Anyone Think House Prices Will Begin Falling?

Boogerman on 02/04/2021 - 09:05
Last edited 09/04/2021 - 13:50

I’m going to be contrarian
Mortgage moratoriums are over, Jobkeeper is over, Rental eviction moratoriums are over, Business rent payment deferments are over.
Rental vacancy rates in Melbourne & Sydney are at their highest in many years (Melbourne over 6%)
FOMO occurred due to the Liberal Party socialist handouts creating a false economy (while racking up both the biggest budget deficits & national debts in history). That false economy is now exposed

Evictions ramping up with worse to come, tenants groups warn
https://www.theage.com.au/national/victoria/evictions-rampin…

So, not sure where all this demand is coming from

Home & Garden

Comments

    • Drakesy on 02/04/2021 - 10:08
      +6

      Thankfully i think we'll revert back to a recession again by Q4 2021, just in time for the election.
      There's no way that the economy has grown since covid. It's all funny money, next stop is the inevitable inflation and interest rate hikes which will push the limit of their mortgage.

      • bargain huntress on 02/04/2021 - 17:28
        +3

        It's all funny money

        haven't you heard; it's called Modern Monetary Theory

        apparently governments never need to worry about debt because they make the money in the first place! 😏

        i wish i could /s but that's a genuine simplification of what our overlords actually believe now

        the LNP were dead against it during the GFC when the ALP spent all the surplus and wayne swan won an economics award for doing so

        now the LNP seem to be big fans as well

        as usual the economists are experimenting on us all 🐭🐹

        i wish i had my own money machine 🤔

        • derrida derider on 02/04/2021 - 19:55
          +2

          "i wish i had my own money machine"
          The whole point of MMT is that governments have exactly that, which is why they never have to actually repay their debts. If they owe someone $600 trillion dollars they can just print a $600 trillion banknote and hand it over.

          You can see by this example that printing too much money does have consequences; people will not want to buy your IOUs unless you are offering high returns in exchange for the risk. That is, you need high interest rates to finance your deficit. But that the government can currently sell its IOUs at 0.1 percent annual return tells you that printing money is the least of our problems ATM. And garbage about "our grandchildren will be paying off this debt" is just that - garbage.

        • Karfaffel on 03/04/2021 - 14:27

          Actually if they did apply MMT things could be a lot better. This current government is still peddling a trickle down economy approach and running the budget like a household.
          Perhaps you need to educate yourself about what MMT really is before passing comments like this.

          • bargain huntress on 03/04/2021 - 14:47

            @Karfaffel:

            This current government is still peddling a trickle down economy approach and running the budget like a household.

            so there's a household budget that;
            includes a never ending money making machine,
            and where you consequence free never pay your debts - no debt collectors hounding or banks forclosing on you!?

            can anyone use this 'household budget'? i'm keen

            • Karfaffel on 03/04/2021 - 15:00
              +4

              @bargain huntress: Like I said… inform yourself about what MMT is. Economics is not simple topic. You'll have to make an effort if you want to understand that what's currently considered the orthodox approach is actually quite misguided and on many levels simply incorrect. A recent book on the topic would be The Deficit Myth by Stephanie Kelton.

              • bargain huntress on 03/04/2021 - 15:06
                -1

                @Karfaffel: facepalm

                and how many real world experiments have been run using your prefered perfect academic fantasy version of MMT as of right now?

                • Karfaffel on 03/04/2021 - 15:33
                  +5

                  @bargain huntress: Facepalm indeed.
                  You don't seem to be genuinely interested in the topic but feel the need to make comments.

                  Reminds me of that old quote:
                  Never argue with an idiot. They just drag you down to their level and then beat you with experience.

                  • bargain huntress on 05/04/2021 - 09:12
                    +1

                    @Karfaffel: @Kerfaffel

                    i see your comments have devolved to arguement-free insults already

                    i'm afraid i'm not easily deflected

                    i am still waiting for some references to experiments supporting MMT

        • RedHab on 05/04/2021 - 08:42
          +3

          MMT = Mugabe Monetary Theory

          The experiment has already been done, you can print all the money you want, it is just worth less and less.

          • bargain huntress on 05/04/2021 - 09:19
            +1

            @RedHab: @RedHab

            LOL

            well at least when a loaf of bread costs each of us $35 million dollars, we'll both finally be millionaires

            or will be once we bake some

      • greatlamp on 04/04/2021 - 10:39
        +1

        You can't say we are going to have inflation and interest rate hikes and at the same time a recession. It's one or the other.

        Property will never crash in this country, noone will sell their home at a loss while negative gearing tax breaks exist. if you want to see where we are headed, look to Japan as an example.

