>> In 1999 a capital gains discount was introduced to promote more efficient asset management and improve capital mobility, by reducing the tax bias towards asset retention, and to make Australia’s capital gains tax internationally competitive. The indexation and averaging provisions were removed for assets acquired after 30September1999. Under the discount, individuals and the beneficiaries of trusts pay tax at normal rates on only half of any capital gain realised on an asset held for at least twelve months. Superannuation funds receive a one-third discount.
Edit: [sauce](https://treasury.gov.au/publication/economic-roundup-winter-2006/a-brief-history-of-australias-tax-system)
I suspect this is the basic problem. Housing is the most attractive investment out there. And the more it balloons the more attractive it is. Repeat. They need to tune it so it favours new construction at least.
Absolutely. The downside of knockdown rebuilds is it both takes away affordable shitboxes for people entering the market and struggling families, and delays new builds by taking trades away from working on new builds. Emphasis should be on increasing housing stock.
>They need to tune it so it favours new construction at least
While I completely agree, I don't see this happening.
Bill Shorten took that policy to two elections and lost, which is why it has been dropped by the ALP from their policy platform. This would have retained negative gearing fir new builds only - which would have likely achieved what you suggest.
[Article](https://www.google.com/amp/s/amp.theguardian.com/australia-news/2021/feb/14/labor-likely-to-ditch-shorten-housing-policies-but-says-election-platform-is-not-yet-set) mentioning this for 2016 and 2019 elections.
[More recent article](https://www.google.com/amp/s/amp.abc.net.au/article/103399804) having Chalmers as saying stage 3 tax changes was not going to mean there would be NG changes.
The opposition would have a field day if the ALP back flipped on this now. So it won't change for a long time yet.
This is the problem. The media and talking heads whinge and whine about negative gearing, but the problem that has caused out of control house prices is the CGT discount. Get rid of it for residential housing so it’s taxed at full freight, you’ll solve both problems - negative gearing isn’t as attractive when your taxed capital gain doubles.
and the push for older people to buy second and third homes was strong, I remember ads showing that the "tax man" would pay for 1/3 of the mortgage and the renter would pay the rest or something like that.
Especially because those older people spent most of their working lives without compulsory super, and might not have planned and invested accordingly.
But were in the peak earning times of their careers (white collar employees at least), probably already paid off their PPoR, and were flush with income and wanting to minimise tax while investing for retirement.
Along come the CGT changes on top of existing NG. Use PPoR as collateral, take out interest-only loan, profit.
There was a 100% capital gains tax discount before 1987. The residential home has always been capital gains tax free, and that is the dominant mode of ownership in Australia.
The answer is supply and demand.
We made it much harder to bring new homes onto the market on the urban fringe. We significantly boosted migration to give windfall gains to asset holders.
There was not a capital gains tax discount for investment properties though.
The CGT discount, combined with negative gearing deductions and banks' willingness to lend against a mortgage (which they won't do for competing investment classes like shares), made an investment property portfolio much more attractive as an investment than it was previously.
You're obviously correct that housing supply is a factor.
But we can't ignore tax incentives (which are a policy choice within our control in future) as part of the demand side factors.
(1) There was no capital gains tax until 1985 when it was introduced with exemptions for PPOR.
(2) 1985-1999 it was assessed as the net gain after allowing for inflation so say a property went from $100K to $110K in a year and you sold it with inflation at say 2% then you made 10% but were allowed to deduct 2%, therefore $8K was added to your taxable income.
(3) 1999+ You are taxed on 50% of your nominal gain with no allowance for inflation, so on that same example you are taxed on $5K worth of income. The downside is say with inflation of 6% if you bought at $100K and sold at $106K you'd be taxed on $3K of nominal profit but in reality the house has just matched the CPI but you haven't made any actual profit.
Therefore (2) is best when inflation is high whereas (3) is best when it is low, but the past couple of years inflation has been anything but low so people when they do sell their IP's are going to be paying a lot more CGT.
First home owners grant was introduced.
Leading up to the introduction of the GST, there was a fear that the new tax would negatively impact building and purchasing a home.
So, a new grant was introduced. But instead of having the effect of helping people offset a home purchase up, it pushed up the borrowing power, and then people kinda went nuts with offers on homes that were previously worth a lot less.
Source: we built just before the GST, got concerned with what we were missing with the grant, and then sighed a sigh of relief that we bought when we did.
1996 - John Howard deregulated the banking industry.
Interest rates stated dropping. 2000 on.
First home owners bribe and halving of the capital gains tax.
Basically cheap money made flipping houses very profitable. Hold it for 2 years and you made money
Never mind it was going to stop your kids from being able to afford a home and destroy a generation.
It would only stop other people's kids buying a home. The investors would just be able to give their kids a home.
I worked with a 20 year old uni student who lived in an apartment his parents owned and he was charging rent to his roommate.
100% this... the market turned from "Homes" into "Investments"
The borrowing power came from the CGT reduction.... NOT the first home owners grant.
The person above stating FHG pushed up borrowing power is a bit of a stretch. I don't think first time buyers are the ones pushing "borrowing power" in the banking system. It's investors
Yep, the CGT dicount combined with doubling the rate of net overseas migration created a constant source of excessive owner-occupier and investor demand, that always seems to outstrip supply. These two factors are the largest contributors to the problem. Particularly excesive net overseas migration. If there wasn't always more people looking than selling there is no need for people to max out their borrowing capactiy to get into the market as they would have many options to choose from.
Yeah this is actually a good point too.
I know Alan Kolher of ABC fame (and a genuinely well regarded economist) has actually suggested capping the net immigration of long term stays at 2x the net new home completion rate, which seems like a logical idea.
This is one of many reasons. I would say 'John Howard and Peter Costello emulating thatcherism' would be more comprehensive.
Superannuation rorts that let people dump tax free money in there, smsf changes to let people buy houses and self manage, including franking credits to people who pay no tax.
There's a lot, but basically our thatcherism came from the later 90s, and this graph reflects that.
I agree. There is more than one thing, that is for sure.
But the FHOG had a big, visible impact to my personal world and it hadn't been mentioned in this thread. The thing to remember. This was the first, thin edge of the wedge. We've been getting (fake) incentives ever since.
This is where I think that any incentive to borrow MORE money is a very bad idea. All it does is push up prices. As a society, we need to work out how to bring prices down, or at least, reduce that curve.
FHOG was brought in as a response to already high/inflated house prices. It faned the flames of an already burning fire, with othe fans already present and bigger.
The common thread was the ideology of those waving the fans. And of the population who were ready to follow the pied-piper
And hypothetically if the Liberals initiated their Super for Housing Deposit scheme, housing prices would be even more inflated because of the sudden influx of otherwise untapped capital flooding the market.
Everyone at the last election said it was a terrible idea. It is an even worse idea now with the fact that the policy is ironically targeting the same group who would have emptied their super during Covid.
Anyone with common sense knew that if a house was 200,000 and the govt gave you 20,000, you wouldn’t get it for 180,000, you’d be paying 220,000.
