# A warning for first home buyers!



## glads262 (22 April 2009)

Okay. Just got a call from my real estate agent. We are selling a 3brm home in Adelaide. Just a little villa, 400m2 block, average condition.
council value $240000, bank valuations:
$285000 Feb 08
$275000 Aug 08
$265000 Feb 09.

We advertised at $285000 - $295000. We have just received an offer for $295000.
Not complaining.

Buyers?

First home owners. They are putting in $8000 cash. $14000 FHOG. With costs etc etc, their loan will be $282000.
Thats an LVR of 95%
If they NEEDED to sell the house, cost = $10000.
So, they have a house worth $285000, a debt of $282000.

If house price has dropped 1%, breakeven.

If house price drops 10%, $25000 loss.

All you first home buyers out there - please be careful. If one of you loses your job, you are stuffed. If you both lose your job....


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## pilots (22 April 2009)

*Re: A warning for first home buyers.*

How true, first the little lady gets pregnant, then interest rates goes up.


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## JimBob (22 April 2009)

Is the 21k grant only if purchasing a newly built home?  14k otherwise


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## tommymac (22 April 2009)

glads262 said:


> First home owners. They are putting in $8000 cash. $21000 FHOG. With costs etc etc, their loan will be $282000.




FHOG is only $14,000 for established homes.


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## glads262 (22 April 2009)

yep, sorry your right, would be 14000 grant.


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## JimBob (22 April 2009)

glads262 said:


> All you first home buyers out there - please be careful. If one of you loses your job, you are stuffed. If you both lose your job....




Me and the Mrs are saving to buy a house, but this is the main reason we are going to put it off for at least a year.  Both our jobs are fairly safe, but you never know what is around the corner.  

People might be able to afford the house at current lower interest rates, but need to be prepared for higher interest rates in the future and be able to pay it off on one wage if kids are on the cards.


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## Beej (22 April 2009)

What exactly are you warning them against? Why do you assume they are buying on 2 incomes? That sort of mortgage could be serviced comfortably and easily on an average single income? Even a lower than average one!

$282k loan - current interest rate say 5% = $271/week interest cost (ie $14k pa). I bet they are paying more than that in rent right now! 2 people on the dole could pay that and have enough money left over for a frugal but not poverty stricken lifestyle......

Ok let's say in 3 years time interest rates were 10% (unlikely). Those people have been able to save their $8k probably in the last year, while paying rent, so let's assume they continue to get ahead on their mortgage to the tune of $8k/year over the ensuing 3 years. Principle is now $258k, 10% interest bill is now = $500/week ($25kpa). Again, even on one average income this would be doable - would just mean not getting ahead on the principle as much for a while until rates fell again. If this was a real worry they could fix half or more of their loan now at 6/7% and then no problemo.

As for the risk of their house price falling - pretty low in that price range at the moment it would seem, however, even if it did - in 10 years do you think it would be lower? Just about zero chance of that! And what will their mortgage be in 10 years? 100% chance it will be lower than what they started out with!

So what exactly are you warning FHBs like this against? Or do you think everyone should put their lives on hold for a few years because we are having an economic recession?

It would make sense to warn FHBs not to over-stretch themselves - Ie don't borrow $500k if you have only one income of $50k! That would be madness! But the scenario you are describing sounds like it could be a very sensible, low risk purchase for a FHB to me, depending on the peoples circumstances? Especially if they have 2 incomes? Especially if at least one of them has a secure job? Maybe they work for the government?? Or they are a nurse etc?

PS: The home you just sold - was it an investment property? How much was it rented for? Why are you selling? Or was it your own PPOR? In which case same question - why are you selling?

Beej


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## cutz (22 April 2009)

I could never see the point of the grant, surely putting money into the hands of first home buyers had the effect of artificially pumping up prices in first home buyer areas ie. outer suburb-new developments, so in the end the only group that have benefited were the developers.

Another waste of taxpayers money that will probably end in tears.


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## glads262 (22 April 2009)

cutz said:


> I could never see the point of the grant, surely putting money into the hands of first home buyers had the effect of artificially pumping up prices in first home buyer areas ie. outer suburb-new developments, so in the end the only group that have benefited were the developers.
> 
> Another waste of taxpayers money that will probably end in tears.




