It would be interesting to see the results extended from 2010 for the next two years. We have still had wages growth and in parallel, interest reductions since 2010. A month after that article the cash rate was at 4.75%, it is now 3.5% and house prices have been falling from mid-2010 (at least in Melbourne)
Westpac MD Gail Kelly says compound growth in house prices are over for good!
- Thread starter hobo-jo
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It would be interesting to see the results extended from 2010 for the next two years. We have still had wages growth and in parallel, interest reductions since 2010. A month after that article the cash rate was at 4.75%, it is now 3.5% and house prices have been falling from mid-2010 (at least in Melbourne)
The lack of buying is definitely not limited to first home buyers, but the way I see it if there is no one buying in FHB territory the lack of demand flows all the way up the chain. The person living in the 3 bedroom $300k house can't upgrade to the 4 bedroom $450k property , the person in that property can't upgrade to the 4 bedroom $600k inner suburb property and so on. The First Home Owners Boost in 2008/2009 pulled forward demand for a brief period and this flowed up through the rest of the market... but it has now been pulled. Various state grants and subsidies have done similar for brief periods of time. Without these grants and subsidies prices will have to drop further to interest FHB level buyers.
Could happen, I would suspect it would be a very slow process (e.g. change over decades, not a couple of years) and for investors to start taking up the slack from the lack of PPOR buyers we would need to see yields increase substantially IMO.
Easy to rattle off all these things that Gen Y is buying (stopping them from saving), but when you add up the cost of these things it does not really amount to that much. iPhone $360pa on a monthly plan, iPad $500 every 2 years ($250pa), Foxtel (? would suggest more Gen Y download their shows), $1000 for a new TV every few years... you're talking about perhaps $1000 all up per year for all that so far. The overseas holiday is obviously very dependent on where they head, but the stats show Thailand and Bali are the most popular destinations for Australian travelers. I recently booked flights from Adelaide (often cheaper from Melbourne/Sydney/Brisbane) for $500 to Bali (return), it will cost around another $400 per head for accommodation for 8 night stay (can be done a lot cheaper), add another $600 for tours and what not and you're talking an annual overseas holiday for less than $1500 per year + $1000 for gadgetry. Do older generations really believe that $2500 per year on "Gen Y expenses" is what's stopping them from buying?
I think its more relevant to say, that if these are the types of priorities and spending habits, there is a higher likelihood of other bad debts such as credit card, store credits etc being present for these same individuals.
Where is this iPhone plan that costs $360pa?
I am in the market for an iPhone....That obviously doesn't include the iPhone itself......I don't see any of these habits being limited to Gen Y though. It is simply society today at large. So why is it that only Gen Y are targeted with being abusers of them?I think its more relevant to say, that if these are the types of priorities and spending habits, there is a higher likelihood of other bad debts such as credit card, store credits etc being present for these same individuals.
Where is this iPhone plan that costs $360pa?
Yeah woops on the iPhone plan, assumed wrong, add a couple of hundred to that, but point remains.
P.S. Stuff the iPhone and get the Samsung Galaxy S3 (I'm loving mine
). Never understood the draw of iPhones which are one of the most limiting devices out there. Not even basics like drag and drop are available as I understand it.
I think the above statement is plain insanity!!
30 years down the track, even if your CG rate is 0%, which scenario will see you better off?
Same interest payments. Taking into account inflation. It is rare for people to take inflation into account, though it's a huge factor.
$600k will probably be less than the average wage in 30 years.
Plus you've been living in a house that's twice as good.
You entirely missed the point loco.
There was a graph posted earlier, that showed a comparison of interest payments to disposable income. The point I was making is that a low interest environment may allow the same interest only repayments on a larger loan, but it isn't as good a position to be in.
We are comparing buying power over time, inflation adjusted. People often argue that today's large loans are affordable due to lower interest rates than 20 years ago. This clearly isn't the reality.
Interest rates can vary greatly over time, but the massive debt stays with you. That is why you are always in a much better position to service debt at 12% on $300k debt, rather than 6% on $600k debt. The bank may tell you you can borrow more when interest rates are low, but they will be quick to take your house away when interest rates revert back to 12% and your repayments double, which you can't afford.
