Housing bubble in Australia
#347
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Joined: Sep 2009
Posts: 708
Re: Housing bubble in Australia
I'm sure that the Australian press would never allow it's factual and independent reporting of the events of the day, to be influenced by the the fact that Real Estate advertising produces a regular and much needed stream of income
#348
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Joined: Jun 2005
Posts: 9,316
Re: Housing bubble in Australia
Consider this. Where does swigski get most of his housing bubble posts from? He managed to find them in the Aussie press without any problems. And in comparison, how many counter ones are posted. I still reckon it's evens stevens at the mo.
Last edited by MartinLuther; Feb 13th 2010 at 2:28 am.
#349
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Joined: Jun 2005
Posts: 9,316
Re: Housing bubble in Australia
"Housing bubble still not crashed." More news tomorrow.
repeat until bubble pops....
Until the crash happens anything in the paper can only be opinion and not reportage.
#351
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Joined: Nov 2009
Location: Dullsville
Posts: 672
Re: Housing bubble in Australia
Fairfax Media (over 200 publications, including newspapers The Age, etc) owns APM (Australian Property Monitors). APM sell property reports and data to Real Estate Agents, Banks, property developers, etc. It's in Fairfax's interests to 'big up' property as always going up because they don't sell as many reports if property is heading downwards. No one wants to buy property reports if the market is said to be going down - why bother?, look at other investment vehicles like shares, bonds, gold.
Over 60% of The West's (WA newspaper) revenue comes from Real Estate. LOL.
#352
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Joined: Nov 2009
Location: Dullsville
Posts: 672
Re: Housing bubble in Australia
This one's for ABCDiamond, I think he'll find this interesting.
Sydney Morning Herald 13th Feb 2010
http://www.smh.com.au/business/relax...0212-nxh4.html
Sydney Morning Herald 13th Feb 2010
http://www.smh.com.au/business/relax...0212-nxh4.html
All this Greek stuff isn't exactly good for the old fear factor but let's keep it in perspective. If you look at the problem on a debt-to-GDP basis the Greek government has a debt that equates to 125 per cent of GDP. Let's put this in human terms (apologies to economists).
This is like an Australian family earning $100,000 a year having a mortgage of $125,000 and on that equivalent the Greek government is cruising because the average adult wage in Australia is about $64,906 and the average mortgage is $354,000. In other words, the average mortgaged adult in Australia has a debt-to-GDP ratio of 545 per cent. Put another way, Greece is like an average Australian with an $81,000 mortgage and the average Australian is worse off than Zimbabwe (300 per cent debt-to-GDP ratio), Japan (192 per cent), the US (60 per cent) and Britain (47 per cent). Not too flash is it. On this basis, the US is cruising, Britain is flush and Greece can still afford to buy a boat.
I spoke to an economist before I made this analogy. I asked at what point does debt as a percentage of GDP become a problem. His reply was "When people think it's a problem."
And this is why Greece is now the problem. Because people think it is. It is also why the US dollar is not a problem. Because people don't think it is. The US economy's annual income can easily fund their debt repayments, and the greenback will remain the world's reserve currency and a safe haven as long as that's the case.
So when does your mortgage become a problem? The answer is the same, "when the bank thinks it's a problem".
When I first got a mortgage the banks had a rule of thumb that said our relationship would become a problem if my interest costs got over 30 per cent of my gross income. But with an average mortgage of $354,000 and a variable mortgage rate of 6.74 per cent the average mortgaged adult is paying $23,859 in interest a year. That's 36.7 per cent of the average gross income, 47 per cent of net income and 58 per cent if they repay capital as well. The average mortgaged adult is spending well over half their total net income on servicing debt.
Clearly the banks have relaxed a little since my day, no doubt because the median house price is approaching $500,000, meaning the average mortgage is only about 70 per cent of the average house value, which gives the banks about 30 per cent of your house or $146,000 of your equity as a buffer before they really need to worry about your ability to service the interest. With that sort of cushion the banks aren't really too fussed about your income and whether you have enough income to eat, they'll only start worrying when your debt gets bigger than your asset.
The fact is, Greece is better off than the average Australian. The only reason it is under the pump is because people think it's a problem. In the same way the only reason the US dollar isn't in a hole is because people don't think it's a problem and the only reason you aren't in a panic to pay off your mortgage is because you don't think it's a problem. Which, as long as house prices hold up, it isn't.
But debt is becoming what it used to be, a liability not an opportunity and while this continues the sharemarket will increasingly discount companies with debt issues. Speculation is out, preservation is in. The question now is how long it goes on.
Unfortunately the last perception of debt lasted 22 years. Let's hope this one doesn't. Parties are so much more fun.
Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today.
