The Great Australian Housing Bubble
#62
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Re: The Great Australian Housing Bubble
I don't see your point. The renter still ends up with a lump sum to do with whatever they like. Whether that is investing in property or some other investment or keep on demand deposit. Average rental yields in Australia are currently 3.5%, demand deposits are 6%. It's a no-brainer.
#63
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Re: The Great Australian Housing Bubble
surely the owner of the property would have an assett to sell or rent?
#64
Re: The Great Australian Housing Bubble
So put very simply because this is a simple point, in 25 years' time. Person A has paid 300,000 to his landlord and is then asked to leave and has 300,000 in savings, and Person B has paid 300,000 to the bank and now has an asset worth 300,000 and 300,000 in savings. So Person B has 600k and Person A has 300k - and Person A's landlord has way more than either, probably.
Last edited by Seneca21; Sep 28th 2010 at 4:43 am.
#65
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Re: The Great Australian Housing Bubble
Exactly. Person A rents a 300,000 house for 25 years, Person B pays mortgage on a 300,000 house for 25 years. In that time both people pay 1000 per month for their accommodation and pay 1000 per month into a savings account.
So put very simply because this is a simple point, in 25 years' time. Person A has paid 300,000 to his landlord and is then asked to leave and has 300,000 in cash, and Person B has paid 300,000 to the bank and now has an asset worth 300,000 and 300,000 in savings. So Person B has 600k and Person A has 300k.
So put very simply because this is a simple point, in 25 years' time. Person A has paid 300,000 to his landlord and is then asked to leave and has 300,000 in cash, and Person B has paid 300,000 to the bank and now has an asset worth 300,000 and 300,000 in savings. So Person B has 600k and Person A has 300k.
#66
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Re: The Great Australian Housing Bubble
I'm guessing there is an assumption that renting is cheaper than buying?
#67
Re: The Great Australian Housing Bubble
You talk about 'recovery' in the UK market like it's a given fact too.
No offence, but people are often irrational when it comes to property. The heart rules the head. If it were a business they would be a lot more cold and analytical.
#69
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Re: The Great Australian Housing Bubble
it would appear that renting v owning/mortgage is a personal choice.
on your model, i'll quite happily buy properties and have others pay for them and then have assets to own
Last edited by Rod-Helen-Poppy; Sep 28th 2010 at 4:57 am.
#70
Re: The Great Australian Housing Bubble
My post makes it clear that the capital and interest payments of Person B comes to 1000 every month. Revisit it and tell me if you need any assistance. You were so polite to me I can only return the favour.
#71
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Re: The Great Australian Housing Bubble
Also person A only has $200k in savings and the government has $100k in its coffers.
#73
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Re: The Great Australian Housing Bubble
You can't compare Ireland or the US, Spain or any of the other recent big housing busts to Australia's. They are completely different and were a result of massive over supply and lax lending. Here the planning and land release is set to always try and maintain more demand than supply, and it's always been quite hard to get a mortgage, aside from homestart's 100% loans a couple of years ago that is. No more of them, 20% min or you pay insurance to the bank. Only unemployment will trigger a bust here, almost forgot to add the negative gearing chestnut that adds another dimension to things here.
The markets can stay irrational longer than you can stay solvent.... or married....
The markets can stay irrational longer than you can stay solvent.... or married....
Or another way to look at it is, if current trends (20% pa price rises) in some areas of Melbourne for example were to continue, then a 700k house today would in 15 years cost 9mil, moving from 8-9 times average earnings today to around 30 times average earnings in 2025 (assuming ~3% inflation).
There is no way that is sustainable. Everyone knows that. So having accepted that, what are the scenarios? One is a long period of stagnation, the other is a sharp correction. The longer and faster the bubble inflates the likelier the sharp correction. This simply reflects the human behaviour that sees people become more and more desparate as the stakes increase e.g. "I have to get in now or I will never be able to afford it" or "I have to sell because its going to crash".
We've all witnessed that behaviour before. Dot-com bust, Irish housing market, Spanish housing market, US housing market etc.
#74
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Re: The Great Australian Housing Bubble
Sweden, Japan, Amsterdam (although that's going back a century or two), there are many examples. You also have an opportunity cost of the capital employed in the UK. That capital could be in UBank earning 6% too.
#75
Re: The Great Australian Housing Bubble
It's a very real cost. More info... http://en.wikipedia.org/wiki/Opportunity_cost
Sweden, Japan, Amsterdam (although that's going back a century or two)
there are many examples.
You also have an opportunity cost of the capital employed in the UK. That capital could be in UBank earning 6% too.