The ABS data as presented by the Economist doesn't show "housing affordability" and it certainly doesn't show housing affordability for FHBs who borrow most of the money for a house. Housing affordability for such people is determined by the repayments as a proportion of their disposable income.
I posted the chart (from the RBA) for that in my post. That chart is much more relevant for FHB affordability than the price/income chart.
The Economist price/income chart shows the latest price/income ratio to be lower even than it was in Q1 of 2003. The price/income ratio is now lower than it was more than 10 years ago. That is not a bubble by any use of the term.
So, yes, I deny that the chart shows a bubble. I do not deny ABS statistics (as Veritas does repeatedly). ABS statistics confirm that there is no bubble as follows:
ABS House price index - 8 cap cities weighted average
December 2003 - 101.5 December 2012 - 145.3
House prices rose 43% from Dec 2003 to Dec 2012
Average weekly full time earnings (RBA table G6 column F)
December 2003 - $929.80 December 2012 - $1396.00
Average earnings rose 50% from Dec 2003 to Dec 2012
So let me get this clear you view a household paying 500pw over a 30 mortgage as more affordable than a household paying 550pw on a 15 year mortgage because they are paying less per week?
you have to look at what is paid over the course of the loan not solely weekly repayment s. Why not just have 50 year mortgages because that will be more affordable for you
So let me get this clear you view a household paying 500pw over a 30 mortgage as more affordable than a household paying 550pw on a 15 year mortgage because they are paying less per week?
you have to look at what is paid over the course of the loan not solely weekly repayment s. Why not just have 50 year mortgages because that will be more affordable for you
The household can largely choose to pay what it wants.
No they are not. They are not counted at all. The current methodology counts dwellings, not people. No it doesn't. The current data doesn't describe people as anything. It describes the status of dwellings.
Yes but by not counting them is misleading in itself. If the constitution of these people changed alot it would not be captured in home owner rate but could have a big impact on it.
The household can largely choose to pay what it wants.
Yeah so what?
He is right.
This is the old servicing costs trump principal two step so beloved of VIs like the HIA and fools like Skamy.
If you stretch any debt over a long enough time frame you can make it look affordable to the debtor.
The fact that the typical typical length of a mortgage has elongated has to be counted into the "changes over time" equation when it comes to affordability.
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
And all of the calculations on 30 year loans go straight out the window when interest rates rise. As we see happening in the US of late. The 30 year discussion is basically meaningless unless you are an RE agent trying to flog a home to someone.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
It isn't an "average" and it isn't based on investors.
It's based on the repayments on an 80% loan for a median value house at each point in time expressed as a percentage of the household disposable income.
If anything, it probably overstates the repayments for FHBs. We know from ABS data (I'll show it if you ask) that FHBs on average purchase below median price houses and they have above average household incomes. The average repayment for FHBs is thus likely to be less than shown in the chart.
Thanks for getting the thread back on track after it was derailed.
But wouldn't investors skew it down? As their renters are playing the mortgage therefore how much they repay of their own income is very low compared to an owner occupier.
So let me get this clear you view a household paying 500pw over a 30 mortgage as more affordable than a household paying 550pw on a 15 year mortgage because they are paying less per week?
you have to look at what is paid over the course of the loan not solely weekly repayment s. Why not just have 50 year mortgages because that will be more affordable for you
Sadly that is exactly how short sighted some renters are. They see that their current rent is less than the repayments on a similar home and decide to rent for life. They end up paying much more on their accommodation costs.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
This is the old servicing costs trump principal two step so beloved of VIs like the HIA and fools like Skamy.
If you stretch any debt over a long enough time frame you can make it look affordable to the debtor.
The fact that the typical typical length of a mortgage has elongated has to be counted into the "changes over time" equation when it comes to affordability.
Yeah kinda, but a lot of these arguments focus on the brand new loan, and don't consider what happens down the track. Once you're a few years into the loan and inflation has done some work, the real cost of the loan has dropped (and continues to drop).
As such, I think cashflow is important in the early years, to give you time to get on top of things (including growing your career and letting inflation do some work), and then you can smash the principle down hard once you're down the road a bit.
Anyone who pays the minimum payment for the entire life of the loan for a PPOR is, frankly, an idiot.
Anyone who pays the minimum payment for the entire life of the loan for a PPOR is, frankly, an idiot.
At the very least, people should stick to their higher repayments (or extra in offset) when interest rates go down. That in itself helps minimise interest which further speeds up paying off the loan.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
Yeah kinda, but a lot of these arguments focus on the brand new loan, and don't consider what happens down the track. Once you're a few years into the loan and inflation has done some work, the real cost of the loan has dropped (and continues to drop).
As such, I think cashflow is important in the early years, to give you time to get on top of things (including growing your career and letting inflation do some work), and then you can smash the principle down hard once you're down the road a bit.
Anyone who pays the minimum payment for the entire life of the loan for a PPOR is, frankly, an idiot.
I was lucky enough to not have to worry about paying maximum repayments. Pre boom mortgages were affordable.
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