This is like an Australian family earning $100,000 a year having a mortgage of $125,000 and on that equivalent the Greek government is cruising because the average adult wage in Australia is about $64,906 and the average mortgage is $354,000. In other words, the average mortgaged adult in Australia has a debt-to-GDP ratio of 545 per cent. Put another way, Greece is like an average Australian with an $81,000 mortgage and the average Australian is worse off than Zimbabwe (300 per cent debt-to-GDP ratio), Japan (192 per cent), the US (60 per cent) and Britain (47 per cent). Not too flash is it. On this basis, the US is cruising, Britain is flush and Greece can still afford to buy a boat.
I spoke to an economist before I made this analogy. I asked at what point does debt as a percentage of GDP become a problem. His reply was "When people think it's a problem."
And this is why Greece is now the problem. Because people think it is. It is also why the US dollar is not a problem. Because people don't think it is. The US economy's annual income can easily fund their debt repayments, and the greenback will remain the world's reserve currency and a safe haven as long as that's the case.
So when does your mortgage become a problem? The answer is the same, "when the bank thinks it's a problem".
When I first got a mortgage the banks had a rule of thumb that said our relationship would become a problem if my interest costs got over 30 per cent of my gross income. But with an average mortgage of $354,000 and a variable mortgage rate of 6.74 per cent the average mortgaged adult is paying $23,859 in interest a year. That's 36.7 per cent of the average gross income, 47 per cent of net income and 58 per cent if they repay capital as well. The average mortgaged adult is spending well over half their total net income on servicing debt.
Clearly the banks have relaxed a little since my day, no doubt because the median house price is approaching $500,000, meaning the average mortgage is only about 70 per cent of the average house value, which gives the banks about 30 per cent of your house or $146,000 of your equity as a buffer before they really need to worry about your ability to service the interest. With that sort of cushion the banks aren't really too fussed about your income and whether you have enough income to eat, they'll only start worrying when your debt gets bigger than your asset.
The fact is, Greece is better off than the average Australian. The only reason it is under the pump is because people think it's a problem. In the same way the only reason the US dollar isn't in a hole is because people don't think it's a problem and the only reason you aren't in a panic to pay off your mortgage is because you don't think it's a problem. Which, as long as house prices hold up, it isn't.
But debt is becoming what it used to be, a liability not an opportunity and while this continues the sharemarket will increasingly discount companies with debt issues. Speculation is out, preservation is in. The question now is how long it goes on.
Unfortunately the last perception of debt lasted 22 years. Let's hope this one doesn't. Parties are so much more fun.
Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today.
#353
Account Open
Joined: Jan 2005
Location: Brisbane
Posts: 4,298
Re: Housing bubble in Australia
If that is the standard of business journalism in the Sydney morning herald, then I'd encourage anyone with an ounce of sense to apply for a position as a freelance writer.
#354
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Joined: Jun 2005
Posts: 9,316
Re: Housing bubble in Australia
Even more of a worry: "Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today".
#355
Banned
Joined: May 2007
Location: Sydney
Posts: 564
Re: Housing bubble in Australia
Lets see what affect using NET income has and the actual Sydney median price?
Using the same figures as ABC.
Combined NET income = $101,400
57.4% of that = $4850 per month in repayments
That would cover a mortgage of about $700,000
However a mortgage for the median SYDNEY house would be about $510,000 with repayments of about $3530 per month, or 41.7% of the income.
A median house with two people earning median wages with repayments at 41.7% of NET income Considering the figure where mortgage repayments are considered at stress levels is 30%
Does this look like an affordable option for housing affordability?
Using the same figures as ABC.
Combined NET income = $101,400
57.4% of that = $4850 per month in repayments
That would cover a mortgage of about $700,000
However a mortgage for the median SYDNEY house would be about $510,000 with repayments of about $3530 per month, or 41.7% of the income.
A median house with two people earning median wages with repayments at 41.7% of NET income Considering the figure where mortgage repayments are considered at stress levels is 30%
Does this look like an affordable option for housing affordability?
That's 36.7 per cent of the average gross income, 47 per cent of net income and 58 per cent if they repay capital as well. The average mortgaged adult is spending well over half their total net income on servicing debt.
#356
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Joined: Nov 2009
Location: Dullsville
Posts: 672
Re: Housing bubble in Australia
I'm surprised the media hasn't discussed this more.
This is Australia's achilles heel.
#357
Re: Housing bubble in Australia
What would the figure work out to, assuming a couple of interest rate rises and an increase in council/water/electricity rates...shudder
#358
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Joined: Mar 2004
Location: Sydney
Posts: 1,628
Re: Housing bubble in Australia
On our next place we buy we'll be spending more than 50% of our net income on mortgage payments but it will mean we just reduce the amount we are able to save each week. I've done my calculations any we'll not have to reduce our current standard of living until mortgage rates hit double figures.
Percentages of income and average house prices aren't always the best figures to use as there are just to many variables.
