Potential Big GFC Discussion Thread

[GTP owner]

Originally Posted by burnz

individual: as to your reference "buy now pay later" which is typically low end credit.

Yes, and an easy trap for those with less than an iron will. Credit cards, point-of-sale credit, personal loans all add up, and are usually for the most non-essential items. I really wonder what hope we have, given the message promoted by govco and big business that we need to spend to be happy and prosper. I think far greater pleasure comes from modest activities such as having friends or family around for a home cooked meal.

[Franco Cozzo]

I seen the AUD falling heaps against the USD in the last few days, not too happy now its going to start costing more to import stuff from the USA.

Also whats the deal with gold prices? When I was in Grade 3 in 2000 it was like $300 something an ounce, looking the other day it was $1600+ Is a shiny rock which you can't do much with really worth that much?

Also its going to be interesting with work considering we keep getting told we're not doing our jobs fast enough, as far as our boss says, we're one step away from the chopping block by the board of investors who bought into our company. I wonder if this downturn is enough to tip us over the edge? Might be the time and perfect chance for the career change we where all dreaming about if we all get the sack?

[Resurrection]

Originally Posted by Big Damo

Also whats the deal with gold prices? When I was in Grade 3 in 2000 it was like $300 something an ounce, looking the other day it was $1600+ Is a shiny rock which you can't do much with really worth that much?

Gold, like anything else, is affected by supply and demand. Demand for gold always increases during times of financial uncertainty. It is a product which is used to protect ones wealth when other forms of investment are proving too risky.

[fmc351]

Originally Posted by GTP owner

If you are poor - you have nothing, right? So how can you get poorer? I think this is one of the stupidest thow-away lines there is.
The next one in this vein is that the gap between the righ and poor is growing. Once again, the poor can't get any poorer. Yes the righ are increasing their wealth, but you would too if you were in their shoes.

So we come back to how we as individuals can limit the effects of a recession. The answer is to live within your means. Just because you can buy now and pay later does not mean you have to!

Well today, even dead broke you can eat by going to the Salvos, but given the numbers of people out of work in a depression (30 -50% or more), and the tight government budget theres no Dole and the Salvos are stretched far to thin, so you get poorer by not being able to eat or feed your kids. Id say thats poorer.

What you can buy now, even well within your means is well out of your means in a depression for most people. One of the first things to go in a depression is your job, and likely your partners. By that time people are begging for work to earn just enough to feed the family and not much else.

[fmc351]

Cash can be worthless in a DEPRESSION. Havent you seen the photos of Germans during the Great Depression walking around pushing a wheelbarrow full of money, and not enough to buy a loaf of bread. There were other reasons why German money was so worthless, but it was a large part the Depression that did it.

Guns and ammo is where its at. Im only half joking. Oh, and baked beans lots of canned goods like baked beans.

Originally Posted by JC

Could be for real. American economy is fragile (and that's being kind), and while we are a fair way away geographically, we rely on the US for a lot (all those crate engines to power the "Australian" car, for example) - but seriously, the US economy the way it is can't last, and the impact will be felt around this globe of ours.

So....shop at Aldi, Coles, Woolies, the local butcher, or wherever is cheapest!

Seriously, their Debt to GDP ratio is no worse than ours. Sure its high, but sustainable, the rest is just politicians staking a claim to their jobs and using the fear of doom and gloom to get there. All this talk about depression and recession is what will do us in, consumer confidence is dodgey enough now, if we keep it up it will become a self fulfilling prophesy.

Originally Posted by Spudz27

...christ countries like pakistan get handouts, why?.

Well theres humanitarian reasons but if they dont float your boat, then theres it being in our best interests given its a hotbed for extremists and they have a nuke. Its cheaper than another war we cant win.

Originally Posted by Scott

The country at the greatest risk [direct exposure] of the US failing is China, then there is China's worrying inflation and seemingly growing stock of empty commercial premises.

The US is a big buyer of Chinese exports, as is the rest of the world and there would be no hiding from a Chinese fart at the moment.