An alternate way to look at it, lets say you are 45 and have 20 years to retirement with a $300k debt. In addition to the interest repayments, you will need to repay on average $15k per year debt until retirement to end up with no more debt at retirement. With a $600k loan at a lower interest rate, you still have $300k debt at retirement, while making the same repayments. I have simplified the model, but that is essentially how it works.
Or if this helps you to understand, you would be in a much better position to have an average house in Sydney with $100k equity, when median Sydney house prices are $300k and have a $200k debt at 12% interest, repaying $24k per annum, than if median Sydney house prices are $500k, with $100k equity and the same average house at 6% interest, also repaying $24k interest only. The first scenario would always be preferred.
If prices are very high in Europe and rents affordable then yields must be poor?
Hi All,
The sales turnover in one particular stretch of melbourne i have been watching for about 4 months, is VERY slow, but there is not alot of evidence of vendors willing to drop prices.
Its almost like they are saying "well...if we cant get the price we want, it doesnt matter, we wont sell".
I would think that the main reason we would see big drops in prices, is if all of a sudden alot of home owners HAVE TO sell for some reason (job loss, divorce, whatever).
Or there could be a positive spin with quite a few people who have enjoyed quite a run up in Capital Growth over the last 10-15 years, and dont care if they sell for less than they could have gotten 18 months ago...because they still come out way ahead anyway?
With unemployment low, a growing population and a low mortgage rate climate, i cant see any "logical" reason why there would be massive falls...but our housing market isnt really based on logic is it...70% of purchases made are for (surprisingly to some on this forum) a roof over ones head
If noone is selling (because they dont NEED to) and we still have rising population....what direction do rents head in then....
Cheers,
Nathan
The sales turnover in one particular stretch of melbourne i have been watching for about 4 months, is VERY slow, but there is not alot of evidence of vendors willing to drop prices.
Its almost like they are saying "well...if we cant get the price we want, it doesnt matter, we wont sell".
I would think that the main reason we would see big drops in prices, is if all of a sudden alot of home owners HAVE TO sell for some reason (job loss, divorce, whatever).
Or there could be a positive spin with quite a few people who have enjoyed quite a run up in Capital Growth over the last 10-15 years, and dont care if they sell for less than they could have gotten 18 months ago...because they still come out way ahead anyway?
With unemployment low, a growing population and a low mortgage rate climate, i cant see any "logical" reason why there would be massive falls...but our housing market isnt really based on logic is it...70% of purchases made are for (surprisingly to some on this forum) a roof over ones head
If noone is selling (because they dont NEED to) and we still have rising population....what direction do rents head in then....
Cheers,
Nathan
While I see your point and agree, but its more the mindset im referring to. I used to work with an 20 year old who was consistently getting $400 per month phone bills! had I been on contract I would have upgraded or simply purchased another crappy phone, bought an unlimited prepaid simcard for $40 per month, and used the 2nd phone to make those long phone calls. This girl also damaged her phone, and ended up paying out her contract all int eh tune of $600, and then signed a new one.
i lost my phone a couple of years ago, had 6 months left on contract, so simply bought a cheap nokia, and used that until they let me upgrade early.
Its all about the mentality, sure holidays have become cheaper but now on top of the phone costs, there is now ipad costs, so what next? it doesnt surprise me by the way most of them think! and maybe im gen Y too, so im not bashing Gen Y for the sake of it
I'd say; yes; it is. Most young people don't earn all that much, and want to live it up as well.
Maybe you are a Gen Y whose income is so high that $2500 per year is nothing? If so, you'd be in the minority maybe, and probably not able to really give an accurate opinion as to what is a lot of expenses for that age group...
From my experience here on SS, this is a common type of comment; most young-uns here are in the higher earning/professional type careers; IT and the like, and make those sorts of ignorant-of-the-plight-of-the-average-person remarks.
Otherwise, every broke young adult would be here chewing the fat with us other would-be property investors... but they aint.