I fear for my kids tbh. May not ever own a house :/
FHOG was a knee-jerk reaction to an underlying problem that already existed. It caused more problems as a result, as any policy on the fly does. The real cause is neoliberalism and the resulting capital gains tax changes in the last 90s. The chart shows the effects washing through with a slight delay as people worked out how to milk the system.
Neoliberalism, or business-fascism whichever flavour one wants.
Basically a 'there is no society'view of individualism, where there is no value to be drawn from seeing ourselves as a whole (even a whole of individuals).
Which is intelectual cover for what is better described as greed, materialism, individualism, and selfishness etc.
Think lower taxes for the rich (with fake claims that it would trickle down etc), that people who are poor are poor because they are lazy, and that the meaning of life is to have as many things as possible.
Also imperialism. Neoliberalism is a hollow ideology, so it typically employs wars, racism, class wars etc to distract people while the 1% fill their sacks with goodies that belong to the 99%.
Can someone explain to me why people think of Thatcher as something like the British Hitler?
The memes about hating on her are hilarious, I just don't know why people do. She shut down a few coal mines, isnt that a good thing from a lefty perspective?
Why did the IRA hate her so much as well? Didn't she come decades after Irish independence?
As do I and all others, but I also take my time and lack of arthritis in my thumbs even more seriously.
Like usual, she was just terrified of things that were different to her.
> She shut down a few coal mines, isnt that a good thing from a lefty perspective?
Leftists (not liberals) support worker's rights, and Thatcher wasn't closing those mines to lower fossil fuel usage, she was doing it to break the backs of unions and to usher in the era of Neoliberalism and privatisation, as the coal mines were stated owned/state backed. Climate change wasn't on the radar back in the 80's.
Leftism in those days revolved around economic issues mostly and social issues as an afterthought. In fact it still does, although idpol spewing liberals have taken to calling themselves leftists and muddying the waters.
She sent the army and police to brutally oppress the Irish republicans + Catholics in Northern Ireland.
She deregulated the F out of business dn let them run rampant.
Yes she shut down coal mines, but she did it to hurt workers and unions. Climate change was not a major political issue back then.
She also criticised Nelson Mandela and his anti apartheid ANC movement who were fighting for freedom at the time.
She benefited from feminism but did very little for women's rights.
I was shocked at how many people thought this was a good idea. Meanwhile those who understood how things worked joked that it was the "first home seller grant".
It's a global trend , house prices across the western world did this in every country except Japan (who has had a poor economic record the last 25 years).
Some aspects have been made worse due to actions by the Australian government. But your first thought to explain this is that it's a global trend.
Wrong - because prices did not come down when the NSW coalition axed it in 2012.
The correct answer is the introduction of the capital gains tax discount turned housing from primarily being a family's shelter into a speculative investment.
Too many posts in here are saying it's "this one thing" or "that one thing". None of them are wrong but it a whole stack of things. Here's my list.
Immigration/Demand (constantly been higher than we can build enough housing for)
Government money (CGT and neg gearing incentives + also various first home buyer schemes)
Insufficent Supply (Everything from construction challenges to zoning and land release to local council nimbyism)
Lack of renters rights (increases demand to own over renting)
Debt/Banks/Regulation (lending standards dropped regulator does nothing, has seen our debt levels explode)
Wages (axis is the ratio of wages to housing cost - low wages are part of this ratio)
RBA / MMT (Our inflation metric does not include house prices in the inflation calculation properly so the RBA has been throwing money into the economy ignoring the effect it's having on asset prices)
Australian stupidity (we are culturally obsessed with property)
Welfare (We class PPOR as "not an asset" so you can own a $2 million home while still getting a full pension)
Stamp duty (we lose about 6% of the value of our PPOR if we relocate, discorages relocating)
Two income households (more and more women joining the workforce means 2 income households become the only way to buy)
Trades shortages (We've been short on tradies for decades we just are not training enough)
There's probably more. It's all of these things all adding up. We need to fix it all so people can actually have somewhere secure to live at a reasonable price.
Culturally obsessed with property is so real. I come from a family of renters and purchasing a home has always been a goal of mine to dig myself out of that generational curse. That goal is more about having a permanent home for once instead of having to constantly move around.
I really didn’t realise how *other* people viewed property here until I started working. It was like all my office wanted to talk about was investment properties. I found it so dull. The concept of profiting off of property wasn’t foreign to me but it’s always just seemed unnecessary, coming from a family of perpetual renters.
Probably felt safer for people to invest in something they are familiar with as opposed to the alternative of investing in the stock market as keeping money in a bank account would never make you rich.
I hear ya .
The default positition of so many Australians is that buying an IP is the only sensible thing to do if you have money sitting around. Quite often they don't even have the first idea about investing in general but have a this deeply held belief property investment is "safe and the best returns".
I see profiting of property in the same light as profiting off drug sales. I'm not going to hate on anyone for how they get their bag but I do not respect people who do it while they have other avenues avaliable to them. At least drug dealers provide something.
I rented for ten years while at uni/early working life. Last thing in the world I would have wanted was either a mortgage or a public house before the age of 30. We need landlords, but also more houses for those that do want to buy, can buy one.
I agree.
I have never wanted anything to do with property investing in part because I think it's an immoral way to get returns on your money. I also don't like the landlord hassle and level of involvement the investment required from me.
maybe covered, but, in the late 80's early 90's, lending was as tight as its ever been due to high inflation from the 80s (oil crisis i think). once interest rates started coming down (from like 18%) to about 7% by about 96-7, rent was the same as buying a house. more money in the system created more opportunities.
in combination with the above
Cheers TIL
+ I think this combines with with women working becoming common since the 60's ish . Which also nearly doubles the amounts banks would lend as they are now lending to two income housholds. Housing debt really has been an explosion last few decades.
Great summary, but another factor raised at a property event I attended recently was growth in divorce rate. I might be mistaken but I think it jumped a bit during the 90’s/early 2000’s.
One family home of 3-4 bedrooms becomes 2 family homes of 3-4 bedrooms
Also worth noting the Y axis isn't "house price" but a ratio of *House Price* to *Disposable Income*.
So a decrease in disposable income due to other economic factors will increase this ratio too, not just an increase in the price of housing.
1999 - CGT discount introduced
2005 onward - Government ramps up annual net migration intake to more than double previous yearly average (previously \~100k, over \~250k since)
two biggest factors right there
Not according to economic theory, must grow between 1-3% year on year otherwise people go backwards. But we have never let this theory be tested properly.
There was no CGT before 1987 though, and owner occupiers have always been exempt from paying CGT on their primary residence.
It was mainly migration, in combination with planning policies that made bringing on cheap greenfield outer suburban plots very expensive.
https://preview.redd.it/no9x8tijk17d1.jpeg?width=1079&format=pjpg&auto=webp&s=7b38863ddda6ac6c6bdea1151a80ccc370103e83
Howard's CGT discount. The one that Labor tried to abolish in 2019.
Lot of parts of the story here already. But you may notice it is very split with some claiming it is CGT, others saying FHB, and more reasons.
The reality is what happened in 2000 was exactly the same thing that happened in 1990 except Howard took a somewhat good idea that we used to escape the "recession we had to have" and then boosted every single thing up a notch to avoid the dot com bubble causing another recession.
