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"We had to get a home" - desperate homebuyers camp out for three days to buy in Sydney; The only way to secure a property as Sydney house prices continue their inexorable rise
Topic Started: 4 Sep 2014, 08:26 AM (9,945 Views)
skamy
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Veritas
8 Sep 2014, 12:48 AM


Why do you keep repeating this 10-15 year horseshit claim?

You have no evidence at all to suggest this is the norm

Also if rent is dead money why is the RBA issuing high profile papers on that very subject?

http://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-06.pdf

Could have asked you and clowns like Skamy- could have put them right in 5 minutes.
Veritas lose the name calling.

Rent money is dead money as it never ever gives you anything back.

That RBA paper tells us

Quote:
 
With historical average real house price expectations of 2.4 per cent, represented by the green dashed line in Figure 7, buying is less expensive than renting for anyone expecting to stay in their house for more than eight years.


After 8 years buying gets better and better.

People who tell you other than this are just simply liars.

I have seen what has happened to my friends and relatives who took the viewpoint that you and your pal Gen X/Miles/Frum are taking. You think you are smarter than everyone else with your bargain rentals in good suburbs and your conviction that the world is gonna change and you will not have pay what everyone else is paying to buy.
You cannot see that the property market is moving on without a care in the world as to your feelings about what prices should be.
By the time you guys eventually buy a house you will 40 plus and buying the same properties that kids of 30 are buying and you will be well behind your peers who bought in better suburbs 10 years ago.

Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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John Frum
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A Lurker
7 Sep 2014, 03:50 PM
Ok here is the story.

I bought my first house in 2004 (a mini top for Sydney). It was a starter home in the Inner West Sydney. $550k. 90+% LVR no parental help or guarantor. There was a cash crunch on settlement and mortgage payments were higher than the rent I had been paying for a modern apartment in a nearby better suburb. People told me I was crazy and it was the top of the boom etc. After 2 or 3 months the cash crunch was behind me and having a mortgage was no different to paying rent and I got to have some fun around the house painting, drilling holes and the like (which I don't mind doing).

In 2007 I bought my current house, again with 90+% LVR. It was high $800ks. But I bought before I sold my other place. The new place needed a reno so I sold the old place (within a couple of months) to unlock the equity for that. I only got $580k for the old place so not much uplift for those years between 2004 and 2007. With transaction costs pretty neutral, basically the original equity and the amount I had repaid between 2004 and 2007 was my final equity. Again people told me I was crazy and buying at the top of the market.

I then spent 2008 renovating the new place at a cost of over $400k (so I know how much it costs to build in Sydney and go along with Stringberg's replacement cost arguments but that's a tangential point here). So, let's say my current house cost me $1.3m (purchase + reno). When I finished the reno my debt was about $950k. I think the payments were just over $7k per month at the time. Household take home income was pretty high then so no big deal (but still a big number). Since then we have had 2 kids and 1 of us hasn't worked for 3 of the 6 years since the reno was finished. We throw all surplus money to pay off principal and the debt is now $500k which is only just over $2k per month in interest. It would rent for $1,200 per week I suspect. No austerity measures either (kids have been more a handbreak on travelling etc than the mortgage).

What I have learned:

- Renovating is expensive. Building is expensive.
- paying off the first 1/3 of the mortgage is a grind, after that it is easy.
- as per Stringberg: your life time accommodation costs = the amount you spend on rent + the amount you spend buying houses. If your aim is to minimise this you buy the cheapest house you can stand as soon as possible and pay it off as soon as possible. That is not practical and, let's face it, is a bit boring but it is something to keep in mind.
- it didn't matter that I didn't make money on my first house, I bought and sold in the same market when I traded up. In some ways it was probably better as it kept down the entry costs of my current house.
- the one thing you swear and curse about when you buy is signing the stamp duty cheque (especially when it's going to the NSW Government).
- taking on the 90+% LVR loans didn't bother me. I wasn't risking much. It's probably not advisable but that's just me. You might say dumb luck but my employment has always been very secure (I'm now self employed so to get laid off or sacked would take some doing).
Thanks, i appreciate you taking the time to do that. I'll try and get a chance to look at it tonight and apply a bit of the doom spin to it and see what comes up.