The problem that faces the troubled economies (which realistically is most of them) is that the biggest numbers in the Euro Zone, US and Japan are all in a lot more trouble than they can hope to fix without epic change.

China has one thing up its sleeve, its barely brought 10% of its population into the economy. Without trade to the US it will suffer and obviously we will too, but it can turn its attention to growing its economy within its borders and sustain a growing economy. Instead of the record growth it has now in terms of GDP, it could reflect a more normal level of growth of say 3% by focusing on internal growth. Make good use of all that empty building space too. Maybe, just maybe they know what they are doing.

[GTP owner]

Originally Posted by fmc351

Well today, even dead broke you can eat by going to the Salvos, but given the numbers of people out of work in a depression (30 -50% or more), and the tight government budget theres no Dole and the Salvos are stretched far to thin, so you get poorer by not being able to eat or feed your kids. Id say thats poorer.

What you can buy now, even well within your means is well out of your means in a depression for most people. One of the first things to go in a depression is your job, and likely your partners. By that time people are begging for work to earn just enough to feed the family and not much else.

What you are talking about is not happening. We are not going into a depression, the dole is still there, and unemployment will not go to 30-50%. In the Great Depression people ate rabbits, possums and seaguls to stay alive. We are so far away from this reality that we think our world is ending when we have to cut the subscription to Austar. As an example - the highest per-capita spending on pokies occurs int he lowest socioeconomic sectors/suburbs. How poor can you be if you can still afford a flutter? Oh, there will always be ACA or TT doing an article on some idiot living off tinned cat food, but really that is more an example of stupidity that anything else. One tin of cat food is $1, which will buy you 2kg of spuds if you buy a bag. Which one fills you up more?
So I will stand by my original statement that the poor cannot get poorer. And if you really think you are poor and getting worse off, then you were not really poor in the first place!

[fmc351]

Originally Posted by GTP owner

What you are talking about is not happening. We are not going into a depression, the dole is still there, and unemployment will not go to 30-50%. In the Great Depression people ate rabbits, possums and seaguls to stay alive. We are so far away from this reality that we think our world is ending when we have to cut the subscription to Austar. As an example - the highest per-capita spending on pokies occurs int he lowest socioeconomic sectors/suburbs. How poor can you be if you can still afford a flutter? Oh, there will always be ACA or TT doing an article on some idiot living off tinned cat food, but really that is more an example of stupidity that anything else. One tin of cat food is $1, which will buy you 2kg of spuds if you buy a bag. Which one fills you up more?
So I will stand by my original statement that the poor cannot get poorer. And if you really think you are poor and getting worse off, then you were not really poor in the first place!

Except depression is the thread title. Your original answer was in reference to being poorer during a depression compared to now. And yep, absolutely what I spelled out is exactly what happens in a depression (unemployment numbers may vary).

If you read my other posts, I dont think were headed for a depression either, but your post suggested that even in a depression, you cant be poorer. Nothing to do with the storylines of rubbish 'current affairs' programs.

That last bit I cant disagree with at all, no-one in Aus has any excuse to think they are dirt poor, not by world standards anyway. However in a depression, that will change.

[GTP owner]

Originally Posted by fmc351

Except depression is the thread title. Your original answer was in reference to being poorer during a depression compared to now. And yep, absolutely what I spelled out is exactly what happens in a depression (unemployment numbers may vary).

If you read my other posts, I dont think were headed for a depression either, but your post suggested that even in a depression, you cant be poorer. Nothing to do with the storylines of rubbish 'current affairs' programs.

That last bit I cant disagree with at all, no-one in Aus has any excuse to think they are dirt poor, not by world standards anyway. However in a depression, that will change.

So we pretty much agree
So who, or why are people talking up a depression? What is to be gained from promoting doom, gloom, and fear? (actually, don't answer that - I think it is pretty much clear who is doing that).

[StrokedXT]

Originally Posted by GTP owner

I really wonder what hope we have, given the message promoted by govco and big business that we need to spend to be happy and prosper. I think far greater pleasure comes from modest activities such as having friends or family around for a home cooked meal.

