Glenn Stephen's comments this week

[BV]

Remind me again why we have had amongst the highest rates in the world.
If higher rates represent a higher reward for risk, why is Australia considered such a high risk for foreign capital, that we need to pay a higher reward?

WW
Considering the wealth of this country we are the safest borrowers in the world and this is the reason why every1 is queueing up to lend us money.
Why then do we pay high interest rates?
It's a systemic problem which none has tackled before because it suits them. Both the government and the RBA often turn a blind eye to the exploitation of the system by the big 4.

I think we lost the battle when the CBA was sold off
so now us consumers have NONE to defend us.

Also, the so called independence of the RBA isn't working.
How can the board be independent when the majority of the members are also working for half a dozen other companies?
IMO we'll be better off having a government controlled RBA.
At least then we wouldn't have situations where economic and fiscal policies are conflicting with each other.
IMHO

 

[BV]

The article below is proof that the RBA board is living on another planet.

ANOTHER round of crappy economic data showing the excessive past interest rate rises are working and still economists are tipping the Reserve Bank will raise the cash rate of interest again by 0.25 per cent on Tuesday. What are these people thinking?

We know it can't be the health of the small business sector, with retailers hit hard in February.

And it comes when we learnt, again, that businesses are not borrowing. Do you think it could be higher interest rates and weakish sales causing this?

In fact, business credit has now fallen for 13 months straight and is down 7.6 per cent for the year.

This doesn't sound like an economy going gangbusters and imagine how bad it would be without the often-questioned stimulus spending. But worst still is the plight of the retail sector.

http://www.theaustralian.com.au/bus...the-tv-spotlight/story-e6frg8zx-1225849060385

 

[Deltaberry]

It seems like you're the one who has a fixed mindset (that property always goes up!) - I just asked a question.

It's some bricks and rubble - there are some polished turds selling at premium prices. When the music stops I'll gladly take your polished turd off you at its true intrinsic price, not a manic price driven by greed, media and perpetuated falsehoods!

Thanks god the RBA Governor has his keen eye on things.

Good Luck

SYDB

Haha any argument can always be countered. I was simply offering some potential explanations to your question - I never actually said that was my mindset.

But I do wonder whether you were asking a genuine question after all if you have what it takes to counter any thoughts and go into deep economic arguments, or whether you're just asking a rhetorical question.

With the capital gains i'm sitting on, I think even after a 30% crash I'd still be doing fine. Not that I'd imagine you'd look at the sort of turd I invest in. But I think your anxiety is reflected in your last angry response... so my only advice is if you think there's a crash, certainly stay away from any investment at the moment because you sound like the type who'd end up paying a premium for turd.

By the way, how are you working out intrinsic value? Some version of DCF (only if you've heard of it)? And yea, perpetuated falsehood - that's too religious for me. But the media has certainly not been shy from reminding us of the imminent bubble, so not sure what sort of media you're reading.

 

[Alex P Keaton]

Wow, alot of hostility here from PI's against people looking for their first home for their family within a reasonable commute from work. It's not an entitlement at all. I'm sure you'd like to see 12 hour days with 2 hour commutes on either end, leaving ZERO time for family. As long as you can squeeze a buck out of your fellow man......then what does it matter.

I havent had a chance to read all the threads yet.

As a fhb (like most fhb's) You have to make some compromises. Location v Space

1. Buy Small inner city 1/2 bed apartment ppor (not much space)
2. Larger outer ring ppor house (with long commute to work)
3. Buy an ip and you and your family rent a house inner city

There's nothing wrong with your family renting something and buying an ip for your first property. It is becoming more common for young people to do this now esp those over east who want to live inner city but cant afford to buy inner city yet. You have to start somewhere!

When I first bought I wanted to buy a 2 bed villa but couldn't afford 2 beds so I bought a studio. I'm 3 k from the cbd. Its all about what you can afford.

 

[Sheryn]

Even if we are stretched budget wise, we have decided to buy. That was why I asked the original question re: interest rates as technically, when we buy, we will be in "mortgage stress" (not that I agree with the definition of mortgage stress anyway). It is a risk we feel we have to take given where prices currently are.

Make sure you get an interest only loan to reduce mortgage stress until your wages go up.

I'm not here to argue about the merits of the system, it is what it is, just really p*sses me off when those with alot want to trod down young people just trying to work, put a roof over their heads, and raise a family/spend time with them.
SYDB

SYDB
You are generalising, most of us started with little but have the will to devote time to learn how to improve our family life via investing.

Stop whinging and focus on getting that PPOR for your family. For all we know you could earn more than us?


Good Luck
Sheryn

 

[mmmggg]

The Scenario.

If interest rates do increase then FHB will be priced out of the market and so SYDB will be back to square one. If house prices crash demand will rise as more ppl able to buy so prices increase and again FHB are back to square one. It seems to me home owners / landlords always win. Just buy what you can afford and get on with the repayments and capital growth. Getting there is half the fun as they say.

 

[Amadio]

You haven't read my previous posts. I can afford to live in the inner west, I am just borrowing to my maximum if I want to live in a house. I do not need to move further out. An inner west townhouse/apartment is easily affordable.

This is just an opinion from someone who first bought a house in 1979. It doesn't matter what happens, whether interest rates go up, housing prices skyrocket, house prices crash. Trying to time the market is an exercise in frustration and if this is your first purchase then you are probably buying for the long haul.

My kids are also looking to buy in Sydney and this is what I've told them:

1. calculate the maximum amount of mortgage payments you can make but go beyond the buffer that the banks calculate - calculate payments as if interest rates go up to 12%. Then you can sleep at night not worrying about every announcement by the RBA.