For me - the FHOG has given me $7000 when buying, and now an extra $14000 when selling.
Cheers for the $21000... Makes the $900 bonus seem like nothin!


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## skc (22 April 2009)

cutz said:


> I could never see the point of the grant, surely putting money into the hands of first home buyers had the effect of artificially pumping up prices in first home buyer areas ie. outer suburb-new developments, so in the end the only group that have benefited were the developers.
> 
> Another waste of taxpayers money that will probably end in tears.




Agree...first home owners grant = home seller's grant.




Beej said:


> $282k loan - current interest rate say 5% = $271/week interest cost (ie $14k pa). I bet they are paying more than that in rent right now! 2 people on the dole could pay that and have enough money left over for a frugal but not poverty stricken lifestyle......




Don't forget there are plenty of costs associated with home ownership as well. Rates, body corp, maintenance etc - they easily add $5-10K to any dwelling.


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## Surly (22 April 2009)

Beej said:


> What exactly are you warning them against? Why do you assume they are buying on 2 incomes? That sort of mortgage could be serviced comfortably and easily on an average single income? Even a lower than average one!
> 
> $282k loan - current interest rate say 5% = $271/week interest cost (ie $14k pa). I bet they are paying more than that in rent right now! 2 people on the dole could pay that and have enough money left over for a frugal but not poverty stricken lifestyle......
> 
> ...




Beej I question some of your numbers!

To *repay* a 285k loan over 25 years is ~$389 a week at current rates per WBC

After tax income on $50k is ~$788 per week so this is roughly a 50% of net wage commitment which is doable if you had few other commitments....no kids...lived a pretty simple life.

Partnered on the dole is $409 per fortnight each...i guess if you cut out everything including eating you can survive on $20 a week.

cheers
Surly


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## glads262 (22 April 2009)

Beej said:


> What exactly are you warning them against? Why do you assume they are buying on 2 incomes? That sort of mortgage could be serviced comfortably and easily on an average single income? Even a lower than average one!
> 
> $282k loan - current interest rate say 5% = $271/week interest cost (ie $14k pa). I bet they are paying more than that in rent right now! 2 people on the dole could pay that and have enough money left over for a frugal but not poverty stricken lifestyle......
> 
> ...





Beej, I can see your point - this is the renting V owning argument. Works out fine with 5% interest rates.

My wife & I struggled to pay a $200k mortgage when we first purchased. We ran out of money/credit card limit at one stage. This was on 1 1/2 incomes. Not everyone earns $60kpa - especially FHO's. These guys by the sounds work in a cafe & a bookbinder?? 

The fact is, you can't look long term with this. If they fall behind in payments in the next say 2 years - which they will if one of them loses a job - they will probably have negative equity - not saved money. 
The bank doesn't give a stuff, they will sell them up. 

paying $3-400 p/w on one income of $600/week net of taxes?? I dont think so. Add in Rates, water, maintenance and their stuffed. Plus, if their like any young person these days, they probably have two new cars @ $2-300/week payments, some credit card debt (plus more when they buy new furniture for the house) etc etc.

I'm not trying to bag people out, or scare them out of doing anything, just urging people to think carefully about the future. House prices do drop, and interest rates do get into double digits (PS - have a look at our still high inflation rate of 4% just announced. If there is even a small economic recovery, how quick can rates rise??)


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## glads262 (22 April 2009)

Oh, and FYI - it was an investment property in the end. renting for $240/week. Still negatively geared with a 75%LVR and 5% interest rate. We have lost about $5000 per year for the last 3 years - ie if prices don't keep rising, we are losing money.
we are selling for this, plus the above reason. We think that property prices are just getting beyond a joke, and wanted to take advantage of the $14000 FHOG buyers.

We are now renting a (supposedly) $500000 home, two story, ocean views, brand new, loving it sick, home for almost half the interest we would pay on a $450000 home loan. Two identical homes next door to us are empty, and have been for 3 months. The rent has dropped by 20%, still no takers. Our landlord has told us he is losing $2000 a week. Hows that for low risk property?