Says the guy with an xa coupe, a gtp, a turbo and a pajero

[GTP owner]

Originally Posted by StrokedXT

Says the guy with an xa coupe, a gtp, a turbo and a pajero

Yep - I did without smokes, pokies, alcohol, eating out at restuarants etc for many years. I still don't have a big TV, Austar, eat out more than once a month, go on overseas holidays, buy expensive clothes or jewelry for the missus. We live within our means - that is the message I have been trying to get out. I lived in cruddy rental homes while we scrimped and saved for our first and only house, then put every spare dollar into paying it off. We bought a house that was within our means to repay no matter what happened in the economy. We did not have a tiny 2% margin of error. We did not use credit cards. We bought home brand foods. We resisted the urge to buy new furniture.
The xr6t, pajero and gtp were all purchased through our business, which we work in 6 days a week. When our financial advisor suggested margin loans we refused. We resisted the urge to go with the crowd and the lure of easy money.
Now - we are in a very comfortable position. I am back at uni studying medicine full time. The kids go to private school. I having another 4 car shed built for my next project. But we are living within our means. I think the description they use is "delayed gratification" for when you do without now so that you can benefit later. It's a term that is forgotten when we are sold the idea that posessions make us happy. Buy now, pay later. The economy is suffereing form this mind-set. We are paying now for what we bought earlier on, except nobody wants to foot the bill...

[trippytaka]

I have put off all plans of buying a place. I am looking for new ways to secure the money I have saved...

[StrokedXT]

Originally Posted by GTP owner

Yep - I did without smokes, pokies, alcohol, eating out at restuarants etc for many years. I still don't have a big TV, Austar, eat out more than once a month, go on overseas holidays, buy expensive clothes or jewelry for the missus. We live within our means - that is the message I have been trying to get out. I lived in cruddy rental homes while we scrimped and saved for our first and only house, then put every spare dollar into paying it off. We bought a house that was within our means to repay no matter what happened in the economy. We did not have a tiny 2% margin of error. We did not use credit cards. We bought home brand foods. We resisted the urge to buy new furniture.
The xr6t, pajero and gtp were all purchased through our business, which we work in 6 days a week. When our financial advisor suggested margin loans we refused. We resisted the urge to go with the crowd and the lure of easy money.
Now - we are in a very comfortable position. I am back at uni studying medicine full time. The kids go to private school. I having another 4 car shed built for my next project. But we are living within our means. I think the description they use is "delayed gratification" for when you do without now so that you can benefit later. It's a term that is forgotten when we are sold the idea that posessions make us happy. Buy now, pay later. The economy is suffereing form this mind-set. We are paying now for what we bought earlier on, except nobody wants to foot the bill...

Its OK Mate i was just stirring - Personally i have no issue with credit used plenty of it in the past to get things i wanted if it suited me at the time. If i could get the car i wanted now and pay it off in 12 months instead of waiting a year and saving i did it.

[AMGC63]

Originally Posted by trippytaka

I have put off all plans of buying a place. I am looking for new ways to secure the money I have saved...

Unless you're concerned about stability of your employment that is an example of the attitude that WILL send us into a financial hole.

People need to keep spending money to keep the economy alive.

There is no logical reason to avoid buying your first home unless you've got unstable employment or are borderline to over committing yourself.

Even if homes drop back a bit they will recover and appreciate long term.

People need to continue on with their lives and keep a positive attitude, a negative attitude will actually BE the cause of this to happen in Australia to a very large degree, not what happens in America...

[StrokedXT]

Originally Posted by AMGC63

Unless you're concerned about stability of your employment that is an example of the attitude that WILL send us into a financial hole.

People need to keep spending money to keep the economy alive.

There is no logical reason to avoid buying your first home unless you've got unstable employment or are borderline to over committing yourself.

Even if homes drop back a bit they will recover and appreciate long term.

People need to continue on with their lives and keep a positive attitude, a negative attitude will actually BE the cause of this to happen in Australia to a very large degree, not what happens in America...

So your advice is he buys a house in one of the most overpriced markets in the world that is due for a big correction in the very near future? Personally i would wait until we see what happens then hopefully get in and buy a bargain.

