Property Watch

[Run n Spread]

People like to directly blame property for it's comparitive unaffordability but the truth is there's a lot more to it. Our economy is maximised due to the boom 10 years back.

For you nuffies who think this is a bad thing, let me explain it to you:

10 years ago we had a boom. Millions of traditional working class moved into middle class. Bogans were all of a sudden earning $100k a year as a tradesman. Their house prices went up, their wages went up, they started voting Liberal (that part not nec good).

As a whole this has more positives than negatives. These people won't move back to being working class. And the people left behind? Too bad. They had their opportunity and didn't take it. If we took working class values and waited for the week links we'd stifle our standard of living.

The negative is that we are maxed out. People want $250k houses but the truth is we can't build them because every tradie building it is getting $100k.

The good news is that we are having a slow correction rather than a bust. Given the state of boom can never last for long periods, the way it's panned out really is optimal.

Agreed it is maximised. Problem the Gen Ys face therefore is trying to find new opportunities for market growth in a saturated market. The cycle thus is at a disadvantage.

Yep tradies are raking it in. Working moved to middle class, wages drove up and people with high wages buy what they value most. Most people value property and with favourable tax breaks went and bought investment properties. This further crowded the market.

 

[Run n Spread]

House prices can continue this trajectory if couples are allowed to marry other couples and all four continue to work. Or a similar set up consisting of four adult working to pay off one home that they all live in, perhaps their two children are the extra two adults who pay the mortgage but that will it's own issues.

Not as far fetched as you think. (sans the marriage idea). Already happening over a range of purchases/industries and commodities. People will always buy what they value most. The price is determined by what the rich (highest bidders) are willing to pay. Therefore if people want the asset or commodity the money has to materialise from somewhere. Trend is the sharing economy i believe. Whether it catches on or not is another thing.

http://www.mysixcorners.com/business.php

http://www.au.timeout.com/sydney/aroundtown/features/12525/48-hours-in-the-shared-economy

http://www.fastcompany.com/1747551/sharing-economy

 

[Taylor]

The issue I see with it is that if it takes four workers to service a home loan then that would halve the houses required.

 

[Smell The Glove]

Agreed it is maximised. Problem the Gen Ys face therefore is trying to find new opportunities for market growth in a saturated market. The cycle thus is at a disadvantage.

Yep tradies are raking it in. Working moved to middle class, wages drove up and people with high wages buy what they value most. Most people value property and with favourable tax breaks went and bought investment properties. This further crowded the market.

Try explaining this to bunsen burner. He think it's Gen Y's fault they weren't saving their $5 a week pocket money toward a house deposit while they were in their peak lemonade-selling and bed-making years of 7-9.

 

[J_Moore]

Had a look at my tenant ledger the other day. Have dropped about 55 grand on a rental over the past 2.5 years (with a partner). Although I knew academically what my annual rental costs were, it's confronting seeing it all tallied up. I could easily afford to pay more per week, but have always thought the "houses are massively overvalued" argument held a lot of water, so have had reservations about taking out a mortgage. Still, it's hard not to feel like you're tipping money down a hole with a rental.

 

[Run n Spread]

Had a look at my tenant ledger the other day. Have dropped about 55 grand on a rental over the past 2.5 years (with a partner). Although I knew academically what my annual rental costs were, it's confronting seeing it all tallied up. I could easily afford to pay more per week, but have always thought the "houses are massively overvalued" argument held a lot of water, so have had reservations about taking out a mortgage. Still, it's hard not to feel like you're tipping money down a hole with a rental.

You are not really tipping money down a hole. That money enables you to have a roof over your head and not be on the street. Its a tough one. Yes it is always better to own something rather than rent something but if the costs are prohibitive you are left with the 2nd preference, happens all the time in life.