#359
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Posts: n/a
Re: Housing bubble in Australia
Australian Property Monitors Figures issued Aug 2009 for the Real estate Industry
Adelaide Jun-09 $417,404
Brisbane Jun-09 $420,861
Canberra Jun-09 $488,213
Darwin Jun-09 $549,035
Hobart Jun-09 $302,425
Melbourne Jun-09 $465,113
Perth Jun-09 $476,180
Sydney Jun-09 $547,193
http://www.homepriceguide.com.au/med...es_JuneQ09.pdf
Australian Property Monitors Figures issued Nov 2009 for the Real estate Industry
Adelaide Jun-09 $408,132
Brisbane Jun-09 $426,403
Canberra Jun-09 $488,293
Darwin Jun-09 $528,650
Hobart Jun-09 $295,534
Melbourne Jun-09 $459,194
Perth Jun-09 $485,933
Sydney Jun-09 $549,213
http://www.homepriceguide.com.au/med...ptemberQ09.pdf
Australian Property Monitors Figures issued Feb 2010 for the Real estate Industry
Adelaide Jun-09 $406,936 revised by -$10,468.00 or -2.5% from original
Brisbane Jun-09 $426,324 revised by $5,463.00 or 1.3% from original
Canberra Jun-09 $488,608 revised by $395.00 or 0.1% from original
Darwin Jun-09 $530,058 revised by -$18,977.00 or -3.5% from original
Hobart Jun-09 $292,074 revised by -$10,351.00 or -3.4% from original
Melbourne Jun-09 $451,783 revised by -$13,330.00 or -2.9% from original
Perth Jun-09 $484,120 revised by $7,940.00 or 1.7% from original
Sydney Jun-09 $553,583 revised by $6,390.00 or 1.2% from original
http://www.homepriceguide.com.au/med...ecemberQ09.pdf
Australian Bureau of Statistics Figures issued Feb 2010
Adelaide Jun-09 $362,000
Brisbane Jun-09 $420,000
Canberra Jun-09 $469,000
Darwin Jun-09 $465,000
Hobart Jun-09 $312,000
Melbourne Jun-09 $403,000
Perth Jun-09 $455,000
Sydney Jun-09 $490,000
Adelaide Jun-09 $417,404
Brisbane Jun-09 $420,861
Canberra Jun-09 $488,213
Darwin Jun-09 $549,035
Hobart Jun-09 $302,425
Melbourne Jun-09 $465,113
Perth Jun-09 $476,180
Sydney Jun-09 $547,193
http://www.homepriceguide.com.au/med...es_JuneQ09.pdf
Australian Property Monitors Figures issued Nov 2009 for the Real estate Industry
Adelaide Jun-09 $408,132
Brisbane Jun-09 $426,403
Canberra Jun-09 $488,293
Darwin Jun-09 $528,650
Hobart Jun-09 $295,534
Melbourne Jun-09 $459,194
Perth Jun-09 $485,933
Sydney Jun-09 $549,213
http://www.homepriceguide.com.au/med...ptemberQ09.pdf
Australian Property Monitors Figures issued Feb 2010 for the Real estate Industry
Adelaide Jun-09 $406,936 revised by -$10,468.00 or -2.5% from original
Brisbane Jun-09 $426,324 revised by $5,463.00 or 1.3% from original
Canberra Jun-09 $488,608 revised by $395.00 or 0.1% from original
Darwin Jun-09 $530,058 revised by -$18,977.00 or -3.5% from original
Hobart Jun-09 $292,074 revised by -$10,351.00 or -3.4% from original
Melbourne Jun-09 $451,783 revised by -$13,330.00 or -2.9% from original
Perth Jun-09 $484,120 revised by $7,940.00 or 1.7% from original
Sydney Jun-09 $553,583 revised by $6,390.00 or 1.2% from original
http://www.homepriceguide.com.au/med...ecemberQ09.pdf
Australian Bureau of Statistics Figures issued Feb 2010
Adelaide Jun-09 $362,000
Brisbane Jun-09 $420,000
Canberra Jun-09 $469,000
Darwin Jun-09 $465,000
Hobart Jun-09 $312,000
Melbourne Jun-09 $403,000
Perth Jun-09 $455,000
Sydney Jun-09 $490,000
#360
Guest
Posts: n/a
Re: Housing bubble in Australia
This one's for ABCDiamond, I think he'll find this interesting.
Sydney Morning Herald 13th Feb 2010
http://www.smh.com.au/business/relax...0212-nxh4.html
The average mortgaged adult is spending well over half their total net income on servicing debt.
Sydney Morning Herald 13th Feb 2010
http://www.smh.com.au/business/relax...0212-nxh4.html
The average mortgaged adult is spending well over half their total net income on servicing debt.
The monthly repayments on this would be $2,291.13 at 6.18%
Average Male full time Income (May 2009) is $1,346.90 per week or $70,038.80 per year
Repayments on a SINGLE INCOME are therefore:
39% of Gross SINGLE Income
51% of Net SINGLE Income
Repayments based on 1 Full Time and one Part time (50%) would be:
28% of Gross Joint Income
35% of Net Joint Income
In January 2010 the average Australian Loan Value Ratios stated by the largest Mortgage Broker group was 64% of the property value.