Swedish property bubble vs Australian house prices; Sweden looking at option of forcing households to amortize their mortgages to prevent debt loads rising
Being Swedish I always love to compare Oz to Sweden. With property prices this is really interesting. Swedes earn about the same as Australians and they love their property so in some ways its comparable. The general consensus in Sweden amongst media and residents is that there is a bubble and it will correct soon. So lets compare to Australia.
The inner city of Stockholm has by far the highest prices. Like Sydney. Prices have been fuelled by super low interest rates of 2-3% and 50 year interest only loans as pretty much standard. In addition, they have their own version of negative gearing where you get a concession of the interest payments on your primary residence. (Investment properties are very rare because pretty much all residential buildings are similar to Aussie company title where you cannot sub-let) Sweden has also been warned by the EU and IMF to remove the tax concessions and force repayments on loans.
Comparing to Australia is very interesting. Whereas most of Australia has high very prices by international standards, only Stockholm does in Sweden in my opinion. As soon as you leave the inner city its dirt cheap.
Now compared to Australia its still cheaper. Top end Stockholm can be comparable to Bondi Beach in terms of popularity. For a top end unit of 110 sqm in Bondi beach you are looking at more than $1.5 - 2M. And interest rates in Sweden are half of what they are here so your monthly costs are probably 3 X times higher in Australia.
Now try finding a unit within 40 minutes of Melbourne CBD for $80K.
If Sweden is generally believed to be in a bubble due to their crazy prices than what do we have here where prices are MUCH higher but people do not earn more?
If Sweden is generally believed to be in a bubble due to their crazy prices than what do we have here where prices are MUCH higher but people do not earn more?
ask most people under 30 and i think you'll find a general consensus in australia that there is a bubble here too. this is purely anecdotal, but i'm 30 and not an unusual blue collar australian (except that i may have saved a deposit larger than most, over 200K) home ownership has always been an important goal of mine, but the longer i wait and the more i look around, the less sense it makes. i don't understand all the reasons and i don't completely comprehend how the economy works but i do know about a third of my mates have already bought, and they struggle to get by. the rest rent or still live at home. like me, most are saving. a decent lot of them aren't even doing that. almost no one i know thinks its a good idea to buy property at these prices. even the ones that have bought over the last few years massively regret it and are looking to sell now. unlike sweden, our high incomes are pretty much dependant on mining, and that looks like its drying up. after food, petrol and electricity, spending $300 p/w on a mortgage leaves most of us with little or nothing. my mates with mortgages say they feel like they're just working for the bank and the areas they live in don't give much distraction from that feeling. part of me still wants to own, and i follow the market and i read the forums but i mostly disagree with everything i read presented as reality. i think most people on this forum will tell you that this is just the way it is and people like me and my mates will have to buy or stay renting forever. its possible, but it seems to me much more likely that prices will come down. sure credit is cheap, and if you're keen on a 30 year mortgage, i guess anything is affordable. i personally have never worked at a job for longer than 3 years and i don't think theres just not enough actual money to houses as expensive as this.
ask most people under 30 and i think you'll find a general consensus in australia that there is a bubble here too. this is purely anecdotal, but i'm 30 and not an unusual blue collar australian (except that i may have saved a deposit larger than most, over 200K) home ownership has always been an important goal of mine, but the longer i wait and the more i look around, the less sense it makes. i don't understand all the reasons and i don't completely comprehend how the economy works but i do know about a third of my mates have already bought, and they struggle to get by. the rest rent or still live at home. like me, most are saving. a decent lot of them aren't even doing that. almost no one i know thinks its a good idea to buy property at these prices. even the ones that have bought over the last few years massively regret it and are looking to sell now. unlike sweden, our high incomes are pretty much dependant on mining, and that looks like its drying up. after food, petrol and electricity, spending $300 p/w on a mortgage leaves most of us with little or nothing. my mates with mortgages say they feel like they're just working for the bank and the areas they live in don't give much distraction from that feeling. part of me still wants to own, and i follow the market and i read the forums but i mostly disagree with everything i read presented as reality. i think most people on this forum will tell you that this is just the way it is and people like me and my mates will have to buy or stay renting forever. its possible, but it seems to me much more likely that prices will come down. sure credit is cheap, and if you're keen on a 30 year mortgage, i guess anything is affordable. i personally have never worked at a job for longer than 3 years and i don't think theres just not enough actual money to houses as expensive as this.
Yeah Im with you but Im in two minds. -I guess everyone in this forum is in one way or the other or they wouldn't be here.
I still think that long term you will always win if you own. But the question is if now is a good time to hop in. I have to say that I thought the same 10 years ago and if I bought then I would be laughing now, even if it crashed 40%.
What doesn't add up to me is the way people are struggling who entered in the past couple of years. It just doesn't make sense. When I bought my apartment I was on a $150K salary and I was struggling and my loan was only $460K. Not only because of interest but also all other costs that are super high with ownership. Gas, council fees, electricity, strata etc.
I stand by my prediction of a correction coming soon.
lets put it this way, without a correction, even emigration will seem like a feasible alternative. i could buy a house outright in quite afew other nice countries. it'd take time to learn how to adapt but hey, that still beats spending your whole life paying off a mortgage for the same brick box here.
lets put it this way, without a correction, even emigration will seem like a feasible alternative. i could buy a house outright in quite afew other nice countries. it'd take time to learn how to adapt but hey, that still beats spending your whole life paying off a mortgage for the same brick box here.
Ha yeah I seriously know what you mean.
