Are we headed for a financial crisis?

[ShareIt]

As we all know, the US is going through some hard times with the sub prime crisis. But I couldn't help notice that it seems as if we are headed in the same direction. Back in the day, loans were walking out the door, property was booming... and now we are at a point where interest rates are rising, the real estate market is slowing down to a point that people are loosing on their property or are starting to default. I read that analysts are predicting another 2 interest rate rises this year (one this week) and this will bring up to 300,000 home owners to go under.

UP TO 300,000 Australians risk losing their homes this year - smh.com.au http://www.smh.com.au/news/national...r-750000-owners/2008/02/02/1201801094694.html

It all sounds too familar to what has happened in the US, only that we are about 1 - 2 years behind.... perhaps our banks and mortgage brokers will have some writedowns to reveal?

I thought I would bring this topic to air as it really got me thinking and wanted some experienced voice on it

 

[theasxgorilla]

It all sounds too familar to what has happened in the US, only that we are about 1 - 2 years behind.... perhaps our banks and mortgage brokers will have some writedowns to reveal?

I am NOT experienced. But my strong opinion is that the US is not our economic master. Our housing market was booming at different times to the US, we weathered their post-dotcom recession without falling into recession ourselves and we've continued to boom when their housing market was starting to break down. We are our own entity. Immune from global economic shocks? No way. Marching to the beat of our own drum...very much so.

ASX.G

 

[vishalt]

Hope it happens and good riddance I say .

Homes prices will collapse after that and we could finally have some good property to buy at normal rates.

Although I'm saddened for innocent families that will lose their home, I seriously hope that people who invest/and have like 3-10+ properties lose it all, they're the real reason why home prices are as much of a joke as they are now.

 

[theasxgorilla]

Although I'm saddened for innocent families that will lose their home, I seriously hope that people who invest/and have like 3-10+ properties lose it all, they're the real reason why home prices are as much of a joke as they are now.

I used to think the same thing. But it's almost unheard of in Sweden for the average mum and dad or wanna-be r/e investor brat to own investment property. And prices are still high here. It's more likely to do with low interest rates and tax incentives. Or is it? I dunno. I just don't think it's black and white, that's all I mean.

ASX.G

 

[Bill M]

I don't think we are heading for a financial crisis, not yet anyway. When I bought my first house 30 years ago interest rates were 11% and I have seen them at 17% as well. If people take out home loans surely they would factor in a few rate rises, I know I would. As for the rest of the OZ economy I think we are doing quite well so I'm not particularly worried.

 

[wayneL]

I don't think we are heading for a financial crisis, not yet anyway. When I bought my first house 30 years ago interest rates were 11% and I have seen them at 17% as well. If people take out home loans surely they would factor in a few rate rises, I know I would. As for the rest of the OZ economy I think we are doing quite well so I'm not particularly worried.

You have to look a bit deeper than that.

My opinion is that there is "potential" for a full blown crisis. (There already is one depending how you define "crisis")

Recession in Anglo Saxon economies is a certainty, though Oz mey experience less/later, but don't know for sure... too many variables, butterfly wings and all that. How deep that recession is, depends on how many butterflies flap their wings...

... and how many poisons left to hatch from the mud.

 

[ShareIt]

I am NOT experienced. But my strong opinion is that the US is not our economic master. Our housing market was booming at different times to the US, we weathered their post-dotcom recession without falling into recession ourselves and we've continued to boom when their housing market was starting to break down. We are our own entity. Immune from global economic shocks? No way. Marching to the beat of our own drum...very much so.

ASX.G

I see what you mean and you are probably right... but it all looks too familar!

Thanks to the rest for the input...

 

[ShareIt]

I seriously hope that people who invest/and have like 3-10+ properties lose it all, they're the real reason why home prices are as much of a joke as they are now.

Sounds like the typical mob thing.... buy on greed, then sell on fear

 

[KIWIKARLOS]

we'll be fine most big resource companies have order books filled for the next few years. We have so much coal, Iron and aluminium so close to the two fastest growing economies that we will be set for my lifetime. There are heaps of differences between us and the US.

