Confidence in Australian Housing Market

Beebop said:

Anyone who can't see a shred of risk in the current market and why a FHB would be hesitant to buy in now with the turmoil around the world economies and local sky high prices is clearly just not looking at the facts and is concentrated on past success rather than looking to the future.

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completely agree with your above statement.

I do however put it too you that anyone who can't see a shred of opportunity in the current market is also clearly not looking at the facts and is concentrated on just headlines i.e. buy when the mags say BOOM and sell when the mags say CRASH - this is how most people invest and is (in my view) upside down logic.

In short just as you correctly state people should "see a shred of risk" so too you must agree conversly that there must be opportunity too.

If you dont then your simply like the rest of the bears and perma-bulls who are not investors at all just irrational parrots chanting the same tune over and over again.

This is INVESTING there are ups, downs, sideways, booms, crashes... you make and loose money at any stage of the cycle it just comes down to you.

beebop I admire your perseverance and dedication to the forum ... I only wish that you would use the time you have spent here to researching the property market .... I think you will be pleasantly suprised with what you can find if you keep an open mind and look hard enough ...

I think your issue is not you cannot find something that you can afford, but you think it is not worthwhile to take the risks associated with purchasing a property.

Well, life is a full of risks. Investing in property is no more or less risky than walking outside your house (and hoping you don't get hit by a bus). To pre-empt you, no I don't have the empirical evidence to support this proposition, but I'm sure you can understand the idea behind it.

I think it is impossible to change someone's mindset unless the person himself/herself wants to. So I wish you all the best with your life. I don't believe you need to be a property investor to enjoy life, but there are people out there (like many of us on the forum) who enjoy investing and are completely at ease with the risks because based on our research, belief and experience, they are worth taking.

On another note, if you want to share with us your desired kind of property (no of bedrooms, distance to transport/shopping, location, budget), I'm sure many of the SS'ers (including those that may have posted comments disagreeing with your position) would be happy to extend their hands to help you find something suitable. That is .... only if you are prepared to take the risk ......

Beebop said:

Negative gearing gives investors huge tax breaks so they can continue to pay ridiculous prices.

A house provides a fine return at 5% CGs per year combined with a rent increase offset of 5% per year. People are just being greedy and taking uneccesary risks for short term gains, which always leads to trouble. Negative gearing encourages this behaviour.

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Hmm there seems to be a significant philosophical confusion here. Negative gearing doesn't really inflate property prices to the point they're beyond 'fundamentals'. Negative gearing is a fundamental, just as capital gains tax, stamp duty, GST, income tax all are fundamentals of life.

To the extent you want to abolish negative gearing, why don't we reduce GST too? Why not reduce income tax rates to 5%? Oh and abolish CGT and stamp duty while we're at it? Let's see in a truly liberal and free economy whether, after abolishing all these things, asset prices revert back to their true value by rising or falling... I reckon if we reduced income taxes from 45% to 5% we'll see property prices rise another 200% in 2 weeks...

Beebop said:

So show me the data where it says houses are now cheaper ?

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That is not what you said. Read your post again.

Beebop said:

You've got a tiny little economy with a lot of money floating around and the favourite is property because it is all so easy to extort young people who need a place to call home.

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The last lot of D&G visitors were constantly rabbiting on about how they were gleefully renting their places for half the cost they would have if they were actually buying them. They constantly gloated about how we landlords were suckers whilst they lived the high life, on low rents.

You lot just cannot have it both ways. Are renters young people we love to extort, or are they happily paying half the cost they would if they were buying?

I also think the days of all renters being poor young people is a bit of a generalisation. Many of our tenants over the past few years have way more assets than we do. They rent for reasons other than "cannot afford to buy".

wylie said:

The last lot of D&G visitors were constantly rabbiting on about how they were gleefully renting their places for half the cost they would have if they were actually buying them. They constantly gloated about how we landlords were suckers whilst they lived the high life, on low rents.

You lot just cannot have it both ways. Are renters young people we love to extort, or are they happily paying half the cost they would if they were buying?

I also think the days of all renters being poor young people is a bit of a generalisation. Many of our tenants over the past few years have way more assets than we do. They rent for reasons other than "cannot afford to buy".

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Hatred of the younger generations does not make a fact. Anyone who has rented for a period of time knows that owning your own place is superior for many reasons.

I suspect the people you speak of are high income earners who have access to other kinds of investments which they can see a greater return and it is therefore more cost efficient for them to do this and rent a place in hawthorn than to buy one. Obviously, you'll extrapolate this to struggling people renting cheap properties because that is all they can afford. I suspect it is because those are easy targets.

You just need to accept that owning housing today is expensive. Your 300k for an x-commission housing 2 bedroom unit on an IO loan is a classic example of this and of rampant speculation.

Beebop said:

Hatred of the younger generations does not make a fact. What the???? Where did you drag up "hatred of the younger generations" from. You really are annoying. I have "younger generation" children. I was a "younger generation" myself once. STOP TWISTING MY WORDS!!!!!Anyone who has rented for a period of time knows that owning your own place is superior for many reasons.

