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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 (9,950 Views)
John Frum
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6 Sep 2014, 09:44 PM
Shadow might be right, I got no data to back it up but I'm 28 and me and all my mates ( nearly all have mortgages ) all have offset accounts and we all reakon our loans will last around 10 years. The money you save with an offset acc is more than any term deposit and it's tax free...
You and all your mates will be fucked in 10 years trying to pay off that extra interest with a stagnating salary.

Enjoy the hubris while it lasts.
Shadow
6 Sep 2014, 07:37 PM
I'm not greedy - I have enough IPs for now.
Oh so suddenly you've grown a conscience? So does that mean you won't be making morally dubious claims on your business losses anymore, as per a previous discussion?

Here's an idea - why don't you buy a swag of IPs, make a motza and then give away most of the loot to charity...everybody wins!
Edited by John Frum, 6 Sep 2014, 11:15 PM.
"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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John Frum
6 Sep 2014, 11:06 PM
You and all your mates will be fucked in 10 years trying to pay off that extra interest with a stagnating salary.

Enjoy the hubris while it lasts

Here's an idea - why don't you buy a swag of IPs, make a motza and then give away most of the loot to charity...everybody wins!
well most of us are 5+ years into the loan so in 10 years from now we would have been mortgage free for 5 years and saving around $500 a week to spend on the family and our social lives.
Why do all you bears get so angry and cut up talking about it? You say me and my mates will be fucked? I think the people most like yourself who are still working when your 70 because your super will run dry within 5 years of retirement because your still renting will be more stuffed then us...
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skamy
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6 Sep 2014, 07:03 PM
Skamy your rentals returns graph shows a few things and it is not up to date.

Its shows that the good times for returns are over, and that wages cannot grow like in previous history when competing on a modern global level.

If your graph was up to date , it would show that perth decline headed to the floor would be much lower, showing 10% declines, and Canberra rents down 18% over the last three years. You need to update your graph.
ha ha ha :D

1 year of drops in a few cities, one of which had just come off huge price inflation after nearly two decades of increasing rents and suddenly its all over red rover.

Bit of the dramatics there don't ya think?
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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Shadow
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Veritas
6 Sep 2014, 07:51 PM
Your claim is bull shit.
No it's not. When people put their mind to it they can pay off their mortgage very quickly, within 10-15 years, and then those people have virtually free accommodation for the rest of their lives, aside from rates and occasional maintenance costs, which are tiny compared to the cost of renting.

But you and John Frum don't look at the long term picture. You just compare the cost of renting this year to what it would cost if you bought this year. Using that comparison you will never think it is a good time to buy. It has ALWAYS been cheaper to rent for one year than to pay the first year's interest on an equivalent home. That will never change.

In 10-15 years from now you will still think you are 'winning' by renting, even though you are still paying rent and people who bought today are paying practically nothing.

Quote:
 
And interest only mortgages in the housing market are what exactly?
They are a type of mortgage where the borrower is not required to pay the principal, although that doesn't prevent then from repaying it if they choose to, or paying additional funds into an offset account.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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John Frum
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skamy
6 Sep 2014, 06:39 PM
Rent money is dead money
I pay less than a full days pay of my salary for a four bedroom family home in a nice area of sydney half an hours commute from the CBD. I can save a day and a half's full pay a week. A similar place bought with 80% leverage would double my weekly housing costs, most of which will initially be 'dead money' paid to the bank as interest.

Tell me skamy, if prices stagnate for a decade and interest rates start to rise, which situation will be best for us, assuming a purely financial play (i.e I'm willing to forgo the freedom to home renovate for 10 years) ?
"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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Shadow
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szokolay
6 Sep 2014, 08:36 PM
You really do stretch the truth shadow "virtually free accommodation for rest of their lives" Do you own a brand new property? After a time maintenance rears it head. New roofs, new kitchens, replacing concrete driveways, it all costs quite a bit. And there are the ever increasing council rates and insurance bills. Owning is better than renting but there are periods when buying is not always better than renting.
New roof, kitchen and driveway... maybe once every 20 years. Hardly a regular cost.

Rates and insurance are insignificant compared to the cost of rent - maybe the equivalent of three weeks rent per year.

Quote:
 
As for paying less interest than the cost of rent, well that's fine, but what about the 3/4 of a million dollars of principle? You have to pay that that off as well remember.
You don't have to pay off the principal if you have an interest only loan, but even if you do pay off the principal, it will still be much cheaper than renting.

On a $750K home as you suggest, the rent will initially be about $30K per year. If you rent for 70 years and the rent rises with inflation (3% per annum) then you pay a total of $7 million in rent. In year 70 you are paying $230K to rent just for that one year! How does that compared to the $750K principal now?

Plus the renter has nothing to show for it at the end, whereas the homeowner owns an asset worth many millions of dollars after the 70 years. Plus the homeowner has all the profits from the extra money he was able to invest after he paid off that home after 15 years. While the renter kept paying ever-increasing rent for the next 55 years, the homebuyer, since his accommodation was now virtually free, had hundreds of thousands of extra dollars to invest every year.
Edited by Shadow, 7 Sep 2014, 09:12 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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A Lurker
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Veritas
6 Sep 2014, 07:20 PM
So people are paying off their mortgages in 15 years are they?

