So when is this house price insanity going to end ?

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 !


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64 Responses to So when is this house price insanity going to end ?
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milkman milkman 7:27 pm 30 Sep 12

If you use debt sensibly you won’t have a problem. People focus a lot on the immediate and not the future.

Deref Deref 1:26 pm 30 Sep 12

Truthiness said :

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.

/me claps.

Well said, that wo/man.

Nightshade Nightshade 9:23 am 30 Sep 12

Maxwell said :

Save for ten years bwhahahahahahahah. That’ll work in the long run. If everyone has to save ten years for a deposit, what do you think will happen to sales volumes ?

There are always people at the end of their 10 years of saving. For all you know, the people buying the houses you think are too expensive may have done just that. Personally, I wasn’t settled enough work and location-wise to feel comfortable buying a house until I’d been working for 14 years. I’d been actively saving for a house the whole time, so of course I had a deposit when I was finally ready.

Ultimately, houses are worth what someone is prepared to pay for them. If no one was prepared to pay the current prices, they would have to come down. Clearly, there are people who are both able and willing.

Sandman Sandman 9:05 am 30 Sep 12

shirty_bear said :

Kids these days :-\

Instead of renting a mcmansion and grizzling about the cost while playing your xbox on your 60″ 3D LED, going out and getting clattered every weekend at 9 bucks a drink, and doofing around in a fully sick WRX … do what your (OK, my) parents did; live in their parents’ converted garage for 3 years, eat cheeses grillies, and save everything. Then you’ve got your deposit, the loan is 20% smaller, and you’re away.

The only thing that’s changed is peoples’ lifestyle expectations. Homes always were expensive, always will be.

Spot on.

My partner and I are both 33 and didn’t exactly enter the market in the real “Golden years”. However, we already have a house and a rental unit in the inner north, as well as a weekend property within 1 hour of the Cbd and a fairly good amount of equity in those properties. While our household income is reasonable its hardly mind blowing, yet we still live a reasonably good lifestyle without being over the top extravagant.
We make do with a $15k used family car and I drive a $2000 van. All the “toys” are older classics that have good stable or appreciating values. There’s no need to have $100k worth of cars in the family that will depreciate down to $30k within 4 years. That seems to be the way people are going. I feel a bit out of place driving around this city in a 15 year old van amongst all the shiny $40k late model vehicles.

Of course, if affordability is a problem then possibly Canberra isn’t the place for you. My in-laws live in Albury. Brother in law earns 80k and a decent 4 bedroom down there can be picked up for $250k. His commute is 5 minutes, parking is free and they live very comfortably. He moved from Sydney and is loving how easy and stress free his life has become.

Jethro Jethro 6:51 pm 29 Sep 12

milkman said :

Maxwell said :

Save for ten years bwhahahahahahahah. That’ll work in the long run. If everyone has to save ten years for a deposit, what do you think will happen to sales volumes ?

Worked for people in times past. Could it bee that youngsters these days don’t have the patience (or character)?

The youth these days….

milkman milkman 6:02 pm 29 Sep 12

Maxwell said :

Save for ten years bwhahahahahahahah. That’ll work in the long run. If everyone has to save ten years for a deposit, what do you think will happen to sales volumes ?

Worked for people in times past. Could it bee that youngsters these days don’t have the patience (or character)?

rosscoact rosscoact 3:41 pm 29 Sep 12

trevar said :

Greedy Baby Boomers decide one house not enough. Buy more house. Expect gain. More Boomers buy. Price rise. Offspring of Boomers unable to participate in market to same extent. Price rise. Generational divide. Boomers die. Rejoicing. Price fall. Descendants get houses. Price stabilise. Equilibrium. Nirvana.

I’m going to die with a big reverse mortgage to fund my lifestyle when I don’t work. Sucked in GenXY screwed again mwah hahaha

OpenYourMind OpenYourMind 12:08 pm 29 Sep 12

shirty_bear said :

Kids these days :-\

Instead of renting a mcmansion and grizzling about the cost while playing your xbox on your 60″ 3D LED, going out and getting clattered every weekend at 9 bucks a drink, and doofing around in a fully sick WRX … do what your (OK, my) parents did; live in their parents’ converted garage for 3 years, eat cheeses grillies, and save everything. Then you’ve got your deposit, the loan is 20% smaller, and you’re away.

