Housing affordability crisis
Oct 8th 2007, 11:03 pm
#16
Proudly Deplorable
Joined: May 2003
Location: Alloha snack bar
Posts: 24,246
Re: Housing affordability crisis
They have a high proportion of Plasmas and 4wds too, double-whammy 
Granted, some areas (and jobs) will be more prone to a correction than others and, as usual, it will be the people who are least able to cope with it (or chose to blatantly ignore it) that will suffer first. And they are the ones living in sin with debt that they can't service.
Then there will be inevitable tedious whining on Today Tonight about 'The Battlers' being down-trodden and bankrupt when in fact a little forward planning would have helped alleviate the situation.
For example, if you have some spare cash (yes, not everyone does) then put it against the mortgage and have a penalty-free redraw facility so if the rainy day (or month) comes then the cash is there .... otherwise it is neatly reducing the interest and period on the loan.
And credit cards ... have a Visa debit card for purchases overseas or over the internet.
The correction will come, it has to, or as the research the other night showed, no ordinary Joe will be able to afford a house. You only have to look at the stats and trends from the past to see bust has to follow boom.
My principles?
- Live within your means
- Be happy with what you've got
- Try not to impulse buy, if you want something then wait a week and see if you still want it
- Don't treat 'spare' cash as spare, make it work
- Take pleasure in the details
- Chill out, it's just a ride, just a ride.
Granted, some areas (and jobs) will be more prone to a correction than others and, as usual, it will be the people who are least able to cope with it (or chose to blatantly ignore it) that will suffer first. And they are the ones living in sin with debt that they can't service.
Then there will be inevitable tedious whining on Today Tonight about 'The Battlers' being down-trodden and bankrupt when in fact a little forward planning would have helped alleviate the situation.
For example, if you have some spare cash (yes, not everyone does) then put it against the mortgage and have a penalty-free redraw facility so if the rainy day (or month) comes then the cash is there .... otherwise it is neatly reducing the interest and period on the loan.
And credit cards ... have a Visa debit card for purchases overseas or over the internet.
The correction will come, it has to, or as the research the other night showed, no ordinary Joe will be able to afford a house. You only have to look at the stats and trends from the past to see bust has to follow boom.
My principles?
- Live within your means
- Be happy with what you've got
- Try not to impulse buy, if you want something then wait a week and see if you still want it
- Don't treat 'spare' cash as spare, make it work
- Take pleasure in the details
- Chill out, it's just a ride, just a ride.
Oct 9th 2007, 12:11 am
#17
Forum Regular
Joined: Aug 2004
Posts: 110
Re: Housing affordability crisis
I agree with you Vim Fuego. Have been wondering - is it possible for a market to keep going up? There has to be a correction somewhere, and usually when it comes, it usually will be nasty for those who take more than they can chew. It's all perceived confidence. Many ppl talk about capital gain to make up for huge mortgages beyond their limits, but this works only in a rising market. Just my humble opinion.
Oct 9th 2007, 12:33 am
#18
Joined: May 2007
Posts: 5,133
Re: Housing affordability crisis
Or even better get a credit card that pays cash back and an offset account.
Works well if you can be trusted to pay your credit card off every month (the catch)
You get your 1-5% cashback plus the debt is on your credit card for that month with the cash sitting in your offset account, it really does add up.
Works well if you can be trusted to pay your credit card off every month (the catch)
You get your 1-5% cashback plus the debt is on your credit card for that month with the cash sitting in your offset account, it really does add up.
Oct 9th 2007, 12:35 am
#19
Joined: May 2007
Posts: 5,133
Re: Housing affordability crisis
Nothing wrong with credit cards if they are used sensibly and you are disciplined - in fact you can make money out of them. I have credit cards that give Qantas trequent flyer miles and have no annual fee. After 18 months of use I now have enough miles to get the 3 of us to the east coast and back - just for buying everything on these cards and paying the whole balance off every month. A good deal I reckon.
Oct 9th 2007, 12:40 am
#20
Joined: May 2007
Posts: 5,133
Re: Housing affordability crisis
I agree with you Vim Fuego. Have been wondering - is it possible for a market to keep going up? There has to be a correction somewhere, and usually when it comes, it usually will be nasty for those who take more than they can chew. It's all perceived confidence. Many ppl talk about capital gain to make up for huge mortgages beyond their limits, but this works only in a rising market. Just my humble opinion.
Take the surprise at the recent 'sub-prime' crisis in the US, now, yes, the markets have more than made their losses and yes, if you in it for the long haul (5 years+) then you will likely make money but it doesn't take too many 'global co-incidences' to plunge the whole economy into chaos and people will be sitting on a shedload of debt and unable to realise their equity for love nor money.
That's the trouble with equity in property, it takes a long time to get at and you have to live somewhere. S'all relative innit?
