The future of Australian property prices

[medicowallet]

W

Imagine how great life would be then? You would be under or barely 30

And would have done nothing in your twenties, oh and wait. Your kitchen, bathrooms, carpet and paint need to be replaced. Now you find out that the 3 bedroom showbox cannot house the 3 kids you barely managed to feed over the past 4 years as your P&I was so high, so you need to buy another house.

 

[againsthegrain]

Given that the average income is around 60k, after tax and if spend nothing the average aussie would be left with just under 50k. You need to spend at least 10k on essentials so for the average aussie living sleeping and trying not to breathe for the best part of their life 40kpa could be used to pay off the mortgage.

Taking out a martgage of about 450k you would be paying interest for the first few years. So in reality the payments off the 450k would start in the mid to late 20s. add another 10 - 15 years of the stress life style and your house might be paid off.


I like how the baby boomers who bought their houses for 150 - 200k 10 years ago compare their success to the current situation.

The world changes, people need to change with it

The whole put yourself in debt as soon as you turn 21 and spend your life feeding the banks is just 1 big propaganda that alot of the young are trapped into by bad advice and promise of quick riches.

5 or 10 years ago it might of been wise, now it is not

 

[Beej]

And would have done nothing in your twenties, oh and wait. Your kitchen, bathrooms, carpet and paint need to be replaced. Now you find out that the 3 bedroom showbox cannot house the 3 kids you barely managed to feed over the past 4 years as your P&I was so high, so you need to buy another house.

I'm not sure I see your points?

I did heaps in my 20s while I had a house and mortgage - built a successful professional career and did loads of interesting things. I travelled extensively (just rented my house out for 12 months), partied heaps, chased the ladies, and always had somewhere to take them back to The percieved impact of what I am suggesting is nowhere near as great as most imagine. You just have to think outside the square a little.

As for the house needing renos etc all of a sudden - well usually no-one ever *has* to replace a kitchen or bathroom, people do that because they want to 90% of the time. Carpet?? I'd rip it up and polish the floorboards anyway. Painting you can do yourself if you don't want to spend too much dosh. Anyway a few years of living rent and mortgage free will leave most people with enough spare cash to do all these things comfortably if they want.

Also re a 3 bedroom house + 3 kids, well you don't *have* to move. You might choose to, but there's nothing wrong with 2 kids sharing a room - in fact most want to and enjoy it! If you really want you could extend your house, which you could do probably with an amount equivelent to 2-3 years rent (which you don't have to pay now remember EVER again if you choose - that's 40-50 years of no rent.....). And that expenditure also adds value to your house - so when you sell you get it back, unlike rent. And even if you move, at least you already own a big chunk of housing equity to use to fund that lifestyle upgrade.

Cheers,

Beej

 

[againsthegrain]

Its either you are paying rent or interest, thesedays you pay more interest then rent not to mention fees, maintenance etc

 

[robots]

hello,

gidday everybody, coming to you from sunny Geelong

Great inflation numbers out today, what you reckon? Well done Kincella you called it again brother
Thankyou
Professor robots

 

[robots]

hello,

Gidday again, beautiful day

Spot on Beej, mortgage gets easier as the days roll on, b4 you know it 10yrs gone and cruising

Oh well, paradise
Thankyou
Professor robots

 

[medicowallet]

I'm not sure I see your points?

I did heaps in my 20s while I had a house and mortgage - built a successful professional career and did loads of interesting things. I travelled extensively (just rented my house out for 12 months), partied heaps, chased the ladies, and always had somewhere to take them back to The percieved impact of what I am suggesting is nowhere near as great as most imagine. You just have to think outside the square a little.

As for the house needing renos etc all of a sudden - well usually no-one ever *has* to replace a kitchen or bathroom, people do that because they want to 90% of the time. Carpet?? I'd rip it up and polish the floorboards anyway. Painting you can do yourself if you don't want to spend too much dosh. Anyway a few years of living rent and mortgage free will leave most people with enough spare cash to do all these things comfortably if they want.

Also re a 3 bedroom house + 3 kids, well you don't *have* to move. You might choose to, but there's nothing wrong with 2 kids sharing a room - in fact most want to and enjoy it! If you really want you could extend your house, which you could do probably with an amount equivelent to 2-3 years rent (which you don't have to pay now remember EVER again if you choose - that's 40-50 years of no rent.....). And that expenditure also adds value to your house - so when you sell you get it back, unlike rent. And even if you move, at least you already own a big chunk of housing equity to use to fund that lifestyle upgrade.