Got any data to back that up?

Why aren't you buying more investment properties? A man of your skill should really take full advantage of this virtually risk free cash farting investment.
I bought my current house in 2007 and will have it paid off in 2 years (before 2017) so less than 10 year mortgage. That includes doing a large renovation as well. I don't see this as particularly unique. I have other gen x friends that have been mortgage free for a few years already (and all bought their current house after 2005).

For me interest payments are already minimal, less than half what it would rent for.

This is in a well located Sydney suburb.

Original term was 30 years and payments seemed large for first little while but once you knock a bit of principal off and get a few pay rises it becomes easy. It's a weird thing, my mortgage is my only monthly bill (interest component) that decreases each month.

I think there is data to say that the average life of a mortgage is 8 years but this includes refinances and people that sell to upgrade.
John Frum
7 Sep 2014, 08:36 AM
I pay less than a full days pay of my salary for a four bedroom family home in a nice area of sydney half an hours commute from the CBD. I can save a day and a half's full pay a week. A similar place bought with 80% leverage would double my weekly housing costs, most of which will initially be 'dead money' paid to the bank as interest.

Tell me skamy, if prices stagnate for a decade and interest rates start to rise, which situation will be best for us, assuming a purely financial play (i.e I'm willing to forgo the freedom to home renovate for 10 years) ?
I pay less than a full days pay for the interest on a 4 bedroom family home in a nice part of Sydney that I bought in 2007. Admittedly it was more than that when I originally bought it. Every month it decreases some more and will go to zero in 2 years (before 2017) on current forecasts.
Edited by A Lurker, 7 Sep 2014, 08:55 AM.
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Shadow
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John Frum
6 Sep 2014, 11:06 PM
You and all your mates will be fucked in 10 years trying to pay off that extra interest with a stagnating salary.
Why would it be harder in ten years time to pay off what by then would be a lower principal? Even if salaries stagnated as you suggest, it would still get easier as the principal is paid off.

It might make you feel better about your bad financial decisions to believe everyone else will be 'fucked' but it's simply not true. You are the one who will still be paying for your accommodation in 10-15 years. The people who bought homes will be pretty much free of that financial burden and will therefore have lots of extra dollars to invest for many decades to come.
Edited by Shadow, 7 Sep 2014, 09:16 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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John Frum
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Shadow
7 Sep 2014, 08:35 AM

But you and John Frum don't look at the long term picture. You just compare the cost of renting this year to what it would cost if you bought this year. Using that comparison you will never think it is a good time to buy. It has ALWAYS been cheaper to rent for one year than to pay the first year's interest on an equivalent home. That will never change.
Incorrect. I (and I'm pretty sure Veritas does too) understand the effects of inflation in reducing real capital costs very well. I also understand the're a small premium to pay initially for owning over renting, for (amongst other things) the security of tenure. It's a bit of an insult to a guy that's been frequenting this forum for over a year to assume i don't know the basic tradeoffs in homebuying.

However the same charges you're levelling at the bears here is exactly the same ones we can throw back at you - you extrapolate current conditions to infinity.

My gambit is that current conditions won't continue - higher IRs, or monetary-policy resilient deflation as a result of chronically low IR, or a sharp decline in asset values are all likely the next few years in my predictions. It's very clear that the situation is worsening for Australia - look at recent turnarounds by high profile economists and investment firms.

Happy to argue those points with you, but any bull that comes here armed with a bunch of 'I'm alright Jack' stories about cleaning up in the IP game i will continue to treat as troll bait. I know first hand from my parents' experience that it isn't a one way bet.
Shadow
7 Sep 2014, 09:15 AM
Why would it be harder in ten years time to pay off what by then would be a lower principal? Even if salaries stagnated as you suggest, it would still get easier as the principal is paid off.

It's you that will pay with your silly renting!
Don't you know property always rises!
Foolish bears! I am the great fearful Shadow and you are all DOOOMED!!!! BWAHAHAHAHA!!!!
See comments above.
Edited by John Frum, 7 Sep 2014, 09:32 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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Shadow
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John Frum
7 Sep 2014, 09:27 AM
My gambit is that current conditions won't continue - higher IRs, or monetary-policy resilient deflation as a result of chronically low IR, or a sharp decline in asset values are all likely the next few years in my predictions.
It's not a gambit, it's a gamble, and it's been a losing gamble so far.

You are pinning your hopes on an unprecedented event. The odds are against you. It's a huge gamble.

You might as well just play the lottery.

The RBA has a mandate to ensure inflation. They will do what is necessary to achieve that goal.

But even if you do get the deflation you hope for, the person with a fully paid off home still pays less than you will be paying in rent.

If you had bought 10-15 years ago you could easily have had your home fully paid off by now.
Edited by Shadow, 7 Sep 2014, 09:39 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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