I think a lot of young people are lazy and expect everything served on a silver platter.
My parents gave me very little towards my property so I did it all myself, including saving up a deposit and then sleeping in what was basically a construction site for 6 months just to get a head. Before that i spent about 5 years expecting house prices to crash...
Sometimes you just have to suck it up and take control of your situation.
3-4 years is an investment, but not a huge or unreasonable one.
I didn't say it was unreasonable. But it's not like you can go prancing about changing careers like a kid in a candy store like you suggested.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
The point is that young people earn a much better real income at a younger age, which means investing is easier and they have much longer for their investments to bear fruit.
So this broad generalisation of yours makes you supportive of government policy and the tax system being in favour older Australians at the expense of future generations?
So this broad generalisation of yours makes you supportive of government policy and the tax system being in favour older Australians at the expense of future generations?
It's always been hard to get into your first home, but the reasons why it's hard have changed. In the 1970s and 1980s required LVRs were high and interest rates were astronomical compared to now. In 1989, average variable home loan rate was 17-18%. Since then, median house prices have tripled and average disposable income has not, but average mortgage repayments as a percentage of average household disposable income was just slightly lower in 2008 than it was at the 1990 peak. Since then they have declined a tad.
In my lifetime, 1998-2001 was probably the easiest time to get into a home, simply because rents were so high compared to value and interest rates were pretty low and credit was easy, meaning if you had a 10% deposit saved then it was possible in some cases to buy the place you rented and have the monthly loan repayments be just slightly less than the monthly rent, at least in Brisbane. (I did it in 1998.)
By comparison, today, in the same suburb where I bought my first home (Brisbane inner west), monthly loan repayments on a 30-year loan are approx. 6 weeks' rent.
In 1989 in the same suburb, however, it would have been more like 10-12 weeks' rent.
So affordability now is worse than was 10 years ago, but still good by historical standards.
And it is likely that affordability will improve over the next few months as interest rates drop and house prices don't rise much, but likely it will get worse in 2013 and 2014 as interest rates and house prices rise faster than rents again.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
It's always been hard to get into your first home, but the reasons why it's hard have changed. In the 1970s and 1980s required LVRs were high and interest rates were astronomical compared to now. In 1989, average variable home loan rate was 17-18%. Since then, median house prices have tripled and average disposable income has not, but average mortgage repayments as a percentage of average household disposable income was just slightly lower in 2008 than it was at the 1990 peak. Since then they have declined a tad.
Prior to the globalisation of our banking sector during the Keating years, people would apply for home loans, but be refused. Not because they didn't have a deposit, not because they couldn't afford the repayments, but because the reserve ratios were so high banks had to ration credit. They did this by lending to their best customers first, or to members of familes who were wealthy enough to demand attention.
It was basically a banking system that advantaged the wealthy and disadvantaged the poor. The less wealthy borrowed from building societies, who were also cash strapped. Loans would be approved, and you would then have to wait until the building society had enough money to fund the loan.
Finance companies lent for housing, but at exhorbitant rates. When the economists quote bank lending rates over the decades prior to 1985, they elect to not show those alternate sources of lending that so many people had to use. Building society loan rates were about 1% or more higher than banks, and finance companise were probably 2% to 4% higher - but many gratefully took that finance anyway. The economists who produce these charts are wrong in their analysis, not because they mean to be, but because they don't know.
Most economists regard the pre-Keating years as a good time for buying houses, but in reality they were largely reserved for the more wealthy or the well connected. This did keep house prices down, but it also kept them as an elitist asset.
The working class and the poor bought through state owned housing commissions. Those houses were solid but unattractive. Brisbane people can drive through Inala and sections of Acacia Ridge to view good examples of those homes. It was the same in other states, and it cost the state a small fortune to privide mass housing for the battlers and the needy.
We can either have easy to obtain credit for all, or elitist credit for the wealthy, but we can't have both. The minute you strictly ration credit in any way, lenders start to get choosy as to who they lend to. They are running a business, and they will lend to families and connections who bring them profitable business, before they will lend to some young couple who mean nothing to them.
If it was your bank and credit is restricted, would you lend to someone whos fathers company provided substantial profits for your bank, or would you choose a borrower whos family meant nothing to the bank?
Elementary isn't it.
Keatings reforms enabled everyday Australian to borrow to buy what they could afford, rather than restrict them to a price range applicable to their standing in the community and limit them to the value placed upon them by their bank. That brought unintended consequences, but it was a necessary step in the evolution of finance and housing. It's simply time to take the next steps, which will no doubt also have unintended consequences for generation that follow Gen X and Y, who will also no doubt blame Gen X and Y for the issues that they face as a result.
In the Nineties we had a very bad recession that hurt a lot of people. Unemployment was twice as bad as it is today. In the second half of the nineties we came out of that recession, and interest rates plummeted, people started to get used to easy credit at low rates, and people who had it tough in the seventies and eighties upgraded their homes into what they saw as luxury housing they could not previously afford - many bought second homes and holiday homes that they never thought they would be able to own.