The only thing that’s changed is peoples’ lifestyle expectations. Homes always were expensive, always will be.

This is spot on. I get so sick of all the bitching about house prices. I’ve seen plenty of honest people buy their own house. As Shirty_Bear suggests, to buy a house is not easy and it never has been. It will take some sacrifices and hard work. But that goes for most things in life, I’m afraid.

SusanV SusanV 7:47 am 29 Sep 12

The absurdity of our housing market is the excessively high amount lent on each house as a percentage of its’ value. Some lenders then also include the stamp duty so the buyer has virtually no equity at all. There is one major difference between our housing market and that in America. In America if you default and the lender takes the house that is it. In Australia if you default and the mortgagee enters into possession and sells the property you are still liable for the diffence between what you owed and what the mortgagee realised.
Susan from SpeedyLoanSearch

caf caf 5:51 pm 13 Aug 12

Truthiness said :

And here we see the illusion perpetuated.

“it isn’t unaffordable, its totally affordable if you go into debt!”

You’ll only have to pay half your wage to a bank for the rest of your life. That is on top of the third you’re already giving the government, so they can give it to a bank on your behalf. Life long indentured servitude in exchange for a place to sleep, and if you’re lucky, bread and circuses.

There is nothing immoral or perverted about going into debt to fund an asset that you will be using continuously for many years. You aren’t getting all of the benefits up front, so there’s no reason why you should have to stump up all the cost up front either. Instead it makes sense to spread the cost out over the time you’ll be using it.

And you know, instead of paying a bank for the rest of your life you could always pay rent instead – that way you’ll be paying only for the actual utility you get out of the house, and not bundling it up with investment in a somewhat dubious asset. But either way you’re going to have to pay for that roof over your head, unless you were lucky enough to have someone endow one to you.

Lunch, free, there isn’t.

umehomes umehomes 2:10 pm 13 Aug 12

I always want to know when talking “According to the ABS, average full-time adult earnings in Canberra are $1345 a week. Let’s not forget that most people looking to buy property are doing so as part of a household with two incomes. Average household earnings in Canberra are $1920”

Is the weekly income figure for household or full time adult before tax or after tax. Because that will make a lot difference.

G-Fresh G-Fresh 1:30 pm 13 Aug 12

Buy a tent

wycx wycx 1:06 pm 13 Aug 12

Credit growth has been the driver behind the Australian economy over the last ~15 years. Most of that credit was taken out to make our houses more expensive. We (our banks, and thus our taxpayers) owe interest on all of that to overseas creditors, interest which must be sucked from our economy. If our economic growth is largely due to borrowing, we should wonder how sustainable it is, and what the implications of a slow down in credit growth will be, given we still owe all that interest.

Following the capital investment phase, I fail to see rivers of gold flowing from the mining boom to the general population, given the small number of Australians directly employed, and the large amounts of foreign ownership (yay for foreign investment) and profit repatriation.

So, for those who suggest that house prices will continue to rise, I would like you to indicate how high is unreasonable? An average of 5, 8, 10, 15 times annual income? There must be an upper limit somewhere.

For those who suggest flat prices and rising incomes, what happens if there is widespread decline in standard of living? I suggest that a drop in the average standard of living is not unreasonable if there is future global financial turmoil. Why exactly are you so sure of increases in income in real terms?

I pose a more general question: What is the benefit of high house prices relative to incomes? I can’t think of it as anything more than a massive overhead on the rest of the economy, especially because we borrow all the money from overseas.

Maxwell Maxwell 12:57 pm 13 Aug 12

Grail said :

If the prices really were insane, no one would be buying. As it is, people are buying, so the prices are rational. Just because you can’t afford a place doesn’t mean the market is overpriced.

Live in a group house, stay with parents, or find cheaper rental accommodation. Save up your coins and in ten years or so you will have the money to buy a place. Even today I see apartments for sale in Hughes and Griffith for under $300k.

The first place I bought was worth about four and a half times my annual salary. It took three years living at home with my parents to raise the money to buy that place.

