I wrote this for my blog, but thought it was worthy of posting here...
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Well, the big news of today is that the cash rate has risen 25 basis points. It now stands at 6.5%. I am too young to remember the late 1980s and early 1990s where interest rates reached 20% — but it happened, so I am hardly complaining at the current 6.5%.
Of late, it seems the trend has been to blame the Liberal Government for the interest rate rise. The Government is not completely unaccountable, as their previous election promise went along the lines of:
Interest rates will always be lower under a Coalition government than under a Labor government.
An election ploy, and hardly a provable statement. But it still doesn't mean the current Liberal Government is to blame for interest rates.
So, back to housing affordability...
The alleged housing affordability issue has been branded in the media as simply the "housing crisis". Strong words, but looking into the issue more, I have to wonder for whom housing is a "crisis" for. In the past decade, housing prices have increased a great deal. The boom of 1999-2003 made a lot of money for a lot of people. Surely that's a good thing? More equity for those owning a house or few.
Not for those who default on their loans. This article notes that the amount of mortgage insurance claims has risen from $49 million to $210 million in two years. At first glance, this may look bad, but one has to remember that house prices only boomed a few years ago and it would be just now when those whom over-extended themselves a few years ago are feeling the pinch, and hence making insurance claims. Thus, the average mortgage claim amount would be much larger, (as more needed to be borrowed to purchase a house in recent times). This largely accounts for the sharp rise the fiscal increase in claims. Recently, 2GB radio broadcaster Alan Jones noted that less than 0.70% of all mortgages in Australia are defaulted, which was said to be much the same as it has always been. And these are mainly people who over-extended themselves with debt, possibly under-stating their existing financial obligations when applying for a mortgage.
House prices have risen, but Alan Jones also noted that a real "housing crisis" would exist, if house prices, not went up, but rather went down. Indeed, a lot of people would be in real trouble if this happened.
So then, who are the ones feeling the pinch?
I think it comes down to the first home owner. I myself, am looking to purchase my first property, so the last property boom has made it harder to get into the market. But, how hard is it? Working for 1 or 2 years to save a deposit isn't exactly hard — just slow. But did previous generations have it any easier? After hearing stories of people who are double my age, with interest rates nearly 20%, and getting mortgages before industry deregulation, do current first home owners really have it that bad?
When putting it all into perspective, I would say things are pretty good. House prices in my home city of Adelaide still relatively cheap against other Australian capital cities, and are poised to rise in the next few years.
So, where is this "housing crisis", so often referred to in the mainstream media? I'm still looking. It must be election time...
---
Well, the big news of today is that the cash rate has risen 25 basis points. It now stands at 6.5%. I am too young to remember the late 1980s and early 1990s where interest rates reached 20% — but it happened, so I am hardly complaining at the current 6.5%.
Of late, it seems the trend has been to blame the Liberal Government for the interest rate rise. The Government is not completely unaccountable, as their previous election promise went along the lines of:
Interest rates will always be lower under a Coalition government than under a Labor government.
An election ploy, and hardly a provable statement. But it still doesn't mean the current Liberal Government is to blame for interest rates.
So, back to housing affordability...
The alleged housing affordability issue has been branded in the media as simply the "housing crisis". Strong words, but looking into the issue more, I have to wonder for whom housing is a "crisis" for. In the past decade, housing prices have increased a great deal. The boom of 1999-2003 made a lot of money for a lot of people. Surely that's a good thing? More equity for those owning a house or few.
Not for those who default on their loans. This article notes that the amount of mortgage insurance claims has risen from $49 million to $210 million in two years. At first glance, this may look bad, but one has to remember that house prices only boomed a few years ago and it would be just now when those whom over-extended themselves a few years ago are feeling the pinch, and hence making insurance claims. Thus, the average mortgage claim amount would be much larger, (as more needed to be borrowed to purchase a house in recent times). This largely accounts for the sharp rise the fiscal increase in claims. Recently, 2GB radio broadcaster Alan Jones noted that less than 0.70% of all mortgages in Australia are defaulted, which was said to be much the same as it has always been. And these are mainly people who over-extended themselves with debt, possibly under-stating their existing financial obligations when applying for a mortgage.
House prices have risen, but Alan Jones also noted that a real "housing crisis" would exist, if house prices, not went up, but rather went down. Indeed, a lot of people would be in real trouble if this happened.
So then, who are the ones feeling the pinch?
I think it comes down to the first home owner. I myself, am looking to purchase my first property, so the last property boom has made it harder to get into the market. But, how hard is it? Working for 1 or 2 years to save a deposit isn't exactly hard — just slow. But did previous generations have it any easier? After hearing stories of people who are double my age, with interest rates nearly 20%, and getting mortgages before industry deregulation, do current first home owners really have it that bad?
When putting it all into perspective, I would say things are pretty good. House prices in my home city of Adelaide still relatively cheap against other Australian capital cities, and are poised to rise in the next few years.
So, where is this "housing crisis", so often referred to in the mainstream media? I'm still looking. It must be election time...
