Too much money!

[Merovingian]

Think about it? Where is the real money in the future?

Rase resources, safe food production, water, power to some extent, unpolluted living, will be were the wealth is.

Would a corollary to this be: "Buy stocks in companies that will play a large role in producing green power plants in the future, as coal/oil/gas will become 'less favourable'"?

 

[Merovingian]

I paid in 1987 $599 for my push button National Microwave ( which I proudly still have). It was top of the line and I was earning $215 after tax a week. So it cost me 2.5 my take home pay or 250%.

My parents bought a Philips microwave, (I don't know how much for, though), just before I was born — this would have been early 1980s. It still works perfectly today, and it is much larger than the microwaves you buy these days, too... It has all the doodads, and is comparable in features to many of today's microwaves.

 

[Bill.L]

Hi all,

In answer to question about changes in house price, rents etc. consider the following property. ( I hope the link works)

http://www.realestate.com.au/cgi-bi...3&f=0&p=30&t=res&ty=&snf=rbs&cu=&fmt=&header=

It is an ordinary 3 bed bv, and is forsale for $250,000 (has been for a couple of weeks). We owned the property across the road that was the same sized block, with the design and building essentially the same.

We bought in 1981 for $44,000. At the time we bought Interest rates were 12.5%, but came down a bit later that year. My wifes wage as a second year teacher at the time was $13500 p.a. Rents in the same street were $70 p.w.

A second year teacher today will earn around $41,000 p.a.

Rent of the same age style house in that area will be ~$200 p.w.

Putting it all together an IO loan in '81 would cost $5,500 p.a.
or
40.7% of annual wage.
A years rent would be $3,640 or 26.9% of years wage.

Fast forward to '05.
IO loan would cost ( @6.75% ) $16,875 or $41.15% of annual wage.
A years rent would be $10,400 or 25.36% of years wage.

Over the last 24 years the growth has averaged 7.5% p.a. while the "wage" inflation has been a tick under 5% p.a. Rents have risen by about 4.5% p.a.
How much of the extra growth above inflation is due to lower interest rates??? That to me is the great mystery.

To purchase the same type of house that was bought 24 years ago seems to cost the same today. But today people have a much greater expectation of their "starting" house.

bye

 

[always_learning]

Hi all,

In answer to question about changes in house price, rents etc. consider the following property. ( I hope the link works)

http://www.realestate.com.au/cgi-bi...3&f=0&p=30&t=res&ty=&snf=rbs&cu=&fmt=&header=

It is an ordinary 3 bed bv, and is forsale for $250,000 (has been for a couple of weeks). We owned the property across the road that was the same sized block, with the design and building essentially the same.

We bought in 1981 for $44,000. At the time we bought Interest rates were 12.5%, but came down a bit later that year. My wifes wage as a second year teacher at the time was $13500 p.a. Rents in the same street were $70 p.w.

A second year teacher today will earn around $41,000 p.a.

Rent of the same age style house in that area will be ~$200 p.w.

Putting it all together an IO loan in '81 would cost $5,500 p.a.
or
40.7% of annual wage.
A years rent would be $3,640 or 26.9% of years wage.

Fast forward to '05.
IO loan would cost ( @6.75% ) $16,875 or $41.15% of annual wage.
A years rent would be $10,400 or 25.36% of years wage.

Over the last 24 years the growth has averaged 7.5% p.a. while the "wage" inflation has been a tick under 5% p.a. Rents have risen by about 4.5% p.a.
How much of the extra growth above inflation is due to lower interest rates??? That to me is the great mystery.

To purchase the same type of house that was bought 24 years ago seems to cost the same today. But today people have a much greater expectation of their "starting" house.

bye

Mulgrave (Lower Middle class) is a very good area to compare as the house type is the same and we dont get the bias on increased values caused by our increased expectations on home size and fitout. Actually just looking at that property, seems a reasonable deal, add $300K for a couple of units all up, each of which would be worth around the $300K mark, I think there could be a 20% margin in there! Back to topic, just my guess but would think that Mulgrave has underperformed to average in Melbourne, and in comparision to potential first home buyers living in Sydney the "starter" home is 60-70% more than that at around $440K.

 

[quiggles]

It is an ordinary 3 bed bv, and is forsale for $250,000 (has been for a couple of weeks). We owned the property across the road that was the same sized block, with the design and building essentially the same.

A second year teacher today will earn around $41,000 p.a.

Putting it all together an IO loan in '81 would cost $5,500 p.a.
or
40.7% of annual wage.
A years rent would be $3,640 or 26.9% of years wage.

Fast forward to '05.
IO loan would cost ( @6.75% ) $16,875 or $41.15% of annual wage.
A years rent would be $10,400 or 25.36% of years wage.

Excelllent post, Bill.

I think one thing that folks would find daunting is that the cost of the house is now 6 times annual salary, rather than three time annual salary. I haven't done the figures, but it suggests to me that a P&I comparison may yiled an uglier truth for first home buyers.

It's even uglier when you consider that four years ago they probably could have bought it for a relative song.