Oct 9th 2007, 4:16 am
#21
Lost in BE Cyberspace
Joined: May 2006
Posts: 6,600
Re: Housing affordability crisis
Hi there
What’s the real situation about the lack of affordable housing in Australia??
Do you think the housing stress is growing and frustrating more and more people who can not get into the housing market.
As the rental supply is low, price of rentals is increasing; hence some gets stuck in the rental market and can’t even take an average mortgage isn’t it ???
.
What’s the real situation about the lack of affordable housing in Australia??
Do you think the housing stress is growing and frustrating more and more people who can not get into the housing market.
As the rental supply is low, price of rentals is increasing; hence some gets stuck in the rental market and can’t even take an average mortgage isn’t it ???
.
The current situation is just unsustainable. Rental costs, what people can afford (or are willing) to pay to live in a property, are a much truer indication of affordability and of property value.
$400 per week would see you renting an average $400,000 home or owning a property of around $225,000, and once the incentive of rising markets is stripped away, the second option becomes much less attractive. Rental demand grows, but rental yield still doesn't cover costs (particularly for those landlords who came late to the buy to let market). Leads to a surge of properties being put up for sale in a depressed market. Leads to a further depressed market.
All resulting in a rather painful correction.
All in my humble opinion of course.
Andy
Oct 9th 2007, 4:53 am
#22
Forum Regular
Joined: Aug 2004
Posts: 110
Re: Housing affordability crisis
The whole situation is distorted by the perception that the equity gained in a rising market is 'real' money. For the single property owning majority, it isn't. It just gets transferred from one property to the next. And as people have a tendency to want to 'trade up', it buys a smaller and smaller proportion of the next property, with a ever greater proportion being serviced by debt.
The current situation is just unsustainable. Rental costs, what people can afford (or are willing) to pay to live in a property, are a much truer indication of affordability and of property value.
$400 per week would see you renting an average $400,000 home or owning a property of around $225,000, and once the incentive of rising markets is stripped away, the second option becomes much less attractive. Rental demand grows, but rental yield still doesn't cover costs (particularly for those landlords who came late to the buy to let market). Leads to a surge of properties being put up for sale in a depressed market. Leads to a further depressed market.
All resulting in a rather painful correction.
All in my humble opinion of course.
Andy
The current situation is just unsustainable. Rental costs, what people can afford (or are willing) to pay to live in a property, are a much truer indication of affordability and of property value.
$400 per week would see you renting an average $400,000 home or owning a property of around $225,000, and once the incentive of rising markets is stripped away, the second option becomes much less attractive. Rental demand grows, but rental yield still doesn't cover costs (particularly for those landlords who came late to the buy to let market). Leads to a surge of properties being put up for sale in a depressed market. Leads to a further depressed market.
All resulting in a rather painful correction.
All in my humble opinion of course.
Andy
I think one of the factors for the current housing price levels is investor
driven. It's scary when you hear of average salary workers jumping on to the wagon in rolling their housing debts to buy investment properties 1,2,3......
the winners will be those who have bought much earlier, has gained equity
and the holding power(to weather any storms thru the next 10yrs?), but not those who enter the market recently, esp this year. My gut feel is the market will run out of steam the next couple years? Any input on this?
Many are wanting to buy their first homes, but its crazy at the moment, and first home buyers are the ones who suffer if buying at the peak .......
Pls tell if Im in the wrong direction.........
Oct 9th 2007, 5:39 am
#23
Living in Perthection
Joined: Mar 2003
Location: Wickedy WA WA...
Posts: 1,868
Re: Housing affordability crisis
Nothing wrong with credit cards if they are used sensibly and you are disciplined - in fact you can make money out of them. I have credit cards that give Qantas trequent flyer miles and have no annual fee. After 18 months of use I now have enough miles to get the 3 of us to the east coast and back - just for buying everything on these cards and paying the whole balance off every month. A good deal I reckon.
how hard can it be to manage your day to day finances? Surerly people dont go oh I take home $5K every month but ive got a credit card so i'll go and buy that $8K TV, that'll pay for it.... or i'll pay a bit off over the next few months.
Simple rule, if you cant afford it dont buy it, if you can afford it it makes sense to buy it on a credit card.
I put everything possible on credit card because I know i'll pay it off at the end of each month, in the last 5 years we've had 2 return flights to Cairns, 2 return to Brisbane and a flight from Sydney to Perth each, i've just cleared the balance and it's got us 2 return flights to Tokyo.
It's also linked to our mortgage so instead of spending it in cash and not having that money offset against the mortgage its counteracting the interest up until the time the credit card is paid off.
Oct 9th 2007, 5:52 am
#24
Where traffic lights rule
Joined: Aug 2006
Location: Brighton QLD
Posts: 2,460
Re: Housing affordability crisis
Will tell you in 5/10 years, hindsight is a wonderful thing
But I agree, these people buying loads of investments they can't afford are taking a huge risk, kind of like taking you life savings and putting in on a horse.
