If they start chatting about "The Australian Housing Bubble" I don't think I'll have much interest.
Tho Yeah sure, if they call it something like "Sydney and Melbourne's Issues For Their First Home Buyers" I just might be interested in hearing the highlights.
What about Perth???
You see if it takes say 5 years to pay off $50,000 and the house drops say $50,000, well that is 5 years of pain for no gain...
Plus say $100,000 in interest bills...
Insurance, water rates, maintenance...
So what on paper looks ok, house drops say $50,000 over 5 years and you payed off $50,000, thats ok.
But then it is plus say $150,000 with all costs or $30,000 per year or say $600 p.w.
Plus the %50,000, so an extra $10,000 per year or $200 per week.
That rounds out at say $800 per week in after tax dollars, or to add the tax, $1,300 per week.
maintenance and the little lady making it "hers" can be a lot more.
If it is over say 10 years, you are looking at a cost of over $700,000, in pre tax dollars.
Apparently Jonathon Tepper has given them a shocking account where he reveals how over exposed Australian banks are to residential mortgages. Its going to be a real nail biter alright.
Sydbourne people don't like authorities telling them what to do. If you inform them they're way over leveraged and over priced, they walk out the door and buy another block just to show you who's boss. Get enough of these people together and insanity ensues.
You see if it takes say 5 years to pay off $50,000 and the house drops say $50,000, well that is 5 years of pain for no gain...
Plus say $100,000 in interest bills...
Insurance, water rates, maintenance...
So what on paper looks ok, house drops say $50,000 over 5 years and you payed off $50,000, thats ok.
But then it is plus say $150,000 with all costs or $30,000 per year or say $600 p.w.
Plus the %50,000, so an extra $10,000 per year or $200 per week.
That rounds out at say $800 per week in after tax dollars, or to add the tax, $1,300 per week.
maintenance and the little lady making it "hers" can be a lot more.
If it is over say 10 years, you are looking at a cost of over $700,000, in pre tax dollars.
But houses always go up, right???
I'm with you right up until your 20% interest rate on 50k which seems to just be plucked randomly with no relevance.
Don't exaggerate and lose credibility.
Let me break it down.
If it takes 5 years to pay off $50k then you'd have a $600k mortgage (or thereabouts depending on interest rates) if you're making minimum repayments over a 30 year loan.
In 5 years you'd pay $135k in interest on your total loan.
So you could argue if your house dropped $50k, then overall you're actually down $185k.
HOWEVER
You still need a place to live.
So lets do two scenarios, one with a 600k home loan and one for someone who bought the house 5 years later.
Scenario A: A man buys a $750k house with a 20% deposit so he's left with a loan of $600k and lost $50k in house value over 5 years so theoretically in 5 years he'd paid $135k in total interest on his loan and lost $50k in value bringing his total loss to $185k.
Scenario B: A man rents a $750k house and buys that same house 5 years later for $700k.
Now this next bit is going to be a bit of an argument over yield but lets say you are renting a similar place who is getting a 4% rental yield.
So scenario B man spends $30k a year on rent, therefore $150k over 5 years. As a renter he still has to pay a bunch of bills, plus bond, exit cleaning fees etc and his 'little lady' is still going to make the rented house 'hers', so overall I think those 'maintenance' and bills etc are negligible and more or less the same.
Lets say Scenario B man still had his $150k deposit and it was in the bank the whole time at a 2% interest rate, so he turned that into $165k in the meantime.
So we'll subtract his profit in savings from his rental loss, overall he's paid $135k over 5 years and the scenario A man spent $185k.
The difference? Scenario B man is $50k better off than the Scenario A man who lost $50k in house value.
Therefore Scenario A man loses 50k over 5 years in total when compared to his alternative option of renting, not your BS 150k or 700k or whatever tangent you were on.
Now if that house value stagnated for 5 years, scenario A man was in the same place as the renter, but if the price of the house goes up just slightly then any increase is all money he profits more than a renter.
