Compound growth in house prices over ?

[buggerlugs]

http://www.news.com.au/money/money-m...-1226395093277
Interesting comments by the Boss of Westpac......

[karj]

The housing boom was always a double edged sword. It benefitted those who were already financially established and allowed them to grow their wealth whilst freezing out new homeowners and pushing house prices through the roof. If it is over, it's a good thing.

[Jim Goose]

Have to agree... if its over ... good!

Its everyones right to be able to own a home, however in the past 7 or 8yrs its become just a pipe dream for some to be able to;
a) afford to buy one...
b) be able to actually pay it off

[|||]

Originally Posted by Jim Goose

Its everyones right to be able to own a home

that's a good point. if the government expanded the department of housing & took control of the real estate market we could all exercise our right to home ownership

[karj]

Originally Posted by |||

that's a good point. if the government expanded the department of housing & took control of the real estate market we could all exercise our right to home ownership

We actually do have the right to housing, but not home 'ownership' as such. Although in a broader sense, we also have a right to own 'property'.

It comes under the United Nations UDHR (Universal Declaration of Human Rights). Says something to the effect of having the right to a standard of living adequate for health and wellbeing, which includes housing amongst other things. So affordable housing is a basic human rights issue.

[2011G6E]

Originally Posted by |||

that's a good point. if the government expanded the department of housing & took control of the real estate market we could all exercise our right to home ownership

...Or brought in rent control as has been done in other countries. It's frankly criminal that houses in my area are being rented out at up to nearly $4000 a week in some towns. Ones in my town are nearly a grand a week, ones in Blackwater are well over that. Moranbah is eye-watering.
The trick is, a house...cheap kit homes like they throw up in weeks...don't cost much more to build out here than down the coast, and land isn't that much more either. It's just greedy landlords snapping up old houses and filling them with miners.
One house recently sold in our town and eight miners have moved in. Another sold and at least four or five will be living there...god knows what the landlord is charging the mines for them.

[MAD]

It won't be over. Maybe not to the levels as before, but it will still exist.

It has stopped over the past 1-2 years (depending who you ask), but as long as there are incentives to invest in property (tax offsets as generous as they are) there will always be someone with more coin than you possibly vying for the same property.

I think people have realised that the "value" they are placing on property is well above its true value.

[drwevil]

Man I'm glad I have a cheap mortgage.

My wife can stay home, we are comfortable, well fed and have a nice car and a hack ..;-)

Our house isnt the biggest or the best but it's home and we can afford it ..

Unlike some of our friends who both work , have nice houses, nice cars, drop the kids at day care or school and have HUGE mortgage and are miserable...the reality of the Aussie dream....

[buggerlugs]

Originally Posted by drwevil

Man I'm glad I have a cheap mortgage.

My wife can stay home, we are comfortable, well fed and have a nice car and a hack ..;-)

Our house isnt the biggest or the best but it's home and we can afford it ..

Unlike some of our friends who both work , have nice houses, nice cars, drop the kids at day care or school and have HUGE mortgage and are miserable...the reality of the Aussie dream....

It's called living within your means. Well done. Australian Crawl had a song called "Live now, Pay later". Sums up a lot of Australia.......

[Jim Goose]

Originally Posted by buggerlugs

It's called living within your means. Well done. Australian Crawl had a song called "Live now, Pay later". Sums up a lot of Australia.......

Exactly.... a LOT of Australians (without causing a stir), especially those in the mining boom, who make a $100,000 a year, seem to be all whinging they cant afford to live... "really" I say in reply??

I wonder why?

3 or 4 cars, a jetski, a boat, two trail bikes, 5bedroom home in the most expensive part of town, a plasma in every room..... hmmmm

[Ben73]

Originally Posted by Jim Goose

Exactly.... a LOT of Australians (without causing a stir), especially those in the mining boom, who make a $100,000 a year, seem to be all whinging they cant afford to live... "really" I say in reply??

I wonder why?

3 or 4 cars, a jetski, a boat, two trail bikes, 5bedroom home in the most expensive part of town, a plasma in every room..... hmmmm

Eventually that person will own that 5 bedroom house in the nice part of town and it will be worth heaps.
Better then buying a tiny house in the **** part of town and drinking the rest of their money away.

