Half a million dollars

[JamesGG]

From the main headline on The Age website this afternoon; "Is panic buying sweeping our property market?"

Fuelled by pennies from Kevin and emboldened by low interest rates, first home buyers and those in the 'lower-end' of the market of under $500,000 (call me old-fashioned, but I struggle to accept how half a million dollars is 'low'), have been the prime movers of this activity, prompting some commentators to start muttering about the appearance of a 'bubble'.

I'll take her up on that; she is indeed old-fashioned to struggle with accepting half a million dollars as a low amount.

Regardless of what the housing market has done, is doing, or is about to do; I think that simple statement from the author of the article speaks volumes. It really says a lot to me about the difference in thinking between a reporter, and someone actually doing (ie, buying) what is being reported on.

 

[Belu]

haha just read that one too.

basically she tried to buy a property in a historically undervalued suburb (i think from the description its Footscray) and got out-bid.

I wouldnt be surprised if she is Gen X either. a lot of Gen X i know are of the "oh, its too expensive to purchase at the moment, I will wait until it bursts and pick up the pennies". meanwhile prices continue to go up.

Not to mention the fact that if, in fact, house prices do collapse the banks will want 20% deposit + 5% costs @ 12%+ interest rates and it doesnt matter if the price comes down from $500k to $400k they still wont be able to afford it!

In my opinion it is all about location - well located properties will always do well imo. As we have seen it is impossible or too expensive for the government to build new train lines etc - so if you can secure near a zone 1 station (walking distance) then you will be laughing in years to come.

Not to mention analysts comparing property sales based on median sales prices (yuck) on a quarterly basis (double yuck!) for a cycle that historically runs for 7-10 years.

Oh well - back to putting on my media filter and the 9-5

Cheers,

Ben

 

[josko]

Articles and insights like these certainly point out the danger of falling into the trap of believing what you read in the newspaper.

Not only do we have to stop and ask ourselves: "Is this headline meant to cause sensationalism and sell papers?"

We also have to ask: " How old is this reporter, what is their experience and is the report based on a bad/good personal experience?"

Yesterday, I forgot myself and commented on something I read on the front page of the newspaper at the supermarket. My 11 year old son quite seriously said to me, "Mum, you can't believe everything you read in newspapers."

Regards JO

 

[aussierogue]

Strike me down

I know i am gonna be struck down for this but I agree with her.

If we look at 500k in realtion to many other economic things this is indisputable.

eg

- The average aussie retires with less than aud 80 k in super (after working for 40 years)
- is 8 time the average yearly wage
- 500 k would support a 3rd world village for years
- 500 k would buy you 10 houses in Detroit
- 500 k would take the average aussie 20 years to save (bank account)

Yes some will scream relevance but I think we live in a global economy and everything is somehow connected.

As an investor surely we CAN accept 500 k is a large amount but not necessarily hold us back in making further investments.

Cheers
Aussie

 

[buzzlightyear]

I know of many examples in the past, where friends/family people are outbid to purchase a property (generally PPOR) tend to look at blaming overexuberant buyers, low interest rates, help from 'rich' parents and a myriad other reasons which are sought after not being able to by their dream home. Its natural to feel dissapointed.

Helen (the journo) will get over it and will eventually buy something, and the unsuccessful bidders looking to buy the same property as she has just bought, will nash their teeth at 'her' luckiness in being able to afford their 'dream home'. And so it continues......

I suspect the commentary will reasonate for those looking to buy (especially in Melbourne) at the moment.

 

[josko]

hi aussierogue,

Everyone is entitled to their opinion.

I think if you re-read the article and put 500k in regards to the property market in general, then 500k is not top dollar.

I don't know much about Melbourne, but I take it she was not trying to buy a little country cottage.

However, I do agree that if I had a 500k bet on a horse, it would be a heck of a lot of money to lose. It is all relative and depends on your perspective and what you are comparing it with.

Regards JO

 

[RumpledElf]

And I'm spliting hairs at around $85k with an overpriced house *sigh*

Can't even begin to picture $500k. Would set us up for life.

 

[steveadl]

- The average aussie retires with less than aud 80 k in super (after working for 40 years)

I don't follow super, but that can't be true?!

 

[buzzlightyear]

I don't follow super, but that can't be true?!

Wouldn't surprise me. How long has super been going for the broader public - 1992 (?). Public servants, politicians aside, there would be many people, who would not have had a significant amount accumulated in their own super.

 

[steveadl]

Wouldn't surprise me. How long has super been going for the broader public - 1992 (?). Public servants, politicians aside, there would be many people, who would not have had a significant amount accumulated in their own super.

Still doesn't sound right. I had about $9k built up in super from the few years I had a part time and full time (though not high paying job) up until the age of about 24 when it stopped.

But I guess if that is indeed the correct figure - it's bloody scary!

 

[willfong]

$80k in super for 40 years work doesn't sound right, especially with compound return. I have about $30k after just 7 years despite the recent negative returns. I think you may have missed an extra 0 at the end there.

 

[aussierogue]

super

The super figure is about right as an average figure - but not equating to 40 years work. Most aussies dont accumulate super for 40 years.

If you work for 40 years the average super is prob more like 400-500k.

 

[Aaron Sice]

come to metro Perth.

anything UNDER $500k doesn't exist.

affordable? i dunno - people are buying them.

 

[Ausprop]

looking in the wrong areas BC.... plenty of stuff out thornlie, gosnells maddington etc for $300k. then there's midland, bellevue etc.

 

[kidd1]

There is plenty in Perth still...eg. half of the northern suburbs.
Not sure I would head down as far as gosnells (especially not for PPOR).

But there is still plenty out there that's for sure.

 

[BayView]

We also have to ask: " How old is this reporter, what is their experience and is the report based on a bad/good personal experience?"
Regards JO

And, you also have to ask where the reporter lives and grew up.

Many are inner-city or near-city dwellers, and are pretty myopic about what is "the world" outside of the cafe set I would suggest.

 

[BayView]

$80k in super for 40 years work doesn't sound right, especially with compound return. I have about $30k after just 7 years despite the recent negative returns. I think you may have missed an extra 0 at the end there.

Yeah, but how old are you, and what is your income Will? I'm guessing below 30 years, and above $100k p/a?

Don't forget; the population is getting older, and many of the older workers never contributed to super until it was made compulsory by the employer, and even then they probably didn't - or don't - contribute any extra funds.

Also, for the first several years of compulsory super, it was only 6% - not the 9% it is today.

And, many were lower to maybe average income earners. The super-high income earners drag the average income UP.

And, a lot of super funds are high growth options linked to the stock market, so when the stock market goes south, as has done 3 times since 1987, then there are a lot of down periods, which take several years to catch back up and surpass their previous level.

Meanwhile, add to that some horrendous management fees for some of these funds which don't stop just because your super's gone to cr@p, and voila! No spondoola.

 

[wylie]

Don't forget that the average also encompasses those with super balances of $500 to $1000. I think it sounds about right.

 

[steveadl]

Don't forget; the population is getting older, and many of the older workers never contributed to super until it was made compulsory by the employer, and even then they probably didn't - or don't - contribute any extra funds.

And there's the key word - employers - emplyees didn't have to contribute a cent. The govt. gave everyone a pay rise which had to be paid by the employer. Can you imagine the political backlash if the govt. suggested at the time that employees had to contribute even an extra 1% of their own money?!

 

[aussierogue]

Here are the super figures from a few year back

http://www.superannuation.asn.au/mr060503/default.aspx

Seems the average rolling rate is around 80k these days but when one retires after 40 years work its probably up around the 200k mark. Still sobering numbers.

Cheers
Aussie