Night Alf, about to head to bed as well. Just watching more Peter Schiff utube vids, hilarious viewing.
Perhaps mattz is one sided in his outlook but then, by denying the possibility of a crash, you are equally one sided.
I think a crash is the most likely outcome from this point. Doesn't mean it will happen.
I think strong growth is the least likely outcome. Doesn't mean it wont happen.
There is fundamentaliam on both sides of the fence here, not just mattz.
Last night on the ABC news channel one of the speakers, did not catch the name but senior in the RE industry, said and among the many reasons for the slump, buyers market, etc etc etc, is there is no property shortage, actually the reverse with many more sellors than buyers and lots of "off the plan " stuff coming on…
and why do all the "go property "advocates that think property is bullet proof assume that anyone who thinks the correction is immenient has no investments …come on…
Here are some fascinating graphs…
First, US house prices, inflation adjusted, 1890 to present.
http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png
Now Australian house prices, inflation adjusted, 1880 to present.
http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/04/041011_2142_ThisTimeHad111.png
Note the huge heights of the blue line. Very scary if it reverts to the mean as is currently happening in USA.
G'day Matt.
Boy, are you going to have a field day with my latest post! Be kind
https://www.propertyinvesting.com/forums/community/opinionated/4336372
mattnz wrote:Here are some fascinating graphs… First, US house prices, inflation adjusted, 1890 to present. http://www.ritholtz.com/blog/wp-content/uploads/2011/04/2011-Case-SHiller-updated.png Now Australian house prices, inflation adjusted, 1880 to present. http://cdn.debtdeflation.com/blogs/wp-content/uploads/2011/04/041011_2142_ThisTimeHad111.png Note the huge heights of the blue line. Very scary if it reverts to the mean as is currently happening in USA.I'm glad you found these mattnz – I was trying to find them for fword in another thread but only found back to 1970.
Do you also have IRs over a similar term?
The correlation becomes very obvious when you view them together over a long period.
Sorry I don’t have them unmester.
Here is a great article from Chris Martenson which clearly outlines the problems I have previously highlighted, on the amount of debt which needs to be financed internationally and the problems faced by China and Japan the key countries which have historically funded that debt.
It is a train wreck waiting to happen that would have huge implications for the Aussie banks, which are also trying to refinance their debts.
http://www.chrismartenson.com/blog/breakdown-draws-near/56594
I want to buy a property that is worth around $450K in Blacktown,, and Have got $90K deposit for it,,, total household income is $120K,,, I don't care which way market goes,, for person like me,, I can not afford to burn my money in Rent,,, since the interest I will be paying on $330K loan is equal or more than the ammount of rent I am currently Paying,, My rent is $430,, in Western Sydney suburb of Westmead,,, The property I am planning to buy is costing me above,,, why the heck on this planet would I keep renting,, waiting for the disaster to strike in my scenerio,,,,,,,,,,,,, If you have 15% of deposit of your borrowing capacity,,,,,, and your household income is around or over $110K,,,,,,, than buying a property upto $450 to $500K will not impact you in any sense whatsoever,,,, than who cares about the rest of the world,,,,,,,,,,,,,,,,,
Good LuckGood on you desilucky.
Let the doom & gloomers have their 'soapbox' moments. Have a look at this earlier thread of mine as a bit of moral and emperical support for your optimism.
https://www.propertyinvesting.com/forums/community/opinionated/4336372Also, have a read of this too!
https://www.propertyinvesting.com/forums/community/opinionated/4336418
Desilucky,
You made me laugh…. that was so cute.
I totally agree with you. When the mortgage payment is the same as the rent, why pay the landlord's mortgage? Doesn't make sense. I'm on your corner. Remind me not to be on your wrong side.
Bless you.
Angel
desilucky is in a position where buying makes more sense – mainly because of the deposit. A buyer with little to no deposit would not be in the same position at all.
I totally agree with the theory that if your interest payments are less than your rent it is right to buy. If you only have 20k, however, you are not going to get your interest payments under the cost of rent on a 450k property.
with deslucky the rent PA would be $23400 and the interest PA @ 6.5% would be around 21k – plus 5-6k of the principle in the first year.
if a buyer only had 20k deposit the rent PA would still be $23400 and interst would be around 28k – meaning they are 4k in front by renting (if they can save the 4k PA).
