Interesting Article

This means Mr Average needs to borrow $405,000 (90% loan-to-value ratio) from the bank over 25 years... at a generous low interest rate of 4.68% (right now, mortgage rates are the lowest they’ve been since 1970). This rate is fixed for two years; then his mortgage becomes a variable rate product, i.e. it reverts to whatever the standard rate is at the time and tracks it henceforth.

sigh. if you're a first home buyer, why would you borrow $405,000 to buy a house in the first place? shouldn't you start buying something cheaper, smaller, further out from the city, pay it, and then upgrade if you want (and use whatever you've paid plus equity) to have a smaller debt? I'd do this so I can sleep nicely at night!

I've seen properties everywhere in sydney for less than 300k. Obviously, not near bondi, far from the city, but that's how I would start. wouldn't you?
 
These article presetn lots of facts and figures, but they can't (and don't even try to) factor in the human element.
We are a resilient species. We survive and are very good at adapting to and changing our environment.
Housing has never been "affordable". Look at any decade from the 1940's to present day. Every decade has had it's own affordability "crisis" either as a result of rising values or rising interest rates.
We always find ways to overcome the "crisis".
When I was in school, working Mum's were a rarity. Indeed, even among couples with no kids, many women didn't work.
Over the years, part time working Mum's were more common. Young couples both worked. Now, even couples with kids both work full time in numbers we haven't seen previously.
Mortgage products change and new ones come into being over time. Just look at the duration of the standard P&I loan. It's now available over a longer timeframe than used to be the case.
Interest only loans were not available to my parents when they were starting out, as another example or our creativity.
So, while the numbers and graphs tell one story, the human element is not so easy to measure.
 
He doesnt give an explanation of why house prices continue to defy wwide trends here....

Maybe if he were to look into those reasons he may have some new conclusions.

Look he may have good points - hard to argue with - but they are the same old points that people have been pointing to for ages. Why then are we still in a bubble when everyone else isnt? - give me something new - something insightul please.

Cheers
Aussie
 
Thought it was a good read, a bit of food for thought.

As i am in the process of thinking about getting into property investing thought it was worth asking those here with much more experience than me if its possibly worth holding off for another year or so to see how things go.

I guess after a year something else will present as a possible issue to reduce prices and id be in the same mindframe as now.
 
Look

I actually think the crux of the article is probably true.

If I was 22 yeard old right now - would i be investing in a large mortgage - the answer is NO.

I reckon there has definatley beena a paradigm shift and rather than just investing in an house you are investing in huge debt.

There are probably smarter ways to live these days. But with this comes a necessary change in values and expectations. And these are not all bad. Maybe a great time to get some perspective about life, live for the now a bit more and lobby those wealthy parents to leave you something when they die!

This is important aswell - baby boomers need to have their own realisation as to the realities facing younger generations. Its ok to say we are gonna spend the inheritance except they dont realise that their wealth was not totally of their own doing (they were hugely lucky).

I have no interest in an inheritance from my parents because I am on the way to being independandtly wealthy and they arent! But This is the way i see things moving forward.
 
I read the Daily Reckoning to keep a jaundiced eye on the world, but it's about doom and gloom and predicting the crash that must come. A while ago Denning (I think or one of their main contributors) unapologetically responded to charges that his bearish view had prevented many of his followers taking part in the recent stock market rises, saying that eventually he would be proven right and it would all crash down.

I read the article back when it first came out and and took on some of the matters mentioned, but he is like many of the doom and gloomers, measuring Australia against US and wishfully hoping that his gold stocks will zoom up to $5,000 an ounce and he'll be the new guru who predicted it all.

He makes some valid points, but look at the style of the language and match it against some of the flowery language found at other conspiracy and doom and gloom sites. They can't resist a bit of hyperbole. Have a read of the Daily Reckoning site and you'll see the general tone. Good to keep in mind but by no means the final word.

If you want to see more commentary in the style of the Daily Reckoning then go to http://www.marketoracle.co.uk/. Again, many valid points of view but they are just opinions still.

It all comes down to affordability, what you're hoping to achieve and what your plan is.

True, housing affordability is probably the largest political issue facing the new voting generation, and true, government has let down that generation, but a blanket run away from the market or you'll lose your future is not the message to read.

As Rob says, the human nature influence is the one that matters and we are still a nation that aspires to home ownership.
 
I think the report is just BRILLIANT. As a direct response copywriter, I believe a professional copywriter was paid top dollar to produce this. For a supposedly academic-type report, check out the strong emotional language. It takes you on a roller-coaster ride of stress, anxiety and concern. It finds the little itching worry that's sitting in the back of your mind and scratches it until it bleeds.

I even love the official looking stamps on the front page, and the signed 'authority' to release. Nice touch.

Pity the content is a load of rubbish.
 
Look

I actually think the crux of the article is probably true.

If I was 22 yeard old right now - would i be investing in a large mortgage - the answer is NO.

I reckon there has definatley beena a paradigm shift and rather than just investing in an house you are investing in huge debt.

There are probably smarter ways to live these days. But with this comes a necessary change in values and expectations. And these are not all bad. Maybe a great time to get some perspective about life, live for the now a bit more and lobby those wealthy parents to leave you something when they die!

This is important aswell - baby boomers need to have their own realisation as to the realities facing younger generations. Its ok to say we are gonna spend the inheritance except they dont realise that their wealth was not totally of their own doing (they were hugely lucky).

I have no interest in an inheritance from my parents because I am on the way to being independandtly wealthy and they arent! But This is the way i see things moving forward.

Sadly the Boomers will continue to spend on themselves so as to become a burden on our health and social security systems. I don't expect society to carry me when I am 65 and I only want to pay taxes to carry the genuine needy (blind , handicapped etc). I suspect Gen X (thats me) will end up carrying the Boomers- Gen Y are too savvy and as you say will have a paradigm shift to sidestep the hit.

In some area of the US it is necessary to first loan against or sell the family home for medical care/ social security in later years. One wonders how long an unencumbered family home will remain a sacred cow.
 
his argument of the cost of ownership vs the cost of renting didn't take into consideration the rising cost of rent over that 25 years? that's a serious omission.

also his assumption that FHOs are pimply faced teenagers with 20 bucks in their pocket is a dangerously wrong stereotype to carry. Many are cashed up immigrants or FIFO mine workers on 6 figure incomes.
 
Out and out scare-mongery. What's with all the bold and underlining and all the quotes and one sentence paragraphs. Its a horrible piece of writing with no factual analysis behind it at all.

For example, please explain why a debt load of 100% of income "is where it gets unsustainable"? Why? What is it about having, say $60K debt on a $60K pa income that is so terribly unsustainable? Sure, we're at 150% on average now, but so what? For that to even be possible it requires a lot of people to be on a lot more than 150% given there's a lot out there with no debt at all. My personal debt is in the millions and is perfectly sustainable given my current cash flow position but I certainly don't earn over $1M pa.

Just rubbish scare-mongery weak journalism disguised as publishing.

Cheers,
Michael
 
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