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## Beej (22 April 2009)

Surly said:


> Beej I question some of your numbers!
> 
> To *repay* a 285k loan over 25 years is ~$389 a week at current rates per WBC
> 
> ...




The dole part is extreme yes - but if they were faced with that scenario then you would talk to the bank about paying interest only for a while at least, thus leaving as in my example $138/week to live on - which would be doable *just* in an extreme situation if you had no other liabilities.

As for the $50k example - as you show it could be done on a single, below average income (average full time wage in AU is now $65k according to latest ABS stats). I think the original poster suggested the people in the example had 2 incomes, so they would actually be quite comfortable if they keep their jobs, and even if one lost their job they would be OK by the looks etc. So really their risk is not that great, and in a worse case scenario they struggle on the dole, and maybe then could survive *for a while* until at least one found another job. 

In the end, any couple facing long term double unemployment are going to 
end up in a pretty big financial mess regardless of whether they have taken on a moderate mortgage/house purchase or whether they are renting and maybe have a car loan or a big CC debt instead....  So I guess I don't see fear of that extreme situation as a big reason not to get on with life.



glads262 said:


> Oh, and FYI - it was an investment property in the end. renting for $240/week. Still negatively geared with a 75%LVR and 5% interest rate. We have lost about $5000 per year for the last 3 years - ie if prices don't keep rising, we are losing money.
> we are selling for this, plus the above reason. We think that property prices are just getting beyond a joke, and wanted to take advantage of the $14000 FHOG buyers.
> 
> We are now renting a (supposedly) $500000 home, two story, ocean views, brand new, loving it sick, home for almost half the interest we would pay on a $450000 home loan. Two identical homes next door to us are empty, and have been for 3 months. The rent has dropped by 20%, still no takers. Our landlord has told us he is losing $2000 a week. Hows that for low risk property?




Ok thanks for the info. So bottom line, your FHBs are paying $30/week more in interest to the bank than they would otherwise have had to pay to rent the place from you.

PS - re your current house - so you are paying only $220/week (half of 5% of $450k) for your 2 storey house with ocean views then? Less than your little investment villa? Sounds like you have pretty special deal then!!! Well done!

PPS: If you kept it, you should be close to generating positive cashflow by now AND you have made a capital gain! To each their own, but imagine if you hung to that for another 10 years.....


Cheers,

Beej


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## nunthewiser (22 April 2009)

Beej said:


> The dole part is extreme yes - but if they were faced with that scenario then you would talk to the bank about paying interest only for a while at least, thus leaving as in my example $138/week to live on - which would be doable *just* in an extreme situation if you had no other liabilities.




LOL geez your a funny fella at times m8 gotta love your tenacity on things tho

just a quick question $138 divided by food, power, phone, transport, medical , school stuff , etc etc etc etc etc the list actually goes on a lil more but i thought you may get the pojnt  THIS is WITHOUT any credit card debts , car loans , Etc etc etc still "doable" ?

ya dreamin son

gunna be plenny houses lost this time round of the cycle , but hey never let them lil things worry ya 

cheers


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## Beej (22 April 2009)

nunthewiser said:


> LOL geez your a funny fella at times m8 gotta love your tenacity on things tho
> 
> just a quick question $138 divided by food, power, phone, transport, medical , school stuff , etc etc etc etc etc the list actually goes on a lil more but i thought you may get the pojnt  THIS is WITHOUT any credit card debts , car loans , Etc etc etc still "doable" ?
> 
> ...




Nun - did you go to uni?? When you live away from home at uni you learn how live on a shoe string. It's not easy, but if you have no choice, $138/week could be lived on - I know I could do it if I HAD to. All CCs would have to be cut up. Sell the car, get rid of the mobile or get a prepaid, disconnect home phone, no internet, no foxtel, turn off lights when not in room, where jumpers instead of running heaters etc etc etc, learn about cooking pasta at home etc etc. The point is you could get by *for a while* if you HAD to, until you found some work/income again - it's not meant to be a permanent situation!

PS: You could also get one of your other unemployed former co-workers to come and share your house, and pay you board/rent with the help of the dole/rent assistance they would be receiving. Many ways to get by.....

