For those outside the Morningstar paywall it was also published (open to public) on Firstlinks here: Australian stocks will crush housing over the next decadehttps://www.firstlinks.com.au/australian-stocks-will-crush-housing-next-decade (tho the Morningstar original article includes an extra byline "By our estimate, housing is 40% overvalued, making it one of the world's priciest assets and even more expensive than the 'Magnificent Seven' US tech stocks. That doesn't bode well for future returns from property")
@Strawman - the price was maybe more for the 651 square metres of land than the house itself - that said I can still shudder at the price
Powerball is about my only hope too at this stage @innuendo
I agree too @Remorhaz that the value is all in the land; no doubt someone will squeeze a block of units on it.
Still, I'd be curious as to what the expected ROI would be when you factor in demolition, construction etc. I suspect on any reasonable DCF basis of potential income it'd still defy logic, but if you can flip it easy enough there's probably a certain rationale. Especially if as a developer you have no ongoing liability after the sale (ie there's no consideration for maintenance/remediation Capex).
It is not a good situation where a large segment of the population are unable to buy their own home.
The tax system is greatly skewed towards home ownership with zero capital gains tax. Also an investment property is given favorable tax status with negative gearing and 50% capital gains tax relief if owned over 1 year (along with other investments). In addition Australia's immigration rates are amongst the highest in the western world.
Worse it has become embedded in Australian psyche that buying a home or investment property is a one way street to riches. So everyone is running around maxing out their borrowing capacity on residential real estate.
To add fuel to the ridiculous fire, our politicians are all in on the act big time. See article below on property ownership for the local Newcastle politicians. It is unlikely this lot will be spending the New Year thinking about how to crack down on housing taxation benefits.
However despite the above, I think the article "Australian Stocks will crush Housing over the next decade" is basically correct.
Just because every idiot is piling into something does not mean you have to.
My daughter is a 30 y/o nursing unit manager at a private hospital in Sydney CBD. She makes good money with shift work etc and is starting to think about buying a place to live. She is single and has previously been focused on travelling, but has now saved almost $10k towards a home deposit in about 6 months.
I was doing the maths and I'm thinking she will take 10 years to save a deposit. Say house prices double in the next 10 years, she would be looking at about $2.8m median house price in Sydney, so she would need to save $560k over that time for a 20% deposit. Hopefully by then she has a partner and a double income to help (otherwise I assume she will continue as a member of flatmates.com). Then she could try to aggressively pay down the mortgage and possibly think about having kids. Alternatively, she could buy a small place further out in the suburbs, and commute 1hr+ in to the city including her late night shifts. Neither of those options sound very appealing to me and I really do wonder if something will have to give.
Over the Christmas holidays we got together with the family at Hyams Beach and spent a lot of time playing Monopoly. It suddenly dawned on me that my generation have been playing Monopoly since we were kids and could that have fed the great Aussie real estate obsession? :-)
@actionman the property rant is fair enough, but there are better (tongue in cheek) and more affordable places to live just about anywhere else across the country. She could also rent-vest, which has its merits.
Out of interest, latest median property data has the median unit price in Australia’s capital cities is $650k, while the median house price stands just below 940k.
That said, the current immigration trend will likely further exacerbate problems seen in the housing market -- I remain flabbergasted that more aren't talking about this.