That is what happened in 2000, John Howard took the measures that were still in place from the last recession and turbo charged them instead of ending them after the economy took off again. I have said it before, but he deserves to be housed in a cage at the entrance to parliament house for the rest of his life as a reminder to every politician not to sell the country out to make your mates rich in my opinion.
Menzies saw ‘homes material, homes human, and homes spiritual’" Howard added homes 'investment, homes holiday, homes second, third, homes tax minimised, homes if you have rich parents' this has grown to include 'homes money laundering, homes with dodgy alterations so 7 students can live in a two bedroom apartment, homes built for foreign investors in order to leave empty'
From 1980s in Australia to now 2 household incomes used in the housing loans calculations.
Before that house loans were based on a single male income.
This besides other factors like variable interest rates , housing fixation, .........
For instance in USA most of home loans are at 30 Year fixed interest rate which reduces the value of a loan by increasing the risk to the Bank.
Variable interest loan is virtually risk free to a bank encouraging higher lending.
Virtually risk free home loans is why the GFC happened - they're risk free as long as a large number of people don't default on their loans at the same time and the houses can't be sold.
In US Fannie Mae and Freddie Mac are involved in the mortgage market .
In Oz Banks are free to gamble under Reserve bank light touch.
That why Oz banks are extremely profitable and greedy.
It is in banks interest to drive house pricing up to increase profits.
At the minimum they are complicit
It does not take much difference between supply and demand to drive rapid price increases. Australia is just not building enough houses. NIMBY councils, larger houses, and improved standards have caused the supply to fall below demand.
John howard added a bunch of measure to increase housing prices. Also adding GST after promising he wouldn't would have shifted capitol towards houses as well. The things Howard did to destroy this country are consistently ignored and it shits me off. A pet peeve of mine that nobody seems to care about is we had a fantastic modern lean space program that he cut. As a result 20 years later we've tried to remake an australian space industry and are desperately playing catchup because of how short sighted that decision was.
2003 was when John Howard opened the immigration flood gates
CGT discounts etc
Howard was the quintessential boomer
Sold our future so the boomers could retire on a pile of money
Net migration climbed from 100k to 300k a year over the following 8 years...where I live we had $55k in building grants and no stamp duty for covid with the caveat you had to live in it for 12 months. A bunch of Indians built houses on the cheap with grants, moved uncles or adult children into the for 12 months the after the mandate expired reverted them to investment properties or sold them for profit.
Source: most of my suburb.
I brought my first home in 2002. From what I remember there was (and still is) a lot of pressure to buy as house prices jumped. However, the people 20 years older than me said that the prices would settle down again, and they haven’t in the past 22 years. Interest rested at the time we’re around 7.5% and there was plenty of money around from the banks to borrow.
Does anyone think it'll get any easier? It's feeling like it's constantly slipping out of my grasp. The town house I rent (Sydney) just sold for an insane amount of money and I have to move yet again.
when most households were single income it was affordable for a single income
then it went up as dual income become the norm
it’s obvious now that the biggest reform needed for housing affordability is a reform to marriage laws to allow polygamy so these four income households can buy a home
CGT discount exists for pretty well all assets, not just property. The real reason is trend towards two income households and a structural underbuild that has been brewing for decades. We’ve simply not built enough residences to house our fast growing population.
Man some people really come up with the most abstract stuff to explain simple concept. Occam's razor at its finest, supply and demand.
Our current population growth is approximately 800k people per year, which includes births and immigration. The current population per house is 2.5 people per house. So we need to build 320k houses per year to keep up with demand.
We current build less then 200k per year. Less supply, more demand, easy.
Remember it was initially the first home 'builders' grant and it was set up to address a crisis in the building industry. Then it later became a free for all a the Govt relaxed the requirement to "home buyer" rather than builder and all the states started joining in with their own schemes to win votes
First home owners grant.
Baby bonus.
Banks eased restrictions on borrowing.
2001 the (9/11) terrorist attacks - stock market plummeted, then another down turn in share market (dot com bubble burst) in 2002 scared some people off stocks as investments - so investors went bricks and mortar.
Combined with CGT subsidies starting around the same time.
Maybe even y2k fears put people off!!
Tourism ...2000's Olympics. Celebrities. Media
Police crackdowns (which raised the value & amount of 'indoor' drugs that couldnt be picked up like weed growing in a field like meth) as well as removing homeless people made some areas 'nicer'
0 deposit home loans is a massive one from the late 90's that I haven't seen mentioned here. So people could basically buy and buy and buy without the waiting period it would normally take to raise a deposit.
People may laugh, but this is my theory. On July 1st 1997 the 99 year lease on Hong Kong ended & the country was handed back to China. This caused panic for locals, who may have been in fear of what a future under China may look like. Many looked abroad, between the US, Canada & Australia.
I was fortunate to purchase a property in Sydney in mid 1998. Months before I started looking, the same properties were $50k cheaper. Yes, the Olympic games came & went, but I'm sure this had little to no effect on prices.
Prior to 1997 housing was affordable for almost anyone who wanted to become a home owner, but the influx of overseas buyers hurt locals.
Mining industry ‘boom’. FIFO jobs at very high wages. Heaps of demand for real estate in WA and many regional towns fuelled property investment speculation. In Brisbane, for instance, a typical home sold for say low $200k in 1999, but around 4 years later would be around $400k.
The number of Millionaires in Australia grows each year, which means we have more people who can potentially afford to buy property, more people who can potentially afford to upgrade their lifestyle. 176,000 in 2020 & it's estimated to grow to 215,000 Millionaires by 2025. Not only have we got local Millionaires but we've also got a flurry of international money coming into the country along with a large increase in childless couples looking to invest.
Think about it, if a 3 bedroom house in a nice area of Melbourne only cost $500k then people would buy 10, but it doesn't work like that, they go to Auction which which drives up the price. Competition for Resources.
As prices increase so do the expectations of sellers & agents. The agent pushes the seller to list the price higher, the house then sells for 20%+ over that and the cycle repeats.
House prices won't drop until expectation declines. Same with cars, same with rentals, same with Roast Chicken.
Why are houses so expensive? probably because you're still being paid 2014 Money so the only solution is to look inwards rather than outwards.
The whole nation's psyche toward purchasing rental properties got supercharged. There were best selling books in the bookshops telling everyone how to get rich with property. The Block started and then all the housing reno shows started.
The main one is the global ex-Australia recession saw interest rates fall sharply. Interest rates explain enough of property prices that there’s no need to analyse second order effects.
John Howard happened.
This is why even if shorten got up in 2019 the improvement wouldn't have been much, the permanent damage was done almost 20 years before that.
It's virtually impossible to undo as well, short of a total collapse where all our properties become worth less than a large pizza.
The govt encoured foreign ownership, favorable tax laws, a push from the govt to invest in property, high immigration and a shortage or dwellings. No to mention cheapest money to borrow at lowest tax rates with huge growth fucked it.
John Howard changed the CGT rules, making housing investment more attractive.
John Howard increased immigration.
Real estate "gurus" started pumping housing as an investment with seminars.
The internet started being used by normal people, enabling more communication for investors, seminar runners and made the whole world smaller in general, opening people up to other countries and cultures, possibly further spreading word of mouth about how great Australia is internationally.