Beej


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## tech/a (22 April 2009)

Beej said:


> What exactly are you warning them against? Why do you assume they are buying on 2 incomes? That sort of mortgage could be serviced comfortably and easily on an average single income? Even a lower than average one!
> 
> $282k loan - current interest rate say 5% = $271/week interest cost (ie $14k pa). I bet they are paying more than that in rent right now! 2 people on the dole could pay that and have enough money left over for a frugal but not poverty stricken lifestyle......
> 
> ...





A lot of sence in this post.

If your not locking your interest rate down NOW then you'll miss the boat.

You will get inflation and it will hit hard in around 3 yrs time. Interest rates rise as will house prices.

Sure its a balance and a tough choice but there is a real chance that the opportunity for those to buy a home will go further away again.

Over 90 % of people will keep their job.


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## glads262 (22 April 2009)

Beej said:


> Ok thanks for the info. So bottom line, your FHBs are paying $30/week more in interest to the bank than they would otherwise have had to pay to rent the place from you.
> 
> PS - re your current house - so you are paying only $220/week (half of 5% of $450k) for your 2 storey house with ocean views then? Less than your little investment villa? Sounds like you have pretty special deal then!!! Well done!
> 
> ...




Again, I can see what your saying. 
we're CLOSE to positive cashflow NOW. But I forsee higher interest rates, and lower home prices, so this does not work out well for me.

We are in a medium country town now that has inflated property prices, but relatively lower rents. Paying $300/week (houses next door are going for $240/week.


Also, I just heard of a customer of mine who bought his caravan in Roxby for $80000 (you get access to the land) two years ago. Just sold it for $10000. twelve months ago he would have got $300/week rent for his caravan. there were no houses for rent, or land to build on.


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## Trevor_S (22 April 2009)

Beej said:


> So what exactly are you warning FHBs like this against?




To wait until the FHOG and the the house buyer with less acumen who has already bought won't be out there overbidding on property.  If the price comes back say 20%  then they will have made money by leaving it for a short time.  All the FHOG is doing is pushing the prices of the lower end of the market up, so it's going to the pockets of sellers, like the OP.  So, rather then making it cheaper for FHB, the grant is making houses more expensive.

This "strategy" also comes with an inherit risk of course.

Will the Government continue to artificially prop up housing prices, probably but to do so they will have to up the ante again, and go further into debt.  I am predicting a $200Billion deficit at this rate  sweet lord, there is going to be some nasty taxing at some stage to pay this back


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## Adam A (22 April 2009)

Interesting posts today on this subject 

I saw a show or read something cant remember which, on the subject of tech a comment re 10% unemployment being only 1 in 10 unemployed

They went on to explain how 1 in 10 actually effects a wider range of people
than the number suggests 

Family members, friends  take up the slack in the great aussie tradition and try and help out those affected and in itself reduce spending power of the 90% 

I found this interesting as it wasnt some thiing i had considered myself


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## IFocus (22 April 2009)

cutz said:


> I could never see the point of the grant, surely putting money into the hands of first home buyers had the effect of artificially pumping up prices in first home buyer areas ie. outer suburb-new developments, so in the end the only group that have benefited were the developers.
> 
> Another waste of taxpayers money that will probably end in tears.




The point of the FHBG is to put some sort of floor under house prices.

Why because it puts a floor under the capitalization of the banks, the Gov (read treasury) statements and actions have all been about this very thing. The rest can go to hell in a basket but keeping the banks solid is the key......good examples world wide when you don't.


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## IFocus (22 April 2009)

JimBob said:


> Me and the Mrs are saving to buy a house, but this is the main reason we are going to put it off for at least a year.  Both our jobs are fairly safe, but you never know what is around the corner.
> 
> People might be able to afford the house at current lower interest rates, but need to be prepared for higher interest rates in the future and be able to pay it off on one wage if kids are on the cards.




Risk management

Ideally you get some sort of buffer between market price (what punters pay) and what you pay. Learn strategies on how to do this there are lots of.

You buy in a market sector of high liquidity just in case you have to sell.

