Each photograph represents a day, construction of 60 residential units 8 levels, structural steel columns and beams, aerated concrete panel flooring and external cladding.
In the first week and a half we lost four days from a late delivery of steel and three days rain
Another 2 weeks have passed, work could be quicker but we have been plagued with quite bad weather. After 3 and a bit weeks we have started to put down some floor for level 3. I am hoping that after the structure will be finished in another month (if we get decent weather)
Another few weeks have past, not long now. Spring carnival horse racing is on so its a pretty awesome view on the weekends
Welcome dear reader, I have been on holiday / moving house / renovating and selling old house so have lapsed to update the blog in a bit. I wrote this article on the issues of construction in this great city of Sydney, Australia. I hope you enjoy...
At the moment in Sydney there is a construction boom, fueled by record low interest rates and tax exemptions for foreign investors. The majority of inner city property that traditionally would be purchased by young first home buyers are generally being sold off to foreign investors, with our largest privately owned developer Meriton telling us 70% of stock gets sold to mainland China
or Chinese buyers. This boom in part is Government created, actually majority Government created, back in 2006 in the last days of the Howard / Costello government a law was passed to make foreigners exempt from capital gains tax there was no logical reason for this, the economy was going fine, unemployment around the natural rate 5%, steady growth etc. If someone was pessimistic they would assume just a favor for a future favor.
This tax exemption has done what it was intended to, increase investment and demand for investment of Australian assets from foreign buyers. Its basic economics that as demand increases this will push up the price (P1= original price to P2 new price) as well as quantity produced (Q1= original price to Q2 new price)
This has been very good to many trades, construction is booming and we are doing very well. Developers are going great with no trouble offloading newly constructed units.
There is however a fallacy that homeowners are doing well, actually they may be doing poorly but do not realise it, you see if you only have 1 house, no matter the price your 3 bedroom house is only worth as much as a similar 3 bedroom house in a similar street in a similar neighborhood. If you have to sell your house you bought for $300k fifteen years ago for $1.2m to buy another house your buying power is exactly the same as if you went back in time and sold the $300k house to buy another house. Even worse is that the owners of these houses now believe they are millionaires and are maximising their debt by borrowing against the houses. This has been very good for local banks, who now have the majority of earnings derived from residential real estate loans.
Okay so give or take the homeowners are not doing so bad, people with a property portfolio that experienced the property boom are doing superb on paper, those that offload property have made massive gains.
At the other side of the coin is the first home buyer, the one struggling to buy a first home in Sydney. Here is the situation, the average unit in Sydney, actual Sydney not 1 + hours away is about $700K, the average wage is about $1400 a week before tax, $320 of that goes to tax leaving just $1,080. So how is a guy going to buy a property for $700k, the repayments on a $700k loan @ 6% are $1,042 a week, guess you have to either move to the country or have your wife postpone having children until she is 55, you pay the mortgage and she pays everything else... IVF definitely needed and no holidays EVER!
The wonderful thing is that the same people that bought in all the foreign investment and priced the younger owner occupiers out of the market have came up with another great plan, 'affordable housing for low income earners' according to government press releases this is to provide accommodation for those working in the city that cannot afford to live there, firefighters, police, nurses etc. Ironically the ones they mention are on average to above average incomes, probably because its no so popular to tell who the low income earners really are = the long term unemployed, those recently released from prison, the mentally ill, unskilled immigrants and drug addicts. Yeah it doesnt sound like such a great thing now does it? Housing Commission AKA Housing NSW markets itself as the provider of housing to 'low paid essential workers' through its subsidiary/ brand City West Housing but at the end of the day its the same crap just a different name.
Its great that in theory people get access to property they are 'unfairly' denied but lets looks at this a bit closer and the problems it creates.
Remember the Supply / Demand curve, currently government 'affordable housing' constitutes 15% of accommodation in Sydney city, however there are some in government that want to raise this to 25%
As you can see the reduction in supply of available property (instead of releasing property to the public market they develop the property, reducing the amount of units constructed for sale) shifts the supply curve to the left, pushing the price up further and pricing out legitimate 1st home buyers from the market.
Ironically the potential first home buyers are working and paying tax, subsidising the government housing that is making their housing unaffordable by reducing supply. They are also subsidising the other side that is making housing unaffordable by increasing demand, remember foreign investors exempt from capital gains tax, they are tax exempt so the tax burden falls on those who are not, local buyers and investors.
Ahh Government you have to love them....
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