In this world you are either a concumer or a producer. The US stopped been a producer back in the 70's when they stopped becoming an exporter of oil and started importing. Now the only thing they make are bombs, planes and arms. Resources make and break countries. We may not have oil but we do have huge supplies of Uraniun, coal, gas and geothermal / renewable energy. IMHO Oz will be one of the largest energy exporters in the next decade.

 

[trinity]

I don't think we are heading for a financial crisis, not yet anyway. When I bought my first house 30 years ago interest rates were 11% and I have seen them at 17% as well. If people take out home loans surely they would factor in a few rate rises, I know I would. As for the rest of the OZ economy I think we are doing quite well so I'm not particularly worried.

Hi Bill M,

I was just wondering, when you bought your first home, what was the ratio of your income vs your house. I am not asking for the actual figures (that's impolite), but a ratio, if you don't mind.

Thanks.

 

[PortfolioPlus]

You have to look a bit deeper than that.

My opinion is that there is "potential" for a full blown crisis. (There already is one depending how you define "crisis")

Recession in Anglo Saxon economies is a certainty, though Oz mey experience less/later, but don't know for sure... too many variables, butterfly wings and all that. How deep that recession is, depends on how many butterflies flap their wings...

... and how many poisons left to hatch from the mud.

My goodness WayneL...you comment that "you have to look a bit deeper than that" and then you serve out a dolphins and crystals diatribe that isn't capable of comprehension.

I've read your threads and they are usually right on the mark. I'd be interested in your views without the "forked tongue" talk of butterfly wings and poisons to hatch in the mud. That's better left to the mystics in India or the hillbillies on pot in Nymbin.

 

[wayneL]

My goodness WayneL...you comment that "you have to look a bit deeper than that" and then you serve out a dolphins and crystals diatribe that isn't capable of comprehension.

I've read your threads and they are usually right on the mark. I'd be interested in your views without the "forked tongue" talk of butterfly wings and poisons to hatch in the mud. That's better left to the mystics in India or the hillbillies on pot in Nymbin.

Well I was just dealing out my Tarot cards at the time.

 

[Bill M]

Hi Bill M,

I was just wondering, when you bought your first home, what was the ratio of your income vs your house. I am not asking for the actual figures (that's impolite), but a ratio, if you don't mind.

Thanks.

It's ok I don't mind answering this. I had a simple factory job and I was getting about $150 per week (1978). The house cost $22,500 and the deposit was 10%. The house was in an average working man's suburb in Adelaide, I think it's important to say that because Sydney and Melbourne was always way higher. I remember I had $1,500 in the bank and a motorcycle worth $1,000 which I sold to raise the deposit. Can you believe it only $2,250 for a deposit? Anyway I went to Building Society for the loan which was 11% at the time.

I will leave it to the mathematically minded to work out the ratios compared to today, simply because I'm out of the workforce and I don't know what a factory worker would get these days. Plus I haven't a clue what Adelaide's house prices are. At the time I only saved for two years for the deposit but that included the sale of my motorbike. I might add I didn't think the loan repayments were that difficult to make at the time, hope that helps.

 

[stock_man]

It's ok I don't mind answering this. I had a simple factory job and I was getting about $150 per week (1978). The house cost $22,500 and the deposit was 10%. The house was in an average working man's suburb in Adelaide, I think it's important to say that because Sydney and Melbourne was always way higher. I remember I had $1,500 in the bank and a motorcycle worth $1,000 which I sold to raise the deposit. Can you believe it only $2,250 for a deposit? Anyway I went to Building Society for the loan which was 11% at the time.

Based on a loan of $20,250 @ 11% over 25 years, your weekly repayments (p&i) would have been about $45/week.
This is 30% of your weekly take home income.

Using this ratio, and a take home wage of $900/week (just a guess to a decent average wage), this would equate to a repayment of $270/week, or a house price of $180,000. (8% loan using a 10% deposit over 30 years.)

This feels a bit on the low side compaired to todays average house price. (>$300K). Not too sure what the average first home owners price is.

 

[The Mint Man]

re first post. No

 

[KIWIKARLOS]

for one i would rather see inflation go up than house prices go down. If inflation goes up our assets do technically loose value but at least my house repayments go down in real terms value as well. If only my house price goes down and inflation is flat only i loose out not the bank.