Current price/income and price/rent ratios have been sustained approximately at 2003 levels for the past decade, so for now that seems to be the new normal.
Is Australia facing the first recession in 20 years?
- Thread starter hobo-jo
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Current price/income and price/rent ratios have been sustained approximately at 2003 levels for the past decade, so for now that seems to be the new normal.
Actually, since the GFC it is much harder.
This is no different than when I was a kid, and should be factored into every person's situation when buying.
This is probably true, but not necessarily a good thing.
A small deposit comes at a cost; most banks will be attaching Loan Mortgage Insurance to the borrowings if it above a certain level; I think 90% would be the starting point these days?
As above; factored into the borrowers' financial situation, and only those who are too heavily geared will have a problem if and when they are out of a job.
What you are saying is nothing new; it has been happening for several generations.
This is nothing new HJ.
Go for a drive around the Melb CBD fringe, and see what sort of houses were built back when the end of civilsation was that fringe, or indeed the "outer suburbs".
Places like Collingwood, Richmond, Northcote and so on - thousands of dog-box terrace houses on tiny little handkerchiefs of land - the edge of the suburban sprawl, but lots of demand and not a lot of available land at the time.
This is still happening in all the areas where there is a lot of demand from people who want to live closer in the the popular areas, some 150 or more years later..
Amazingly, it is often the view of the younger folk - on SS and in the wider community - they bleat about how hard it all is like it just happened last year when they decided to start looking for a place of their own;
"blocks are shrinking! costs are soaring!" and so forth.
Why do you think suburbs like Burwood - which was the end of civilisation when I was a kid - popped up all over the Country?
I remember as a 4 or 5 year old, getting off the tram at the end of the line on what is now the Burwood highway, and walking down a dirt road with my mother to visit my Auntie in their newly built home....
It was because it was cheaper to buy, cheaper to build, land was cheaper per square foot than in Preston etc, so folk started moving out there.
Nothing's really changed; just the next generation of players, and the edge of civilisation where houses were affordable has moved further out.
Has the cost of building really increased more as a % of income for the average wage earner in the last 100 years or so? I reckon it probably has a bit actually, despite what I just said.
But housing is still affordable - it depends where you are looking and the style of dwelling.
But look at why the cost of building has gone up; Workcare premiums, superannuation guarantees, penalty rates over 37.5 hour weeks, redundancy pay-outs, unfair dismissal payouts and costs, safety regulations and compliance costs, increased govt charges and fees at every stage of a house design and construction - planning and permit fees, bushfire overlay plans and fees, GST....the list goes on.
Half of these things weren't around 100 years ago. You went to work, did your job or you got sacked.
People got injured, sure; and now we have a much safer building industry, but now it costs probably the same as one employee to ensure that 5 others aren't injured - every year, and it's never going away..
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Giday
Some great stuff here but I think comparing house prices from a century ago needs to take in account they are not that comparable.
Around Federation only the wealthy owned homes.
The twenties was middle upper class.
In the 50's unless your parents knew the bank manager and you have a large deposit, home owning was still a privilege.
In the 80's they often refused to count the wife's income and you had to have 20% plus costs.
In the 2000s loans are easily and widely available in comparison. Rates are lower longer and you get FHOG which gets over the hardest bit, the deposit.
Who is the most unaffordable of the above?
I am not saying you are wrong but simply pointing out stats as proof can be very misleading.
Case in point: Death of Young and P Plate Drivers.
We hear all the time the stats that P Platers die a lot more than others
THEREFORE we assume something is wrong, and that there needs to be more training, controls etc..Something must have failed as opposed ot he past when we had dad teaching ups to drive???
But I asked a mate who was a Coroner for years about this and the fact is P Platers and Young Drivers died on the road a lot more back in the "good old days". And that todays Road Toll is the best it has even been on per capita and overall numbers.
Just was back in the old past we didn't have internet, ACA and "Report Society Failures with Indignation because it is Someones Fault" Journalism and expectations.
Regards to all, Peter 14.7
Some great stuff here but I think comparing house prices from a century ago needs to take in account they are not that comparable.
Around Federation only the wealthy owned homes.
The twenties was middle upper class.
In the 50's unless your parents knew the bank manager and you have a large deposit, home owning was still a privilege.
In the 80's they often refused to count the wife's income and you had to have 20% plus costs.
In the 2000s loans are easily and widely available in comparison. Rates are lower longer and you get FHOG which gets over the hardest bit, the deposit.
Who is the most unaffordable of the above?
I am not saying you are wrong but simply pointing out stats as proof can be very misleading.
Case in point: Death of Young and P Plate Drivers.
We hear all the time the stats that P Platers die a lot more than others
THEREFORE we assume something is wrong, and that there needs to be more training, controls etc..Something must have failed as opposed ot he past when we had dad teaching ups to drive???
