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