Inflation? maybe.
They say Price of house doubles every 10 years. And actual money doubles 25 years.
?
r1trackday wrote:Inflation? maybe.
Price of house doubles every 10 years. And actual money doubles 25 years.Good point. Problem is:
Chart courtesy of Steve Keen (http://www.debtdeflation.com/blogs/?page_id=16)
(Mortgage debt vs household income is even more out of whack given household income < GDP)Problem is that house prices only rise faster than inflation so long as debt rises faster than income. That's something that's happened fairly steadily since Nixon severed the dollar's tie to gold but it is by no means something that can go on forever. To borrow from Mr Keen's report (the words not the opinion):
"[T]hings can’t continue as normal, when normal involves an unsustainable trend in debt. At some point, there has to be a break–though timing when that break will occur is next to impossible, especially so when it depends in part on individual decisions to borrow."
You're quite right, inflation (specifically wage inflation) in the order of 10%+ per annum could perhaps solve the problem in a matter of years. Unfortunately, where would interest rates go? More importantly, the window of opportunity for inflating away our debt is closing fast. I'm inclined to believe we're headed for a deflationary period beginning some time over the next few years.
Just about the only thing that could delay (but not prevent) something* causing a collapse of my optimistic plan (the buy one house plan, not the deflation thing) is… one final frothy blow-up in the housing boom. The future is in your hands! I'd be stoked if we could have 40%+ in Victoria by year's end!
Cheers, F. [cowboy2]
*Your pick – high interest rates brought on by inflation, or declining house prices from debt deflation.
I have a possible answer to your problem. Basically, I agree with most of the comments saying you are going to be overwhelmed if you stretch yourself any further…. that is if if you stay where you are (which I assume is somewhere near or in a major city on the big island).
My advice is come to lovely Tassie, get some new jobs (there are lots and if you have a skill they pay okay), use your equity to buy a nice 3 bed house in need of work, add value, make more equity, use that to buy your first investment property in somewhere like New Norfolk or Cambridge and bob's your uncle. The game is on. Okay, you have a bit of discomfort for a few years but jeez it's worth it. PM if you want to hear more about our story but two years ago it was very similar to your own.
Steve speaks an awful lot of BS but one thing that he does say that stands up to scrutiny is that you have to find creative solutions to your problems.
Almor
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