But, say desilucky can save another 30k over the next 2 years and niether property prices or rents increase, then the loan will have less than 20k of interest payable each year.
desilucky should also consider that if IRs are above 7.5% the break even point is lost.
Its a numbers game, nothing more. Everyone should do their own maths and not rely on continual capital gains or low IRs.
It is prudent to assume an average interest rate of 8% when calculating the right time to buy in.
Ancedotally, my rent PA is 17k and I have less than 100k in the bank. In ACT very little is advertised under 400k and the house I am living in would probably be advertised around that. I still have another 70k to save before I reach my break even point in my area – 170k in the bank and less than 17k PA in interest payments. I'm planning on moving interstate soon, where I believe rental returns are better and prices are cheaper. In this instance, my 100k may be better used on a loan than it could be in ACT.
Hello All Again,,
I am not conforting anyone above,, or not even dragging someone on my side,,, At the end of the day its your own perception,,, to either buy or rent,,,All I am saying is with my above stats,,, I think I am ok,,, and since I will be paying more than my min pyts,,, I will be more than happy to repay and repay back more mortgage amt,,, (This goes to all you readers,,,, if you r throwing ur money in rent, which is nearly same as ur int amt in dollars,, than buy a property within a prescribed price range,,, and if you can pay more,,, ur a happychappy….. Life is all about calculation,,,, I don't mean any major calculation,, just simple calculations can lead u to a better life, and better retirement,,,,,,,,,,
Have fun people,, Sleep tight,,,,,,,,, don't let the property bug bite,,,,,,,,,(Thanks to my supporters,,,,rather I should say all rational thinkers))))))))))))))A must read article on the Australian housing bubble,recently posted by another contributor to this forum in another thread.
http://www.unconventionaleconomist.com/2010/09/australian-housing-bubble-in-search-of.htmlI am planning to track the borrowing power calculators of the major banks on a semi-regular basis to see if borrowing power is affected over time in line with…
Step 4. Since Australian banks can no longer fund their debts on the international market, they restrict credit to home buyers.
The current 7-8 times income offered for mortgages is now reduced to 4-5 times income. 95% lending becomes 80% lending. This creates a viscious spiral as buyers on $100k combined income that bought a $700k house with a $35K deposit now find that other couples on $100k income they were planning to sell to now require a 20% saved deposit and could only borrow enough to pay $500k for the house.The current benchmark (6/5/11) is based on the following parameters:
Single
Personal residence
Annual income = $120,000
After tax monthly income = $7,250
No outstanding debt
No dependentsBorrowing Capacity as at 6/5/11:
Westpac $710,850
NAB $743,700
CBA $625,373
ANZ $708,000If we see these figures drop significantly in time, it is a sure sign of an imminent significant correction.
Here is an earlier benchmark from a news article http://www.news.com.au/money/property/first-home-buyers-urged-to-beat-rate-rise/story-e6frfmd0-1225791082144
“BANKS are urging first-home buyers to lodge mortgage applications ahead of the next rate rise so they qualify for the biggest possible loans, an investigation by The Sunday Telegraph has found.Despite financial markets factoring increases of 2.5 per cent by December 2010, potential buyers risk having the amount they can borrow scaled back if they delay lodging applications.
The danger of such a tactic is buyers being rushed into loans they can barely afford today, which become unaffordable when higher rates kick in.
A Sunday Telegraph journalist sought a home loan through major banks last week. Based on an income of $61,000, a deposit of $55,000, and a good savings record, NAB offered a loan of “at least $450,000”.
“You could bid on a property at auction this weekend knowing that is the least we will lend you,” a mortgage adviser at NAB’s Surry Hills branch said.
He said the loan amount could be even greater once the buyer went through the official application process, when some “human discretion” could be applied.
“But you will need to hurry to get in before there is another rate increase as that will reduce the amount you can borrow,” he said.
A $450,000 loan, equal to 7.5 times stated income, would require repayments of $2496, based on the NAB variable rate of 5.29 per cent — more than half of the buyer’s income.
