You also have to make the assumption that the suburbanite will accept the constraints of the house's location. For example, if for any reason, incomes are stagnant, or even fall, there is likely to be some impact on house prices.
Sure - anything *could* happen. But we know that historically, from the actual data, that over-all home owning households (suburbanites or not), end up far wealthier than their non-home owning peers. Surely that means something to you?
Quote:
You wouldn't even know where to start when inputting that into your spreadsheet.
Really? Maybe yours is deficient in that respect, but my model enables the assumptions about house price growth, wage growth, CPI, interest rates, and a range of other parameters, so be set for any given year - ie they are not static parameters with only a single value allowed. So it would be easy to assess the impact of periods of house price stagnation or falls or income falls etc if that's what someone desired to do.
Sure - anything *could* happen. But we know that historically, from the actual data, that over-all home owning households (suburbanites or not), end up far wealthier than their non-home owning peers. Surely that means something to you?
Really? Maybe yours is deficient in that respect, but my model enables the assumptions about house price growth, wage growth, CPI, interest rates, and a range of other parameters, so be set for any given year - ie they are not static parameters with only a single value allowed. So it would be easy to assess the impact of periods of house price stagnation or falls or income falls etc if that's what someone desired to do.
OK, how does income growth work in your model? If you have built these variables into a "model", they must be weighted accordingly. For example, how much does a 1% increase in income affect house prices?
OK, how does income growth work in your model? If you have built these variables into a "model", they must be weighted accordingly. For example, how much does a 1% increase in income affect house prices?
A rent-vs-buy model does not HAVE to link income growth assumptions to house price growth assumptions - there is no such thing as a prescriptive set of rules about such things. However, it might make sense to do so, if you demonstrate of course via historical data analysis what the expected / anticipated relationship between income growth and house prices might be? But remember the model may simply be modelling an individual set of circumstances - for example where the individual would expect to see wage growth that was much higher than what average / aggregate wage growth might be - in that case it would not make sense to link the two assumptions.
Anyway regardless, sure, it would be easy to link the house price growth assumption to income growth assumption via some simple heuristic, if that's what we wanted to do.
For Aussie property bears, "denial", is not just a long river in North Africa.....
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Here's a story about housing and snake oil. The Kouk Link Back in late 2009, there were two Sydney based couples looking to buy their first first home.
The median house price in Sydney in the March quarter 2010 (ABS data) was $583,000 and the standard variable mortgage interest rate was around 6.7 per cent. Each household was on a combined income of $95,000 a year, which was about average for those living in Sydney. Couple 1 took the plunge, they had $116,600 in savings, and borrowed the $466,400 or 80% of the value of the house and moved into their median house. The repayments were solid, at $2,881 a month over a 30 year mortgage.
Couple 2 also had $116,600 in savings in 2010 but saw a series of high profile stories from economist Steve Keen, who was warning about a 30 or 40% fall in house prices as the Australian property bubble burst. He reckoned unemployment would exceed 20% and something akin to a Great Depression was almost unavoidable. Couple 2 continued to rent and put their savings in term deposits, fearful of their job prospects and waiting hopefully for the collapse in house prices before buying.
Fast forward to the end of 2016.
The value of Couple 1’s house is now $882,000, which is a neat $299,000 tax free gain from the purchase price. Following average wages growth and a bit more seniority at work, Couple 1’s household income has risen to $125,000 a year. They have been able to negotiate a mortgage rate of 4.5% and based on constant repayments of $2,881 a month, their mortgage has dropped to around $375,000. This means that the $116,600 deposit in 2010 has turned into just over $500,000 of tax free wealth in their house which they have enjoyed living in.
Couple 2 are still renting. They have moved twice in the period to different properties at great cost and inconvenience. With rents being a little cheaper than mortgage repayments, they held off buying too many coffees and smashed avocado breakfasts and put $400 a month, every month for six years, into their savings account. Their income is now $125,000 a year, the same as Couple 1. They would liked to have saved more than the $400 a month, but rents have increased by 28 per cent since 2010 which has taken up most of the increase in income. Their strategy of having money in term deposits has seen an average interest return of about $5,000 a year, one third of which has to be paid in tax. The sum of their savings is now around $170,000. They are still looking to buy.
In six short years, Couple 1 have $330,000 more wealth than Couple 2.