Judge those events as you see fit.
Any expressed market opinion is my own and is not to be taken as financial advice
The point is that young people earn a much better real income at a younger age, which means investing is easier and they have much longer for their investments to bear fruit.
Sorry stinkbug, it's just not true. Real wages are in decline, and traditionally income increases over the course of a career. You start on a low base, and before you retire you should be on the highest salary of your lifetime.
I'm an early Xer, so when I joined the workforce I was working with the Lucky Generation, the Boomers, and very few X. When I joined the workforce, the managers (Luckys) were earning somewhere between 20-50% more than their Boomer employees. In some extreme cases, it was 100% more.
As I progressed through my career, the income gap between Luckys and Boomers widened, but not by much. By the time the last of the Luckys retired, the gap was more like 40-70% and in extreme cases 200%. Once the Luckys retired, that was the end of the Age Of Prudence and Responsibility. From that point on, the Boomers went on a borrowing binge and began giving themselves pay rises like there was no tomorrow (literally).
Their largess did NOT extend to the Xers in their employ however. No, X salaries stayed flat (going backwards in real terms) as Boomers sourced cheap labour around the planet. By 2006, the Boomer managers were paying themselves MINIMUM 100% more than their X staff, the common range being 100-300% more, and the extreme cases were at 3300%. This situation persists to this day. (In fact, they are still moaning about how much they pay their staff, so expect more outsourcing and downsizing in a company near you.)
So here is some advice to the younger tail end of GenX, leave your job, because you are being screwed. If you can find a way to earn income from home, pursue it. If that is infeasible, find an investment strategy that hedges against the coming inflation. Sell your property if you can realize any capital gain, invest the gains in fixed income or precious metals. Invest in your education, spend more time with your children. Learn to cook and enjoy good food with good company.
I spent the last 10 years trying to figure out away to avoid what's coming. Perhaps it's a limitation of my intelligence, buy I don't see the path. So I am resigned to what comes. It may take 20 years, but it too will pass.
Keatings reforms enabled everyday Australian to borrow to buy what they could afford, rather than restrict them to a price range applicable to their standing in the community and limit them to the value placed upon them by their bank. That brought unintended consequences, but it was a necessary step in the evolution of finance and housing.
Rubbish. They were implementing the Detroit model. When people have a mortgage, they are reluctant to go on strike. This reduces the bargaining power of organised labour, because prolonged strikes hurt the the workers more than the owners.
All of this was to reduce the power of organised labour so the owners of capital could force down salaries and wages, which they have done since the reforms began.
And what was the effect of reducing income in an economy driven by consumption? Why, the expansion of credit of course!
Look at the growth of credit cards, personal lending, vendor financing (GM,GE?) since your 'reforms' began. GenX were plunged into debt to restrict their mobility and push down their income, and now GenY are falling for the same stupidity.
There is a reason why banks only lent money to those with good credit: MORAL HAZARD.
The reforms you talk about removed moral hazard from lending, and pushed the risk onto future generations so the Boomer generation could party.
This is the agenda you serve Peter, whether you know it or not.
Keatings reforms enabled everyday Australian to borrow to buy what they could afford, rather than restrict them to a price range applicable to their standing in the community and limit them to the value placed upon them by their bank. That brought unintended consequences, but it was a necessary step in the evolution of finance and housing.
Rubbish. They were implementing the Detroit model. When people have a mortgage, they are reluctant to go on strike. This reduces the bargaining power of organised labour, because prolonged strikes hurt the the workers more than the owners.
All of this was to reduce the power of organised labour so the owners of capital could force down salaries and wages, which they have done since the reforms began.
And what was the effect of reducing income in an economy driven by consumption? Why, the expansion of credit of course!
Look at the growth of credit cards, personal lending, vendor financing (GM,GE?) since your 'reforms' began. GenX were plunged into debt to restrict their mobility and push down their income, and now GenY are falling for the same stupidity.
There is a reason why banks only lent money to those with good credit: MORAL HAZARD.
The reforms you talk about removed moral hazard from lending, and pushed the risk onto future generations so the Boomer generation could party.
This is the agenda you serve Peter, whether you know it or not.
I said that you could judge it any way that you choose, and I meant it.
Each generation is judged by the following generation, and on every occasion fault will be found, just as it will be in Gen X and Gen Y in years to come as their children reach adulthood. Neither you or I can change that.
People react to circumstances. It isn't true that someone born in 1960 will react differently to someone born in 1980 - any differences in behaviour is as a result of different conditions and experience, not because of DNA.
For example do you think that you are fundamentally different to a man born in 1780 - if you had the same upbringing and exactly the same education, what would you do different to that man born in 1780?
Any expressed market opinion is my own and is not to be taken as financial advice
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