2. If after this calculation you can still buy a house, go for it, if not, settle for the townhouse.

3. Get a preapproval in writing for an IO loan- then you can easily convert it to an IP and move up in the future.

4 Seriously study a limited area where you are prepared to live, and aim for a purchase which is at least 10% below the area's average. These buys come up more often than you think (divorces, sellers bought elsewhere) but you have to be prepared for quick decision making and as few possible clauses on your offer as possible.

Hope this helps a bit - I'm sure a ton of bricks will descend upon me from other SS posters but it's a plan, and a plan is what you need even if it's not this one. Good luck.

 

[.toe]

You have to wonder why the reserve bank governor is going public and saying he's going to make us hurt. Why doesn't he just do it? Here's my opinion on it...

House prices may be on an unhealthy run, but increasing interest rates will only add fuel to the fire, because this is a supply side problem. The population is booming and supply is not keeping up.

While there is such a shortage of new housing, and while low rates and negative gearing exist, shouldn't there be an explosion in new home starts? Instead the numbers have remained relatively fixed for years, while the population has exploded.

Personally if interest rates go up enough to bring prices down in the short term I will be buying up big time. The previous reserve bank governor Ian MacFarlane did exactly the same thing (talking up his own rate rises), in 2002-03, and that did not make housing any cheaper for his children did it.

Raising interest rates will only remove money from new home starts. Same goes for the recently re-popular removal of negative gearing. Both would have the LONG TERM effect of increasing house prices because the real issue is the failure of 'land supply'. Which makes the 'Housing Bubble' in fact justified from a market standpoint. The market is not actually in a bubble (ie. full of hot air), at all, it is driven by real market forces which will not change quickly or easily, it is not driven by pure speculation, even if there is some speculation going on.

 

[Saber]

Isn't it better to say that housing starts have stayed flat because all the new housing estates are situated in places like Cranbourne, Point Cook, Lyndhurst etc. which are very far away from the CBD and hence not as desirable to purchase? People would rather pay more and buy more inner-city...

 

[.toe]

I would've said that the governments policy of selling land to developers as a 'comercial imperative' along with developer land banking has lead to the situation where land on the fringe costs more than it's actually worth. Everybody knows it will cost more to live there so you'd expect a much lower pyrchase cost. Also businesses should be openning up on the fringes at a far greater rate due to the lower cost. But it turns out its not as cheap as it should be.

I would've thought the governments responsibility is to providing for the increased population based on its own policies, however is own directive to VicUrban (in Victoria), is to make a large profit.

 

[Saber]

well .toe it all comes down to incentive and revenue. The State Government's taxing power is quite limited - their main source of revenue comes from GST + land taxes. Land taxes are based on property values so of course they want to push prices upward. However, there isn't a lot of land in the inner-city areas which need to be unlocked - most, if not all of it is already developed.

Businesses do set up in the fringes of Melbourne but it's not all about cost - it's about profit. The only real businesses that would set up in those fringe areas are manufacturing businesses due to the cheaper land cost. But as we know manufacturing in Australia is all but dead

 

[komstak]

It seems that RBA is the only one worried about this housing bubble. Why don't the gov't take steps to combat this? Rudd should review the policy allowing foreign property investors. Or reduce the red tape on its land release programs.

 

[.toe]

Saber I don't have a problem with the government taxing land sales to provide infrastructure. However right now there is such a shortage of housing starts, which is clearly the main driver of rising prices of existing stock. I would've thought that allowing developers to hold land for 10-20 years would not be in anyones best interest but developers.

 

[Sunfish]

........ Or reduce the red tape on its land release programs.

Does the Fed release land for development?

 

[Sunfish]

Saber I don't have a problem with the government taxing land sales to provide infrastructure.

I have reservations and this must be the only point on which I agree with Gen X/Y.

When I bought my house there was a narrow strip of bitumen out front. Since then the council has (sort of) improved drainage, put in concrete gutters and pathway, gutter to gutter bitumen, run sewerage mains and connected us to it FREE and replaced the water main a couple of times.

I did not pay any developer to do this out of my own pocket and the work was done on the public purse but now that it has been done I can resell my council's effort for personal gain. Had the council not spent money on me, it is absurd to suggest that my property has increased enough in value to make it a good investment. (It never was, an "investment" it's my Casa.}

Yes, developers must contribute to head charges but should not be nailed to the wall as our council is doing. I'm sure ours isn't the only council blowing millions on arty-farty, feelgood green (whatever that means) projects. Our's has even pledged a couple of mil to keep our A League soccer team afloat.

 

[.toe]

Your rates will have gone up in line with the increased value of your land. I know several people who could not afford to keep up the rate payments and had to move on. So I wouldn't worry about councils too much, they know how to survive.

 

[Sunfish]

Your rates will have gone up in line with the increased value of your land.

True, but I'd rather pay it on drip feed than up front, which is what the new entrants have to do.

 

[komstak]

Does the Fed release land for development?

Rudd wants to seize control of the nation's health system. Why not do the same for land development?

 

[Sunfish]

Originally Posted by Sunfish
Does the Fed release land for development?

Rudd wants to seize control of the nation's health system. Why not do the same for land development?

So the answer is "No!"

Lets talk about how things are.

 

[.toe]

State mostly release land but federal governements can also. But state governments are in control of zoning so when huge swathes of land are rezoned from rural to also include residential and sales to developers are taxed at $100k/hectare or so, to pay for infrastructure that is state gov business.