And Steve Keen?
Well, he’s now a Professor of Economics in London and seemingly the go-to person when journalists want a headline grabbing, high click story to write. Keen still thinks house prices are going to fall by a large amount it’s just the timing that is uncertain.
Ironically, in that time house prices have gone up more in London. Did he buy a house in London?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
If I retain my 20% deposit and keep adding to it over 12 months I will be invariably wealthier than a counterpart who purchased. Even If values rise 15% if they were to cash out of the home 12 months later the would blow most of the deposit in stamps and entry exit costs. This gets worse the lower the deposit and if it's IO.
It's pure logic, home owners are only wealthier once they have had 5-7yrs to make ground on the loan and some capital gains.
Besides if this data includes all renters it would be taken into account government housing tenants as well so it is an extremely distorted view of what's reality but that's what I expect from you deceit and lies
Sydneyite has already addressed most of your errors.
I'll just add that no matter what convoluted scenarios you dream up, the actual data shows that the typical homeowner is vastly more wealthy than the typical renter, across all age bands.
The overwhelming evidence is that home ownership does that and renting doesn't.
For example, in its most recent survey of Household Income and Wealth, the Bureau of Statistics says this:
"Average household wealth for those households who were renting was about 21 per cent of the average wealth of owner occupied households with a mortgage, and 13 per cent of owner occupiers who owned their home outright."
In other words, renters have about one-eighth to one-fifth of the wealth of home owners.
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
Sydneyite has already addressed most of your errors.
"Average household wealth for those households who were renting was about 21 per cent of the average wealth of owner occupied households with a mortgage, and 13 per cent of owner occupiers who owned their home outright."
In other words, renters have about one-eighth to one-fifth of the wealth of home owners.[/i][/b]
No he didn't he just ignored everything and deciddd to churn out some crazed rant based on his ideology, like you really.................
I will take a little snippet from your quote "ON AVERAGE".
That in itself tells you there are points where the renters are in front and I'm stating that's in the early stages of a purchase and that's a best case scenario where it's p&i and add decent deposit over 10%.
Then there's times where there's downturns, man way in front but good on you for picking boom time data sets.
The quote also states that these figures are based on those who "own their homes OUTRIGHT" which suggest most people with a mortgage in its early stages would make up the lower percentile of the AVERAGE that I'm referring to.
The abs stats you quoted also includes people who are solely dependent on government income who rent Government housing which would also massively skew initial data on first years of ownership.
But as always you use very deceptive data, lies and sock saturation to shout down what is the truth.
Home owners net worth will always be greater on average but that's nothing to do with the PPOR as we've discussed prior it's value is meaningless if you are living in it and not leveraging off it. The key to it is long term ownership where the cost of buying and holding gets over run by wage inflation, this should begin around 5yrs in. There's the ability to invest using the home as collateral which will also increase a home owners wealth but the majority don't do this only a select tax rorting minority's do.
If Sydneyite actually believes someone who has purchased an IP on a 90-100% IO loan will be in a better position as a renter who deligently saves over the short term without massive capital gains then there's is nothing I can do for stupidity.
The quote also states that these figures are based on those who "own their homes OUTRIGHT"
Outright and mortgaged are both are covered...
"Average household wealth for those households who were renting was about 21 per cent of the average wealth of owner occupied households with a mortgage, and 13 per cent of owner occupiers who owned their home outright."
The key takeaway from all this is that home ownership generates real wealth, with the typical Australian homeowner household building a substantially larger net worth than the typical renting household, across all age brackets shown on the chart. I'm going to assume you're in the renting demographic - which would help to explain all the angst.
"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
I'm going to assume you're in the renting demographic - which would help to explain all the angst.
You don't have to assume anything as I have told you on numerous occasions that I'm a renter, pay attention.
And for those in my age group who managed to who purchased around 5yrs ago on a p&i mortgage it would be extremely likely they would be now wealthier than I am but only if they didn't draw equity for consumables or to invest with IO loans.
But I would have been in a better position initially.
NB: Your first quote did not reference mortgagees in the data set
And for those in my age group who managed to who purchased around 5yrs ago on a p&i mortgage it would be extremely likely they would be now wealthier than I am but only if they didn't draw equity for consumables or to invest with IO loans.
Ahem, if they used that equity to invest in more property they are much much better off.
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