Cheers,

Beej

Of course, when I purchased my first house, prices were actually reasonable.

They are not now.

Most people, and in the scenario posed included, will struggle to live a nice lifestyle and pay off a mortgage quickly.

I was saying that a renter never has to renovate, pay rates, insurance etc.

Of course you could never see the point I am making, as you are particularly biased with your rose coloured glasses on.

Not that I say people should not purchase property, but to pay it off that fast AND have a lifestyle is plainly ridiculous for most people (interns and registrars included )

 

[Beej]

Not that I say people should not purchase property, but to pay it off that fast AND have a lifestyle is plainly ridiculous for most people (interns and registrars included )

But that's not true in the case of the post I originally replied to - read it again - Prawn86 stated that if they had a $450k mortgage he and his partner could pay off $50k-$60k of principle per year if they really went for it, so they could achieve *exactly* what I am saying. QED.

 

[againsthegrain]

450 / 50 = 9

and you would also be paying back the bank about 150 - in interest over that time

150 / 50 = 3

so around 12 years given he never upgrades his car, goes on a holiday, has no other expenses such as kids, not to mention rates and interest rates will only be going up form here.

What if he loses his job?

Now decrease the 50k to about 20 - 30k for the very average aussie, subtract a bit of travel, kids? that 12 years now stretches to 30 if they are lucky so first home paid off at 50 ... time to start living lol

 

[Beej]

450 / 50 = 9

and you would also be paying back the bank about 150 - in interest over that time

150 / 50 = 3

so around 12 years given he never upgrades his car, goes on a holiday, has no other expenses such as kids, not to mention rates and interest rates will only be going up form here.

I read the figures stated as being after paying interest on the hypothetical loan.

As for your "what ifs" - if you are stuck paying high rent then those "what ifs" stuff your lifestyle up just as badly. If you own a house and things go pear shaped you can always sell it anyway........ funny thing is 98% of people never have to based on the long term arrears figures for Australia.

 

[doctorj]

As for your "what ifs" - if you are stuck paying high rent then those "what ifs" stuff your lifestyle up just as badly.

Only if the rental payments on a property exceed what the mortgage payments would have been, though obviously this is not usually the case.

 

[Agentm]

hello...

"85 per cent of the additional $985 billion of mortgage debt accumulated
since 1986 predominantly has inflated house prices"

now who said that? lol

and more pertinent, would anyone dare disagree..??

emotive daily robotic remarks about the sheer obvious benefits of the current bubble and how comfortable one is with current wealth/debt nation wide being locked into the current bubble is really not debating what the future of property prices is, nor how it was caused, the size of the bubble now, and what the consequence is for australian property investment in "the future", as it all ends in tears..

imho if the debate turned away from the robotic public ridicule of asf members, and entered into a proper discussion of how long this current bubble could possibly be sustained, then imho the real value of moving the discussion away from where it is, to discussing what caused it and how devastating the end game is.. then imho your really discussing "the future of Australian property prices"

but i dare say no one would be prepared to debate the reasons for this sorry mess in australia.. its just about beating your chest and laughing at those who see it for what it really is..

imho there needs to be a thread debating "the future of australian prices"..

pity there isnt one..

so back to ridicule and chest beating on how the clearance rates are going. while having a latte.

lol

its like watching a freight train approaching..

wow.. look at the speed of it, look at how big its getting.. lovin' how great my day is seeing it coming up the track at me.. everyone is buying tickets and getting on board and making a killing at the speed its going..


OMG splat


anyone want to discuss what damage that fright train will cause as it flies over the cliff? and what is causing the massive freight train to keep on driving at the speed its going?

imho the future of australian property prices will be universally felt by all in australia.. and imho the consequences of that future will be not as happy for the mug punter..

i only see australian institutions, aussie banks, and the rba saying "this one is different".. i see daily reports that this is not a bubble..

but i see no evidence presented in why it isnt a bubble. no research, no facts.. just generalised remarks on the prices.. they are flattening out,, they are stable.. lol .. to bring confidence to the masses.. its ok.. its all ok.. lets all hope for a happy spring clearance..

where is the debate on the future of the property prices once it all falls in a heap? what will the consequence be for those in it now? their retirement?


do androids dream of electric sheep? or electric property prices?