[Scott]

Originally Posted by fmc351

Maybe, just maybe they know what they are doing.

That I have no doubt of.

[trippytaka]

NZ futures open 2% lower... a crystal bakll into the fate of the markets, as NZ is the first market to open

http://www.abc.net.au/news/2011-08-0...rading/2828800

The New Zealand stock market opened more than 2 per cent lower and the US futures index plunged this morning as investors reacted to the global financial turmoil.

Futures trading for the Dow Jones Industrial Average, the S&P 500 and the Nasdaq all fell more than 2.5 per cent this morning after Standard and Poor's decision to downgrade the US's credit rating.

The fall suggests some sharp losses when the physical market opens in the US tonight (Australian time).

In Australian futures trading, the ASX Share Price Index 200 is down five points to 4,045, indicating losses of just 0.1 per cent when the Australian market opens this morning.

Twin debt crises in Europe and the United States are causing global market turmoil and stoking fears of the rich world sliding back into recession.

[ltd]

Originally Posted by mcnews

People talking up depression and the negative everything attitude that Abbott and his minions are talking about will be the main thing that drives this country into recession, they will take us into one even if we shouldn't be in one with their scare tactics. They don't care, only power is important to them, same as all modern day politicians, it is not about what is good for the country, only what is good for them.

So what you're saying is Tony Abbott spent the 20 billion surplus, borrowed over 250 billion from China to waste on stupid projects like pink batts, BER, NBN and other non necessities? So it's also Abbott threatening the only booming part of our economy with a new resources rent tax, and scaring the populace with an all encompassing consumption tax?

Hmm. I thought the idiots in power now who pork barrelled and made deals with anyone desperate to cling to power were responsible. I suppose we've found one of the 26% of Aussies who would vote for more of the same waste, mismanagement, erosion of rights; standard of living and lies.

[trippytaka]

Good article on the fear in Asia. Don't expect China to save the day. :(

http://www.eastasiaforum.org/2011/08...through-again/

Author: Barry Eichengreen, UC Berkeley

How serious is the risk of a double dip recession in the US and Europe? Why did global stock markets fall so dramatically last week? How worried should Asia be? The answers, I submit, are: we don’t know, we don’t know, and very.

Start with the stock market. Although the pundits had all kinds of explanations, there was in reality little new information to justify a 500-point fall in the Dow Jones index on Thursday. That the summit in late July designed to solve the crisis in the euro zone had solved nothing was already apparent in, well, late July. The new data for US GDP that reinforced the picture of weak growth were similarly well beyond their sell-by date — they had been released on 29 July. The terms of the deal raising the debt ceiling were already known on 1 August. None of this was news. The truth is that market psychology is volatile. Investor sentiment is erratic. We saw a dramatic demonstration of that last week.

The best analysis of the week’s market moves is probably that a combination of factors, each of which was known individually, coalesced to create fears of a double dip recession in the US and Europe. In the US, the supposed anomaly baffling analysts was the apparent disconnect between GDP growth and employment. The most popular explanation was that the US was enjoying a productivity miracle, so businesses needed fewer workers. We now know that there was no anomaly and no productivity miracle: the entire story was that the earlier GDP figures were overstated.

Then there was the debt-ceiling deal which took all possibility of further short-term fiscal support for the economy off the table. No one disputes the need for fiscal consolidation in the US in the medium term. But medium term is, in practice, when recovery is secure and the economy is firing on all cylinders. The fiscal impulse had already turned contractionary because the 2009–10 stimulus was being progressively withdrawn. The debt deal guaranteed that there would be a further, albeit small, contractionary impulse starting this October. More importantly, it boxed in the Obama administration, preventing it from doing anything substantive to get the economy going again.

How likely is a double dip? Larry Summers says that the odds are now one in three. Martin Feldstein says one in two. Odds like these are telling us that no one knows. But what we can say with confidence is that the probabilities are now far from negligible.

The European situation is if anything more dismal. Fiscal policy is even more contractionary in Europe than the US. The European Central Bank (ECB) is even less supportive than the Federal Reserve. Exactly nothing has been done to resolve the debt problems of the crisis countries. Greece is still insolvent, even after the cosmetic agreement reached a couple of weeks ago to nominally restructure its debt.