But I asked a mate who was a Coroner for years about this and the fact is P Platers and Young Drivers died on the road a lot more back in the "good old days". And that todays Road Toll is the best it has even been on per capita and overall numbers.
Just was back in the old past we didn't have internet, ACA and "Report Society Failures with Indignation because it is Someones Fault" Journalism and expectations.
Regards to all, Peter 14.7
We only have to go back 15-20 years to observe very significant rise in prices compared to rent/gdp/incomes.
Yes low rates & easier credit have been an enabler for higher levels of credit growth and in turn higher prices but these are variables which can reverse. They also don't make property more affordable e.g.
http://www.bullionbaron.com/2012/06/does-australia-have-housing.html
The lower rates go, the more dangerous it is for borrowers to saturate their serviceability with debt. With rates at 6%, a 2% increase is a 30% increase in cost for an IO or P&I borrower with a new loan.
Pretty true.
When I was in the process of buying my first PPoR in 1985, it was with my then G/F, who had a very good job with SIO Insurance.
Our first attempt to obtain a loan together for our $78k house was rejected on the basis that she was "of child bearing age" and would more than likely be leaving work to raise kids...
She is now well in her 40's and still childless, by the way.
Agree but I put that down to one BIG if not, the biggest factor, effectively for the purposes of serviceability incomes doubled when Lenders included the wife income.
This is often overlooked and often by younger members (no offence) who never experienced this world.
Not that long ago: In the public sector women actually had to resign when you got married! It was law and legal.
I know personally: back in 1989 we got out first PPOR and the bank flatly refused to include my wife income as we were:
a) newly married
b) she was 22
So obviously we were going to have children any moment!!!!!
Now I will say as newly weds there was plenty of practise happening
but our "little bundle of joy" didn't arrive until aged 39. In that time wife went from a junior bank clerk on minimum wage with no advancement, to a professional sales executive earning triple figures with a company car thrown in. She is now "retired" and works part time
on our business in between hair dressing appointments, nail, yoga, etc..Anyhow getting over my issues on inequality on who got to "retire" ....that Change is by far the biggest factor.
It is also why a lot of Homosexual Couples rent rather than own, despite above average incomes, because they have the "single income on the books" issue.
Whether having both partners working full time is good for child rearing and society is another matter but the banks now count every cent, so when incomes doubled, so did loans and demand went up.
However, you are spot on that increases in rates have a much greater effect now than before. Hence we have lower rates but not lower costs in comparative terms.
Regards Peter
It gets my back up a little when I here people saying it is so hard for young ones to get into the market, houses are more expensive, bla bla bla.
It takes hard work, commitment, a savings plan and sacrifice to buy a home - (unless you inherited wealth)then that is the same in that respect today as it was for earlier generations.
The difference is the young people of today don't want to make these sacrifices, instead chosing to whinge about it.
My parents and grandparents lived where they could afford to buy a house and raise a family and got on with it. Family members who earned more lived in Brighton, my single parent aunty lived in Melton - where she could afford to live.
Earlier generations also moved out of home earlier, married earlier, had kids earlier and were self-sufficient. Most left high school at 15 to work. Parents parented and made kids take responsibility of paying for themselves.
Some younger generations don't move out, sponge off their parents (use the excuse they are saving for a house but save nothing), have high school or tertiary education and global opportunities for employment. And their parents enable this behaviour, make excuses for them , join the whinge wagon about how tough it is.
It takes hard work, commitment, a savings plan and sacrifice to buy a home - (unless you inherited wealth)then that is the same in that respect today as it was for earlier generations.
The difference is the young people of today don't want to make these sacrifices, instead chosing to whinge about it.
My parents and grandparents lived where they could afford to buy a house and raise a family and got on with it. Family members who earned more lived in Brighton, my single parent aunty lived in Melton - where she could afford to live.
Earlier generations also moved out of home earlier, married earlier, had kids earlier and were self-sufficient. Most left high school at 15 to work. Parents parented and made kids take responsibility of paying for themselves.
Some younger generations don't move out, sponge off their parents (use the excuse they are saving for a house but save nothing), have high school or tertiary education and global opportunities for employment. And their parents enable this behaviour, make excuses for them , join the whinge wagon about how tough it is.
Pretty true.
When I was in the process of buying my first PPoR in 1985, it was with my then G/F, who had a very good job with SIO Insurance.
Our first attempt to obtain a loan together for our $78k house was rejected on the basis that she was "of child bearing age" and would more than likely be leaving work to raise kids...
She is now well in her 40's and still childless, by the way.
On that point, another factor is the rise of childless couples in stats and like us, only child couples, thereby all with more disposable income for housing.
Peter
Exactly!
We have 20 something staff and I encourage them all to "suck it up and buy a house." But their saving mentality is non existent.
