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So when is this house price insanity going to end ?

By Maxwell - 12 August 2012 64

World asset price implosion. Australia in small recession, stock prices falling.

Australia had a housing price boom.

Well off young people struggling with rentals, well off young folk can only dream of buying. Well off buyers of yesteryear in negative equity. Big buyers effectively bankrupted with asset worth less than the amount borrowed.

Houses sitting on the market not selling for years. Income earning individuals sleeping in cars through lack of accommodation. Huge amounts of apartments coming online which hardly anyone can afford to buy. Baby boomer investors starting to look nervous !

Under supply of houses in productive regions means they can’t grow – workers can’t re-locate. Wage spiral. People can’t earn enough to pay for housing and consume – retailers suffering.

Job losses accelerating by the day. Public service job losses through the roof !

Is the mining boom starting to slow ? I hope not.

When will the house price insanity end ? When will Australia be a country where an honest person can safely put a roof over their own heads ? Housing is a right and a need.

Only 400k ? Only ? Do you hear yourself speak ? Do you have 400k ? Do you know what the interest payment of 400k is per year ? Do you know you need an 80k deposit ? Do you know how long it takes to save 80k ? Do you know that if I had 80k I wouldn’t spend it to go into 320k in debt ! On an asset that won’t grow ! Because the law of numbers has finally arrived and I cannot pay what I do not have which means it cannot possible grow !

What’s Your opinion?


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64 Responses to
So when is this house price insanity going to end ?
johnboy 4:02 pm 12 Aug 12

WMC is on fire today.

Maxwell 3:55 pm 12 Aug 12

wildturkeycanoe said :

I can answer one question for you. An honest person can put a roof over their heads. I have, on one income, with a family of 3 kids as well. It only costs $550 per week and will one day be mine. I agree prices are ludicrous, but it isn’t impossible, just VERY challenging on the budget. It also helps if you work lots of overtime to make ends meet and only buy cheap groceries. You also don’t have a life because you can’t afford to do anything or go anywhere, which allows for more time to work to pay off your house. Gawd, I’m starting to sound as depressed as you…..
I am happy in the knowledge that I will own my house before I retire [just] and we aren’t paying off someone else’s place anymore.

$550 a week purchased as of… when ? You’re depressed about prices as of then imagine buying now ! Or even in the future.. my crystal ball tells me the future…

Oh yes. One day I’ll get married to a lovely young 40 year old woman and when we decide to take her ovaries out of the freezer and artificially implant them with my sperm we’ll be able to ask our 85 year old parents for a loan, so that we can scrape together the 400k deposit on that 3 million dollar 3 bedroom unit in Yass (now the urban boundary of Canberra).

The bank will need a guarantor, as 85% of our combined income will be going towards the 40 year mortage. By 2027 house prices doubled every five years ! Making the average 3 bedroom house 4 million dollars ! We started small and are building up equity. Get in now or miss out forever.

Grail 3:53 pm 12 Aug 12

“The law of numbers has finally arrived” — what’s that supposed to mean?

$80k is just over one year of an average salary, thus I would assume that if you were to live in group house or bottom end rental you should be able to save that money in a few years, maybe ten if you’re really struggling. Use term deposits, keep rolling your dollars over. You are competing in this market with families who have two salaries, so you have to be much smarter with your money than they need to be.

There are plenty of places available for less than $400k, in fact I’m off to inspect one in Brisbane on Thursday. Oh … don’t buy your first home for yourself to live in. Use that first homeowner’s grant and whatever state incentives are available to buy your first rental property. Any money you can pump into that is earning you five to ten times as much buying power. Thus another few years of saving to get another $80k in equity in that property will buy you about $800k with LMI. For your first property, you might need to look at a one or two bedroom apartment that doesn’t have two parking spaces.

It took me ten years renting and living with parents to save up the money for my first place.

You can do it too! House prices aren’t going to fall just because you can’t afford one.

HenryBG 3:52 pm 12 Aug 12

wildturkeycanoe said :

. I have, on one income, with a family of 3 kids as well. It only costs $550 per week and will one day be mine. I.

Average earnings are less than twice that.

So, assuming you have $80K in the bank, you can borrow $350K to cover house & stamp duty as long as you are happy that >50% of your earnings are contributing to the Banks’ latest record annual profit.

rosscoact 3:51 pm 12 Aug 12

Ok a couple of issues here. Generally a 10% deposit is required not 20%

$40,000 would take about 4 years to save if you put away $300 per fortnight (at 5.75% interest).