Italy is ‘too big to fail but also too big to bail’. Its problems can be solved only by a combination of three policies. First, a primary surplus of 5 per cent of GDP, which holds out real hope of reducing the country’s public debt. Second, structural reform sufficient to get growth going again. Third, support for the Italian bond market from the ECB for as long as it takes to put those other elements in place. The first two components will require a new Italian government, the third a new ECB president. Both are coming. Whether they arrive in time to avert disaster remains to be seen.

How worried should Asia be? The situation is far less manageable than it was in 2008–9. Then it was possible for China to pull out all the stops and unleash a massive fiscal stimulus. To support investment spending, it could instruct the banks to lend like there was no tomorrow. Today Chinese policy makers have less room for maneuver. With inflation already running at 5 per cent, they are anxious to rein in bank lending. Credit policies that inflated further an already expanding property bubble would not be helpful. Then there are worries about the balance sheets of financial institutions, like the credit cooperatives that financed local government’s infrastructure projects. Standard & Poor’s has already warned that a third of their loans may have to be written off. More generally, analysts are concerned that the public-sector debt burden, considering all levels of government, is higher than suggested by the headline figures and higher than is healthy for an emerging economy.

Add it up and it is clear that the Chinese authorities will not be able to respond as vigorously as in 2008–9. Were China’s exports to the West to drop off as sharply as they did then, there would be no way that the government could substitute a commensurate amount of domestic spending. Chinese growth would fall. The implications of other economies that sell parts, components and, above all, raw materials to China would not be pretty.

Barry Eichengreen is George C Pardee and Helen N Pardee Professor of Economics and Political Science at the University of California, Berkeley. His new book is Exorbitant Privilege: The Rise and Fall of the Dollar (Oxford 2011).

[AMGC63]

Originally Posted by StrokedXT

So your advice is he buys a house in one of the most overpriced markets in the world that is due for a big correction in the very near future? Personally i would wait until we see what happens then hopefully get in and buy a bargain.

It comes down to where you live and want to buy at the moment.
Many parts of main stream Australia are still holding up very well.
There wont be any great bargains to be had unless you want to iliive in the sticks, regardless of what he pays today even if it devalues a bit it will recover then appreciate, meanwhile he's paying if off instead of fueling someone elses investment portfolio.

Look at history, whats the longest period we've ever had of negative house price growth? and how long did it take for them to recover and appreciate again?

As long as you dont sell you havent lost anything.

Get in but buy smart and buy somewhere stable.

[302 XC]

Originally Posted by GTP owner

So we come back to how we as individuals can limit the effects of a recession. The answer is to live within your means. Just because you can buy now and pay later does not mean you have to!

Exactly !!!

How easy is to "wack it on the card"
Than it is to say,save for that item
Or
Heavens forbid (and dont be seen doin this) puttin a layby on ???

[trippytaka]

Originally Posted by AMGC63

Unless you're concerned about stability of your employment that is an example of the attitude that WILL send us into a financial hole.

People need to keep spending money to keep the economy alive.

There is no logical reason to avoid buying your first home unless you've got unstable employment or are borderline to over committing yourself.

Even if homes drop back a bit they will recover and appreciate long term.

People need to continue on with their lives and keep a positive attitude, a negative attitude will actually BE the cause of this to happen in Australia to a very large degree, not what happens in America...

Yes I am worried about the stability of my job. Last GFC the company I work for retrenched 15 people. I was retrenched by the company I worked for at the time and was unemployed for 9 months.

The is no way in hell I am committing myself to a 30 year mortgage right now. I will continue savin, put my head down, and work my **** off.

Spend our way out? It is debt that has beought us into this. The only way out is to repay the debts! I am debt free. Just because our country now owes 160% of GDP (last recession was 50%!) doesn't mean I need to bankrupt myself for the sake of the nation!

The world needs to man up, take the medicine, go through some pain and come out stronger and smarter for the experience.

