the country’s foreign exchange markets for his own gain..

    That market responded, as any effective market should, with hyperinflation.

    It was a rational response to deliberate policy changes.

    No one in their right mind would champion such markets, because they’re heavily manipulated. So why does Alan Kohler champion manipulated markets in Australia?

    Because, like Mugabe, Alan Kohler and his baby booming cohort benefit from the status quo.