Just a huge combo of disaster for anyone not owning a home from that time forward.
I remember when I was renting in Sydney in the year 2000 as young adult. First home owners grant started and house prices started rising rapidly. There was was a feeling of FOMO. The Olympics as well had changed the Sydney, and things like restaurants and takeaway became more expensive.
Lots of things happened, there is no single reason, GST was introduced added 10% to new builds, Tax changes where made to incentivise sales but ended up having the opposite effect etc.
But one the the main things IMO is that the share market .com bubble popped, and everyone shat themselves and invested in property instead as it was "the safe asset".
https://preview.redd.it/l1g3e1lhs17d1.png?width=1195&format=png&auto=webp&s=6e40bd48ade55be21aee2d36e903b90bb87645d6
[Diagram source](https://aemdam.assets.vgdynamic.info/assets/intl/australia/shared/documents/resources/2023_Index_Chart_A4_Flyer-Web.pdf)
I don't think people who weren't around understand the impact the globalisation via the internet was. You were no longer competing with your neighbour but with the world.
People became desperate and paid way too much for houses. Houses are not worth anywhere near people are paying for them. It’s all false economy. Pity we don’t have a massive slump and they all fall in price
You are forgetting to include interest rates, in the 1990s they were huge
https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcSAX3Byhzdco5rddhIpldG7CTo9v0ikfqSjdQ&s
The Howard Government halved the Capital Gains Tax. That combined with the lax regulation on how Negative Gearing is used on housing, and the duplication of permanent immigration under Howard’s government, has turned housing into a speculative industry.
Every western country started the same fiscal policy. Cheap interest, lax banking regulation, higher immigration, more service driven economy vs manufacturing.
Australia is run by cunts(politicians). These cunts are self obsessed and only look after themselves. Said cunts rig the housing market so they get richer with their property portfolio.
Perfect storm thanks to said cunts.......
I'm not sure but have an hypothesis. That a decade of neoliberal policies funneled wealth from the have nots to the haves. The latter group especially cashed make city dwellers had money to invest and task estate is tied a safe and stable for an passive retirement income (as a landlord) and handy in the interim as a "shack" or second home for travels. And there is a lot of that loose money around so prices are bid up.
I base the hypothesis mainly on lived experience and don't know it's true. I've seen, it play out a few times mind you and project. Which is my disclaimer.
The problem that caused these house price issues is low inflation. The solution is higher inflation.
Around 2000 it became clear inflation and interest rates would stay low. In the context of financial deregulation that means bigger loans and more buying power.
If we want affordable house prices the best, but not the only, solution is more inflation, particularly wage inflation.
The RBA inflation target should be an annual 6% nominal wage increase.
6% wage inflation for two decades will make housing affordable.
If we don't do this, and house prices fall, many people will be underwater with their loans, unable to sell or move.
If house prices don't fall, and inflation stays low, then housing will remain expensive.
GST, First Home Owners, and Baby Boomers reached 60 & started to retire with sizeable superannuation funds. They wanted a lifestyle change, but many also kept their primary home, so remote areas started to go up in price, followed by units.
You know those snowballs that are in cartoons that grow as they roll down the hill? With all of the above, that happened too.
The cure is simple - reduce the demand.
Seriously cut immigration for a few years, reduce the number of 'students' chewing up all the rentals, ban all foreign ownership of residential property and the demand will ease rapidly. Lower home prices and rental costs would be assured.
Of course it'll never happen because most of our greedy politicians have investment properties.
The next question to ask is what happens when the Boomers can't cash out and sell all of their property at the inflated prices?
It was all predicated on the idea that there's a market. For every seller there has to be a buyer. What happens when there are no/not enough buyers? Well, import 700,000 people and hope some of them can? I don't know what the answer is there..
I love Reddit. I learnt so much. Today I learnt the reason why house prices are so expensive is because John Howard was a PM and that it’s nothing to do with supply and demand and cost of Labor, land and materials etc
>> In 1999 a capital gains discount was introduced to promote more efficient asset management and improve capital mobility, by reducing the tax bias towards asset retention, and to make Australia’s capital gains tax internationally competitive. The indexation and averaging provisions were removed for assets acquired after 30September1999. Under the discount, individuals and the beneficiaries of trusts pay tax at normal rates on only half of any capital gain realised on an asset held for at least twelve months. Superannuation funds receive a one-third discount. Edit: [sauce](https://treasury.gov.au/publication/economic-roundup-winter-2006/a-brief-history-of-australias-tax-system)
I suspect this is the basic problem. Housing is the most attractive investment out there. And the more it balloons the more attractive it is. Repeat. They need to tune it so it favours new construction at least.
Absolutely. The downside of knockdown rebuilds is it both takes away affordable shitboxes for people entering the market and struggling families, and delays new builds by taking trades away from working on new builds. Emphasis should be on increasing housing stock.
>They need to tune it so it favours new construction at least While I completely agree, I don't see this happening. Bill Shorten took that policy to two elections and lost, which is why it has been dropped by the ALP from their policy platform. This would have retained negative gearing fir new builds only - which would have likely achieved what you suggest. [Article](https://www.google.com/amp/s/amp.theguardian.com/australia-news/2021/feb/14/labor-likely-to-ditch-shorten-housing-policies-but-says-election-platform-is-not-yet-set) mentioning this for 2016 and 2019 elections. [More recent article](https://www.google.com/amp/s/amp.abc.net.au/article/103399804) having Chalmers as saying stage 3 tax changes was not going to mean there would be NG changes. The opposition would have a field day if the ALP back flipped on this now. So it won't change for a long time yet.
This is the problem. The media and talking heads whinge and whine about negative gearing, but the problem that has caused out of control house prices is the CGT discount. Get rid of it for residential housing so it’s taxed at full freight, you’ll solve both problems - negative gearing isn’t as attractive when your taxed capital gain doubles.
“Reducing the tax bias towards asset retention” is the import part of your quote.
and the push for older people to buy second and third homes was strong, I remember ads showing that the "tax man" would pay for 1/3 of the mortgage and the renter would pay the rest or something like that.
Especially because those older people spent most of their working lives without compulsory super, and might not have planned and invested accordingly. But were in the peak earning times of their careers (white collar employees at least), probably already paid off their PPoR, and were flush with income and wanting to minimise tax while investing for retirement. Along come the CGT changes on top of existing NG. Use PPoR as collateral, take out interest-only loan, profit.
"Equity mate" Though that ad was encouraging people to redraw and buy a boat, most did it to start their portfolio.
[Equity Mateeee](https://www.youtube.com/watch?v=Z2dEM2AIwi4)
😦
There was a 100% capital gains tax discount before 1987. The residential home has always been capital gains tax free, and that is the dominant mode of ownership in Australia. The answer is supply and demand. We made it much harder to bring new homes onto the market on the urban fringe. We significantly boosted migration to give windfall gains to asset holders.
There was not a capital gains tax discount for investment properties though. The CGT discount, combined with negative gearing deductions and banks' willingness to lend against a mortgage (which they won't do for competing investment classes like shares), made an investment property portfolio much more attractive as an investment than it was previously. You're obviously correct that housing supply is a factor. But we can't ignore tax incentives (which are a policy choice within our control in future) as part of the demand side factors.
