The Great Australian Housing Bubble
Sep 28th 2010, 3:19 am
#31
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Re: The Great Australian Housing Bubble
No. I don't know about anyone else, but for me it would be much more expensive to rent than buy. My mortgage is $157,000, I have ~45% equity, and I pay ~$250 a week. There's no way in hell I could afford to rent a comparable house for that money. Better to sit tight, ride out the interest rate hikes, and keep grinding my mortgage down.
Last edited by Steve2009; Sep 28th 2010 at 3:22 am.
Sep 28th 2010, 3:20 am
#32
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Re: The Great Australian Housing Bubble
Seriously, the interesting thing to compare country to country is the spread between cost of renting and cost of buying. In Aus, it is MASSIVE. I have seen situations where cost of buying is 4 times what it would cost to rent the same place. Thats extreme, but 2 times is quite normal. Its certainly less in the UK, and in the US in some places, it costs MORE to rent than to buy.
See, rents track average wages pretty closely. You would think that given the majority of lAus andlords are losing money every month (even after the tax break) that they would put rents up. This would be even more so if you believe that theres an accomodation shortage. But they're not. Why is that? Because they wouldnt rent it, or at least they would struggle. And all this in a time when interest rates are low.
What that shows is that house prices are WAY out of whack. This spread between rent and mortgage cost must close. It can only close in 2 ways - wages go up, or mortgage costs come down.
Sep 28th 2010, 3:22 am
#33
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Re: The Great Australian Housing Bubble
There are a LOT of things that could break the stand-off, either in Aus or UK.
IMO, we are witnessing globally a period where asset-backed, debt-based growth is unwinding.
Once sellers see that the era of ever-increasing house prices is coming to an end, you can be sure they will head for the door in droves. Market sentiment can turn very quickly. The other thing to look at is banks valuations of property when they're considering loans. If banks decide that the market is overvalued, then they will be more aggressive with both their LTV ratios and the valuations they place on a property when writing a loan. This becomes self-fulfilling, because as they lower their valuations, they send the market lower. This is 100% what happened in the US - the subprime crisis would have been much lessened had people been able to refinance after their teaser rates ran out. But they couldnt, because banks tightened their valuations massively, meaning everyone was underwater, so they had to sell, forcing the market down and leading to the cycle repeating.
IMO, we are witnessing globally a period where asset-backed, debt-based growth is unwinding.
Once sellers see that the era of ever-increasing house prices is coming to an end, you can be sure they will head for the door in droves. Market sentiment can turn very quickly. The other thing to look at is banks valuations of property when they're considering loans. If banks decide that the market is overvalued, then they will be more aggressive with both their LTV ratios and the valuations they place on a property when writing a loan. This becomes self-fulfilling, because as they lower their valuations, they send the market lower. This is 100% what happened in the US - the subprime crisis would have been much lessened had people been able to refinance after their teaser rates ran out. But they couldnt, because banks tightened their valuations massively, meaning everyone was underwater, so they had to sell, forcing the market down and leading to the cycle repeating.
I agree things can happen fast, especially when real fear hits the sellers, but what is there to induce this fear now? Like I said, only China going pop will bring the Aussie housing market down any time soon - even rate rises can be soaked up by people cutting their massive discretionary spending on consumables.
Sep 28th 2010, 3:24 am
#34
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Re: The Great Australian Housing Bubble
the housing market over here is tied in so massivley to all the banks that i would think the government will do all it can to stop it going belly up.
Sep 28th 2010, 3:29 am
#35
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Re: The Great Australian Housing Bubble
Sep 28th 2010, 3:32 am
#36
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Re: The Great Australian Housing Bubble
Aussie has all this to come, so a big crash way, way off in the future.
Sep 28th 2010, 3:36 am
#38
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Re: The Great Australian Housing Bubble
Are you prepared to catch a falling knife and buy into instant negative equity? I'm going to enjoy the footloose lifestyle afforded by renting for a while. Try out a few different areas and maybe even countries. Enjoy my disposable income (lots of savings). If I didn't have savings then I would be renting and saving as much as I could.
Sep 28th 2010, 3:40 am
#40
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Re: The Great Australian Housing Bubble
Yet. Look at the total value of mineral exports and the total value of housing market investment per annum. Subtract 20% from each and look at the potential effect on GDP. Now subtract 33% and look at the potential effect on GDP. etc. etc.
Are you prepared to catch a falling knife and buy into instant negative equity? I'm going to enjoy the footloose lifestyle afforded by renting for a while. Try out a few different areas and maybe even countries. Enjoy my disposable income (lots of savings). If I didn't have savings then I would be renting and saving as much as I could.
Are you prepared to catch a falling knife and buy into instant negative equity? I'm going to enjoy the footloose lifestyle afforded by renting for a while. Try out a few different areas and maybe even countries. Enjoy my disposable income (lots of savings). If I didn't have savings then I would be renting and saving as much as I could.
I cannot honestly say that a future of giving my money to these people is worse than going into negative equity for 10 years. I really have no fear of that at all any more.
Sep 28th 2010, 3:43 am
#41
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Re: The Great Australian Housing Bubble
I have rented and owned many times a piece, and I can say that with the exception of one landlord, every single other one was a major league arsehole who took money but had to be begged for the smallest improvement of repair to the property. One I even had to threaten with serious legal action to make them bring the property up to legal standard - which they did not by the way and I ended up moving out - so much for the law which is 100% biased in favour of owners.
I cannot honestly say that a future of giving my money to these people is worse than going into negative equity for 10 years. I really have no fear of that at all any more.
I cannot honestly say that a future of giving my money to these people is worse than going into negative equity for 10 years. I really have no fear of that at all any more.
Sep 28th 2010, 3:46 am
#42
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Location: Adelaide, South Australia
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Re: The Great Australian Housing Bubble
Also, I assume based on your 45% equity stake that you did not buy in recent years? If so then I'm not sure how relevant your situation is to this discussion about the current market.
Again: I am saying that in my situation it is still cheaper to buy than to rent.
Sep 28th 2010, 3:47 am
#43
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Re: The Great Australian Housing Bubble
Negative equity is only a problem is you're intending on moving or your life profile is one that dictates lots of moves - so then you must be careful. Anyone with a good job and intending on settling down in one place for 25 years is not easily scared by negative equity. But paying off the mortgage of some prick that won't install a heater in your front room when you can see your breath in the air is no way to proceed through life.
*bargain basement but not cheap - this was INCREDIBLY expensive because of its location. Landlord was a farmer and didn't give a shit about his tenants. I broke the contract and went elsewhere.
Sep 28th 2010, 3:51 am
#44
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Re: The Great Australian Housing Bubble
I have absolutely no idea what that means.
We bought our house in 2007, which is very recent indeed. The market has not changed considerably since then, so I believe my situation is entirely relevant to the current market.
Again: I am saying that in my situation it is still cheaper to buy than to rent.
We bought our house in 2007, which is very recent indeed. The market has not changed considerably since then, so I believe my situation is entirely relevant to the current market.
Again: I am saying that in my situation it is still cheaper to buy than to rent.
Sep 28th 2010, 3:55 am
#45
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Re: The Great Australian Housing Bubble
Negative equity is only a problem is you're intending on moving or your life profile is one that dictates lots of moves - so then you must be careful. Anyone with a good job and intending on settling down in one place for 25 years is not easily scared by negative equity. But paying off the mortgage of some prick that won't install a heater in your front room when you can see your breath in the air is no way to proceed through life.