[Polyal]

I was talking to someone who is pretty clue'y about the economy and investing, his retired so its what he does..hehe

Anyway, he mentioned that Australia has the highest housing debt (cant remember if thats the correct term) in the world..anyone know which set of figures represents that?

From a young person who was in the market, and got out and now is going back in it is a bit of a joke. We brought such a nice house in Launceston for what you couldnt even buy a 1 bedroom apartment/town house for in Vic.

I think one of the issues is that outer suburbs are just hard to get to..I mean I live 40mins NW of Melb and on a good day I can drive straight into the CBD of melb in under 40mins. Problem is that quickly turns to 1.5hrs if the traffic is stuffed.

Ive never heard anyone in mining say that cant afford to live though.

[XB GS 351 Coupe]

House values have been going up at a steady rate since the early 1900's, the rate of increase of value of homes has been consistent for the last 50-60 years, ie the percentage gain of value has not changed over that period when averaged out in the long term.

Obviously ignoring booms like we had in the early 2000's and recessions like in the mid to late 80's, these booms and recessions have since evened out, remembering the housing market is a LONG TERM investment not a point in time.

Re affordability, I believe housing is more affordable these days, people are just expecting more, my parents bought a house in the early 80's for 60K, 1/4 acre block, three bedroom no garage, no air con, fairly small compared to the 4-5 bedroom walk in wardrobes, ensuite, three car garage, ducted air and heating people expect as a first home today.

If new home buyers bought/build small 3 bedroom homes similar to what I have grown up in they could easily afford it.

[Dr Jekkyl]

The most recent housing boom will not be repeated for a long, long time!

Favourable demographics, easy credit availability and govt. policy created a huge asset bubble that is now finally starting to deflate.

Australian household debt is 150% of GDP!

This hardly sustainable and anyone who actually thought it could go on forever was, and still is, deluded.

The property sector does bring in considerable revenue for state govts so I am sure that we will see plenty of attempts at re-inflating the bubble, just like NSW recently announced.

[Road_Warrior]

Originally Posted by XB GS 351 Coupe

Re affordability, I believe housing is more affordable these days, people are just expecting more, my parents bought a house in the early 80's for 60K, 1/4 acre block, three bedroom no garage, no air con, fairly small compared to the 4-5 bedroom walk in wardrobes, ensuite, three car garage, ducted air and heating people expect as a first home today.

If new home buyers bought/build small 3 bedroom homes similar to what I have grown up in they could easily afford it.

This is something I have marvelled at as well. My first house (which we're still in I might add, but we're currently in the process of tarting it up to sell and move into something bigger and better) is a 45 year old 3 bedroom duplex half. Now, being in Perth, we're acutely aware of the impact the housing boom has had on affordability but some people simply won't consider something older and more modest and everything has to be bells and whistles type stuff, and then complain about affordability.

Silly cow in my office has been crapping on about buying a house for 3 years. She's one of these loud talkers on the phone who makes sure everyone knows she and her partner are looking at (or WERE looking at) 5, 6 and 700,000 dollar houses (for their FIRST home). But guess what, 3 years on, they're still renting, but won't accept advice about maybe scaling back their expectations so they can get their foot in the door with something cheaper.

You can lead a horse to water, but you can't make it drink.

[Yellow_Festiva]

Originally Posted by XB GS 351 Coupe

Re affordability, I believe housing is more affordable these days, people are just expecting more, my parents bought a house in the early 80's for 60K, 1/4 acre block, three bedroom no garage, no air con, fairly small compared to the 4-5 bedroom walk in wardrobes, ensuite, three car garage, ducted air and heating people expect as a first home today.

Doubt it's more affordable today.. actually quite the opposite.

I can't remember the exact statistic... 4-6 decades ago the average house cost 3.? times the average wage.

Now the average house costs 8-9 times the average wage.

Then, think of all the other gadgets / dsitractions / financial commitments we have these days to add to the cost of living that wasn't around back then???

We get paid heaps more these days, but the money buys less...

[GT0132]

My 2c

While you have a commodity that's in demand it cannot be a dead set certainty that its value won't increase.

The demand for housing can only increase where there are net increases in migration and no commensurate increase in building activity. However in the mix this time is the fact that many who would otherwise be buying or upgrading are holding on to their cash, not borrowing (or not adding to their existing borrowings) and instead seeing what happens regarding our current econonic problems. As we all know, unless you're in an area positively impacted by the mining boom things are pretty bad right now economically. I suespect most if not all of the Eastern states are in recession.

