Think twice before buying a home… Kochie

There is a fair bit of this type af analysis around at the moment. But a couple of things I take issue with. Firstly, I couldn't care less what the multiple of gross income to house price is, or what some pointy head from the US has to say about how expensive our prices are compared to theirs. It is irrelevant.

Secondly, none of the economists or finance guys talk about the non-financial reasons why people want to buy a house, instead of renting. Based on a purely financial analysis, it may make sense to wait a few months to buy a house, but what if your dream house comes on the market, and you can afford it? What about if you are buying a home you wexpect to stay in for a long time?

Ummester – it looks like your 'bearish'

Its fearful, the oither way to look on it is that it will be a buyers market in the near term

I think Dan42 has made such an important point that many overlook – there are indeed 'non financial reasons' people could/should/might buy – including the emotional side, or feeling of security or ownership if you prefer. Not a feeling money can buy I'm afraid.

Cheers

Aperry what factors are you speaking off. If its the fact that real estate experts keep talking about an undersupply in australia. Well in case you and all the other sheep dont realise, that is all propaganda to keep them in a job. In 2006 and 2007 they where saying the same thing in america and in uk. They where saying they have an undersupply of housing and need to double the amount of houses being built just to keep up with population growth, now they have an oversupply, how does that happen. its all propaganda to keep real estate people in jobs. if we have such an under supply then why is there around 10k properties in south east queensland vacant and unable to be sold. why is it the same in western australia and in outer sydney. we actually have an oversupply of housing and the price to earning ratio is way over the trend so tell me who is going to be buying houses if they can not afford  to pay it. Come on guys stop being sheep and following the blind sheppard cause he will just guide you over the cliff.  The only reasons prices didnt come down in 2008 like it was predicted wasnt the first home buyers grant but the introduction of the new laws governing international investors buying in australia. They came in and bought at any price, but now the government has cracked down on that and changed the laws again so there is noone left to buy.. i think 20% drop within 1-2 years then stagnate for 5-10 years until earnings to price come into trend.

Eloi has a small point re the under supply (US and UK both claiming undersupply is correct b4 the crash). However most people miss a fundamental point which is supply of funds.

Funding over the last 10 years has increased dramatically in Australia. A graph curve showing funding supply increase over the last 10-20 years is followed by a growth in property prices – the lines almost identical. More money in the market obviously pushes up prices.

The issue we have now is long term international debt getting refinanced by our banks to higher rates – which they will start passing on soon, the reduction of stimulas in Australia which is around the corner and the fact both sides of politics are now promising to repay debt. In addition to this ASIC has told CBA and Westpac (who currently write some months over 70% of loans in aust) that they are over exposed to the housing market. Both intend to holt growth of their books / or at least slow the pace of growth.

So in short – we are likley to be entering a period where we can expect a reduction of funds in the Australian property market – whether we take the steam out of the bull or fatten up the bear is yet to be determined…

Personally I think it if your smart – it doesn’t matter. Cashflow is king. If your cashflow is in order you have nothing to worry about. If you are neg geared relying on growth… Well…

I also prefer to see property affordable so everyone in Australia (within reason) can work, support a family and have a home. Buying a house in the major cities should never be out of reach for the average Australian. A future Australia where only wealthy immigrants and people with family gifted depoists can buy is not an Australia I want to live in.

If you buy only for growth – and are neg greared – and get burnt…. You shouldn’t have been greedy… If your smart; there might be some great oportunities around the corner!

I think I explained myself pretty clearly in my previous post. The fact that you are prepared to make a call on what will happen to prices over a 10 year period show that you have absolutley no idea what you are talking about, professional economists generally can't get 12 month predictions correct, what chance do you have? The fact is that prices are just as likely to rise 20% ove the next two years as they are to fall by that amount.