Once I offered a manager my coles voucher at the petrol stations to save him 4c on fuel and he mocked me as "being tight". I said but you are buying it right now anyhow?!?!?
I shut him up by replying, "yes I am tight, and that is why i have XX houses whilst your almost 30 and live at home with mom "
He thought about that and has since changed his ways and early this year, on his own, bought his own 2 bed PPOR apartment in Sydney. He now thinks about every cent!
Peter
I'm actually the 30 year old who still lives at home, though, I have used the time at home to purchase property. Being at home has really assisted me in buying property.
SHOOSH WILL YA!
Can't you see you're setting a bad example for all those kids who reckon houses are unaffordable?
SHOOSH WILL YA!
Can't you see you're setting a bad example for all those kids who reckon houses are unaffordable?
Ha Ha sorry
. A couple more years at home will equal a few more properties. I found this article today.
http://www.theaustralian.com.au/news/pop-the-bubble-and-invest-now/story-e6frg6n6-1226514961849
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Yep, I did my bit for Society this afternoon in a year 8 Maths class. The (smart)girls sitting with me asked a few questions about life and I informed them that I own four houses. After they recovered from the shock, i drew them a little Jan Somers circa 1990 graph with little houses and bags of shares on the left hand side and bigger houses and bags of shares on the Right hand side, with a couple of arrows pointing right on the time axis. They got the general message really fast. I love graphs.
Wrong. Banks treat gay couples like any other couples.
Good piece here from Alan Kohler:
Continues at: http://www.businessspectator.com.au...pd20121114-ZZQR7?OpenDocument&src=sph&src=rot
For each gloomy survey it's not hard to find a positive survey, perhaps a sign of the times,
Rate cuts lift consumer confidence
Consumer confidence has surged to a 19-month high as the Reserve Bank's 1.5 percentage points of interest-rate reductions boost household optimism, a private survey shows.
The sentiment index for November gained 5.2 per cent to 104.3, a Westpac and Melbourne Institute survey taken November 5-11 of 1200 adults showed today. The index rose above 100, which indicates optimists outnumber pessimists, for the first time since February, ending an eighth-month skid below that level that was the longest stretch since the global financial crisis.
The survey is ... clearly signalling a boost to confidence around the housing market.
Read more: http://www.theage.com.au/business/t...-confidence-20121114-29bej.html#ixzz2C9TdHhqx
hobo, moving from surveys on what may happen in the future and returning to the thread topic, why do you think you got it so wrong that Australia would be in a technical recession by 30/6/2012?
Rate cuts lift consumer confidence
Consumer confidence has surged to a 19-month high as the Reserve Bank's 1.5 percentage points of interest-rate reductions boost household optimism, a private survey shows.
The sentiment index for November gained 5.2 per cent to 104.3, a Westpac and Melbourne Institute survey taken November 5-11 of 1200 adults showed today. The index rose above 100, which indicates optimists outnumber pessimists, for the first time since February, ending an eighth-month skid below that level that was the longest stretch since the global financial crisis.
The survey is ... clearly signalling a boost to confidence around the housing market.
Read more: http://www.theage.com.au/business/t...-confidence-20121114-29bej.html#ixzz2C9TdHhqx
hobo, moving from surveys on what may happen in the future and returning to the thread topic, why do you think you got it so wrong that Australia would be in a technical recession by 30/6/2012?
Very good piece. Thanks.
It summarises the need for "reality check" of all stats and surveys as in the end, what they say can be false.
Examples are everywhere.
In my little VIC town we are middle class and well employed and well paid yet for the first time there are vacant shops. Any property over $500k is priced at 20% less than 2 years ago. Over $1M there are bargains to be had.
And as I have said before, even small changes affect others. A close friend is specialist aircraft welder working for very small firm. The decision by Qantas to close it maintenance base in Melbourne is another nail in that business coffin. but he is not in the stats of engineers out of a job. He is one of only three firms left in Aus that does this work. Once they close, they will be gone forever and no new apprentices will be trained.
Regards Peter 14.7
These quotes from the original post/thread (May 2011):
By RBA's account commodity prices peaked in late 2011 (around 5 months later than I expected):
My guess on the timing of a technical recession was wrong, but that doesn't mean my expectations for one are misguided. The commodity/mining bust is playing out. It's full effect on the Australian economy is yet to be seen.
Why was I "so wrong" on the timing of the downturn? I don't have any economic model to use and am no economist, so while I can draw broad conclusions from observing the market, events and data, I have no way of gauging the exact timing of cause and effect, I made an educated guess. The property market also surprised me by staying buoyed longer than I would have guessed, but in time it still turned around and started to correct as I expected it would. I still think we are looking at recession in the near future & as pointed out by myself (& BayView + others) in this thread and Alan Kohler above, the conditions for many businesses are already there.
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