        • Drakesy on 04/04/2021 - 10:50

          I agree that we're headed the same way as Japan. Population growth has stalled and rates can't go down anymore. Most likely we're getting stagflation we're everyone is universally devalued while houses keep on pumping.

        • BigBirdy on 04/04/2021 - 11:07
          +5

          Property will never crash in this country, noone will sell their home at a loss

          Because you’ve never personally witnessed a crash, and what happens in other countries (except Japan) could never happen here?

          • greatlamp on 05/04/2021 - 08:00

            @BigBirdy: What people are uncomfortable with is someone becoming a multi-millionaire doing nothing except holding the same property for a decade.

            They are directly benefiting from changing zoning laws, what was once a 1 house block can now fit 3, or in some cases 6-8 apartments.

            The population in this country continues to grow, primarily in Melbourne and Sydney, and no, it isn't just from immigration. We are the fastest-growing nation in the OECD.

            Infrastructure does not keep up. When a new train station or hospital is built, it's placed in the the ring suburbs, 10-20km from the CBD, where the homes already grew to a million dollars - being close to the old infrastructure.

            I don't see what the driver will be for prices to crash. 50% of people will never afford a home, that doesn't cause a crash, that just slows down sales.

            The banks need to fail, lending needs to stop. If you don't see that happening, you can't predict the bubble popping

        • derrida derider on 05/04/2021 - 21:22

          But when the party finally stopped in Japan in the late 1990s property prices absolutely nosedived, and residential ones have never recovered.
          But that last is simple supply and demand - a huge stock of housing for a continually shrinking population. I can see Oz having a crash but our population growth thanks to immigration means prices would fairly soon recover.

    • bargain huntress on 02/04/2021 - 17:19
      +2

      If Labor takes over, the mortgage bubble will burst.

      why and how?

      • SgtBatten on 02/04/2021 - 22:03
        +5

        Probably because they will make some greater good forward looking decisions that end the insanity but hurt in the short term.

        • bargain huntress on 02/04/2021 - 23:17
          +1

          such as?…

          • SgtBatten on 03/04/2021 - 10:02
            +7

            @bargain huntress: Ending things like negative gearing and ultimately changing the mentality that property is an investment instead of just a basic need.

            I'm not suggesting any party has a policy that does enough, rather I believe the current government has no interest in changing the status quo.

            • bargain huntress on 03/04/2021 - 14:38
              +5

              @SgtBatten: you really think the ALP would try to end negative gearing again after bill shorten (shorto?) lost his unloosable election campaigning partially with that?

              i would be extremely surprised to see that myself.

              if i had to guess what the next federal election campaign is going to look like…

              i would think it would be more likely that albo (or whoever is ALP leader by then) will be screaming from the rooftops that they won't be coming anywhere near negative gearing. he'll probably be posing for the press with likeable-landlords like 'mum and dad investors'.

              i would also think that meanwhile scomo (or whoever is LNP leader by then) will be constantly implying or just outright claiming that the ALP is lying and that they will come after negative gearing.

              my alternative guess would be for if things get even worse by then economically and or housing-wise;
              then i reckon neither albo or scomo (or whoever) will touch the subject. and they will both attempt to avoid any press inquiries into it. knowing that an attack on the opposition's position will also blow back into their own face too badly.

              either way i don't have any confidence negative gearing would actually go.

              i'm interested to hear why you have that hope?

              • SgtBatten on 03/04/2021 - 15:57
                +5

                @bargain huntress: Look I have no political affiliation. I hate pretty much all of them for failing to look to the future. I was also only trying to guess at why the other person said what they did that you replied to.

                I don't think ALP or LNP will change NG anytime soon. I am hopeful though that something does change which is oriented towards the long term needs of this country.

                Pollies in this country spend more effort bitching about why you shouldn't vote for the other guy than anything else and it is so frustrating. I see such a bleak global future ahead all round.

                • bargain huntress on 03/04/2021 - 16:29

                  @SgtBatten: me too

                • Jackson on 04/04/2021 - 00:44
                  +3

                  @SgtBatten: One thing everyone is forgetting in all this is that if you want to live out of town in a greenfield estate or further, it's actually quite cheap. The no. 1 reason prices are going up is because everyone wants to live in the trendy part of town, drinking lattes with their smashed Av while rocking their Iwatch and checking their inata every 5 seconds, while paying for surgery so that one eye can look at their phone all day while the other one makes eye contact with the person they are sitting with. The population is always increasing, and so unless density goes up in line with pop growth there's a squeeze on the property market in that area. No auction ever beat reserve without two bidders.