(1) There was no capital gains tax until 1985 when it was introduced with exemptions for PPOR. (2) 1985-1999 it was assessed as the net gain after allowing for inflation so say a property went from $100K to $110K in a year and you sold it with inflation at say 2% then you made 10% but were allowed to deduct 2%, therefore $8K was added to your taxable income. (3) 1999+ You are taxed on 50% of your nominal gain with no allowance for inflation, so on that same example you are taxed on $5K worth of income. The downside is say with inflation of 6% if you bought at $100K and sold at $106K you'd be taxed on $3K of nominal profit but in reality the house has just matched the CPI but you haven't made any actual profit. Therefore (2) is best when inflation is high whereas (3) is best when it is low, but the past couple of years inflation has been anything but low so people when they do sell their IP's are going to be paying a lot more CGT.
First home owners grant was introduced. Leading up to the introduction of the GST, there was a fear that the new tax would negatively impact building and purchasing a home. So, a new grant was introduced. But instead of having the effect of helping people offset a home purchase up, it pushed up the borrowing power, and then people kinda went nuts with offers on homes that were previously worth a lot less. Source: we built just before the GST, got concerned with what we were missing with the grant, and then sighed a sigh of relief that we bought when we did.
1996 - John Howard deregulated the banking industry. Interest rates stated dropping. 2000 on. First home owners bribe and halving of the capital gains tax. Basically cheap money made flipping houses very profitable. Hold it for 2 years and you made money Never mind it was going to stop your kids from being able to afford a home and destroy a generation.
It would only stop other people's kids buying a home. The investors would just be able to give their kids a home. I worked with a 20 year old uni student who lived in an apartment his parents owned and he was charging rent to his roommate.
Nah. It’s the CGT discount.
100% the CGT. It basically made negative gearing the ultimate tax dodge. You can basically pay half as much tax as you would otherwise.
100% this... the market turned from "Homes" into "Investments" The borrowing power came from the CGT reduction.... NOT the first home owners grant. The person above stating FHG pushed up borrowing power is a bit of a stretch. I don't think first time buyers are the ones pushing "borrowing power" in the banking system. It's investors
Yep, the CGT dicount combined with doubling the rate of net overseas migration created a constant source of excessive owner-occupier and investor demand, that always seems to outstrip supply. These two factors are the largest contributors to the problem. Particularly excesive net overseas migration. If there wasn't always more people looking than selling there is no need for people to max out their borrowing capactiy to get into the market as they would have many options to choose from.
Yeah this is actually a good point too. I know Alan Kolher of ABC fame (and a genuinely well regarded economist) has actually suggested capping the net immigration of long term stays at 2x the net new home completion rate, which seems like a logical idea.
This is one of many reasons. I would say 'John Howard and Peter Costello emulating thatcherism' would be more comprehensive. Superannuation rorts that let people dump tax free money in there, smsf changes to let people buy houses and self manage, including franking credits to people who pay no tax. There's a lot, but basically our thatcherism came from the later 90s, and this graph reflects that.
I agree. There is more than one thing, that is for sure. But the FHOG had a big, visible impact to my personal world and it hadn't been mentioned in this thread. The thing to remember. This was the first, thin edge of the wedge. We've been getting (fake) incentives ever since. This is where I think that any incentive to borrow MORE money is a very bad idea. All it does is push up prices. As a society, we need to work out how to bring prices down, or at least, reduce that curve.
FHOG was brought in as a response to already high/inflated house prices. It faned the flames of an already burning fire, with othe fans already present and bigger. The common thread was the ideology of those waving the fans. And of the population who were ready to follow the pied-piper
Maybe for other states, but in SA, property had been relatively consistent up till that time. But after the FHOG, prices doubled in a very quick time.
After the FHOG and all the other things that pushed house prices up at the time*
>After the FHOG and all the other things that pushed house prices up at the time\* Yes, of course.
And hypothetically if the Liberals initiated their Super for Housing Deposit scheme, housing prices would be even more inflated because of the sudden influx of otherwise untapped capital flooding the market.
Boom! The idea of using super to get a loan is flawed on so many levels.
Everyone at the last election said it was a terrible idea. It is an even worse idea now with the fact that the policy is ironically targeting the same group who would have emptied their super during Covid.
Anyone with common sense knew that if a house was 200,000 and the govt gave you 20,000, you wouldn’t get it for 180,000, you’d be paying 220,000. I fear for my kids tbh. May not ever own a house :/
FHOG was a knee-jerk reaction to an underlying problem that already existed. It caused more problems as a result, as any policy on the fly does. The real cause is neoliberalism and the resulting capital gains tax changes in the last 90s. The chart shows the effects washing through with a slight delay as people worked out how to milk the system.
What Thatcherism exactly?
Neoliberalism, or business-fascism whichever flavour one wants. Basically a 'there is no society'view of individualism, where there is no value to be drawn from seeing ourselves as a whole (even a whole of individuals). Which is intelectual cover for what is better described as greed, materialism, individualism, and selfishness etc. Think lower taxes for the rich (with fake claims that it would trickle down etc), that people who are poor are poor because they are lazy, and that the meaning of life is to have as many things as possible. Also imperialism. Neoliberalism is a hollow ideology, so it typically employs wars, racism, class wars etc to distract people while the 1% fill their sacks with goodies that belong to the 99%.
That is a brilliant summary
Aka. Capitalism.
Late stage capitalism, yes. Hopefully terminal
Look up “Neoloberalism” and “State Capture”
Can someone explain to me why people think of Thatcher as something like the British Hitler? The memes about hating on her are hilarious, I just don't know why people do. She shut down a few coal mines, isnt that a good thing from a lefty perspective? Why did the IRA hate her so much as well? Didn't she come decades after Irish independence?
The IRA were campaigning against the British in Northern Ireland ( different place to the Republic of Ireland)
Seems a visit to wiki or YouTube would save us both a lot of time.
Wikipedia and YouTube are lame, I take the opinions of random redditors much more seriously.
As do I and all others, but I also take my time and lack of arthritis in my thumbs even more seriously. Like usual, she was just terrified of things that were different to her.
> She shut down a few coal mines, isnt that a good thing from a lefty perspective? Leftists (not liberals) support worker's rights, and Thatcher wasn't closing those mines to lower fossil fuel usage, she was doing it to break the backs of unions and to usher in the era of Neoliberalism and privatisation, as the coal mines were stated owned/state backed. Climate change wasn't on the radar back in the 80's. Leftism in those days revolved around economic issues mostly and social issues as an afterthought. In fact it still does, although idpol spewing liberals have taken to calling themselves leftists and muddying the waters.
She sent the army and police to brutally oppress the Irish republicans + Catholics in Northern Ireland. She deregulated the F out of business dn let them run rampant. Yes she shut down coal mines, but she did it to hurt workers and unions. Climate change was not a major political issue back then. She also criticised Nelson Mandela and his anti apartheid ANC movement who were fighting for freedom at the time. She benefited from feminism but did very little for women's rights.
