First Home Buyers Back in the Market

[warmed_cockles]

Can someone outline a scenario where interest rates rise and unemployment rises at the same time? To me that only means inflation is getting out of control - if economic growth was causing interest rate rises then unemployment wouldn't be a problem.

It was an exclusive or!

The point is that the FHOG is bringing forward demand at a time where macroeconomic conditions have never been more favourable. At the moment unemployment is still near generational lows, interest rates are heading to lowest they've been since the 60s, and house prices across Australia are at their greatest in terms of income.

I would have thought given the events of the US most investors would have looked dimly upon encouraging buyers into the market who are unprepared for such a commitment in normal market conditions. In my opinion the current moves by the Rudd govt make the housing market more unstable, not less.

 

[warmed_cockles]

If I could afford the repayments even if I lost my job then I would, but that is what I would do. I'm not suggesting YOU do that or anything else for that matter, what I could suggest is that if you are in need of financial advice to find yourself a good financial adviser and pay him for advice. Taking advice from anonymous posters on some forum is plain STUPID and free advice is worth just that.

Who could afford a house without a job? The dole is pretty paltry. The other consideration is that you may have to move to find a new job, which is easier to do whilst renting than mortgaged. Would you advise someone working in mining to lock in a mortgage?

 

[sparky23]

Who could afford a house without a job? The dole is pretty paltry. The other consideration is that you may have to move to find a new job, which is easier to do whilst renting than mortgaged. Would you advise someone working in mining to lock in a mortgage?

FYO There are people on this forum in unfortunate circumstances who have no job and are paying off their home. Anyone that can be frugal and not waste money could achieve this. My best friend in England had a husband who was retrenched and then got sick not many years into their mortgage but they battled on and the mortgage was paid off and not only did they pay it off but were able to sell up and buy a place by the seaside which has been paid off for some years and they are sitting on good equity (yes still - this was a while ago) If they had rented what would they have now - some dingy little hole in the Midlands not a beach lifestyle thats for sure.

 

[yorke]

I agree.

There are too many who foolishly think that recent (40 year) trends are the norm, and long term (200 year) trends are no longer important.

The amazing rise of Real Estate is a short term event... that does not mean you can't make money out of it... just that it's easy to forget these booms have very looooong periods where capital gains is zip... even less than zip.

It's a matter of what picture you are looking at... the micro one (12 month), the mini one (1-2 years) or the macro one (10-20 years), or the mega one (50-100 years)... yes I pulled these descriptors out of my own mind.

Bwahaha, 200 years trends ? How many of today's countries existed 200 years ago ?

If the cycle is of such a long period this time around that Real Estate is not cheap enough for me to participate again before I retire from it ... then too bad... .

Sorry to be the bearer of bad news Rastus but unless you are closely related to Methuselah you probably won't make it through one of your long term trends.

 

[warmed_cockles]

FYO There are people on this forum in unfortunate circumstances who have no job and are paying off their home. Anyone that can be frugal and not waste money could achieve this. My best friend in England had a husband who was retrenched and then got sick not many years into their mortgage but they battled on and the mortgage was paid off and not only did they pay it off but were able to sell up and buy a place by the seaside which has been paid off for some years and they are sitting on good equity (yes still - this was a while ago) If they had rented what would they have now - some dingy little hole in the Midlands not a beach lifestyle thats for sure.

How? Unless their mortgage payments are a pittance (meaning they live somewhere extremely cheap or bought years ago), how are they achieving this? In your previous examples the weekly IO repayments would take up 90% or more of the dole!

 

[yorke]

Who could afford a house without a job? The dole is pretty paltry.

Boohoo. Then go and get a job, any job.
Besides, even on the dole you need to pay to live somewhere. You can still buy places to live for well under 200k even in Sydney, the most expensive city in Australia. Of course it would be just a "dog box" and not suitable for the more precious renters but would be a start. Using the FHOG and locking in a 10 years rate below 7% the repayments would be less then $250/week which is manageable by a couple even on the dole. Plus we know from other sources that renting is cheaper then buying so if you are currently working then you'd have plenty of savings to put down towards your deposit further reducing the weekly repayment.

