“Thousands of would-be homebuyers have committed themselves to Prosper’s Buyers Strike and are now standing out of the market,” Prosper Australia campaigner David Collyer said today.
“Our call for a buyers strike has gone viral over the internet – spread far and wide by young disaffected adults locked out of home ownership.
“Do not underestimate the depth of feeling around this issue. Being locked out of home ownership denies them full citizenship. They are deeply frustrated and very angry.
The response has been fast and furious. They say and I paraphrase:
“We have done the sums. The gap between prices and earnings is too big. Committing to a home at current prices equals a lifetime of debt slavery. We refuse. We see prices falling soon, just as they have elsewhere in the world. We will rent a little longer. We will save a larger deposit.
“The entire real estate edifice relies on first home buyers overpaying for poor quality property. Sellers can cash out and gear up for a superior home. The process works well until buyers can no longer afford the first step. That is the situation right now.
Evidence of the groundswell for the Buyers Strike can be found at GetUp*, where in a mere 36 hours the issue has catapulted past many other worthy and long-standing campaign ideas.
The IMF, OECD and many economic analysts have warned Australia is in a property bubble. These invariably end in widespread wealth destruction, particularly for those carrying large mortgages. In the USA, one in five properties with mortgages are ‘underwater’ – they owe more than the property is currently worth.
According to RP Data, there are 900 auctions scheduled for Melbourne this weekend. If fifty percent fail to sell, we will regard the Buyers Strike campaign a success.
“We are convinced The Great Australian Land Bubble has reached its climax and is set to deflate. Prosper is pushing on an open door,” Collyer concluded.
* http://suggest.getup.org.au/forums/60819-campaign-ideas/suggestions/1595687-first-home-buyers-property-buyers-strike?ref=title
Keep up the good work David. Don’t forget to include the “Auctions with no result” for the REAL clearance rate this weekend.
It’s not as if the authorities hadn’t been warned: http://blog.lvrg.org.au/2011/03/australias-housing-bubble-warnings.html .
Maybe if First Home Buyers did what we all did and bought a humble first abode and drove an older car they would not have a problem finding cheaper properties in their price range. What makes First Home Buyers think they are entitled to a 4 bedroom brick home with 2 garages and a theater room + a shiny new Prado on the drive.
Get with reality folks, do what your parents did and buy, renovate, sell and upgrade….Sounds like too much work – well that may be another problem…
Bart Meuller
Get real Bart, house prices are underpinned by land prices. It is the land values that have gone from 0.5x the value of GDP back in 1950’s to an all time record of 2.81x GDP in 2010. Its the greatest transfer of intergenerational wealth, the country has ever seen from the FHB who sign up for 30 year debt slavery term, towards those who control the land.
Aushousingcrash,
Welcome to the real world mate. Australia’s population in 1950 was 8.2 million. We now have 22.6 million people most of who are trying to fit around a few major developed centres hugging the Australian coastline. If you are not willing to buy a modest dwelling somewhere within 10km of your area of choice, the next thing to consider is moving to a regional centre, where there are plenty of jobs, plenty of space and you can currently buy a great house for around $300k in many places.
Have you heard the term urban renewal? – think about, say Balmain, it used to be a dive and we have now seen the benefits of urban renewal, there are many examples of this all around Australia, young people bought humble homes in not great areas and improved them and dragged the whole area up with them. Suddenly a cafe culture develops, it becomes trendy and over time your property prices have gone up. Have a look around for the next area where this might occur. People are doing this right now, while you are sitting here whinging, and they are setting themselves up to do very nicely in the long run.
Don’t get me wrong, I don’t want prices to keep going up at a rate greater than CPI either, as I have children who will be wanting to buy homes before too long, but all I am saying is there are options to get a home and get ahead. Many of them involve some hard work so my advice is, when you are ready, get a piece of Australia, get your hands dirty and get ahead. Don’t wish terrible financial ruin on the people who bought homes for their families in the last ten years. No one wins in that situation, and I suspect after you buy your first house and over time it appreciates, you won’t be complaining about the equity you have built and the potential capital gain you will have made.
Bart Mueller,
I don’t think anyone wishes badly on the families who have bought in the last several years. Reality is though that it’s not these owners who will be burned if property prices fall. Here is an excerpt from an early 2010 article on taxpayers:
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“The figures show that one in seven taxpayers now own at least one investment property, about 1.7 million taxpayers, and claimed $33 billion in tax deductions over the 2007-08 year. Negatively geared property resulted in losses of over $8.6 billion, representing an increase of 35%.”
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Here is a section from another article:
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“An Australian Housing and Urban Research Institute report this month said 80 per cent of investors buy for long-term gain, but at least half sell within five years because of cashflow problems or disappointing capital growth. One in four investors sells within 12 months.”
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Now with the above facts in mind which group of home owners do you think will be burned by house price falls? e.g. who will be selling at a loss should the price falls eventuate?
Do you think the family living in their home is going to sell just because it’s fallen by 20% in value? I suspect not and if they are forced to sell then chances are the fall in prices won’t effect them that badly as while they will get 20% less for their own home, they will also pay 20% less for the next one…
The house owners who are set to be burned by any significant fall in prices are investors. Even if we don’t see falls and prices just stagnate investors will likely still be burned by the ongoing costs if they purchase at today’s prices (e.g. 4% yields with 7% rates and costs means they are shelling out each week with the expectation that growth will exceed their out of pocket expenses).
Cheerio
BB.
Bart, you don’t get in. Population growth is reflected in the growth of nominal GDP, therefore at an AGGREGATE LEVEL the ratio should remain close to constant regardless of population growth, and not blow out by a factor of almost 6x in little over half a century. Well it would be constant if there was no credit boom coupled with a demographic spike, pushed along by poor tax policies in this area, encouraging this land appreciation. Regardless of gentrification on specific suburbs, my folks paid 80% of the single wage earners income for a fringe urban block, now I would be needing more than 400% of my annual income to buy a fringe block, of an even smaller size and another 15km’s out.
IN 1980 30 GRAND YOU COULD BORROW 70 GIVING YOU 100 GRAND
2010 30 GRAND YOU CAN BORROW 970,000 GIVING YOU $1,000,000
AND DONT WORRY ABOUY INTREST RATES AS THEY ONLY GO DOWN, LOOK AT THE LAST 30 YEARS AS HOUSE PRICES NEVER GO DOWN SO YOU CANT LOSE.