Fix a portion of the loan you can afford

Gov give $14K

Sounds more like opportunity to me but you must do the research and be hard nose when buying take no prisoners and walk away if the market doesn't come to you.


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## Temjin (22 April 2009)

glads262 said:


> Okay. Just got a call from my real estate agent. We are selling a 3brm home in Adelaide. Just a little villa, 400m2 block, average condition.
> council value $240000, bank valuations:
> $285000 Feb 08
> $275000 Aug 08
> ...




Yep, that's exactly why many of the FHB with low deposit and rely on the bulk of the grant to secure a loan have, by definition, created a subprime loan for the banks. 

Check below,


The federal bank and and thrift supervisory agencies, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Super vision created this guideline for banks to characterize mortgage loan definition.

Anything over 90% LVR is SUBPRIME regardless of the borrower's credit worthiness. 

Of course, I expect people would argue against this. But this is the definition the US Federal Reserve has used BEFORE the subprime market crashed. Note the word, "BEFORE". 

So can anyone now say we should NOT want the FHB about they are regarded, at least by the banking industry in US, as "high risk" borrowers? 

And no, I do not think the First Home Buyer Grant should be taken in as part of the calculation. If the borrower could come up with at least 10% of the deposit without the grant, then his loan should not be categorized as subprime.


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## weird (22 April 2009)

Personally I would prefer an exemption of stamp duty only. Why do we have to pay stamp duty anyhow ... another BS tax ?

I am personally considering a first PPOR, but following the wise advice of not over-extending oneself , and that the bracket I am considering is overheated right now, I am waiting my time (also I happen to be going overseas for abit too right during the June period).

I just finished Jan Somers book quite recently, and definitely can see the benefits of property, this is an excellent book, but also am worried about these Government concessions, on the affect of an artificial increase on demand.

A guy at work, had his accountant over, that apparently agreed that selling his 2 bedroom house in Ryde, with his 3rd expected kid ... that  renting was a sounder use of his money ... not sure of the logic behind this, and quite a few of us are scratching our heads on how the conclusion was drawn ...


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## robots (22 April 2009)

hello,

crazy stuff speaking with accountants, crazy

thankyou
robots


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## gfresh (22 April 2009)

There was an article on this in today's paper.. 

http://www.theage.com.au/opinion/great-australian-scream-20090421-ae0e.html


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## moXJO (22 April 2009)

Does price rise or fall dictate the amount you pay on rates to council?
Is it more profitable for govt to have higher prices through various taxes?


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## tech/a (22 April 2009)

moXJO said:


> Does price rise or fall dictate the amount you pay on rates to council?
> Is it more profitable for govt to have higher prices through various taxes?





When prices rise far enough then the government will re value all properties.
When this is done Councils rub their hands together.
When prices doubled councils recieved a 100% cash flow injection and what extra do we get. Bugger all.

Valuations are "Generally" 20% lower than market.

So when they fall in areas 40% youd expect your council rates to be cheaper wouldnt you?
But that of course is a Dream.

Stamp duty is also affected.
Thats 2 I can think of off the top of my head.


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## Julia (22 April 2009)

skc said:


> Don't forget there are plenty of costs associated with home ownership as well. Rates, body corp, maintenance etc - they easily add $5-10K to any dwelling.



I'm not sure where you get $5 - $10K from?

Stand alone home rates around $2K on about 900sq block.  Building insurance about $500.
Maintenance about $1K tops.

Obviously a unit in block would add body corporate.


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## Trevor_S (22 April 2009)

weird said:


> that selling his 2 bedroom house in Ryde, with his 3rd expected kid ... that  renting was a sounder use of his money ... not sure of the logic behind this,




He expects house prices to decrease in the short/medium term, buying back in to either a similar price for much less money or trading up to a bigger place.

Whether you think that strategy makes sense or not is a different kettle of fish, time will tell I guess.  It will be quite amazing when we get out the other side of the recession (2 to 3, 5 years ?) if Aus. is the only equivalent country where there has been little contraction in housing prices and no reversion to the mean.  Look to any long term (say 100 year) tracking of house prices to see the huge "bubble" in prices, every other bubble has been pricked, housing is the last balloon floating.  Even commercial property is undergoing a severe downward revaluation.  