Owning a house for the market value/investment and owning it for retirement/passive income is a good thing. Great if you can do it. But it is stupid to believe that option is open to everyone. It isn't. I'd hazard a guess and say it isn't a realistic option for most under 30-35s right now or the foreseeable future. Thus the challenge for them is to find another source of passive income rather than worry about one that has past. Trouble is in a crowded and saturated market across all industries new opportunities are hard to come by. Just have to keep looking be innovative and be patient for the turn around for what its worth.

 

[Scotland]

$55k in two years, ouch.

Had you purchased that same house two years ago, how much interest would you have paid? How much would the value have changed in the same period? That's what really matters. If the same place would've cost your $80k in interest and hasn't appreciated at all in 2.5 years, you would be worse off having bought 2.5 years ago...

Historically, it's cheaper to rent than buy a house at a given point in time, but if you buy you are effectively freezing your expenditure for future given points in time (ignoring interest rate fluctuations) and you are contributing towards an appreciating asset. In 2013 maybe renting is $500 a week and paying a 95% mortgage on the same place is $650. Give it 10 years and that $500 will be more than the $650 mortgage payment etc. etc.

Long term you're always better off buying, but I wouldn't be making the decision to buy now without comparing rental costs, interest payments and potential price rises in the short to medium term.

 

[Taylor]

As long as the capital growth exceeds the interest rate..

 

[bunsen burner]

Had a look at my tenant ledger the other day. Have dropped about 55 grand on a rental over the past 2.5 years (with a partner). Although I knew academically what my annual rental costs were, it's confronting seeing it all tallied up. I could easily afford to pay more per week, but have always thought the "houses are massively overvalued" argument held a lot of water, so have had reservations about taking out a mortgage. Still, it's hard not to feel like you're tipping money down a hole with a rental.

BIS Shrapnel forecasts Sydney will grow 19% over next 3 years.....

It's a good time to buy your own house in Sydney.

 

[J_Moore]

$55k in two years, ouch.

One bedroom unit, too. I need a COLA.

 

[Smell The Glove]

BIS Shrapnel forecasts Sydney will grow 19% over next 3 years.....

It's a good time to buy your own house in Sydney.

Keep spruiking BB - maybe the value of your overpriced shanty won't drop if you keep at it on BF.

 

[bunsen burner]

Keep spruiking BB - maybe the value of your overpriced shanty won't drop if you keep at it on BF.

You really are wide of the mark. Just the mere fact you think someone is stupid enough to think they can single handedly influence the property market by talking it up on BF.

The said poster lives in Sydney and is weighing up the cons of rent v buy. BIS Shrapnel's forecasting is some important and relevant information he should know. The Sydney market is actually moving as we speak.

And just so you know, I hold properties in most of the capital cities at the moment. BIS also said:

Brisbane: 17% growth over next 3 years
Melbourne: flat over next 3 years
Adelaide: flat over next 3 years

I've mentioned countless times on here than Melbourne market would be flat over the next few years.

 

[sabre_ac]

Clearly the these cuts are designed to stimulate a rapidly stalling economy and in all likelihood will result in some decent first home sales figures coming out. I'm still struggling to see why buying property for any other reason to live in at the moment is a good idea. Especially when you take into account how expensive Australia is relative to the rest of the world and how reliant its wealth is on coal, iron ore and gas.

http://au.news.yahoo.com/thewest/a/-/newshome/18380812/reserve-cuts-key-interest-rate/

Reserve cuts key interest rate

The Reserve Bank has cut official interest rates for the first time in a Federal election campaign, slicing them by a quarter percentage point.

In a move that will reverberate through the rest of the campaign, the Reserve decided today to take the official cash rate to 2.5 per cent – its lowest level since early 1959

 

[JohnW]

I think everyone here can see the majority of posters think house prices are over inflated. Lets ignore the arguing and one eyed suggestions that are skewed due to the bias due to one's personal position.

What is everyones take on fixing rates at the moment? Generally I believe in riding the high and riding the lows, but historic low rates, have caused me to consider it.