I'm not going to get into probability since you've already shown poor math skills, but long story short is it's a low risk gamble to buy a house assuming you did some basic research.
If scenario A owned his house outright and in fact we want to apply this scenario to his investment property versus Scenario B's renting, then we'll find Scenario A will be ahead even after taking a $50k loss on housing value over 5 years.
If Scenario B man had his $150k in a different investment avenue making say 10% return per year, then he'd be miles ahead too.
So there's a time and a place when renting is favorable - especially when you put your money in other investment avenues. I'd advise anyone to rent in Perth right now, but I wouldn't advise someone to rent a house in Adelaide for example.
You've just got to look at your current location, the economic situation at the time and make a judgement call from that. There's no guarantee with either option.
I'm with you right up until your 20% interest rate on 50k which seems to just be plucked randomly with no relevance.
...
You've just got to look at your current location, the economic situation at the time and make a judgement call from that. There's no guarantee with either option.
You have the patience of a Saint.
A Professional Demographer to an amateur demographer:"negative natural increase will never outweigh the positive net migration"
"It was just 12 months ago that Australia was the hottest thing at Chinese property exhibitions," said Scott Kirchner, a Shanghai-based director of Beller Group, a real estate agency. Now Australian developers are not up here pushing projects and Chinese agents have no appetite for Australian property.....
"Chinese capital controls have contributed to the constrained environment and made inexpensive countries like Thailand look more appealing," Ms Lu said."
WHAT WOULD EDDIE DO? MAAAATE! Share a cot with Milton?
12 months on from last years show the median for both cities has increased at least 100k.
In 12 months!!!
From 4 Corners:
Betting on the House By Michael Brissenden,
Updated August 21, 2017 10:40:00
Betting on the house: Australia's real estate obsession driving us to the brink.
"I think it's a powder keg." Investment consultant
The statistics are startling. Australians are carrying more personal debt than ever before. For every one dollar earned, on average, Australians have nearly two dollars of debt.
We hold the dubious position of having the second highest level of household debt in the world. Much of this stems from our obsession with buying real estate. "Housing has never been rational. In Australia, it's probably more akin to a religion or a cult so it's all about faith. You're either a believer in property or you're not." Former banker
On Monday, Four Corners investigates the forces driving our debt fuelled housing boom and the risks it poses for the nation.
"I've been studying the market here for a good number of years and I have never seen this perfect storm of issues coming together." Financial analyst
The program draws together key experts to map the danger zones in the housing market and will reveal the Australian suburbs currently experiencing the highest levels of mortgage stress.
"It's the nightmare that you live with all the time. You wake up in the morning and you think, 'How much longer will we be living here?' Constantly." Mortgage holder Experts are warning that a wave of home owners and property investors will be unable to cope if there's an increase in interest rates or a change in their personal circumstances.
"You're effectively toast if you lose your job or the main breadwinner does. That's the point of fragility that we're at now." Investment consultant
Regulators have been tightening the screws on lending requirements but there are concerns it's too little too late. "All bubbles really depend on loose credit, that's one of the things that's really fuelled the Australian housing market. Anyone with a pulse could essentially get a mortgage." Economist and investment fund adviser The program investigates the lending practices that have driven the boom in residential lending, and asks, 10 years on from the global financial crisis, if the banks are prepared for a potential crash landing.
"If there's a shock to the economy, that potentially leads to a rise in sensitivity to the banking sector. The banks could in fact experience higher losses because households are more indebted." Ratings agency analyst
Betting on the house, reported by Michael Brissenden and presented by Sarah Ferguson, goes to air on Monday 21st August at 8.30pm. It is replayed on Tuesday 22nd August at 10.00am and Wednesday 23rd at 11pm. It can also be seen on ABC NEWS channel on Saturday at 8.10pm AEST, ABC iview and at abc.net.au/4corners. Tags: economic-trends, housing, australia http://www.abc.net.au/4corners/stories/2017/08/17/4719901.htm
WHAT WOULD EDDIE DO? MAAAATE! Share a cot with Milton?
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