I would prefer we were rich through a more fungible, liquid asset class.
It can be converted into a more fungible, liquid asset class, known as "cash", if desired, within weeks. And that (AUD) cash can be further converted into any tradeable asset you please.
If you have doubts about the value of 'your' Australian real estate, whether in AUD or other terms, by all means convert now.
Well the 2x real house prices that we SUFFER are not real wealth in comparison say with a country whos house prices are around 4x a single gross wage. So that half's our position to start with. Then reduce the overvalued Aus$$ by another 20c then redo the calculation. I would say those two issues would knock our figure down by 60%. You know, those people living in countries with house prices that are at a sensible level and even those where renting for life is quite normal mostly don't feel poorer than us with an inflated everything. Lots of people here live extremely impoverished lives and its not just money either, even a $500k house in Sydney leaves you in a moonscape outburb with little life in it. I would say our style of housing and suburbs would be some of the most soul destroying in the western world at least, I suspect there is no international measure of that is there? Australia did not rate quite so highly re the worlds Quality of life index which is far more realistic than the 'Most livable city' index
As for the poorest with $10k in super and that is where that money would be, will never get the benefit of it.
When people see a study which tells them that themselves sit very low in the matter of wealth compared to the median two adult family (>half a million dollars in net wealth) it is not surprising that they devote their efforts to denigrating the worth of the study. Nobody likes to be shown that they are in the lower half of the population by such median measures. The realisation presented by objective evidence that one has failed in comparison with ones compatriots obviously presents a challenging psychological problem which needs to be addressed if self worth is to be maintained. Denial of the evidence or its significance is a common solution.
Steve at any stage I want I can sell up my Australian home and go buy 1/2 of Ireland. An Irish person cannot sell their home and come and buy half of Australia. The wealth is real. You are unusual in that you wish you had an Irish economy when everyone else in the world wishes they could have an Australian economy.
It is like saying it is better to own a painting by a Street artist than an original Van Gogh.
Not a lot of people desire the first and a huge number desire the second.
Like it or lump it there are a lot of wealthy Aussies on good wages and that money will go into housing.
Wealthy people live in wealthy areas with expensive houses.
This is rubbish, today's wealth is connected by titanium umbilical cord to the incumbents who got there before the monetary madness of the last decade and a half. Those at the bottom right now will not fare as well. Has nothing to do with wanting an Irish economy and I suspect Aus will end up with one anyway if nothing beyond house price inflation as an industry is our future.. Common sense would have dictated to the various governments and the financial 'grownups' that house price 'inflation' is nothing more than that in the long run. The current prices are now a burden on the majority even if they think they are winning, eg people with 30 year old kids at home and wait for when meanstesting for the pension counts your principal residence, wont look so clever then either. As for selling up and going to Ireland to be rich, well imagine if half the population did that in order to realise their 'wealth', houses would devalue 90% overnight. So in agrigate a house is worth nothing more than a house, whether it is worth $5mll or $5K if it is the same house in the same place, only difference is a figure on paper and a bigger restriction on who buys it.
Why
15 Oct 2014, 02:14 PM
This is a great point, we do only come second on the UN Human Development index, which is well below our first place on the wealth index.
Is that the one you meant, when you said it is far more realistic?
Melbourne gets 1st place for 'liability' which is in fact a device used for sending highly paid execs overseas, this one is repeated over and over again in Melbourne where I reside, includes things like private schools, golf courses, do you need an armed guard, expensive restaurants, climate etc which is then used to balance your pay on assignment. Has nothing to do with how someone on median pay lives. http://en.wikipedia.org/wiki/Mercer_Quality_of_Living_Survey This one is more realistic and Melbourne comes in at 17, which is still high by world rankings but nothing like a number 1 and having lived in several countries and cities I find this survey more realistic in terms of how real people live, not cashed up execs.
Veritas, I'd be interested to hear your take on the population spread in Australia versus Ireland. Do you think our elevated house prices might be due to too many people cramming into Melbourne and Sydney? Have they achieved a more even distribution of people in Ireland? Or is this not even relevant to house prices?
The tiny dark brown dots on the map of Australia are the most intriguing ... so many people wanting to cram into such a small area ... why?
Its pretty centralised around Dublin.
1.8 million people live in the Greater Dublin area.
Republic's total population is about 4.5millon.
Note too population growth rates (the fundamentals as the spruikers like to say)
Problem is that the only demand that matters is actual demand from people who have the money to pay the prices being asked.
How many times do you have to be told that this graph does not refute the fact that household debt has grown massively?
What that graph shows is that interest rates coming down means that payments are less at given times.
It does not refute the fact that the loan sizes (debt) has risen.
Nor does it show that wages have risen at the same rate as debt.