The other consideration is that you may have to move to find a new job, which is easier to do whilst renting than mortgaged.

There are other considerations, you may not lose your job or lose it and find another one straight away. There is the possibility that while you waiting for that "safe" job to come house prices continue to rise and put them out of your reach. Or that your "safe" job turns out to be with Enron, HIH or some other place that goes bust. The point is that if you are going to wait for the perfect conditions to buy then you probably never will.

 

[warmed_cockles]

That's some astonishing bullishness. I am frankly surprised that there is a belief that unemployed people should buy property, advocated by yourself and sparky. She I can understand, she is desperately trying to flog off her houses to stave off going under.

Who said Australia had no subprime? In this forum, everyone should buy property!

 

[BoatBoy]

She I can understand, she is desperately trying to flog off her houses to stave off going under.

Who said Australia had no subprime? In this forum, everyone should buy property!

Wow , thats a bit below the belt

Dave

 

[warmed_cockles]

Wow , thats a bit below the belt

Dave

You don't think sparky's urgings for people to get into property ASAP despite possibly fearing for their job have an ulterior motive?

 

[Nathan]

That's some astonishing bullishness. I am frankly surprised that there is a belief that unemployed people should buy property, advocated by yourself and sparky. She I can understand, she is desperately trying to flog off her houses to stave off going under.

Who said Australia had no subprime? In this forum, everyone should buy property!

im with BB,

Thats pretty harsh man....

 

[warmed_cockles]

im with BB,

Thats pretty harsh man....

It isn't harsh at all.

 

[BoatBoy]

You don't think sparky's urgings for people to get into property ASAP despite possibly fearing for their job have an ulterior motive?

I tend to disagree with what she says in this instance and at this time, but you could have said the same thing in a more diplomatic way, with less knife twisting and disembowelment.

You were trying to strike a blow and draw blood and guess what, you did.

Play the ball not the man is the expression isn't it?

Dave

 

[warmed_cockles]

I tend to disagree with what she says in this instance and at this time, but you could have said the same thing in a more diplomatic way, with less knife twisting and disembowelment.

You were trying to strike a blow and draw blood and guess what, you did.

Play the ball not the man is the expression isn't it?

Dave

You are right, I could have rephrased it better. But I find it utterly repugnant that anyone would urge people with a high prospect of becoming unemployed into buying property. You can do the sums to find repayments just fitting into the lowest of the low when being unemployed (as yorke has done, without taking into account strata, rates and utilities). The chance of pulling it off is minuscule and instead it's a fast track to bankruptcy. Nobody should countenance it.

 

[Witzl]

OTOH Mr Cockles..... what if you just found that nice secure job, signed yourself a 12 month lease, and then your company went under?
You still have to pay your rent - dont you?

There is ALWAYS a reason not to do something. The people who listen to those reasons and dont act are the ones who never succeed and never get anywhere.

I plan to be one of the few who does act, and finds the way to make it work, with the goal to succeed.

if i were to find myself unemployed tomorrow... i would be working my bum off to find ANY job(s) i could land to keep my IPs. I wouldnt care if i staked shelves from 2am-6am, then dug ditches from 7am-2pm..... it would keep me ahead of the apathetic majority.

Sure - if you advocate apathy and debt combined, that is a sure fire path to bankrupcy. I am quite certain that Sparky is not advocating that at all though, she is suggesting that if you have to capacity to keep putting the effort in, and finding a way to make it work - now is a good time to enter the property market.

 

[warmed_cockles]

OTOH Mr Cockles..... what if you just found that nice secure job, signed yourself a 12 month lease, and then your company went under?
You still have to pay your rent - dont you?

The financial consequences of that happening are far smaller than if you purchase a property under the same circumstances. There seems to be an assumption that if you run into trouble in owning property you can always clear your debt with the sale. Maybe in a booming market. Not this one.

It is important to point out, that as a risk management strategy to insure against losing your job, purchasing an expensive asset is probably not a safe, prudent idea for the FHB. In fact it is probably the worst idea you could come up with.