My economic background leads me to wonder where the growth will come from that will lead to an increase in rates, and a "pay off" from fixing your rate.

Should rates remain constant, I see no value in fixing once factoring in the fact that:
1) You may not be able to make additional repayments, and
2) Potential break costs.

So the question is, do you folk see rates increasing in the short to medium term? If so why? If not why?

I am siding with rates remaining constant in the short term with maybe a slight increase in the medium term. Thoughts?

 

[sabre_ac]

From what I have read and seen, its a hard sell to suggest the rates will rise anytime soon. All signs point to a slowdown and one that is only just beginning.

That said it wasn't that long ago that the "Experts" where predicting a 30 year boom, the only thing that seems to be consistently right is that most specific long term predictions are wrong.

I don't have a home loan but is there a premium paid on choosing to fix your rates? What are the current rates on offer (Fixed vs Variable).

 

[bunsen burner]

That said it wasn't that long ago that the "Experts" where predicting a 30 year boom,

Links?


I've never heard anyone say this. Even the most biased real estate product sellers don't say things this foolish.

I suggest you're making shit up.

 

[Run n Spread]

So the question is, do you folk see rates increasing in the short to medium term? If so why? If not why?

I am siding with rates remaining constant in the short term with maybe a slight increase in the medium term. Thoughts?

Hard to say. At an estimation I would say I don't really see a rapid increase in the near future. If you take the view that interest rates can be a reflection of the wider economy then low interest rates are geared to increase spending/push for growth. Ergo massive growth = need to put the breaks on, at least as per the RBA thinking.

Where is that growth going to come from thou? Most markets are tapped out. It is hard for new entrants and expansion is being undertaken slowly as investment and capitol is getting harder to attract. I think in the medium term rates will gradually rise as they don't stay at record lows forever. But no record high 18% 91 levels in the mid term either.

 

[JohnW]

with my bank westpac. the premium for fixing over 5 years with a loan amount of $500k + is 0.43%.

Veriable rate is 5.26 including a 1% discount
Fixed is 5.69

I just cant see rates moving in a way to justify fixing.

 

[JohnW]

Hard to say. At an estimation I would say I don't really see a rapid increase in the near future. If you take the view that interest rates can be a reflection of the wider economy then low interest rates are geared to increase spending/push for growth. Ergo massive growth = need to put the breaks on, at least as per the RBA thinking.

Where is that growth going to come from thou? Most markets are tapped out. It is hard for new entrants and expansion is being undertaken slowly as investment and capitol is getting harder to attract. I think in the medium term rates will gradually rise as they don't stay at record lows forever. But no record high 18% 91 levels in the mid term either.

One of the things that may increase growth is the dropping dollar. As exporters start selling again, and perhaps investor look to the AUD again. But again the AUD dollar as per history suggests if at the higher end, and would need to drop further to really effect Australia's growth.

Just interested in others take on our countries economic position.

 

[sabre_ac]

Western Australia state budget came out recently;

First time buyers of new homes will have their grant increased from 7k to 10k

First time buyers of established homes will have their granted decreased from 7k to 3k.

The question is are the majority of new homes built in established areas (Subdivided older homes) or new housing estates?

I suspect the latter which would continue the urban sprawl of Perth, increasing the need for cars, adding pressure to public transport and moving further away from turning the city anything resembling world class.

I should mention though money put aside for transport projects, ideally you'd like to see it spent on turning the city itself into a place where people can live without the need for a car.

 

[Smell The Glove]

Links?


I've never heard anyone say this. Even the most biased real estate product sellers don't say things this foolish.

I suggest you're making shit up.

This - from the King of Unsubstantiated Posts.

And Phillip J Anderson is one economist who thinks that Australian housing is headed for a 14 year boom: http://www.moneymorning.com.au/20130601/can-the-great-bull-run-charge-again.html

So yes, property spruikers do say shit like this.

