Deutschmaster

I suppose perhaps then this would drive immigrants to move into higher density (cheaper) housing. If that's so then it makes the notion of 'immigrants driving house prices' somewhat suspect!

Either that or it takes a bloody long time to save a deposit - which is what i'm doing because i don't like the whole thing of 'mortgaging my future'

ozzieeagle

I wonder if anyone has ever done an indepth calculation on saving after a mortgage has been taken out. Put another way paying off more on the principle, after locking in the house price. I realise we are now in times where house prices could fall so this method probably wouldnt work currently. However in the days of annual house price rises of 2 pct, would one have benefited from taking onboard a 95 pct mortgage and attacking the Mortgage after it was taken out v saving for a higher deposit.

Your post prompted me to ask this question, which I've often thought about.

Mipik

I think that the only siginficant difference would be in the mortgage insurance that you do not have to pay when your deposit is over 20%.

The cost of renting before buying would more or less even out smaller payments on smaller mortgage.

bourbon-biscuit

You can use Google StreetView to wander up and down the street to find out about pubs, neighbours etc nearby http://maps.google.com.au/help/maps/...0street%20view

I suspect (although I've not been here long at all so perhaps am wide of the mark) that the FHOG will be extended but only right at the deadline because it is currently keeping doing two things- bolstering the first home market and also with the deadline looming it's making people get serious about buying now. If they announced now that it was going to be extended it would take the urgency away for a lot of first time buyers and that could cool that end of the market over night. If I was the government ( ) I'd extend it at the last minute for a short period- say 3 months- and then do the same in 3 months time and so on.

Deutschmaster

Last year I did the following calculations:

Property bought for $200k would be a similar size to the one I rent for $966 a month.

A home loan of $200k would have costed around $1600 a month. Chuck on top $1000 a year rates and think about a possible body corp - which is likely on cheaper property which shares the same land. There's also maintenance costs on top and things like building insurance

So I was saving at least $700 a month from not buying (which I had saved)

On top of that Westpac were (although now aren't) giving 7% interest on savings.Over a year I've saved (700 x 12) $8400 and then got 7% on top.

If I were going to buy a $200k house it would have to be rising at a rate of approx. 4% a year (or in other words $8400 rise a year) to cancel out the savings.

I also worked out that every dollar borrowed would cost around $3 over the life of the loan - OK that doesn't take into inflation and how the buying power of the original dollar will have changed.

Given the topsy turvy world we live in today I've no doubt that everything has changed and the above numbers are no longer relevant

ABCDiamond

I've often comparing renting to buying, but ended up thinking it is an enforced way of saving.

My life could have gone 2 ways, renting for life or buying.

If I had chosen renting, I would still be renting.

I chose buying, and now own a house outright.

I do know people who are still renting.
I am happy with the choice I made.
I do know that I could have saved the difference between rent and mortgage etc., but would I have done that ?

Pearl&Wal

OK i've got a question.

I'm no expert on this but if Australian unemployment rises to say 7-10%, the GFC worsens here particularly with regard to lending and inflation starts to creep up (all of which are already happening) why does Australia think it can just buck the trend experienced in every other developed country.

If it happened over there it'll happen here surely.

PS Demand for housing stock is a red herring as has been proved in the UK (particularly the South-East).

IvanM

The only major difference is that the Australian banking system is adequately capitalised. This means lending has not been as interrupted as in the UK and US however it still has been interrupted. The non bank landing sector has been hammered.

Now the downturn has gone beyond the finance industry Australia is in the same boat as anyone else especially when you see that all the major exporting destinations are in trouble ie US, China and Japan.

ABCDiamond

Some people may not be as worried about unemployment, because it was very low to begin with, which is a great help. The Australian unemployment rate is still not as high as the other major countries before the crisis hit them.

Previous figures: I am not sure that it can be compared to the UK.
Population growth is also a very important aspect, and when you compare the faster growing population in Australia to the UK, you do get different results:
That one... well, no one really expects Australia to 'buck' the trend, they just feel that it may not hit us quite as hard, as it will hit other countries.

Reasons may include:
- Our banking system is stronger.
- Most of our migrants are skilled, and arrive with resources. (A better situation than some countries that get a high proportion of benefit seeking migrants.)

asprilla

You say that "Australia thinks it can just buck the trend" - where do you get this impression from ? I think that Australia will suffer quite badly over the next year or two....and so do many people here in Australia.

Are you talking about the economy as a whole, or specifically about house prices?

Pearl&Wal

As the thread suggests i'm thinking purely about house prices only.

Also ABCDiamond again makes some interesting points however the growth of AUS 1.2% of a population of 21 million against the UK's 0.22% from a population of 65 million makes the actual number a lot closer than it would at first appear.

I seem to recall John Prescott calling for greater numbers of houses to be built in the South-East due to a lack of stock 5 years ago. Hasn't helped the property market there.

I look at house prices on the Sunshine Coast - average earnings $42k - average house price $440k and wonder how the local average wage earners manage it.

Pearl&Wal

Regards housing it's like a co-ordinated effort on behalf of REIQ, building companies, local tv news and print media.

I know they have a vested interest but i sometimes wonder if there must be some truth in what they say - or do they just think we are that stupid.

NKSK version 2

This is interesting - I read the other day that the only reason that Australian banks aren't in the same deep doo-doo that US and UK banks are iin s because they didnt have the available capital to invest in the same dodgy loans.

If they had have, they would have and they would now be in the same pickle.

All kind of ironic don't you think?

Wol

I'm by no means an expert on finance, but it depends what you mean by "capitalised". If a very significant percentage of a bank's asset base is invested in loans on housing, and repossessions climb dramatically (as they are going to) the fact that the cash is "backed by bricks and mortar" becomes less appealing. We see it around here, where investment firms are having to sell repossessed housing and are unable to move it at a fraction of previous valuations. My final rental was one of six, repossessed from the developer and they have been on the market for 18 months at a 30% discount to valuation. The investment company did the repossessions, then - when they couldn't recover the investment - went belly-up and the administrators are now trying to flog them, all the while paying out the running costs.

ABCDiamond

Actual quoted average earnings are:
May 2008 Full-time ADULT total average earnings

Australia
$66,232.40 Male
$53,414.40 Female

QLD average wages
$62,119.20 Male
$51,266.80 Female
(Trend Estimates before the addition of the 9% Super)

When I was a first home buyer, most families only had one income in the household, and house was about 3 or 4 times the annual income.

These days, many households have two incomes, and using the QLD average wage figures of about $113,000 per year, a $440,000 house is a multiple of about 4 times the household income.

Things have changed, but we continue spending up to the maximum that we can, so that things never seem to change