Im very close to moving back myself. Out of my group of friends, Im the only one left int he country who wasn't born here. All my European and US friends have all moved home mostly due to not being able to afford to live in a decent place. And these are not poor people, we are talking $150-200K salaries for some of them. What you get here for your money compared to other countries is simply not good enough and for many the compromise is not worth it.
Im very close to moving back myself. Out of my group of friends, Im the only one left int he country who wasn't born here. All my European and US friends have all moved home mostly due to not being able to afford to live in a decent place. And these are not poor people, we are talking $150-200K salaries for some of them. What you get here for your money compared to other countries is simply not good enough and for many the compromise is not worth it.
From official data sets ie RBA and from the major property price comparison sites, Sweden and Australia are almost comparable price wise, but Stockholm (11.5) is more expensive than Sydney (8.94). Australian house prices, even Sydney's, are very reasonable based on any International comparisons,this is why we are seeing a lot of investment right now, our price/rents are really rather low by International standards. These are just the facts.
Maybe you are wishing too hard for a bubble here but there is no evidence whatsoever of this. In fact the evidence is the other direction, and this is what we are observing now in EVERY capital city in Australia.
You did well with your first property -you will do well again, I am sure, even if prices do seem to be moving a bit quickly just now, upturns usually last longer than downturns.
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.
It's all well and good to quote areas where you can find cheap properties out in the sticks. Unfortunately, unless you're thinking of retiring, there isn't much to draw anyone away from the cities in Australia.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
From official data sets ie RBA and from the major property price comparison sites, Sweden and Australia are almost comparable price wise, but Stockholm (11.5) is more expensive than Sydney (8.94). Australian house prices, even Sydney's, are very reasonable based on any International comparisons,this is why we are seeing a lot of investment right now, our price/rents are really rather low by International standards. These are just the facts.
Maybe you are wishing too hard for a bubble here but there is no evidence whatsoever of this. In fact the evidence is the other direction, and this is what we are observing now in EVERY capital city in Australia.
You did well with your first property -you will do well again, I am sure, even if prices do seem to be moving a bit quickly just now, upturns usually last longer than downturns.
The OP just said he was earning 150k - do you have any idea how many people earn that sort of money? It's a solid middle class professional wage - you'd need to move into upper management to get better - and yet in australia any house you could afford to buy in an urban area you would probably want to be wearing Kevlar when you walked out the front door - either that or go for the million dollar+ property, chain yourself to a 30 year mortgage and hope for the best.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
I still have difficulty understanding what's going through landlords minds when they price their houses out in the middle of nowhere as if they were close to the city.
These are random, I can't be bothered looking through them all.
Is it investors who live in the cities and think everywhere should cost the same?
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry
"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
From official data sets ie RBA and from the major property price comparison sites, Sweden and Australia are almost comparable price wise, but Stockholm (11.5) is more expensive than Sydney (8.94). Australian house prices, even Sydney's, are very reasonable based on any International comparisons,this is why we are seeing a lot of investment right now, our price/rents are really rather low by International standards. These are just the facts.
Maybe you are wishing too hard for a bubble here but there is no evidence whatsoever of this. In fact the evidence is the other direction, and this is what we are observing now in EVERY capital city in Australia.
You did well with your first property -you will do well again, I am sure, even if prices do seem to be moving a bit quickly just now, upturns usually last longer than downturns.
I have heard those figures before and I wonder what they were on when when they figured that out. First of all, Swedish house prices are not even in the same ballpark. There is absolutely no comparison whatsoever. Ask anyone who's lived there.
In the absolute most exclusive parts of Stockholm you are looking at about $10,000AUD per square meter for a super well renovated unit. In the top suburbs of Sydney (Bondi Beach etc) you are looking at about $15,000AUD per square meter, sometimes more. (And bear in mind this is the centre of Stockholm only, anywhere else including major cities you are looking at about $5,000 per square meter.)
Secondly, interest rates are about half, so in the end you are paying about 1/3 of the cost in Sweden for a comparable property. Swedish salaries are about the same as here. Higher taxes but lots of stuff is free so all in all its pretty even.
And Im certainly not hoping for a crash in Australia. That would be awful, I have my own business and I would be totally screwed if the Aussie economy went down the drain.
And Im not whining either. It is what it is and it doesn't concern me personally as I will move back to Sweden in a few years anyway. I was only making the point that if someone who earns what I earn cannot buy a place I want to live in then there is certainly a decent risk of a price correction. Because who the hell is going to afford to buy something thats even higher than now? You cant just have investors selling properties to each other like an economic game of musical chairs. There needs to be price pressure coming in from the bottom of the market in the form of FHB or the whole thing will eventually come falling down, especially when rents don't even come near to paying for the cost of holding the property.
You are comparing regional Australia with a 40 minute commute to the second biggest city in Sweden. If we are talking regional Sweden, you can buy a house for less than $50K where I grew up, and thats only 1.5 hours outside of the second biggest city. They give away land for $20Cents if you build your own house.
Soul Torpor
8 Sep 2013, 11:31 PM
The OP just said he was earning 150k - do you have any idea how many people earn that sort of money? It's a solid middle class professional wage - you'd need to move into upper management to get better - and yet in australia any house you could afford to buy in an urban area you would probably want to be wearing Kevlar when you walked out the front door - either that or go for the million dollar+ property, chain yourself to a 30 year mortgage and hope for the best.
Well thats the problem exactly. The way I see it, if I cant afford a decent place to live then not many others can either. Surely we cant expect the Chinese to buy the whole country?
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