Would you mind giving us an idea of your household income during this time? If you borrowed around 500k in 2004 I'm assuming it would be slightly north of the 100k mark?

skamy
8 Sep 2014, 09:54 AM
Veritas lose the name calling.

Rent money is dead money as it never ever gives you anything back.

You have absolutely no clue.
Edited by John Frum, 8 Sep 2014, 10:02 AM.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness.
"Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
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A Lurker
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Veritas
8 Sep 2014, 12:48 AM


Why do you keep repeating this 10-15 year horseshit claim?

You have no evidence at all to suggest this is the norm

Also if rent is dead money why is the RBA issuing high profile papers on that very subject?

http://www.rba.gov.au/publications/rdp/2014/pdf/rdp2014-06.pdf

Could have asked you and clowns like Skamy- could have put them right in 5 minutes.
I don't believe that rent money it dead money. It's just an accommodation cost like the purchase price and interest for someone who buys.

How the figures work out will vary by location (i.e. price growth and rental growth) and the occupant's ability to pay off a property (thereby reducing or eliminating the interest cost).
John Frum
8 Sep 2014, 09:57 AM
Thanks, i appreciate you taking the time to do that. I'll try and get a chance to look at it tonight and apply a bit of the doom spin to it and see what comes up.

Would you mind giving us an idea of your household income during this time? If you borrowed around 500k in 2004 I'm assuming it would be slightly north of the 100k mark?


I've been avoiding putting in detail on the income side because I don't think it really matters to general concepts - although I do acknowledge that the ability to pay off the loan quickly minimises the interest bill and that makes buying rather than renting stack up better (rather than absolute income levels though this is more about relativities, that is, buying within your means and not over-reaching is important. If you are a young professional at the early part of your career you can probably go to the max as in a few years your income can be substantially higher but if your income is nearly topped out and you can only expect general wage growth rises (say 5% per annum) then borrowing the max is probably not going to allow you to accelerate mortgage repayment. Everyone's circumstances are different on this, maybe you have a non-working spouse that will go back to work or increase hours once kids are at school for example.

I will say that there have been no wind-falls or substantial one-off bonuses during this period, just (kind-off) steady income.
Edited by A Lurker, 8 Sep 2014, 10:50 AM.
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ThePauk
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Mmmm, do not think I have ever seen a bear write that owning ourtight is not better than renting.
What I have seen is that interest is as much dead money as rent in and yes, all Bears would like to own outright if housing was affordable I think.

If the bull argument is that people would rather rent than own, they fail.
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Veritas
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FHB
8 Sep 2014, 07:58 AM
Did he say its the norm, no he said its do-able
Wife & I bought in Brisvegas 2008, 20 pc deposit, 850000 house, 680000 loan
Friends said were nuts buying at the top, usual story
Loan down to 270000 today, another 4 yrs max its gone
That'll be 10 years to pay it all off, already after 6 the interests only 250 pw, a third what it would cost to rent it
Bank val last year said it's woth 1.2 mil no work done except painting & bathroom reno
Its not rocket science, knuckle down and do it
A lot of things are doable.

What he was trying to do was create the misleading impression that FTBs who bought in 2009 will pay off their mortgages in 15 years.
skamy
8 Sep 2014, 09:54 AM
Veritas lose the name calling.

Rent money is dead money as it never ever gives you anything back.

That RBA paper tells us




After 8 years buying gets better and better.

People who tell you other than this are just simply liars.

I have seen what has happened to my friends and relatives who took the viewpoint that you and your pal Gen X/Miles/Frum are taking. You think you are smarter than everyone else with your bargain rentals in good suburbs and your conviction that the world is gonna change and you will not have pay what everyone else is paying to buy.
You cannot see that the property market is moving on without a care in the world as to your feelings about what prices should be.
By the time you guys eventually buy a house you will 40 plus and buying the same properties that kids of 30 are buying and you will be well behind your peers who bought in better suburbs 10 years ago.
Your posts are getting more hysterical by the day.

The WA data must be upsetting you.
Edited by Veritas, 8 Sep 2014, 12:37 PM.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Sydneyite
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Veritas
8 Sep 2014, 12:36 PM
What he was trying to do was create the misleading impression that FTBs who bought in 2009 will pay off their mortgages in 15 years.
I reckon it's a fair impression, and the majority (not all) who bought in 2009 will in fact pay their loans off in 15 years or less, not counting those who sell before then, or who extend their loan significantly to fund a house extension or similiar. A smaller number of eople who really smash it will pay their loans off in 7 years or less (as I have with all 3 PPOR mortgages I have taken out in my lifetime so far).