But the bank do seem a little more sensible then there US cousins, over there could could get a loan where the repayments didn't even cover the interest so the value of the loan goes up over time
But I agree, these people buying loads of investments they can't afford are taking a huge risk, kind of like taking you life savings and putting in on a horse.
But the bank do seem a little more sensible then there US cousins, over there could could get a loan where the repayments didn't even cover the interest so the value of the loan goes up over time
Oct 9th 2007, 7:16 am
#25
has lost The Game
Joined: Apr 2005
Location: Chippendale, Sydney
Posts: 8,735
Re: Housing affordability crisis
The whole situation is distorted by the perception that the equity gained in a rising market is 'real' money. For the single property owning majority, it isn't. It just gets transferred from one property to the next. And as people have a tendency to want to 'trade up', it buys a smaller and smaller proportion of the next property, with a ever greater proportion being serviced by debt.
This is very true. You should also take into account the amount that you will pay in interest over a period of time, and compare it with the potential equity gain in the property. Interest payments can make a real dent in the profitability of a property over a period.
A friend of mine is a mathematician, and she calculated that it wasn't worth her taking a mortgage at her age in life, because the potential equity gains would be wiped out by the interest she would have to pay over the term she would have left.
So she's decided to rent for good now. That must be a fairly scary decision to have come to.
S
Oct 10th 2007, 1:28 am
#26
has lost The Game
Joined: Apr 2005
Location: Chippendale, Sydney
Posts: 8,735
Re: Housing affordability crisis
I think some of it can be attributed to people wanting more than they can afford, you have to be realistic and if a McMansion in the 'perfect' suburb is your aim (as pushed by the media and estate agents) then maybe get there in stages rather than take out a huge mortgage (you can't afford) and fill the said palace with Stupid Size plasma TVs ...
Which still have a crap picture, in my opinion ... woh, another thread
Which still have a crap picture, in my opinion ... woh, another thread
Looks like the plasma tv may not be an issue soon...
Link
S
Oct 10th 2007, 2:00 am
#27
Joined: May 2007
Posts: 5,133
Re: Housing affordability crisis
Oct 10th 2007, 2:06 am
#28
has lost The Game
Joined: Apr 2005
Location: Chippendale, Sydney
Posts: 8,735
Re: Housing affordability crisis
S
Oct 10th 2007, 4:59 am
#29
BE Enthusiast
Joined: Apr 2005
Location: Gold Coast
Posts: 493
Re: Housing affordability crisis
An interesting topic!!
Certainly in SE QLD, it is purely a supply and demand issue in that demand far outstrips supply. Just try and purchase land anywhere around the Gold Coast area and see what I mean.
SE QLD is currenlty experiencing a migration surge, both from overseas and interstate, as well as huge inward investment from overseas with the likes of Tiger Airways opening up Gold Coast Airport.
Is there a crisis? Well if interest rates go up much beyond 8%,then things can get a little uncomfrtable for those that are maxed out. However, I don't think there will be any sort of "correction"... more of a stabilisation period.
Fortunately, the banking sector is a little different here compared to the US and the 'sub-prime' crisis happening over there where you could literally get a mortgage without an income. Here, the banks do have stringent affordability tests with interest rate increases built into their affordability criteria.
Also worth noting is that continued low levels of unemployment has created a feeling of security when taking on a larger home debt... much more so that 10-20 years ago when we had the last propert boom/bust situation.
Certainly in SE QLD, it is purely a supply and demand issue in that demand far outstrips supply. Just try and purchase land anywhere around the Gold Coast area and see what I mean.
SE QLD is currenlty experiencing a migration surge, both from overseas and interstate, as well as huge inward investment from overseas with the likes of Tiger Airways opening up Gold Coast Airport.
Is there a crisis? Well if interest rates go up much beyond 8%,then things can get a little uncomfrtable for those that are maxed out. However, I don't think there will be any sort of "correction"... more of a stabilisation period.
Fortunately, the banking sector is a little different here compared to the US and the 'sub-prime' crisis happening over there where you could literally get a mortgage without an income. Here, the banks do have stringent affordability tests with interest rate increases built into their affordability criteria.
Also worth noting is that continued low levels of unemployment has created a feeling of security when taking on a larger home debt... much more so that 10-20 years ago when we had the last propert boom/bust situation.
Last edited by longreach; Oct 10th 2007 at 5:02 am.
Oct 10th 2007, 6:30 am
#30
BE Enthusiast
Thread Starter
Joined: Jan 2007
Location: Western Australia
Posts: 455
Re: Housing affordability crisis
Generally speaking people in Australia would want to buy a house instead of renting and they borrow too much money making it hard for most households.
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