BIS Oxford Economics has done some interesting analysis for The Guardian showing that Sydney’s mortgage affordability is now the equal worst on record, with Melbourne’s just below 2008’s record low, driven primarily by housing investors:
As of December 2016, 42% of the average disposable income of a New South Wales household was swallowed up by monthly mortgage payments on a median-priced house in the capital – after a 25% deposit.
It was the same in 2008, still the highwater mark of housing unaffordability in all but one Australian capital.
Melbourne at 37.1% in December was forbidding but it was worse there in 2008 (38.1%) and 2010 (37.4%)…
Richard Robinson, senior economist for BIS Oxford, says the affordability problem, most acute in Sydney and Melbourne, is mainly a story of “wealthy people investing in property and driving up price and demand”…
Phasing out negative gearing to stop investors writing off rental losses on multiple properties against their income, and tax discounts on capital gains, Robinson says, are key to “deflating the bubble slowly before it goes pop”.
The Turnbull government has resisted calls for such moves, leaving in place what Robinson calls the world’s most “generous tax breaks for residential property”.
“To me, that’s where all our savings have gone.”
That’s quite an extraordinary result given discount variable mortgage rates have fallen from 8.95% in August 2008 to 4.55% currently:
With interest rates approaching a lower bound, you don’t have to be a rocket scientist to see that there’s little scope to ease mortgage pressures and that Australia’s indebted mortgage slaves are highly vulnerable. Moreover, even a small rise in mortgage rates could spell doom for a significant proportion of borrowers.
Bur rather than take BIS’ advice and unwind negative gearing and the CGT discount, the Turnbull Government – in concert with the NSW and Victorian State Governments – is instead seeking to pump first home buyer demand and blow more air into the bubble.
At least BIS just called it what it is: a “bubble”.
Many thanks.
NorthMEMBER
An anecdote from this morning.
Spoke to a ethnically chinese real estate agent.
He sells Sydney property to mainly chinese mainlanders, but also to taiwanese.
Reckons they can’t get enough Australian property as it looks cheap to them with our currency being so low.
I asked him about whether his purchasers were having trouble getting money out of China with the currency restrictions.
He then asked me a bit worried whether I was a solicitor. As I’m not I told him so and he appeared releieved. He then asked whether I know how to get money out of China. I don’t and I told him the same. He then laughed about how there were no legal ways to get the money out.
I thought this was very funny too. Naaaaughtt.
Bloody locusts buying everything up making it unaffordable for Australians.
We need to be able to contact the Chinese government so we can dob in their own for their money expatriation breaches.
I think there’d be a lot of Australians willing to rat on foreign buyers
At least BIS just called it what it is: a “bubble”.
Many thanks.
An anecdote from this morning.
Spoke to a ethnically chinese real estate agent.
He sells Sydney property to mainly chinese mainlanders, but also to taiwanese.
Reckons they can’t get enough Australian property as it looks cheap to them with our currency being so low.
I asked him about whether his purchasers were having trouble getting money out of China with the currency restrictions.
He then asked me a bit worried whether I was a solicitor. As I’m not I told him so and he appeared releieved. He then asked whether I know how to get money out of China. I don’t and I told him the same. He then laughed about how there were no legal ways to get the money out.
I thought this was very funny too. Naaaaughtt.
Bloody locusts buying everything up making it unaffordable for Australians.
We need to be able to contact the Chinese government so we can dob in their own for their money expatriation breaches.
I think there’d be a lot of Australians willing to rat on foreign buyers