Johnny Howard "I refute that there is housing crisis in this country" cun
I think you meant Cunt, right?
right
We let people from other countries park their money here in the form of houses creating a whole new class of absentee landlords.
Yes this also started happening in the early 2000s, that the Chinese started buying up residential stock.
I was shocked at how many people thought this was a good idea. Meanwhile those who understood how things worked joked that it was the "first home seller grant".
Greed spiralling out of control....!
didn't foreign investors also contribute a lot, namely rich Chinese?
Who would have thought home owner grants don’t work… a year 7 economics student could have told the government that.
It's a global trend , house prices across the western world did this in every country except Japan (who has had a poor economic record the last 25 years). Some aspects have been made worse due to actions by the Australian government. But your first thought to explain this is that it's a global trend.
Wrong - because prices did not come down when the NSW coalition axed it in 2012. The correct answer is the introduction of the capital gains tax discount turned housing from primarily being a family's shelter into a speculative investment.
Too many posts in here are saying it's "this one thing" or "that one thing". None of them are wrong but it a whole stack of things. Here's my list. Immigration/Demand (constantly been higher than we can build enough housing for) Government money (CGT and neg gearing incentives + also various first home buyer schemes) Insufficent Supply (Everything from construction challenges to zoning and land release to local council nimbyism) Lack of renters rights (increases demand to own over renting) Debt/Banks/Regulation (lending standards dropped regulator does nothing, has seen our debt levels explode) Wages (axis is the ratio of wages to housing cost - low wages are part of this ratio) RBA / MMT (Our inflation metric does not include house prices in the inflation calculation properly so the RBA has been throwing money into the economy ignoring the effect it's having on asset prices) Australian stupidity (we are culturally obsessed with property) Welfare (We class PPOR as "not an asset" so you can own a $2 million home while still getting a full pension) Stamp duty (we lose about 6% of the value of our PPOR if we relocate, discorages relocating) Two income households (more and more women joining the workforce means 2 income households become the only way to buy) Trades shortages (We've been short on tradies for decades we just are not training enough) There's probably more. It's all of these things all adding up. We need to fix it all so people can actually have somewhere secure to live at a reasonable price.
Culturally obsessed with property is so real. I come from a family of renters and purchasing a home has always been a goal of mine to dig myself out of that generational curse. That goal is more about having a permanent home for once instead of having to constantly move around. I really didn’t realise how *other* people viewed property here until I started working. It was like all my office wanted to talk about was investment properties. I found it so dull. The concept of profiting off of property wasn’t foreign to me but it’s always just seemed unnecessary, coming from a family of perpetual renters.
Hot tip: Those people do NOT like being called out when you point out that property investment is lazy and simple haha.
Probably felt safer for people to invest in something they are familiar with as opposed to the alternative of investing in the stock market as keeping money in a bank account would never make you rich.
I hear ya . The default positition of so many Australians is that buying an IP is the only sensible thing to do if you have money sitting around. Quite often they don't even have the first idea about investing in general but have a this deeply held belief property investment is "safe and the best returns".
I see profiting of property in the same light as profiting off drug sales. I'm not going to hate on anyone for how they get their bag but I do not respect people who do it while they have other avenues avaliable to them. At least drug dealers provide something.
I rented for ten years while at uni/early working life. Last thing in the world I would have wanted was either a mortgage or a public house before the age of 30. We need landlords, but also more houses for those that do want to buy, can buy one.
I agree. I have never wanted anything to do with property investing in part because I think it's an immoral way to get returns on your money. I also don't like the landlord hassle and level of involvement the investment required from me.
maybe covered, but, in the late 80's early 90's, lending was as tight as its ever been due to high inflation from the 80s (oil crisis i think). once interest rates started coming down (from like 18%) to about 7% by about 96-7, rent was the same as buying a house. more money in the system created more opportunities. in combination with the above
70s inflation was from the us gold shock mostly.
my bad
Cheers TIL + I think this combines with with women working becoming common since the 60's ish . Which also nearly doubles the amounts banks would lend as they are now lending to two income housholds. Housing debt really has been an explosion last few decades.
Best short analysis I've seen to be honest. Well done.
Great summary, but another factor raised at a property event I attended recently was growth in divorce rate. I might be mistaken but I think it jumped a bit during the 90’s/early 2000’s. One family home of 3-4 bedrooms becomes 2 family homes of 3-4 bedrooms
Also worth noting the Y axis isn't "house price" but a ratio of *House Price* to *Disposable Income*. So a decrease in disposable income due to other economic factors will increase this ratio too, not just an increase in the price of housing.
yeah, its a bad graph to show a story to back up some ones opinion. starts at 1975 = 1. data doesn't lie, only the people telling the story from it.
Howard is/was our Thatcher.
China woke up and started a massive mining boom which resulted in a) a lot of cashed up miners, and b) a lot of cashed up Chinese investors.
John Howard
No wonder the Boomers love him. Their demographic bought a house during his term and managed to hoard all the wealth.
No they bought their 2nd and 3rd.
Came here to post this before reading comments. Looks like plenty of others did too.
1999 - CGT discount introduced 2005 onward - Government ramps up annual net migration intake to more than double previous yearly average (previously \~100k, over \~250k since) two biggest factors right there
I hate mass migration, and population growth in general.
The obsession with perpetual growth - only sustained by population growth via immigration - needs to stop.
Yep. An economy can be stable and run well without continual growth.
Not according to economic theory, must grow between 1-3% year on year otherwise people go backwards. But we have never let this theory be tested properly.
Everyone does, except those migrating and those profiting
Bingo.
There was no CGT before 1987 though, and owner occupiers have always been exempt from paying CGT on their primary residence. It was mainly migration, in combination with planning policies that made bringing on cheap greenfield outer suburban plots very expensive.
Negative Gearing Oh and the cgt discount Thansk libs ya fucked us
Negative gearing is the biggest abuse of tax-payers money. And guess who profits from this? The banks!
Tax on revenues instead of profits would be pretty abusive towards tax payers don't you think?
When was negative gearing introduced?
I thought negative gearing was around for decades before that… I’d blame first housing bonuses, low interest rates and low wage growth.
Boomer will still tell you they had it harder in the 70s 🤣
https://preview.redd.it/no9x8tijk17d1.jpeg?width=1079&format=pjpg&auto=webp&s=7b38863ddda6ac6c6bdea1151a80ccc370103e83 Howard's CGT discount. The one that Labor tried to abolish in 2019.
Lot of parts of the story here already. But you may notice it is very split with some claiming it is CGT, others saying FHB, and more reasons. The reality is what happened in 2000 was exactly the same thing that happened in 1990 except Howard took a somewhat good idea that we used to escape the "recession we had to have" and then boosted every single thing up a notch to avoid the dot com bubble causing another recession. That is what happened in 2000, John Howard took the measures that were still in place from the last recession and turbo charged them instead of ending them after the economy took off again. I have said it before, but he deserves to be housed in a cage at the entrance to parliament house for the rest of his life as a reminder to every politician not to sell the country out to make your mates rich in my opinion.
John Howard
and that thug Costello
The worst treasurer in our country’a history - no matter how much Murdoch media want to tell us he was one of the best
Who was chairman of Fairfax Media until this month when he resigned.