 

[Mofra]

but i see no evidence presented in why it isnt a bubble. no research, no facts.. just generalised remarks on the prices.. they are flattening out,, they are stable.. lol .. to bring confidence to the masses.. its ok.. its all ok.. lets all hope for a happy spring clearance..

a. Property is at 4.6x household income - the constant comparison to ave salary is less relevant
b. AWOTE has a trend of tracking higher than CPI; AWOTE is the more relevant indicator in terms of capacity to pay
c. Worldwide trends show property within 50km of a coastline attracts a premium over landlocked cities. Guess where the majority of Australians live?
d. Our lending standards are infinately higher than the US and much higher than most countries around the world
e. 96% of our mortgage loans pre-GFC were written by conforming lenders, and the non-conformers as a market share have been almost wiped out since
f. We don't write non-recourse loans - no jingle mail in Australia


There are a number of reasons why the Australian market is different to overseas markets. Do I believe we will have rises in property prices in the short or medium term? No. Is there overwhelming, compelling evidence for a crash? Apart from the "it happened elsewhere" crowd failing to take into account domestic issues, no there aren't.

It's not as exciting a scenario, but wage growth over time reducing the % of fixed income required to service a loan, whilst prices stagnate/pullback slighty is a likely bet. Sorry, I don't see a major crash.

 

[Alex Barton]

There are a number of reasons why the Australian market is different to overseas markets. Do I believe we will have rises in property prices in the short or medium term? No. Is there overwhelming, compelling evidence for a crash? Apart from the "it happened elsewhere" crowd failing to take into account domestic issues, no there aren't.

Couldn't agree more. Tracking sideways is the most likely outcome for Australian house prices from here.

 

[R35]

Question - Is it possible to borrow overseas to purchase Australian property at their lower interest rates?

I imagine not but was wondering.
cheers

This is possible but not recommended unless you have an income in that currency..so I'm paying 1.6% on my JPY loans for my aussie property but i have a JPY salary - without it this strategy is very risky and max LVR is like 70% anyway.

 

[robots]

hello,

Well another great week, its tuff getting an early morning latte down here in Geelong

Oh well, things just plodding along and please think about securing a roof over your head for the later years of your life

No worries
Thankyou
Professor robots

 

[medicowallet]

But that's not true in the case of the post I originally replied to - read it again - Prawn86 stated that if they had a $450k mortgage he and his partner could pay off $50k-$60k of principle per year if they really went for it, so they could achieve *exactly* what I am saying. QED.

Oh so are you referring to this post?

But yes, for me to buy the apartment where i live at the moment would cost 450k. Even if we put all our money into it and had no holiday etc the maximum we could pay off is 50 - 60k pa. Certainly not going to have it paid off in 6 yrs thats for sure

I particularly like the bit about no holiday etc.

ROSE
COLOURED
GLASSES

 

[matty77]

hello,

Well another great week, its tuff getting an early morning latte down here in Geelong

Oh well, things just plodding along and please think about securing a roof over your head for the later years of your life

No worries
Thankyou
Professor robots

such informative and entertaining posts.

I look forward to your next one "another great week, latte at the river was great, oh and buy property"

...

Maybe you could enlighten us with some reasons why you are still pushing property?

 

[againsthegrain]

Robots = Paris hilton? The posts sound like something that Paris or Britney would say lalalala

 

[nunthewiser]

House prices across Perth dropped another 1 per cent in September, new figures released today show, with home values tumbling more than 4 per cent over the past quarter.

The RP Data-Rismark measure of prices, considered the most accurate in the country, shows the median price of a house in Perth is now at $480,000, down 2.8 per cent since the start of the year

Perth units took a hammering in September, with the median price down 4.1 per cent to be 6.8 per cent lower over the quarter.

The median price of a Perth unit now stands at $405,000, 3.2 per cent lower than a year ago.

RP believes those markets with the greatest supply of housing are struggling the most.

It estimates that Perth has a housing supply of nine months.

Senior research analyst Cameron Kusher said there were signs that the national market was unlikely to improve any time soon.

"The middle of the year is typically a much slower time for sales activity and this year was no exception, with capital city property values declining during winter," he said.

"Following on from these soft conditions there is little to suggest there will be any significant rebound during spring.

http://au.news.yahoo.com/thewest/a/-/mp/8222496/perth-house-prices-drop-another-1pc/

Sunshine and lollipops

or whisky and denial for some instead ?

geez that nun fella sure picked that top a bewty!