In four years the ACT recession caused by the Libs wholesale public service sackings in 2013 will be on the way back up.

Start saving champ, it’s a great time to do so

Truthiness 3:51 pm 12 Aug 12

No idea is developed in a vacuum, everything is a remix. Restructuring or refining an idea does not create a piece of property at each step. Humanity collectively depends on our ability to share information, not on our ability to hoard it.

Can you imagine if cavemen had patent lawyers? We’d pay royalties on fire and the wheel.

Woody Mann-Caruso 3:44 pm 12 Aug 12

It’s a better post if you treat it as lyrics to Billy Joel’s We Didn’t Start The Fire.

Asset prices facing doom
Aussies have a housing boom
For sale
Didn’t sell
Wage spiral
What the hell

Housing price insanity
Got negative equity
Big buyers
Bankrupted
Hopes on the rocks

Job losses
Mining boom
Public servants facing gloom
Anyone got 80K
Homelessness is on the way

How much is the deposit
God just think of all the debt
On an asset that won’t grow
Is the boom starting to slow

We didn’t start the shortage
We just got in early with a tiny mortgage
We didn’t start the shortage
We’re not gonna fight it
In fact we’re delighted

Jethro 3:44 pm 12 Aug 12

The premise of your article is that house prices are too high and need to drop.

Yet, as you recognised when you mentioned that some homeowners are starting to see negative equity (in other words – when the price drop that you want to see actually occurs), a burst property bubble is going to be a pretty bad thing for a nation in which so much private wealth is (rightly or wrongly) tied up in property.

Better to see a plateauing for prices for 5 or 10 years and let wages catch up, which is pretty much what is happening. House prices have been flat or slowly deflating for 2 years. I can’t see anything that could possibly lead to a sudden turnaround in this trend.

johnboy 3:33 pm 12 Aug 12

Truthiness said :

Infinite growth is impossible in a closed system, the illusion can not hold. The world is asking questions, which forge makes gold from air? Money has always been debt, the wolves are in the hen house.

Have you heard of the economic value of artistic works? It’s not a zero sum game.

miz 3:32 pm 12 Aug 12

But I certainly received the distressed tone loud and clear.

I am in the same boat – finally earning a decent income but can’t save/get a loan because I am paying so much rent. It’s very depressing.

Truthiness 3:31 pm 12 Aug 12

The illusion that all could be landed gentry was always the bait in a debt trap. The “market” does not care about universal emancipation, capitalistic freedom is never “free”, let alone fair.

While there is a bankster ready to turn an inflated asking price into debt and interest, the prices grow. When the debt becomes too odious to manage, when the yoke hangs too heavy, the debt slave becomes a criminal and the debt masters tighten the reigns.

Infinite growth is impossible in a closed system, the illusion can not hold. The world is asking questions, which forge makes gold from air? Money has always been debt, the wolves are in the hen house.

wildturkeycanoe 3:30 pm 12 Aug 12

I can answer one question for you. An honest person can put a roof over their heads. I have, on one income, with a family of 3 kids as well. It only costs $550 per week and will one day be mine. I agree prices are ludicrous, but it isn’t impossible, just VERY challenging on the budget. It also helps if you work lots of overtime to make ends meet and only buy cheap groceries. You also don’t have a life because you can’t afford to do anything or go anywhere, which allows for more time to work to pay off your house. Gawd, I’m starting to sound as depressed as you…..
I am happy in the knowledge that I will own my house before I retire [just] and we aren’t paying off someone else’s place anymore.

Maxwell 3:19 pm 12 Aug 12

gp said :

Questions? Too many? Redundant? Rhetorical? Passive voice sentences? Trying too hard? Only buying what you can afford? Enforced savings model? Having to buy wisely? Carefully?

Drama? Drama!

Ha ha ! You may find it funny. I find it sad. C’mon. Surely there is another 10 years of 8% a year compound growth left in the market ! In another 7 years time, average house on the fringes of a city will be snapped up for the bargain price of one million dollars.

Young people will just need to learn to start small with a tent and a gas burner, after a few years of equity growth on said tent in the public park, they can move up to a land rental scheme for someone’s tin shed in their back yard.

gentoopenguin 2:52 pm 12 Aug 12

The overuse of exclamation marks was a tip-off for me…

gp 2:51 pm 12 Aug 12

Questions? Too many? Redundant? Rhetorical? Passive voice sentences? Trying too hard? Only buying what you can afford? Enforced savings model? Having to buy wisely? Carefully?

Drama? Drama!

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