I suspect the people you speak of are high income earners who have access to other kinds of investments which they can see a greater return and it is therefore more cost efficient for them to do this and rent a place in hawthorn than to buy one. Obviously, you'll extrapolate this to struggling people renting cheap properties because that is all they can afford. I suspect it is because those are easy targets. No doubt .

You just need to accept that owning housing today is expensive. Your 300k for an x-commission housing 2 bedroom unit on an IO loan is a classic example of this and of rampant speculation.

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You really need to get out in to the fresh air some more.

Beebop said:

So what ? Most of that will be due to capital gains.

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The figures show that other people living in YOUR area can afford the repayments on their mortgages. That is regardless of whether they've had capital gains since purchasing. Why would having capital gains make it any more or less affordable for them, their repayments will still be the same regardless of CGs?

If you are arguing that the capital gains in the last three years has made it less affordable for you, while people who bought three years ago could afford it then, perhaps you should say that. But it still doesn't mean the ACT is Unaffordable, because people are still buying houses at this level. There are more on the market than ever before, yet people are still buying close to the asking price. I'm going to assume therefore that they CAN afford it, unless you can show me news that says foreclosures are up alarmingly in the ACT, or even anywhere !?

So how do I block the posts where people are replying to Beebop too?...

Cheers,
Michael

.toe said:

The figures show that other people living in YOUR area can afford the repayments on their mortgages. That is regardless of whether they've had capital gains since purchasing. Why would having capital gains make it any more or less affordable for them, their repayments will still be the same regardless of CGs?

If you are arguing that the capital gains in the last three years has made it less affordable for you, while people who bought three years ago could afford it then, perhaps you should say that. But it still doesn't mean the ACT is Unaffordable, because people are still buying houses at this level. There are more on the market than ever before, yet people are still buying close to the asking price. I'm going to assume therefore that they CAN afford it, unless you can show me news that says foreclosures are up alarmingly in the ACT, or even anywhere !?

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It doesn't matter because they're not buying their property now, der.

Beebop said:

It doesn't matter because they're not buying their property now, der.

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"der"?

What are you a teenager? No wonder you can't afford it.

If you'd read my post beyong the first sentence you'd realise that I did address your arguement that those people had bought before the capital gains. And the fact is that people are paying near the asking price RIGHT NOW (icluding recent CGs), and they are not missing payments or being foreclosed on.

So go ahead and address my arguement properly, and like an adult!

.toe said:

"der"?

What are you a teenager? No wonder you can't afford it.

If you'd read my post beyong the first sentence you'd realise that I did address your arguement that those people had bought before the capital gains. And the fact is that people are paying near the asking price RIGHT NOW (icluding recent CGs), and they are not missing payments or being foreclosed on.

So go ahead and address my arguement properly, and like an adult!

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It is not useful because they all purchased at different times.I'd address an argument if you had one. All you've done is put random numbers on the screen. I

wylie said:

You really need to get out in to the fresh air some more.

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A person would need to be seriously deluded to actually believe people would prefer renting to owning to save a couple of hundred dollars a week. Have you tried renting these days ?

The only people for whom this is a long-medium term are people on very high incomes who have other investments which were/are getting a higher return.

For example, if you have all of your capital invested in a business which is making more than housing. Or you are very good at trading shares.

Beebop said:

It is not useful because they all purchased at different times.I'd address an argument if you had one. All you've done is put random numbers on the screen. I

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To you they're random numbers, to everyone else they show that people in the ACT can afford their repayments, including the people who bought in the last few months, who continue to pay "high prices", because they can afford it.

And this says that Australians can afford their repayments. Including the ones who paid record high prices.
Aust mortgage market seen stable in Q3

the impact of interest shocks on borrowers has been limited and lower than forecast," the agency said.

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So Where's The Problem?

.toe said:

To you they're random numbers, to everyone else they show that people in the ACT can afford their repayments.

And this says that Australians can afford their repayments. Aust mortgage market seen stable in Q3


So Where's The Problem?

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The average will include the baby boomers who paid $4 back in 1980, so it'll suggest affordability. However, people with small mortgages don't often default, so looking at them is pointless.

If the newer crop of slaves start defaulting and the even newer group can't afford the asking prices, then there is a fall.

beebop. let it go, it's over.

Not sure what all the whinging is about, I'm a gen y and have had no problem getting into the market. It's all about taking small steps, you can't jump to your ideal house straight on your grad salarly. Also if you can't afford it, team up with someone, buy it with your significant other, sibling, parents etc.

My story:
Melbournian, started my grad job in March 09 on an average grad wage. Travelled frequently while at uni so my savings weren't huge, about 6k worth of shares and 10k worth of cash. Was living with my parents at the time, and being good with my money/savings was able to put away 70% of my take home wage. My gf was still at uni in her final year, she was lucky enough to be on a scholarship was had a bit of savings.