And if rates increase by 2.4 per cent over the next year, as tipped, repayments will rise by $700 a month, leaving less than $1000 a month to live on.”
So since Oct 2009, when the peak of lending to first home buyers allowed a person on $61k to borrow $450k, the equivalent income today allows a borrower at NAB to access only $354k. The equivalent income that a person needs to earn today to access a $450k mortgage through NAB is $74,500. Ouch!! Incomes certainly haven’t risen by anything close to 20% in the past 18 months to compensate for this reduction in borrowing capacity.
Also interestingly the person who is earning $61k and got a mortgage for $450k, has monthly repayments at 7.5% of $3,145.77. Their after tax income is only $4,080 for the month. This leaves them with just over $900 to pay all their other bills for the month!!
Sub-prime lending if I ever saw it.
Alf, I have to agree with you. I know Australia could have a correction or small crash, but I hear this before as well. I’m coming from Argentina, I have been in Australia for 10 years and I can tell you that in all the crashes we had in south america, the more secure investment was always property. The Argentinian property market rises in american dollars even when the exchange rate changed from 1:1 to 4:1, so having cash wasn’t good either. In the late 80s the inflation got up to 1000%, food was more expensive in the evening than in the morning and this is the point USA couldn’t afford to get to, but it’s better to touch bottom and start again, it’s the quickest correction.
I also want to add that if houses are too expensive, the rents go up, because the demand for rents is higher. I’m not an expert but this is what I can see.
Talking about affordability I think Australia is still pretty good if you compare with some other countries. For instance in Germany having a house is something only a few people can afford. The amount of space we have here it’s amazing and unthinkable in some European countriesOnly my point of view, thanks for all who collaborate in the forums
Thanks for your contribution Mosqui.
I have been looking at US property investment for the past few months, the main thing that would stop me is the risk of the USD crashing as happened in Argentina. The other side of the equation however is that this would most likely occur in a hyperinflationary environment.
In Argentina during hyperinflation, what happened to the property market? Did it go up at 1000% also? What was the best investment at the time in Argentina? What happened to rents?
mattnz wrote:A Sunday Telegraph journalist sought a home loan through major banks last week. Based on an income of $61,000, a deposit of $55,000, and a good savings record, NAB offered a loan of "at least $450,000".That loan figure seems ludicrous. When I got a loan pre-approval back in the days from middle to late 2009, NAB was only willing to lend me $380K on an income of $63,000. I had an even larger deposit considering substantial savings, the FHOG back then was $16-17K, plus a gift letter from parents. Even so, I was strongly advised by my mortgage broker not to borrow any more than $330K.
Even today, plugging that income into NAB's calculator, and at that previously low rate of 5.29%, we're looking at a loan pre-approval for just over $368K. I honestly don't know how that journalist got a pre-approval for such a large sum of money on that sort of income. There must have been some stuff in the water at Surry Hills that day.
If we're talking about a $500K house (assuming $450K loan and $55K for deposit and closing costs), that's a lot of 'house' for a single to buy…it's like buying a nice 3 bedroom or even an average 4 bedroom house in the suburbs. Does a single actually need a house with FOUR freakin' bedrooms, large rear yeard and a double carport? Please…
It would be more realistic for a family or couple unit with dual income buying into such a property. Alternatively this single person could rent his/ her house out and then rent another house with family or friends. That doesn't seem too difficult to do…rent a 3-bedder in the suburbs at $360 a week with some mates and each person pays roughly $120 a week in rent.
Furthermore, wise home buyers would be well aware of the following:
1. Do not borrow down to the last cent of what the bank is prepared to loan you.
2. Budget for mortgage payments at an interest rate 2% higher than current rates. Or, if you want to be safer, budget for an interest rate at 'historical average' of 7-8%, and then consider what would happen if interest rates went to 9-10%.Obviously we do know that it is counterproductive for a bank to loan money to someone who couldn't possibly afford to pay it back, unless they were looking to enlarge their property portfolio by means of intended foreclosures!
In Surry Hills where they were enquiring, $500k is a 1 bed apartment.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