Lower your standards, don’t insist on a new house with mod cons as your first single person residence. Get a two bedroom place and rent the second bedroom out. Two bed 1 bath 1 garage in Forde for $360k. The hard part is raising the funds. You could start with a bedsit: a couple of those are for sale under $200k. Build some equity, use that to buy your bigger place. In five years you will have enough to cover the deposit on a new place.

Of course you could just rent for a whole longer. If you are not stuck in a place you have to pay a mortgage on for the next 30 years, you can move to where the work is.

Save for ten years bwhahahahahahahah. That’ll work in the long run. If everyone has to save ten years for a deposit, what do you think will happen to sales volumes ?

beejay76 beejay76 11:40 am 13 Aug 12

Kudos to WMC.

Solid gold.

VYBerlinaV8_is_back VYBerlinaV8_is_back 11:28 am 13 Aug 12

trevar said :

Greedy Baby Boomers decide one house not enough. Buy more house. Expect gain. More Boomers buy. Price rise. Offspring of Boomers unable to participate in market to same extent. Price rise. Generational divide. Boomers die. Rejoicing. Price fall. Descendants get houses. Price stabilise. Equilibrium. Nirvana.

Wishing something to change in price does not make it so, up or down…

trevar trevar 11:25 am 13 Aug 12

Greedy Baby Boomers decide one house not enough. Buy more house. Expect gain. More Boomers buy. Price rise. Offspring of Boomers unable to participate in market to same extent. Price rise. Generational divide. Boomers die. Rejoicing. Price fall. Descendants get houses. Price stabilise. Equilibrium. Nirvana.

Grail Grail 10:53 am 13 Aug 12

If the prices really were insane, no one would be buying. As it is, people are buying, so the prices are rational. Just because you can’t afford a place doesn’t mean the market is overpriced.

Live in a group house, stay with parents, or find cheaper rental accommodation. Save up your coins and in ten years or so you will have the money to buy a place. Even today I see apartments for sale in Hughes and Griffith for under $300k.

The first place I bought was worth about four and a half times my annual salary. It took three years living at home with my parents to raise the money to buy that place.

Lower your standards, don’t insist on a new house with mod cons as your first single person residence. Get a two bedroom place and rent the second bedroom out. Two bed 1 bath 1 garage in Forde for $360k. The hard part is raising the funds. You could start with a bedsit: a couple of those are for sale under $200k. Build some equity, use that to buy your bigger place. In five years you will have enough to cover the deposit on a new place.

Of course you could just rent for a whole longer. If you are not stuck in a place you have to pay a mortgage on for the next 30 years, you can move to where the work is.

watto23 watto23 10:42 am 13 Aug 12

Patience is the key and as a society we are not patient. The only reason, I could buy a house, was by staying at home a bit longer, fortunately my parents decided to save my board as well to contribute to a deposit. But now I’ve owned it for a few years, paid more than I needed to, I live a much more comfortabel lifestyle. I have to admit a much more impatient lifestyle too. I doubt I’d have the discipline to save for a house now. I keep telling myself to get a rental property, but the money and hassle stops me.

Still the fact Australia missed out onthe fun of the GFC has meant we live in a pretty expensive country right now. It may soon be time “For the recession we had to have”.

VYBerlinaV8_is_back VYBerlinaV8_is_back 10:31 am 13 Aug 12

Maxwell said :

VYBerlinaV8_is_back said :

HenryBG said :

I can’t even begin to imagine the pain of having to use 50%+ of your income to service a mortgage. Horrendous.

It depends on your income. As income rises, you can spend proportionally more of it without incurring hardship.

For example, paying half your income if you earn $40k per year would make things pretty hard, but if you earn $200k per year you could still live a good lifestyle. And don’t forget, as time goes by and everything else increases (including your income), your payments don’t – in real terms they fall.

Which is why everyone wants to buy a house, the benefits are obvious. But a corrupt, greedy lot have made a house not a house to live in but an expensive investment vehicle for high income earners. The prices being asked are just insane.

Prices have risen because rising incomes coupled with lower interest rates and easier borrowing criteria have significantly increased the buying power the public has, leading to price rises. Also, property in Canberra was quite cheap towards the end of the 1990’s, so a bug run up occurred.

There’s no desperate rush to buy, though. I’d say you have several years before prices in Canberra move upward by meaningful amounts.

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