How many "live-at-home-welfare", or "struggling-to-make-ends-meet-as-a-check-out-dude" Gen Y's are here here on any given day compared to yer IT consultant?
Not many I'd wager, because they often don't have the same aspirations. The vast majority of younger folk aren't into property as a means to get rich, so the reality is that when it comes time to buy, and they go to the Bank and they say; "How much deposit have you got?", many haven't saved one, or enough of one.
Now, this may be totally due to the price/type of the property they have their eye on buying (unrealistic expectations), or they simply haven't got enough saved full stop.
So yes; $2500 is a big hand-brake for many Gen Y's I'd say.
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I think its more relevant to say, that if these are the types of priorities and spending habits, there is a higher likelihood of other bad debts such as credit card, store credits etc being present for these same individuals.
Where is this iPhone plan that costs $360pa?
Hi BLY
Interesting study by ANU researcher Ben Phillips from 1984 to 2010 showing we are spending much more on holidays/airfares and communications and a little less on housing(not broken up into age groups).
AMP director Craig Meller said Australians had learnt to expect the good life. ''Today it's not uncommon to expect to eat at good restaurants, buy the latest technology and enjoy holidays which don't involve camping or staying with relatives
We're doing better than before, but feel life's tough
Read more: http://www.theage.com.au/national/w...lifes-tough-20120501-1xxap.html#ixzz1xwEYRNsF
Mr Phillips said the research suggested that a sense of financial hardship that permeates media and political discourse may be caused more by high expectations than high prices.
Advertisement: Story continues below ''Cost-of-living pressures don't have too much to do with price changes, they have got to do with living decisions,'' he said. ''Our own affluence is what drives our pressures.''
Your full of good news
What about house price growth in line with income growth, which is what has been occurring over the past decade...
Australian House Price to Income Ratio Unchanged since 2003
Do you think growth of property at the same rate as rents and income is sustainable?
Incorrect. Why do you keep making this error? I've corrected you countless times!
Australia's house price to income ratio actually peaked a decade ago.
Prices today are lower, relative to incomes, than they were a decade ago.
ABS 8 cap city index
Dec 2003 – 101.5
Dec 2011 – 141.6
HOUSE PRICE RISE = 39.5%
Average Weekly Full Time Earnings Adults (RBA Table G6 column F)
Dec 2003 – $929.8
Dec 2011 – $1330.2
EARNINGS RISE = 43.1%
Suspect this would be heavily influenced by Sydney data. Break that down to city level and you would probably see a Sydney peak in 2003, Perth in 2006, Melbourne in 2010, etc.
Who controls finance BANKS and I was told years ago its the banks that control the property market
I guess that at the moment with Europe USA etc the banks are nervous and making it harder for customers to take out a mortgage
If we allow some of the biggest banks in the world to start business in Australia that will lend money say at 3% wont that start to drive the property market There is talk about these Chinese banks to come here who have 19 million customers that should stir things
And what happened to the foreign investors who drove the Melbourne property market up by 20% in 2010
So I think there will be some interesting times ahead if we do get more competition in the banking sector
I guess that at the moment with Europe USA etc the banks are nervous and making it harder for customers to take out a mortgage
If we allow some of the biggest banks in the world to start business in Australia that will lend money say at 3% wont that start to drive the property market There is talk about these Chinese banks to come here who have 19 million customers that should stir things
And what happened to the foreign investors who drove the Melbourne property market up by 20% in 2010
So I think there will be some interesting times ahead if we do get more competition in the banking sector
You could break it down by state, city, suburb, even street if you want to.
It won't change the fact that Australia's house price to income ratio peaked a decade ago.
If there was capital available for Australian property lending at 3% don't you think our banks would be all over that already (the o/s bank could just lend to ours at that rate and save on setting up branches themselves)?
They will probably be leap frogging each other to get out of the Melbourne market as it plunges.
? who cares
I assume you care, otherwise you wouldn't have brought it up when you said...
'being ignorant of the fact that prices are higher (or were recently) than about anytime in Australia's history relative to incomes and rents (based on available data).'
If you don't want to talk about it any more... that's fine.
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