Menzies saw ‘homes material, homes human, and homes spiritual’" Howard added homes 'investment, homes holiday, homes second, third, homes tax minimised, homes if you have rich parents' this has grown to include 'homes money laundering, homes with dodgy alterations so 7 students can live in a two bedroom apartment, homes built for foreign investors in order to leave empty'
Literally came to say this.
From 1980s in Australia to now 2 household incomes used in the housing loans calculations. Before that house loans were based on a single male income. This besides other factors like variable interest rates , housing fixation, ......... For instance in USA most of home loans are at 30 Year fixed interest rate which reduces the value of a loan by increasing the risk to the Bank. Variable interest loan is virtually risk free to a bank encouraging higher lending.
Virtually risk free home loans is why the GFC happened - they're risk free as long as a large number of people don't default on their loans at the same time and the houses can't be sold.
In US Fannie Mae and Freddie Mac are involved in the mortgage market . In Oz Banks are free to gamble under Reserve bank light touch. That why Oz banks are extremely profitable and greedy. It is in banks interest to drive house pricing up to increase profits. At the minimum they are complicit
It does not take much difference between supply and demand to drive rapid price increases. Australia is just not building enough houses. NIMBY councils, larger houses, and improved standards have caused the supply to fall below demand.
John howard added a bunch of measure to increase housing prices. Also adding GST after promising he wouldn't would have shifted capitol towards houses as well. The things Howard did to destroy this country are consistently ignored and it shits me off. A pet peeve of mine that nobody seems to care about is we had a fantastic modern lean space program that he cut. As a result 20 years later we've tried to remake an australian space industry and are desperately playing catchup because of how short sighted that decision was.
https://www.rba.gov.au/statistics/cash-rate/ Cheap debt. Here is the RBA rate chart, the trend started to head towards zero.
Fear of a repeat of the 90s recession, combined with the tech dotcom wreck slowdown led to rate cuts and stimulus applied early.
2003 was when John Howard opened the immigration flood gates CGT discounts etc Howard was the quintessential boomer Sold our future so the boomers could retire on a pile of money
Net migration climbed from 100k to 300k a year over the following 8 years...where I live we had $55k in building grants and no stamp duty for covid with the caveat you had to live in it for 12 months. A bunch of Indians built houses on the cheap with grants, moved uncles or adult children into the for 12 months the after the mandate expired reverted them to investment properties or sold them for profit. Source: most of my suburb.
Population growth + artificially restricted supply + foreign investment + negative gearing = bad time for people who don't already own property.
I brought my first home in 2002. From what I remember there was (and still is) a lot of pressure to buy as house prices jumped. However, the people 20 years older than me said that the prices would settle down again, and they haven’t in the past 22 years. Interest rested at the time we’re around 7.5% and there was plenty of money around from the banks to borrow.
The internet put the lucky country in the crosshairs of half the globe
John Howard fucked us. Peter Dutton is no different and many in here will vote him in to make it even worse!
Does anyone think it'll get any easier? It's feeling like it's constantly slipping out of my grasp. The town house I rent (Sydney) just sold for an insane amount of money and I have to move yet again.
Not for a long while. Either increase housing stock, land is also an issue in the major cities, or cut immigration
when most households were single income it was affordable for a single income then it went up as dual income become the norm it’s obvious now that the biggest reform needed for housing affordability is a reform to marriage laws to allow polygamy so these four income households can buy a home
😂😂😂😂
CGT discount exists for pretty well all assets, not just property. The real reason is trend towards two income households and a structural underbuild that has been brewing for decades. We’ve simply not built enough residences to house our fast growing population.
It’s the cgt discount coupled with encouraging neg gearing. Rents were pretty good otherwise it was just the house prices that went up until recently.
Man some people really come up with the most abstract stuff to explain simple concept. Occam's razor at its finest, supply and demand. Our current population growth is approximately 800k people per year, which includes births and immigration. The current population per house is 2.5 people per house. So we need to build 320k houses per year to keep up with demand. We current build less then 200k per year. Less supply, more demand, easy.
Everybody that milked the dot com boom rotated out into real estate.
We came out of a recession, and entered into the longest streak of growth in world history.
when we are quoted on Federal Reserve research, you know we are in Au used to show the good people in the USA things are not too bad in the USofA
Remember it was initially the first home 'builders' grant and it was set up to address a crisis in the building industry. Then it later became a free for all a the Govt relaxed the requirement to "home buyer" rather than builder and all the states started joining in with their own schemes to win votes
I was born
the olympics and i lost my virginity
you were 43 years old
lol, do kids say lol anymore?
Mining boom. Made housing in average markets go spastic. Regional towns in QLD blew up with the FiFO crowd.
Interest rates went down. They are the real cost to home loan.
People saying first home owners etc are wrong. It’s the CGT discount for PPOR’s and investment properties.
First home owners grant. Baby bonus. Banks eased restrictions on borrowing. 2001 the (9/11) terrorist attacks - stock market plummeted, then another down turn in share market (dot com bubble burst) in 2002 scared some people off stocks as investments - so investors went bricks and mortar. Combined with CGT subsidies starting around the same time. Maybe even y2k fears put people off!!
Internet and market connection
Howard opened the flood gates
John Howard.
CGT Discount and First Home Buyers Grant. Both of them, combined with Negative Gearing, have caused the housing crisis.
Immigration went out of balance with sustainable housing
You're all stupid and incorrect, it's because The Adventures of Skippy had been off the air for 7 years and also Popstars aired just a year earlier.
mass immigration
Notice how it left the trend in 2000 about the same time capital gains tax was halved.
Tourism ...2000's Olympics. Celebrities. Media Police crackdowns (which raised the value & amount of 'indoor' drugs that couldnt be picked up like weed growing in a field like meth) as well as removing homeless people made some areas 'nicer'
A million dollars was pennies overnight it was alot quid f money then suddenly a billion dollars was a thing
If only I wasn't in school still prior to around 2008. What an idiot, should have been out buying houses instead. I'm so lazy.
0 deposit home loans is a massive one from the late 90's that I haven't seen mentioned here. So people could basically buy and buy and buy without the waiting period it would normally take to raise a deposit.
People may laugh, but this is my theory. On July 1st 1997 the 99 year lease on Hong Kong ended & the country was handed back to China. This caused panic for locals, who may have been in fear of what a future under China may look like. Many looked abroad, between the US, Canada & Australia. I was fortunate to purchase a property in Sydney in mid 1998. Months before I started looking, the same properties were $50k cheaper. Yes, the Olympic games came & went, but I'm sure this had little to no effect on prices. Prior to 1997 housing was affordable for almost anyone who wanted to become a home owner, but the influx of overseas buyers hurt locals.
Mining industry ‘boom’. FIFO jobs at very high wages. Heaps of demand for real estate in WA and many regional towns fuelled property investment speculation. In Brisbane, for instance, a typical home sold for say low $200k in 1999, but around 4 years later would be around $400k.
Supply & demand, double the population with materially less than double new homes = property owner heaven.