[trippytaka]

Originally Posted by AMGC63

It comes down to where you live and want to buy at the moment.
Many parts of main stream Australia are still holding up very well.
There wont be any great bargains to be had unless you want to iliive in the sticks, regardless of what he pays today even if it devalues a bit it will recover then appreciate, meanwhile he's paying if off instead of fueling someone elses investment portfolio.

Look at history, whats the longest period we've ever had of negative house price growth? and how long did it take for them to recover and appreciate again?

As long as you dont sell you havent lost anything.

Get in but buy smart and buy somewhere stable.

Negative growth? Just under a decade in the 90s. But back then, the prices hadn't gone up as far past the natural line of inflation - where they are meant to be.

If Australia is hit hard by this - America and Europe go down, then China loses its 2 biggest creditors... where are we going to be then?

EDIT: The fact is if the market drops you DO lose something! equity. I'm not about to risk 20% of 600k at a point in history when you can actually see the writing on the wall burning neon red!

[302 XC]

Originally Posted by AMGC63

It comes down to where you live and want to buy at the moment.
Many parts of main stream Australia are still holding up very well.
There wont be any great bargains to be had unless you want to iliive in the sticks, regardless of what he pays today even if it devalues a bit it will recover then appreciate, meanwhile he's paying if off instead of fueling someone elses investment portfolio.


As long as you dont sell you havent lost anything.

Get in but buy smart and buy somewhere stable.

Theres too many reasons why people buy where they do,unfortunately
Close to work,close to amenities (shops ect)
Buying in mainstream area will always incure a premium price
Then buying outta town ,again depending on the situation can have limited accessability , and incure addition running costs

I sold my acreage , that i owed on 5 years ago
And bought acreage outright where i am
Now the first acreage has gone up , by current value maybe 100-150 K
But where i am now hasnt as much if anything maybe 60 K
But during the first 3 years after i sold my first acreage, we had i think 12 interest rate rises
So i couldnt with a crystal ball see IF i would still be there
Although the interest rate has dropped considerably now,would i still have the same job, would my employer still be in business
To many variables

But im happy where i am,it hasnt gone up alot
But its all mine
Dont ever have to worry about interest rates, bank managers,paying the mortgage,sheriffs turning up when i dont fullfill my obligations

Is that more secure than a huge debt over my head
You betcha

[Yellow_Festiva]

Originally Posted by 302 XC

Exactly !!!

How easy is to "wack it on the card"
Than it is to say,save for that item
Or
Heavens forbid (and dont be seen doin this) puttin a layby on ???

The problem is, we are human and we are easily tempted.

I remember going for my first loan in 1999. I had saved 20 grand and wanted to buy a place that cost 75 grand. I was knocked back because my 5 years of working 30+ hrs a week while putting myself through school and uni were 'Casual'. It didn't matter to them that I had a long history of saving very well, never paid interest on my credit card and also paid 15grand cash for my Festiva 2 month prior to my application. She told me to come back after 2 years of 'full time' employment.

Anyway, I got my loan, and many more after that. It was always a struggle, as I have never worked 'full time'. But the more equity and cash I built, the better the paperwork looked for the banks so it became easier over time.

The last loan I went for went something like this. I had 150k deposit and wanted to borrow about 200k as I didn't want to buy a place over around 330k. I still didn't have a 'full time' job but the call I got from the broker was interesting. "You have been approved for 600k"... now, that was only the loan amount, meaning I could have bought a place for circa 700k.

I didn't need work papers (only tax statements) and the application was through one of the 'big 4' so it wasn't a boutique lender or 'no doc' loan at an inflated rate.

What a joke. I How many people would have jumped at the chance to borrow the lot? Where would they be now I wonder? I stuck to my plan and ended up getting a house for 325K. I was comfortable, my life didn't change 1 bit. I still ate out, I still went overseas on my regular long trips, I had money to buy a car or 2 and that's the way I like to live. I still haven't got a 'full time' job either.

I have a friend on the other hand who has also never had stable work, drives a bomb and has a credit card debt of 70+ grand. Why? Well the banks just kept offering her more credit. Every 6 months she would get a letter saying she has been approved for X,XXX increase. They could see she was already drastically behind..... Of course she kept saying yes. It's not her money after all, it's 'free money' from the bank.

