glittababe

we worked out a while back that we would be in a better position finacially to stay in rented accommodation. We have mates that have come out, brought then sold to go back into rented; one family have done it purely on the fact that they cannot afford $3000 a month. Our concern is that if and when we do get a mortgage, we won't be able to afford to do anything else; no evenings out, clothes shopping, holidays etc If we stay in rented we can do all of those things plus still save money towards our super. Its a difficult call!

temptininnit

The whole situation is madness, is it just me or is it all very precarious?

Where will it end?

NKSK version 2

Having been brought up in a financially conservative manner, I am used to not paying more than you can afford and to sticking at or below 3x income.
(our mortgage in the UK is 350 GBP!!)

When I hear of people gettng 5x income, it seems incredibly reckless.

temptininnit

I'm with you, it does seem to be the norm tho!

steveyp

House prices are a matter of opinion, debt is a fact. I am sure a few people in WA will learn that over the next few years.

renth

I agree. No one knows when it will happen, but happen it will and it's not just about house prices, it's the Australian addiction to debt.

I've admitted I'm not a sophisticated investor but I'd never heard of "leveraged investing" 'till I came to Oz.

So many people here do it - borrow money to invest. It makes no sense to me, you invest your surplus, not money you haven't got

So when the debt chickens come home to roost they will do so big time and we won't hear the end of it, there will be endless stories on Today Tonight about "battlers" forced to sell their jetskis and V8 utes .

It happened before with Keating's "recession we had to have" and will happen again IMO.

themerlin

It's bloody risky but it can pay off, if you had borrowed a few years ago to buy an investment property in Perth you would have done OK

The banks are always trying to sell loans and investments to me

bridie

No way we could afford it, OH doesnt even get paid that much!

Thankfully our mortgage is only $800 a month otherwise we'd still be renting!!

007

In recent years, the banks are to blame for the inflated property prices. Basically because they started lending stupid amounts of money to people, usually working families.

If families have more money to spend on Real Estate, of course prices will go north, especially when supply was low in 2002/03.

The banks don't care about the risks anymore, because they just insist on risky mortgagees getting mortgage insurance.

many families starting out don't really remember the debilitating recession in the 80's where interest rates hit 17% and 1/4 of people were unemployed, so they borrow 5x their total income without a 2nd thought.

The only people winning are greedy investors who bought multiple units pre 2003 on the cheap, and have sold up recently investing in Super while taking advantage of the tax-free perks. And of course the banks have been recording record profits with the astronomical interest they are racking in.

I'm really not sure how the average family with 2 kids (and a total income of probably $80-100k) can afford the average mortgage in Australia anymore.

Vim Fuego

So, banks are to blame for high property prices ... maybe McDonalds is to blame for fat kids (and adults come to that)?

Personal responsibility has to come into play at some point ... yes I agree that the amount that can be borrowed should be cut back but at the end of it only the individual is responsible for their debts.

I see lots of plasma TVs flying off the shelves (that will break sooner than a CRT) and a lot of 4x4 monstrosities kicking around, personally I think 'a correction' is well overdue to sort out the complacent buggers.

It's a very modern trend to blame someone other than individual for any given problem, and it annoys the **** out of me.

themerlin

They will be blaming road deaths on car manufactures soon, for creating cars that go over the speed limit

Oh and drink driving on the beer companies.

themerlin

Funny thing is you can still find bargains out there that might need a little bit of work, problem is people want there first home to be a palace all new and shiny.

chels

Good to hear that, presumably that's what you've found in QLD? In Sydney, the (minor) renovation projects get a lot of interest from people like us - wanting to do a little bit of work, not too much - who can't afford renovated houses. The problem is that such interest is bumping up prices at auction, and people are paying way over reserves to get their hands on so-called bargains.

007

Of course individuals should take responsibility for their finances. That goes without saying.

What I was getting at was that banks have deliberately lent out more in recent years to push property prices up dramatically.

The higher the prices for a unit/house, the more people have to borrow, the more profit the bank makes.

It was all very deliberate.

007

Nah we just blame the english for those things.