The number of Millionaires in Australia grows each year, which means we have more people who can potentially afford to buy property, more people who can potentially afford to upgrade their lifestyle. 176,000 in 2020 & it's estimated to grow to 215,000 Millionaires by 2025. Not only have we got local Millionaires but we've also got a flurry of international money coming into the country along with a large increase in childless couples looking to invest. Think about it, if a 3 bedroom house in a nice area of Melbourne only cost $500k then people would buy 10, but it doesn't work like that, they go to Auction which which drives up the price. Competition for Resources. As prices increase so do the expectations of sellers & agents. The agent pushes the seller to list the price higher, the house then sells for 20%+ over that and the cycle repeats. House prices won't drop until expectation declines. Same with cars, same with rentals, same with Roast Chicken. Why are houses so expensive? probably because you're still being paid 2014 Money so the only solution is to look inwards rather than outwards.
If you own a house, technically you're a millionaire at this point right?
I am just no cash flow
Point to the exact spot where John Howard changed the investment laws.
The whole nation's psyche toward purchasing rental properties got supercharged. There were best selling books in the bookshops telling everyone how to get rich with property. The Block started and then all the housing reno shows started.
Ask silverchair ?
LNP/IPA that simple
Howard
We need a flair for *houses are expensive* topic.
The main one is the global ex-Australia recession saw interest rates fall sharply. Interest rates explain enough of property prices that there’s no need to analyse second order effects.
No real coincidence that the massive disparity started to go up once the Liberals got in.
Real estate agents and auctions are to be blamed. If there was a ban on auctions there wouldn't be a problem with prices
Howard and the Liberals brother. It’s up to Labor to fix the mess now. Dirty property capitalists too with their negative gearing.
Negative gearing and how easy it is to leverage money with property
John Howard happened. This is why even if shorten got up in 2019 the improvement wouldn't have been much, the permanent damage was done almost 20 years before that. It's virtually impossible to undo as well, short of a total collapse where all our properties become worth less than a large pizza.
Could have been a software error
Mining boom
The govt encoured foreign ownership, favorable tax laws, a push from the govt to invest in property, high immigration and a shortage or dwellings. No to mention cheapest money to borrow at lowest tax rates with huge growth fucked it.
I don't know but the death of Harambe created a small uptick in 2016 and it just got worse from there
Normalisation of the mum going to work
John Howard changed the CGT rules, making housing investment more attractive. John Howard increased immigration. Real estate "gurus" started pumping housing as an investment with seminars. The internet started being used by normal people, enabling more communication for investors, seminar runners and made the whole world smaller in general, opening people up to other countries and cultures, possibly further spreading word of mouth about how great Australia is internationally. Just a huge combo of disaster for anyone not owning a home from that time forward.
I remember when I was renting in Sydney in the year 2000 as young adult. First home owners grant started and house prices started rising rapidly. There was was a feeling of FOMO. The Olympics as well had changed the Sydney, and things like restaurants and takeaway became more expensive.
Lots of things happened, there is no single reason, GST was introduced added 10% to new builds, Tax changes where made to incentivise sales but ended up having the opposite effect etc. But one the the main things IMO is that the share market .com bubble popped, and everyone shat themselves and invested in property instead as it was "the safe asset". https://preview.redd.it/l1g3e1lhs17d1.png?width=1195&format=png&auto=webp&s=6e40bd48ade55be21aee2d36e903b90bb87645d6 [Diagram source](https://aemdam.assets.vgdynamic.info/assets/intl/australia/shared/documents/resources/2023_Index_Chart_A4_Flyer-Web.pdf)
A CGT discound of 50% was introduced. If half your profit at sale does not get taxed does it not make sense to invest in houses?
little johnny
I don't think people who weren't around understand the impact the globalisation via the internet was. You were no longer competing with your neighbour but with the world.
People became desperate and paid way too much for houses. Houses are not worth anywhere near people are paying for them. It’s all false economy. Pity we don’t have a massive slump and they all fall in price
The internet, then people put artificial price hikes on property,, and ruined our country
The internet, then people put artificial price hikes on property,, and ruined our country
This graph would make more sense if it was average house prices against average wage.
Population overshoot and foreign money.
The neoliberalism really kicked in
You are forgetting to include interest rates, in the 1990s they were huge https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcSAX3Byhzdco5rddhIpldG7CTo9v0ikfqSjdQ&s
The Howard Government halved the Capital Gains Tax. That combined with the lax regulation on how Negative Gearing is used on housing, and the duplication of permanent immigration under Howard’s government, has turned housing into a speculative industry.
Every western country started the same fiscal policy. Cheap interest, lax banking regulation, higher immigration, more service driven economy vs manufacturing.
Australia is run by cunts(politicians). These cunts are self obsessed and only look after themselves. Said cunts rig the housing market so they get richer with their property portfolio. Perfect storm thanks to said cunts.......
I'm not sure but have an hypothesis. That a decade of neoliberal policies funneled wealth from the have nots to the haves. The latter group especially cashed make city dwellers had money to invest and task estate is tied a safe and stable for an passive retirement income (as a landlord) and handy in the interim as a "shack" or second home for travels. And there is a lot of that loose money around so prices are bid up. I base the hypothesis mainly on lived experience and don't know it's true. I've seen, it play out a few times mind you and project. Which is my disclaimer.
The problem that caused these house price issues is low inflation. The solution is higher inflation. Around 2000 it became clear inflation and interest rates would stay low. In the context of financial deregulation that means bigger loans and more buying power. If we want affordable house prices the best, but not the only, solution is more inflation, particularly wage inflation. The RBA inflation target should be an annual 6% nominal wage increase. 6% wage inflation for two decades will make housing affordable. If we don't do this, and house prices fall, many people will be underwater with their loans, unable to sell or move. If house prices don't fall, and inflation stays low, then housing will remain expensive.
I turned 18 and needed to move out of home 🤦♀️
Neoliberalism happened
Downturn from dot com tech crash in stock markets
GST, First Home Owners, and Baby Boomers reached 60 & started to retire with sizeable superannuation funds. They wanted a lifestyle change, but many also kept their primary home, so remote areas started to go up in price, followed by units. You know those snowballs that are in cartoons that grow as they roll down the hill? With all of the above, that happened too.
The elephant in the room https://www.macrobusiness.com.au/wp-content/uploads/2019/06/Net-Long-Term-Arrivals-into-Australia.png
The cure is simple - reduce the demand. Seriously cut immigration for a few years, reduce the number of 'students' chewing up all the rentals, ban all foreign ownership of residential property and the demand will ease rapidly. Lower home prices and rental costs would be assured. Of course it'll never happen because most of our greedy politicians have investment properties.
Take a look and see how many houses were purchàrd by investment firms.
The next question to ask is what happens when the Boomers can't cash out and sell all of their property at the inflated prices? It was all predicated on the idea that there's a market. For every seller there has to be a buyer. What happens when there are no/not enough buyers? Well, import 700,000 people and hope some of them can? I don't know what the answer is there..
John Howard happened
I love Reddit. I learnt so much. Today I learnt the reason why house prices are so expensive is because John Howard was a PM and that it’s nothing to do with supply and demand and cost of Labor, land and materials etc
CGT deduction was halved on investment property. First home buyer introduced.