[Dr Jekkyl]

We're different.

[DANNO178]

Originally Posted by GT0132

My 2c

While you have a commodity that's in demand it cannot be a dead set certainty that its value won't increase.

The demand for housing can only increase where there are net increases in migration and no commensurate increase in building activity. However in the mix this time is the fact that many who would otherwise be buying or upgrading are holding on to their cash, not borrowing (or not adding to their existing borrowings) and instead seeing what happens regarding our current econonic problems. As we all know, unless you're in an area positively impacted by the mining boom things are pretty bad right now economically. I suespect most if not all of the Eastern states are in recession.

Iron ore was 190 a tonne a year ago , and about 86 dollars a couple of weeks ago.
With mining costs of 50 dollars a tonne they were making 140 propfit per tonne, then at 86 we make 36 dollars per tonne profit. Se we now make about quarter of the profit we did a year ago. The prices bubbled up went through the roof and have now collapsed, sounds like another market I was once invovled in , where the prices bubbled up and went through the roof , while I stuck for the first two , I was not waiting around for the third of the inevitable scenarios so I sold out.

[IDT]

[QUOTE=Yellow_Festiva]
I can't remember the exact statistic... 4-6 decades ago the average house cost 3.? times the average wage.

Now the average house costs 8-9 times the average wage.

QUOTE]
People whinging about these statistics cracks me up laughing. 4-6 decades, or even 2 decades, ago a bank wouldn't give you a loan for more than 3 or 4 times your annual income. That has now changed so they will give you a loan for 8 times (or even more) than your annual income. Its because we have easier access to money that house prices are up. Because more of us are in the market. Its the low interest rate that is the cause. Ultimately its your ability to repay the loan over your life (30years) Higher interest rates lessen your ability. If the banks started charging the interest they did in the 80s the multiple of annual income would go down by default. High interest rates = less players in the market, less players = more risk to banks so they take less risk by reducing the amount they will lend

If you want house prices to go down, you have to have less buyers, the only way to have that is by having high interest rates. What in this country pushes up interest rates better than anything? High unemployment!

Everyone wants a manison in the city or by the beach, my olds bought a fibro house in Mt Druitt, we moved up market to Campelltown in the early eighties (yes compared to Mt Druitt it was upmarket at the time). They now live in Cairns retired and are kickin back in thier eighties. When they hear people complain how hard it is to get into the market for young people they laugh. They worked thier ***** off and bought thier first house in thier forties.

It has never been easier. you may not get the suburb you want or the 4 x 2 with pool but its not so hard as most make out.

[DANNO178]

[QUOTE=IDT]

Originally Posted by Yellow_Festiva

I can't remember the exact statistic... 4-6 decades ago the average house cost 3.? times the average wage.

Now the average house costs 8-9 times the average wage.

QUOTE]
People whinging about these statistics cracks me up laughing. 4-6 decades, or even 2 decades, ago a bank wouldn't give you a loan for more than 3 or 4 times your annual income. That has now changed so they will give you a loan for 8 times (or even more) than your annual income. Its because we have easier access to money that house prices are up. Because more of us are in the market. Its the low interest rate that is the cause. Ultimately its your ability to repay the loan over your life (30years) Higher interest rates lessen your ability. If the banks started charging the interest they did in the 80s the multiple of annual income would go down by default. High interest rates = less players in the market, less players = more risk to banks so they take less risk by reducing the amount they will lend

If you want house prices to go down, you have to have less buyers, the only way to have that is by having high interest rates. What in this country pushes up interest rates better than anything? High unemployment!

Everyone wants a manison in the city or by the beach, my olds bought a fibro house in Mt Druitt, we moved up market to Campelltown in the early eighties (yes compared to Mt Druitt it was upmarket at the time). They now live in Cairns retired and are kickin back in thier eighties. When they hear people complain how hard it is to get into the market for young people they laugh. They worked thier ***** off and bought thier first house in thier forties.

It has never been easier. you may not get the suburb you want or the 4 x 2 with pool but its not so hard as most make out.