Yes, if you're an experienced investor it might be a good strategy. But not for the first home buyer.

 

[Witzl]

..... im not suggesting that purchasing a property is a risk management strategy to insure against losing your job, and i dont think Sparky is either.

Im suggesting that purchasing a property is a good idea for wealth creation, and then working out how to keep it is your risk management strategy.
Things like:
- income protection insurance
- buying cheap/discounted
- buying below your means
- putting spare cash aside for a rainy day
- looking at ways to improve your cashflow (getting a boarder, 2nd job, etc)

Buying a property is a wealth creation strategy, not risk management.
I dont know where you got the latter idea from sorry

 

[yorke]

That's some astonishing bullishness. I am frankly surprised that there is a belief that unemployed people should buy property, advocated by yourself and sparky.

Who said anything about buying property after you are unemployed ? But if you are not going to buy it while employed because you may lose your job in the future then when are you going to buy ?
Yes I know, NOW is not the right time to buy because __________ (just insert your favorite excuse)

She I can understand, she is desperately trying to flog off her houses to stave off going under.

As opposed to what, tire kickers ? Or frozen bunnies who are too scared to buy in case prices fall after they buy but also scared that prices may move up before they buy so they end up waiting for a sign from God and spend their time posting D&G on forums and blog site ?

 

[Token Funder]

I have also mentioned before that if people are worried about their jobs then they definetly need to get on the property ladder now before they do, as they have the opportunity to buy a house and lock in a fixed rate once the rates stop falling at the same or a lower cost than their rent as mentioned by witzl.

Lets assume a person "worrying about their job" is doing so for a logical reason. They armight be in an industry under pressure (mining, tourism, finance), a casual employee, working for an organisation planning a downsizing exercise or have some other risk indicator.

The worst thing that person could do is incur debt that could not be supported if they lost their income.

 

[sparky23]

That's some astonishing bullishness. I am frankly surprised that there is a belief that unemployed people should buy property, advocated by yourself and sparky. She I can understand, she is desperately trying to flog off her houses to stave off going under.

Who said Australia had no subprime? In this forum, everyone should buy property!

Firstly in case you hadn't noticed this is actually a PROPERTY forum! So if you are not interested in buying property I don't really understand why you are spending so much time here, in case you hadn't noticed us optimists will never listen to doom and gloomers so you are fighting a losing battle.

Secondly I will not go under I am not a loser, I am not desperately trying to flog anything I have one settlement due 2nd Feb and an exchange tomorrow, there was a third offer yesterday but the purchasers changed their minds which is fine as I had decided to rent that one out anyway.

There is no need to let any more properties go but if one does it will make life more comfortable a little more quickly thats all. The combo of sold properties, increased rents, renting of 2 more properties not previously rented and rates down from 9% which was the killer and caused the problems will get us back on track sooner rather than later.

I really don't have ulterior motives, by the way can I ask what you suggest that the people on the dole should be doing when they can't afford to pay their rent any more, what is your solution?

 

[BayView]

The financial consequences of that happening are far smaller than if you purchase a property under the same circumstances. There seems to be an assumption that if you run into trouble in owning property you can always clear your debt with the sale. Maybe in a booming market. Not this one.

It is important to point out, that as a risk management strategy to insure against losing your job, purchasing an expensive asset is probably not a safe, prudent idea for the FHB. In fact it is probably the worst idea you could come up with.

Yes, if you're an experienced investor it might be a good strategy. But not for the first home buyer.

Anyone can lose their job at any time for a variety of reasons.

But, if everyone lived their life with this though in the forefront of their mind they would never buy anything, go anywhere, and certainly not buy a house.

A world full of D&G'ers who do nothing but sit around waiting for the world to end.

Thankfully, the human spirit is much more resilient than this.

Hopefully, most sensible adults looking to buy a house will do so factoring in a margin for "life" to occur.

Unfortunately, as has been shown throughout history, a percentage of them don't, and pay the consequences when things turn south.

So, go out and buy that house, but be careful.