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Housing obsession.. Can you spell "bubble"?

Discussion in 'The Pub' at netrider.net.au started by nath, Mar 3, 2010.

  1. Had a rant on my blog about the housing obsession: http://nathan-lee.com/blog/2010/03/03/first-signs-of-a-sydney-property-bubble-bursting/

    Anyhow, who here also thinks the hype related to house (mortgage) ownership has put Australia into a dodgy situation?
    * people jumping in at the lowest interest rate point and expecting it to stay that way
    * government furthering the problem by providing subsidies for first home owners
    * banks allowing people to borrow far more with far less up front than ever before
    * the media hyping house ownership (see my blog for one of the few bits of half arsed critical reporting) by sugar coating the situation

    In short: I reckon we're headed for a housing crash when interest rates get back to semi-normal rates and people start having houses repossessed.
    In between though there'll be lots of idiots voting solely along the lines of who will make (impossible to keep) promises about interest rates (at the expense of real issues like environment/trade/employment).:nopity:
    Add to that I reckon buying existing houses contributes near nothing to the economy: it's just straight into bank profits at the expense of having any disposable income.

    What do people think about the housing obsession?
  2. Owning your own home might not always make sense, and people get caught up in what they want and can overextend themselves, but investing in property can be a smart move.

    If you're investing all you're looking for is potential, you want to buy in an area that will grow in value. It doesn't matter if it's not a place you would ever live in, the point is it will be worth more in a few years.

    Once you buy the house, if you picked the right place (which shouldn't be that hard as there is a wealth of information on house prices and rents), any rent you collect can basically cover the interest. Then you have a property growing in value while someone else covers the interest for you. If you want to save just put it against the loan, you effectively earn higher interest by reducing the interest that you are charged.

    And then there are tax breaks if the rent doesn't cover the interest, and for improving the property...
  3. Has kept me employed for last 20 years

    Lenders are tightening up now and don't give money away like they were two + years ago

    Haven't read your blog, but penty of people make money along the way when a house is bought and sold, and this money goes around the economic cycle

    You can predict doom and gloom all you like, but decent property will continue to be in demand and hardly suffered in last downturn

    People gotta live somewhere, so you either pay rent, or buy something - choice is simple

    So Nath do you own a property??
  4. I am a builder -- what do you think my stance is ?

    plus population is expected to double over the next 50 years

    now if we could somehow get country towns/regional centers to grow not just sydney
  5. +1 they need to really build up a few of the regional towns into and create more larger cities, divide up businesses into different cities, maybe provide tax breaks for companies to move into regional up and coming cities.

    As for buying vs renting, i think if you are cautious you can still do alright out of buying.
  6. Rubbish, the banks have hugely tightened their criteria for lending in the wake of the GFC. They used to let people get away with 95%, 100% or even 105% LVR, now most places are at 90% and heading towards 85%.

    I'm 24 and looking at buying my first property, and although I'll admit prices are daunting, I honestly don't believe there's going to be a major "bust" any time soon.

    My reasoning comes down to the simplest economic tenet: supply and demand.

    If you're buying reasonably close to the city, there is *NO* more land there. The only way they can get more people in close to the city is to build high-rise - and there aren't many of those being put up at the moment (Wolli Creek and Victoria Park aside). The population is only going to increase, which means increasing demand, with (basically) static supply. Hence: prices will not go down by a significant amount (and are much more likely to increase even more).

    For every person who's jumped on the bandwagon while interest rates were low, and who will have their house foreclosed and repossessed in the next 3-4 years, there are two more cashed up investors looking for a bargain.
  7. I see no reason to own a house unless you are wealthy enough to not need a mortgage, or you need to provide shelter for your family.

    Young singles would be better of flatting or renting and travelling.

    I don't think Australia is the greatest place in the world to live.
  8. +2

    I think, in Sydney anyway, 20 years ago they should have said "this is as far as it is going to spread. Either move up or move out."

    Price would have gone up even further but regional NSW would have been stimulated and would have grown.

    The added bonus is we would'nt have the road, congestion and public transport problems we have now.

    and Sydney continues to spread.
  9. All good things and I see your point, but it only makes sense if you intend to continue being young and single.

    The problem is that a great many people do so, and then decide to get married, have kids etc. Not all, but many. Then, you find that you are older (have less time to pay off mortgage) and compromised as a couple between keeping the double income coming in, and taking time off work to have the kids. Plus the extra cost of looking after them and schooling them, at a time when you would like to be knocking the top off the mortgage!

    Solution? for my money, forget about the first home owners grant (a poison chalice if ever there was one) While you are young and as soon as you have a deposit, buy a small investment property to rent out. Remain a renter yourself (or live at home), live the life, travel and whatever. Meanwhile let the tax system and tenants pay the bulk of the repayments.
    Eventually, when you are lassooed and dragged to the altar, you will have a substantial asset to bring to the table and trade up for a family home. Even if you don't have a family this will work in your favour, eventually.

    And in the meanwhile you are helping to ease the rental crisis.
  10. Are you disagreeing or lending evidence to what I said. Banks may have tightened up stuff a bit, but how many loans were made in there? Borrowing with only 10-15% of something is still a massive amount of debt relative to your demonstrated ability to save. Also how much of that percentage was government first home-owners grant money or stamp duty money? That's to speak nothing of how much people overpaid for property thanks to rampant speculation and desperation.

    Back to my comment about religion. All the believing in the world won't change anything. I'm sure everyone said the same thing in Japan, the UK, the USA etc.. From the Japanese bubble lessons:

    "Most of all, economists say, Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out.

    "The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.

    "During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."

    But hey, I'm sure Australia will be so much different from that.. *cough* ](*,)

    Garbage, there's massive scope to build highrises/medium rise buildings. We haven't even begun to compact the sprawl. Compare the sprawl of sydney to somewhere like Hong Kong, Tokyo which actually DO have limited land or massively higher population. In sydney there are always some highrise developments underway right near the CBD (e.g. the massive one at chippendale, surry hills, pyrmont etc).

    Supply and demand: are you saying there's no supply for London? Or any of the US cities who have had massive property crashes? If it is down to simple supply and demand: how can prices possibly continue to rise when we have some of the least affordable real-estate in the world? You're either naively assuming it is going to go up forever (and get even less affordable) or else it will have to normalise (e.g. crash back to something less obscene).

    Given the massive amount of debt society now has riding on mortgages: I think it could have a larger impact once all those people start scrimping just to try and make mortgage payments. Our economy doesn't work too well if no one can afford to buy anything because they're feeding the bank profits.
  11. I think this graph shows how out of normal the housing prices have been allowed to get:

    And that's a few years out of date (the USA would show a massive crash in there that's still going)
  12. Every ten years, house prices in Australia, go up a min of 100%, with out fail. I have watched the prices go up and crash down again, But they are still going up overall.
    Yes I own propertys. I have seen my propertys price fall by $50,000 each, Stiff, its still in the higher profit margin, 12 months later it has regained the $50,000 and a bloody lot more as well.
    Just remember, Property is a long term investment, If you sell before your ten years are up. you will do your arse in most cases,
  13. What people aren't saying is that almost all of the extreme volitility is in inner and middle capital city prices.

    Outer suburban prices and even more so regional house prices are hardly effected by comparison.


    Get off the roundabout and stop getting into bidding wars with other people over a static supply of inner city housing and look further out!