Skamy, when you take credit from the bank it becomes your debt .
That means that housing debt is....( Ill let you complete the sentence)
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
Meanwhile, I remember Ireland was the second richest country in the world. I wonder what they had in common with us...
Quote:
Ireland is now the second wealthiest nation in the world with more than 30,000 millionaires living here, according to new research published by Bank of Ireland Private Banking.
Well noted Veritas. The Irish gains were illusory, but could you imagine telling them that back when they were king of the mountain? Now we are are king of the mountain and no one can convince us our gains are illusory either. The real problem though is not that the value of the assets can drop precepitously, it is that most homes in Australia are leveraged, with even older established home owners going back and re-mortgaging for a new car, or to establish their children in a home.
$900 Billion in mortgage related debt, Around $50,000 for every adult in Australia, which probably equates to an average of $100k for every home owner investment property owner couple.
....seemingly quite sustainable at current levels. Because, as your chart shows, it is at roughly the same nominal levels, and at the same proportion of household income or GDP, as it was 5 - 8 or more years ago, (depending on which measure of those we refer to). A period during which mortgage arrears have remained historical low, aggregate credit growth has been subdued (meaning lot's of people are paying a lot of their existing debt off), mortgage interest rates have varied a lot from as low as ~5.x% to as high as 9.x%, and the housing market resilience itself has been tested at least twice by market downturns / periods of price falls.
szokolay
15 Oct 2014, 07:38 PM
$900 Billion in mortgage related debt, Around $50,000 for every adult in Australia, which probably equates to an average of $100k for every home owner investment property owner couple.
Yes - and we know it also equates to roughly one years household income on average - what's the big deal???
When people see a study which tells them that themselves sit very low in the matter of wealth compared to the median two adult family (>half a million dollars in net wealth) it is not surprising that they devote their efforts to denigrating the worth of the study. Nobody likes to be shown that they are in the lower half of the population by such median measures. The realisation presented by objective evidence that one has failed in comparison with ones compatriots obviously presents a challenging psychological problem which needs to be addressed if self worth is to be maintained. Denial of the evidence or its significance is a common solution.
We, the other half and me have considerably more 'wealth' than the standard issue sum as discussed in the article. So Im not being shown anything pointing out what I am or not but I can see how this 'wealth' index is structured. and its based on bullshit economics regardless of how correct the headline figures are. I and my other half also cannot understand the current mania for ever expanding house prices and the connection with regarding building real national or even long term individual wealth, if half of this current wealth is little other than inflation then its just plain stupid, ditto all the cheerleaders for such ersatz wealth. I would rather see national economic pride invested in much bigger things than house price wealth. ie more public transport is real wealth, more land available for people to buy at the real price of development, ( not the current restricted practices of today) dito the building on that land would create jobs and real wealth, investment in science as a national priority pays bigger long term returns than speculating and pushing prices up via government assistance which in fact operates within the world of spivs, bankers and cheap minded politicians along with their associated cronies. Proper and well distributed quality education also is real wealth. All these things Australia is slipping back on with a current government that would very much like us to have a 3rd world structure to the economy whereby cronyism and nepotism rule the roost. (and Labour was little better) Your views are just based on blunt opinion formed at a single, simple level with no big picture view of how things could be much better. Like a dog not knowing the difference between lobster and a can of Pal.
Seriously, how many hairdressers do YOU know that earn 2.6 million a year??!!
Strindberg
15 Oct 2014, 05:32 PM
When people see a study which tells them that themselves sit very low in the matter of wealth compared to the median two adult family (>half a million dollars in net wealth) it is not surprising that they devote their efforts to denigrating the worth of the study. Nobody likes to be shown that they are in the lower half of the population by such median measures. The realisation presented by objective evidence that one has failed in comparison with ones compatriots obviously presents a challenging psychological problem which needs to be addressed if self worth is to be maintained. Denial of the evidence or its significance is a common solution.
------------------------------ " ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility." - Alan Glynn
Skamy, when you take credit from the bank it becomes your debt .
That means that housing debt is....( Ill let you complete the sentence)
Ya silly that graph is obvious ----house prices rise as people can afford larger loans.
Household income rose house prices rose and mortgages rose.
The truth is that people always take on loans to match their salaries in the same way they have done for decades. Check out the latest ABS chart pack and you will see that the median % of household income spent on on interest payments is 9%. How can you believe these shysters when over and over they sell you this nonsense.
Do those Macrobusiness doom spruikers try to sell rubbish like that chart to young people as proof of increasing indebtedness? what a joke. It makes me angry because they brainwash people with this crap.
Ned Flanders
15 Oct 2014, 09:35 PM
go away you shitstain on humanity.
You are such a sore loser Miles - there is no need for that
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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