Did lots of research, was flexible on suburbs as long as they had shown good growth previously. Didn't follow the trend or panicked when prices were skyrocketing. Managed to buy a 2 bedder in Prahran for 350k (by our valuation it was worth 380k, but the place wasn't in pristine condition and advertised poorly). Put some floorboards in, got it revalued early this year at 420k.

Used the equity and then saved some more to buy our first IP (my gf now also working fulltime), a 2 bed house also in Prahran. We also did months of research before we bought. We found this place that seemed to have slipped through the cracks, also advertised poorly and had been on the market for a while (only 1 photo up on Domain and no floorplan, vendor wanted to save costs). From original asking price of 720k in May, we bought it for 660k with 90 days settlement (could have been even cheaper but there was another buyer who stumbled across it at the same time we did). It'll be negatively gear initially (as most Melbourne properties in the inner east/south east are), but we've left a good buffer so servicing is not an issue.

Lots of people at work, some earning lots more money than me are so surprised that we've managed to buy two properties and they are still renting. The difference is that they've just sat back and dismissed property as too expensive now, whereas we've spent every moment of our time doing research/DD and have actually taken active steps to get into property.

Beebop said:

If the newer crop of slaves start defaulting and the even newer group can't afford the asking prices, then there is a fall.

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They haven't been defaulting Beebop, that's my point, I use facts.

Look if you want facts about the most recent buyers here is the best you're going to get. According to RPData quoted in this months YIP magazine, of the 84 ACT suburbs only 16 recorded negative quarterly growth (81% positive, most were very positive), while only 2 recorded negative yearly growth.

Given that prices rise as result of people paying more, then I can only assume that the people who bought within the last three months, and out to a year, can afford it. Afterall they paid more, and their banks checked their debt service ability as required.

As for whether future buyers can afford it. Well the only person who's future you can predict is your own. But your complaint is not that you can't afford it in the future, it's that you can't afford it now.

I try to avoid predicting the future, but I will make one prediction. My prediction is that if I keep saving, I will afford to pay more in the future. What about you?

Investing is not about predicting, it's about knowing what's going on now.

starter said:

Not sure what all the whinging is about, I'm a gen y and have had no problem getting into the market. It's all about taking small steps, you can't jump to your ideal house straight on your grad salarly. Also if you can't afford it, team up with someone, buy it with your significant other, sibling, parents etc.


Exactly. Baby steps and some flexibility, although you have managed to buy into an oustanding locality. Well done

My story:
Melbournian, started my grad job in March 09 on an average grad wage. Travelled frequently while at uni so my savings weren't huge, about 6k worth of shares and 10k worth of cash. Was living with my parents at the time, and being good with my money/savings was able to put away 70% of my take home wage. My gf was still at uni in her final year, she was lucky enough to be on a scholarship was had a bit of savings.

Did lots of research, was flexible on suburbs as long as they had shown good growth previously. Didn't follow the trend or panicked when prices were skyrocketing. Managed to buy a 2 bedder in Prahran for 350k (by our valuation it was worth 380k, but the place wasn't in pristine condition and advertised poorly). Put some floorboards in, got it revalued early this year at 420k.

Textbook stuff.....improve, re-val, suck out equity and go again.

Used the equity and then saved some more to buy our first IP (my gf now also working fulltime), a 2 bed house also in Prahran. We also did months of research before we bought. We found this place that seemed to have slipped through the cracks, also advertised poorly and had been on the market for a while (only 1 photo up on Domain and no floorplan, vendor wanted to save costs). From original asking price of 720k in May, we bought it for 660k with 90 days settlement (could have been even cheaper but there was another buyer who stumbled across it at the same time we did). It'll be negatively gear initially (as most Melbourne properties in the inner east/south east are), but we've left a good buffer so servicing is not an issue.

Those who research and do thorough DD reapeth the rewards

Lots of people at work, some earning lots more money than me are so surprised that we've managed to buy two properties and they are still renting. The difference is that they've just sat back and dismissed property as too expensive now, whereas we've spent every moment of our time doing research/DD and have actually taken active steps to get into property.

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Emphasis mine on the blue bold bits in the body of your post.

Starter,

welcome to the forum and thanks for sharing your perspective. Kudos administered for your achievements and your post that shows how it can be done, rather than why it can't.

There's always the glass half full versus glass half empty argument. Those who complain about what is, rather than seeking solutions and opportunities either have a broken glass or a thimble that won't hold a thing......like your higher paid co-workers.

Congratulations on your achievements to date.

Looking forward to more of your posts.

Player said:

Emphasis mine on the blue bold bits in the body of your post.

Starter,

welcome to the forum and thanks for sharing your perspective. Kudos administered for your achievements and your post that shows how it can be done, rather than why it can't.

There's always the glass half full versus glass half empty argument. Those who complain about what is, rather than seeking solutions and opportunities either have a broken glass or a thimble that won't hold a thing......like your higher paid co-workers.

Congratulations on your achievements to date.

Looking forward to more of your posts.

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Two words Dual. Income.