 

[bunsen burner]

This - from the King of Unsubstantiated Posts.

And Phillip J Anderson is one economist who thinks that Australian housing is headed for a 14 year boom: http://www.moneymorning.com.au/20130601/can-the-great-bull-run-charge-again.html

So yes, property spruikers do say shit like this.

So you don't have any links of anyone saying 30 years? And all you can provide is one link of a guy saying 14 years? Incidentally a guy who has a web page that is sales copy and a "buy this great offer for $149! at the end.

http://pro.portphillippublishing.com.au/p05andersondvd/W920P719/?h=true


You and a couple of other who post on this board have very little credibility. Wonder why?

 

[sabre_ac]

So you don't have any links of anyone saying 30 years? And all you can provide is one link of a guy saying 14 years? Incidentally a guy who has a web page that is sales copy and a "buy this great offer for $149! at the end.

That was actually me who mentioned the 30 year boom, I don't have any links though a lack of evidence has never stopped you before (Poor form I agree).

Are you saying that there wasn't a belief that the Chinese growth period would be considerably longer than it is turning out to be? That people are currently a little unprepared for the slow down happening?

You and a couple of other who post on this board have very little credibility. Wonder why?

Credibility in your eyes? Is it safe to safe a large percentage of your "wealth" is tied up in real estate, one might argue that your credibility on this subject is what should be questioned.

 

[bunsen burner]

That was actually me who mentioned the 30 year boom, I don't have any links

Probably shouldn't have made such false claims then....

though a lack of evidence has never stopped you before

Not true.

Are you saying that there wasn't a belief that the Chinese growth period would be considerably longer than it is turning out to be? That people are currently a little unprepared for the slow down happening?

Nope. I am saying I have never heard anyone, not even the most misguided or misguiding property spruikers claim 30 years of boom. I haven't even heard 15.

All the good property advisors have been on the money with how it has panned out. Sydney and Brisbane markets are moving as we speak but the good property advisors are not saying "big boom". Would destroy their credibility.

Credibility in your eyes? Is it safe to safe a large percentage of your "wealth" is tied up in real estate, one might argue that your credibility on this subject is what should be questioned.

How so?

Surely you're not naive enough to think I'm naive enough to think what I say on 1 forum will influence anything?

You know I am on record on this very forum advising people to go stocks rather than property, right?

And you're also aware I have stated property markets will be reasonably flat for the next 5-10 years, right?


I've been posting here for 10 years and everything I have said has been on the money. I'm just not sure how my credibility can be questioned? And if you disagree, feel free to sort through 10 years of posts on this board and find something that hasn't been on the money.

Otherwise, have a nice day with a nice big cup of STFU.

 

[Scotland]

My rule of thumb for fixed vs variable rates is to look at what the banks are offering for different loan periods as a gauge of where they think they are going.

CBA for example have a current SVR of 6.15%. With a wealth package, you can get 0.8% off that to get it down to 5.35%. The comparison rate will be slightly higher due to the wealth package fee of $300 a year or whatever it is.

For fixed rates you can get 4.94% for one year, 5.04% for two or three, 5.54% for four and 5.64% for five. The longer term fixed rates are not published. The wealth package discount is limited to 0.15%. You also have to pay $750 to fix for a period, and often offset facilities are not available for 100% of the loan and often it is not as easy to make extra payments, make redraws etc.

If you had a $300k loan at 5.35% and fixed for a year, you'd effectively save $930 compared to the variable rate of today. Two years $2010. Three years $3390. Four years you'd be down $1230. Five years down $2850. All assuming the 5.35% doesn't change. Etc.

What all of this says to me is that the banks think don't think interest rates will start to rise for another year or two and indeed may fall further. If you fix today for three years you can lock in paying less interest than you are today, but rates may continue to fall in that time. It's not like banks will let you lock in for 5-10-20 years at today's historically low rate - that's not how they make multi billion dollar profits.