Temper you reading of Somers stuff with a little on the other side as well

http://forum.globalhousepricecrash.com/index.php?showforum=9

and then make a more informed decision.  I am not advocating either way, you make you own decision.


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## Beej (22 April 2009)

Trevor_S said:


> Look to any long term (say 100 year) tracking of house prices to see the huge "bubble" in prices, every other bubble has been pricked, housing is the last balloon floating.




Actually a HIGHLY debatable assertion - especially given that the bears are now taken to using 50-100 year data (which is and in itself highly suspect and misleading) to try and "inflate" this great bubble argument up...



> Temper you reading of Somers stuff with a little on the other side as well
> 
> http://forum.globalhousepricecrash.com/index.php?showforum=9
> 
> and then make a more informed decision.  I am not advocating either way, you make you own decision.




And for some informed, well researched analysis/comment from the other side read through Cristopher Joyes numerous articles at Business Spectator (http://www.businessspectator.com.au/bs.nsf/fmISHome?OpenForm&is=Property) (you may have to register but it's free and worthwhile). Christopher has been involved in consulting to the government etc on property, and is a respected and well qualified commentator on this particular issue.

Cheers,

Beej


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## Temjin (23 April 2009)

Beej said:


> Actually a HIGHLY debatable assertion - especially given that the bears are now taken to using 50-100 year data (which is and in itself highly suspect and misleading) to try and "inflate" this great bubble argument up...




Likewise, the bulls are only keen on using past RECENT data (which itself is misleading because of the massive run up in the past decade or two and distorted by the massive expansion of cheap credit) to try and "maintain" that there is no bubble and Australia's residential property market is the ONLY ASSET in the world to not be affected by the global credit crisis. 

We only like to hear what we want to hear. That's the truth for both sides.


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## cutz (23 April 2009)

IFocus said:


> The point of the FHBG is to put some sort of floor under house prices.
> 
> Why because it puts a floor under the capitalization of the banks, the Gov (read treasury) statements and actions have all been about this very thing. The rest can go to hell in a basket but keeping the banks solid is the key......good examples world wide when you don't.




Sorry IFocus I don’t follow you here,

I agree, the economy hinges on the fact that house prices need to stabilize and not continue on a downward spiral whether that’s right or wrong I’m not sure but personally I think that prices should find their own levels, not propped up artificially by government intervention. 

But I am certain that most of the cash is ending up in the wrong hands, and if pulling the grant causes a drop in prices (or crash) in first home buyers areas, surely that would be a better outcome for young couples looking at buying their first homes.


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## enigmatic (23 April 2009)

Tech I think your forgetting though 10% unemployment is not really 1 out of 10 not employed. 

It is 1 out of 10 looking for work not working which most likely pushes it up further over 15% I'm sure someone will have the official figures.

And the other thing to note which I have found even at my work and others I know people that use to work 40hours+ a week now working anywere down to 15hours a week now and some of them been forced to take unpaid leave.. so they are technically still employed just not getting paid or are getting paid much less then they use to.

I think you will find a large majority of people have had there hours reduced or are being forced to take annual leave.. That annual leave will only last so long and the work is drying up so hours too will be reducing..


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## Taltan (23 April 2009)

So the FHB has replaced their 8k liquid cash asset for a 3k illiquid net property asset whilst foregoing their right to any future govt grants for first home buyers. I don't think it needs a long debate to concur they are foolish.

I also agree with IFocus. The FHOG was a way of capitalising the banks. After the events of Lehman Bros last October there was always going to be a shortage of sophisticated investors willing to plough their money into falling asset values to keep banks viable (be those property or shares). Hence Rudd turned to First home-owners and general property spruikers. 

If things stabilise globally this will have been a genius stroke saving our banks (and our economy) from the fate befalling most other OECD economies. If not he will have simply dragged thousands of FHB into a Ponzi scheme and will probably go down as the worst PM in living memory

Time will tell


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## Calliope (23 April 2009)

The government's intention to remove the *boost* to the first home owner's grant at the end of June is a wise decision. It will however create an ungodly rush to get the $7000 or $14,000 boost by the deadline. 