The lending standards of today would have caused the old bankers to fall off their chair in laughter. Old days , 20% deposit , this was needed for several reasons , 20% deposit of actual savings shows that the borrower can save and is disciplined in his living standards and not living behond his means. It shows he is of good character and a much safer candidate for the bank . It also gives the bank as well as the owner a buffer and shows that they wont run at the first sign of trouble . You would be less inclined to walk away or go bankrupt if you had actually put in 20% from your hard earned savings. Today or not long back you need no deposit at all , and as if this was not bad enough some would let get away without having the stamp duty or legals fees. I can still hear the old bankers laughing from their grave.

Question is how and why did we go from very safe and stable lending practices to very unsafe and unstable lending practices. In the old days you actually needed a real job that could actually be proved , you also needed to have been working there for a number of years , not like now whete you can work for a few weeks or months then get a loan , and in some cases have no job and get a low doc loan and state whatever you want as income, no questions asked, yes this was happening.

The other thing is when your loan is ten gimes your wage, people have no money left over to spend on or grow the economy , cause its all going in interest payments. This spare money could be used to invest in your future as wlll as grow the economy though actual spending of real money. To have all your eggs in one basket is not a clever way to position yourself .An economy is grown through hard work , savings and investing in growing buisinesses. I still cant understand how we lost the plot and decided that borrowing more money was the way to go when growth and savings and investing is actually hows things are done and work.

[sneaky]

hopefully this doesn't mean house prices drop too much. i have a nice(ish) house and two nice cars (i just bought my SS after waiting over 10 years to get one).

i would like to move closer to newcastle (currently on the central coast) but just can't afford it.. to buy a house similar to ours in the area we want we have to fork out an extra $150k+. for the money i could sell my house for i could buy an older house that needs work done (and i work 6 days a week to pay for the house so no time to renovate).

anyway, just have to wait and see what the market does

[flappist]

Whether you own your house outright or are makeing payments you are just a temporary visitor.

Dead people do not care if they have $1,000,000 in the bank or are in debtor for $1,000,000..........

[MAD]

Originally Posted by flappist

Whether you own your house outright or are makeing payments you are just a temporary visitor.

Dead people do not care if they have $1,000,000 in the bank or are in debtor for $1,000,000..........

You don't think the person in debt might care that they'll be passing that burden on to their family?

[flappist]

Originally Posted by MAD

You don't think the person in debt might care that they'll be passing that burden on to their family?

What burden?

The family do not have to pay anything unless they want to keep whatever has money owed on it.

If it is the house they are living in then it is their turn to pay or do you expect to get everything for free and let someone else pay for it.......

Or they could sell or even walk away from the house and live "within their means" in a shoebox in the middle of the road. Their choice.

[karj]

Originally Posted by flappist

Whether you own your house outright or are makeing payments you are just a temporary visitor.

Dead people do not care if they have $1,000,000 in the bank or are in debtor for $1,000,000..........

The dead might not care, but the living certainly do... or at least they should care.

Especially as you get older and less employable, the security of owning your house and the knowledge that if you are unlucky enough to find yourself out of work, at least you wont lose your house is a great comfort.

Not having to make huge loan repayments also frees up a significant portion of income, allowing for greater financial freedom and better resultant mental health. The sad reality is that many Australians are just a paycheck or 2 from defaulting on their loans. Have you seen some peoples minimum monthly repayments

If the GFC had hit hard in Australia... this country would have been so far up the proverbial creek.

[Keepleft]

Originally Posted by karj

If the GFC had hit hard in Australia... this country would have been so far up the proverbial creek.

GFC was nothing, patience please......

[karj]

Originally Posted by Keepleft

GFC was nothing, patience please......

You've got me a bit confused with that... are you making a joke that I'm just too thick to understand, or are you serious?

The GFC was an unmitigated disaster. Australia got through it relatively unscathed largely because of the structure of our economy, the surplus from the previous government and good government policy/stimulus (guaranteeing deposits in financial institutions, etc).

[MITCHAY]

Originally Posted by karj

You've got me a bit confused with that... are you making a joke that I'm just too thick to understand, or are you serious?

The GFC was an unmitigated disaster. Australia got through it relatively unscathed largely because of the structure of our economy, the surplus from the previous government and good government policy/stimulus (guaranteeing deposits in financial institutions, etc).

I took it as that the GFC was nothing compared to what will come.

[zilo]

Originally Posted by Keepleft

GFC was nothing, patience please......

Anyone who has been to the US or Europe recently knows exactly what you refer to.