Human nature has played a big part in this. We all crave for what we don't have but there was a time when hard work and sacrifice was the only way to attain those things. Now, we can have all those things pronto (thanks to the help of our friendly banks) and worry about paying for it later.

[StrokedXT]

Originally Posted by AMGC63

It comes down to where you live and want to buy at the moment.
Many parts of main stream Australia are still holding up very well.
There wont be any great bargains to be had unless you want to iliive in the sticks, regardless of what he pays today even if it devalues a bit it will recover then appreciate, meanwhile he's paying if off instead of fueling someone elses investment portfolio.

Look at history, whats the longest period we've ever had of negative house price growth? and how long did it take for them to recover and appreciate again?

As long as you dont sell you havent lost anything.

Get in but buy smart and buy somewhere stable.

Government policies and tax incentives are what has made Australian house prices skyrocket to unsustainable levels, there will be a correction guarunteed it has to happen.

Yes you are right if you dont sell you dont loose anything to a point - but circumstances change you may have to sell.

If you are buying your first home i think its absolutely imperative you seek good financial advice not just that on a forum and weigh up the real cost of ownership ie. how much it costs you every year to live in that property and see what type of growth the market needs for it to be considered a good investment, unfortunantly for those entering the market for the first time listening to the oldies who cashed in on the booms a lot of the figures are misrepresented.

Now just as a basic for someone buying a first home in sydney today as a primry place of residence needs a minimum 550k for a unit/townhouse and assuming a 10% deposit.

500k at 6.87% interst per year with fees most first martgagees get and you got a comp rate of 7.5 - $37500
add in rates - 1200
maintaining a property - 5000 (being very light on that)
insurance - 1000
rough total it has cost you to live in that house for a year - 43500

so the market needs to grow @ around 7.9% just to break even - And i dont think i have seen any predictions that can match or beat that.

There other option is take that 50k deposit they have saved and put it in the safest no risk investment around and get 6% for 12 months - keep paying rent so saving even more cash by not paying rates, maintenance, insurance, etc etc they will come out in front.

[dave289]

Hello boys , looks like panic is setting in.

It seems we are about to cop another smashing today on the stock market , opens in 2 minutes..

I would say many mum and dad investors may rush for the exit today.

[trippytaka]

Originally Posted by dave289

Hello boys , looks like panic is setting in.

It seems we are about to cop another smashing today on the stock market , opens in 2 minutes..

I would say many mum and dad investors may rush for the exit today.

I agree.

[dave289]

Originally Posted by trippytaka

I agree.

I thought your posts reguarding housing purchase were good , nobody in their right mind would even be thinking about purchacing at the moment .

[kaniSS]

I'm just worried we have Swan and Gillard to get us through this upcoming financial downturn...

This is going to be bad. These idiots are more concerned about being green issues than fixing our economy up.

Prepare your self guys.

[FTe342]

Originally Posted by GTP owner

Placing bets on which way the interest rates, local market, global market is just like any other form of betting. The experts have LESS than average (50/50) chance of predicting these things well. This strategy has very little to recommend it when you are looking to provide a margin of safety for yourself, your home, your family, and ensuring there is food on the table when things go bad.

Just as a slight aside, given house prices are falling at the moment (2% over the last 12 months), I would be happy to wait longer until things are looking more rosy. We are looking to invest in our first investment property, and have a substantial deposit sitting in a cash account right now. Buit there is no way we are spending it. Better to earn interest and wait to see how far down the realestate market goes down.

That's why I said its best to work out what is comfortable for you

Really? Do tell us which Australian banks had to be bailed out in the sub-prime crisis. What happened in the USA didn't happen here!

Since the Uniform Consumer Credit Code (UCCC) was introduced many moons ago banks have always had a margin of 1.5 to 2% added to the actual loan rate of their borrowing calculators for determing borrowing capacity. Debt Serice Ratio (DSR) is only one of a number of factors they consider however. True, general lending policy has been tightened since GFC.