These people will be mainly those who cannot really afford to buy, and will soon be in financial trouble.


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## UBIQUITOUS (23 April 2009)

tech/a said:


> A lot of sence in this post.
> 
> If your not locking your interest rate down NOW then you'll miss the boat.




Many mortgages are for 30 years. How long and at what rate can a loan be locked at? Buyers should be taking an average 10% rate as a worst case scenario.



tech/a said:


> You will get inflation and it will hit hard in around 3 yrs time. Interest rates rise as will house prices.




Yes, and job losses will also compound as interest rates rise. Can a borrower today be guaranteed employment when the inflation genie is let out of the bottle? I wouldn't be betting on it unless you are in a core job eg. doctor or debt colletor



> Sure its a balance and a tough choice but there is a real chance that the opportunity for those to buy a home will go further away again.




Simply financial survival and not home ownership should be the goal. Time for the masses to get their priorities correct.



> Over 90 % of people will keep their job.




I wouldn't bet on it.


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## Glen48 (23 April 2009)

The First Home owners bribe is another way of stimulating the economy because once the victim/s moves in have to go to Harvey N. for a plasma leather Lounge etc etc nothing to pay for 50 Mths and then they need another car because they have 2 car ports and on it goes until she get pregnant they have a divorce and have to sell the house or rent it out or stay in separate rooms and he pays child support thinking the child is his.
All the time spending money and helping Australia grow ....and they don't know it cost 40% more to own a house.


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## MR. (23 April 2009)

glads262 said:


> Okay. Just got a call from my real estate agent. We are selling a 3brm home in Adelaide. Just a little villa, 400m2 block, average condition.
> council value $240000, bank valuations:
> $285000 Feb 08
> $275000 Aug 08
> ...




Your thread, as unproductive as it is for the economy and house vendor sales, is a good warning.  

Too many think, including myself, that the FHB are getting stitched up big time........


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## amy997 (23 April 2009)

A friend of a friend is a mortgage broker in Sydney, he says he has been rushed off his feet with business from first home buyers for the last 6 months, but he also says 90% of them cannot really afford the repayments they are taking on but the money is still lent and it is justified by assuming that their incomes will increase over time.


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## Mr J (23 April 2009)

amy997 said:


> A friend of a friend is a mortgage broker in Sydney, he says he has been rushed off his feet with business from first home buyers for the last 6 months, but he also says 90% of them cannot really afford the repayments they are taking on but the money is still lent and it is justified by assuming that their incomes will increase over time.




Maybe some of them will learn something from the experience.


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## helicart (23 April 2009)

Julia said:


> I'm not sure where you get $5 - $10K from?
> 
> Stand alone home rates around $2K on about 900sq block.  Building insurance about $500.
> Maintenance about $1K tops.
> ...





Add irregular maintenance costs for apartments, that are not covered by body corp fees 90% of the time. 

Add depreciation contingency fund for houses.


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## IFocus (23 April 2009)

cutz said:


> Sorry IFocus I don’t follow you here,
> 
> I agree, the economy hinges on the fact that house prices need to stabilize and not continue on a downward spiral whether that’s right or wrong I’m not sure but personally I think that prices should find their own levels, not propped up artificially by government intervention.
> 
> But I am certain that most of the cash is ending up in the wrong hands, and if pulling the grant causes a drop in prices (or crash) in first home buyers areas, surely that would be a better outcome for young couples looking at buying their first homes.




Cutz 

Housing lending makes up a large part of bank lending in Oz.

The value of those houses affects the capitalization / confidence in our banking system

If house prices were to fall like in the US then basically that would have a dramatic effect on the ability of our banks to lend in fact we could end up where the banks could not provide finance and the Gov would have to pour money to maintain their capitalization levels bit like the US or worst still like the UK.

Once you lose confidence in your banks it gets really hard.

I think house prices in Oz have been over heated mainly because of the easy credit that has existed. Easy credit always, repeat always ends in bubbles. 

The point of the FHBG is to firm up the most vulnerable part of the market ie the bottom. Its a free goal politically for Rudd as its a very effective move plus wins more Rudd voters. 

Notice Turnbull hasn't criticized


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