It's not that hard - 15 years is a lot of inflation and wage increases. If someone only makes the minimum payments at all times then they will take 25 or 30 years depending on loan term - but it is rare for people to pay the minimum only over the life of the loan. A small increase in payments shaved years of those loan terms - eg if you increase payments on a 30 year loan by 20%, the payoff time drops by 2/3rds from 30 years to 20 years.

EDIT: Here's once article that talks about this: http://www.smh.com.au/business/banking-and-finance/borrowers-in-a-hurry-to-pay-off-mortgages-20120925-26ilm.html#poll and it includes an online poll where 48% of respondents said they were more than 2 years ahead on their mortgages.

Quote:
 
Australians have an unusual habit of paying off their mortgages much faster than borrowers in most other rich nations, a valuable trait that gives households a safety buffer were the economy to slow sharply.





Edited by Sydneyite, 8 Sep 2014, 01:40 PM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Veritas
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Quote:
 
I reckon it's a fair impression, and the majority (not all) who bought in 2009 will in fact pay their loans off in 15 years or less, not counting those who sell before then, or who extend their loan significantly to fund a house extension or similiar. A smaller number of eople who really smash it will pay their loans off in 7 years or less (as I have with all 3 PPOR mortgages I have taken out in my lifetime so far).


Based on what data? Housing loans and housing debt has grown enormously. This seems closer to the mark

Quote:
 
Sydney University anthropologist and author Stephen Juan said it now took two incomes and 30 years to pay off the average home. Half a century ago, it was one income and 15 years.

Mortgages costing the average household 29 per cent of its income put huge strains on the family unit, Dr Juan said.

"With that kind of inflation for the biggest item a middle-class family buys in their lifetime, which is the family home, when you have that kind of colossal increase that has been greater than the percentage increase in salaries - that's the reason we have the crunch.

"There's so much pressure on us. We're losing our leisure time, we're losing our time for families, we're having to commute further and further to get to work, we're finding it more and more difficult to pay our mortgages.

http://www.news.com.au/finance/real-estate/couples-work-twice-as-long-for-a-house/story-e6frfmd0-1225837806405
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Kelly Ville
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Another 30 something year old here who has got to zero debt in 8 years. The mortgage is still there but its fully offset, in actual fact it's "110% offset" because the amount in the savings account is 10% hiher than the loan! The 1st 2 years were a struggle and after that it was easy and now its such a sweet feeling to own our home debt free
The reason for the offset is we'll convert it to an investment when we upgrade in a year or three
I don't think our situation is that unusal, by brother in law has done the same and at least three mates are will on their way to clearing the mortgage in less than 10 years.
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Bardon
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Sydneyite
8 Sep 2014, 01:34 PM
Australians have an unusual habit of paying off their mortgages much faster than borrowers in most other rich nations, a valuable trait that gives households a safety buffer were the economy to slow sharply.
I have noticed that some of the early payment low hanging fruit methods that most Aussies take for granted such as making fortnightly payments and offset accounts are not as well utilised in other countries.

Lets face it most folk pay there homes off early and find the mortgage payment a doddle after the shock of the initial payments wear off.
Edited by Bardon, 8 Sep 2014, 03:25 PM.
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noopsy05
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Kelly Ville
8 Sep 2014, 03:20 PM
Another 30 something year old here who has got to zero debt in 8 years. The mortgage is still there but its fully offset, in actual fact it's "110% offset" because the amount in the savings account is 10% hiher than the loan! The 1st 2 years were a struggle and after that it was easy and now its such a sweet feeling to own our home debt free
The reason for the offset is we'll convert it to an investment when we upgrade in a year or three
I don't think our situation is that unusal, by brother in law has done the same and at least three mates are will on their way to clearing the mortgage in less than 10 years.
I'm the same as you but minus the savings on my loan and i still own around $150,000. That means im paying about $650 in interest, and thats the only money I count as dead money. Who rents for around $650 a month? not even people in public housing thats who.

Bank deposits are at their highest ever, the only people suffering from this is people who have their money in term deposits with their low interest rates. The people loving it are home buyers with offset accounts...
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