                  Also related is that people couldn't get their smashed Av and overseas trips so suddenly they have all this spare income, suddenly it's gone from unaffordable to we can pay even more.

                  • shd on 04/04/2021 - 17:02
                    +2

                    @Jackson: There hasn't been the investment in infrastructure in the bigger cities, no fast rail, no decent public transport. So everyone is trying to get their commute down. Also the suburbs they make are so nightmarish no-one wants to live there.

                • derrida derider on 05/04/2021 - 21:28

                  @SgtBatten: "I hate pretty much all of them for failing to look to the future."
                  Looking to the future costs votes, bigtime. Australian (and other democratic countries) history is littered with the bleached bones of politicians who tried to sell present pain for future gain.

                  So don't blame them, blame your shortsighted and greedy fellow Australians.

              • dylan345 on 03/04/2021 - 21:36
                +1

                @bargain huntress: I've believe they might float the idea of grandfathering negative gearing or capping it because you know when someone has 50 negativity geared investment properties something isn't quite right

                • bargain huntress on 03/04/2021 - 23:25

                  @dylan345: i suppose that would have more of a chance

                  but why didn't shorton do that? was he trying to commit political suicide?

              • Drakesy on 04/04/2021 - 10:52
                +2

                @bargain huntress: I'd argue it wasn't labor ending negative gearing (which polls suggest the majority of Australia is for). I believe it was the franking credits for pensioners with no income that tanked his election.

                • bargain huntress on 05/04/2021 - 09:07
                  +1

                  @Drakesy: ah i forgot he want after that too

                  it was like he had a machine gun of policies and was firing it randomly at baby boomers

                  the biggest and richest voting demographic

                  so that was clever 😆

  • BertieBrown on 02/04/2021 - 10:05
    +1

    No I doubt it. It does seem to be a little bit dependent on area, but generally I don’t think that prices will go down until interest rates increase.

  • pharkurnell on 02/04/2021 - 10:23

    As long as they dont fall in the next month while mine is up forsale.

    but people have been waiting 30 years for it to crash… hows that going for em?

    • derrida derider on 02/04/2021 - 20:06

      All sorts of things push house prices around in the short term - especially interest rate movements, but also just herd behaviour - house prices are rising so everyone wants to buy "while I can afford to" or "gotta get in on the boom early". Note herd behaviour works on the downside too - "I'll wait to buy till they're cheaper" or "its too hard to sell ATM so I won't upgrade".

      But over a 30 year period you have to look at pure supply and demand. The number of houses being built responds to demand, though often with a big lag (the classic recipe for boom and bust). Ultimately demand is set by household formation - the number of new households (whether renting ones - hence increasing demand for investor housing - or buyers). And in Australia that is mostly a product of immigration rates - though again with a lag.

  • holdenmg on 02/04/2021 - 10:29
    +6

    Somewhere, sometime, somebody is going to buy at the top of the market.

    Don't be that person.

    Be the Seller.

    • JSONBourne on 03/04/2021 - 11:09

      Going by the S&P500, that top has been every second week going back 40 years.

    • smartazz104 on 03/04/2021 - 16:28
      +1

      Could you imagine finally buying your own home and then prices go into freefall; "this is the man, who bought a property, right when the property bubble burst".

      • Hvrd on 04/04/2021 - 10:08
        +1

        same as bitcoin

  • Trying2SaveABuck on 02/04/2021 - 10:37
    +3

    There is no more boosts to house prices in the form of stupid 'rate cuts'

    However, our incompetent RBA have already said they aren't looking to increase IR till 2024 - so money is still 'cheap' and will be for a while

    I highly doubt you would lose money buying property in terms of buy-to-sale price (not including taxes, fees etc) but people loading up in investment properties in this market are likely to not see some of the big gains people have seen in the past 2 decades

    I live in Victoria and the sheer cost of stamp duty here and over charging agents means your property needs to increase by +30% before you turn a reasonable profit in most cases im not saying that wont happen but I cant say with confidence it will within the next 3 years

    other states seem to have low SD tax meaning profits are probably easier to come by probably qld is the place to invest right now if you're looking for gains

  • TheMindsetTraveller on 02/04/2021 - 11:23
    +4

    Prices are rapidly rising out there especially in the big cities and trendy 'lifestyle' regional towns.

    My lay opinion is that I expect prices to keep on rising for another 12 months, it might plateau for a bit but the prices will not drop for at least 24 months.

    There are many factors I think, including:

    1. Interest rates are at historic lows and will remain low even if they rose a little bit which the RBA says it won't raise them.
    2. Cashed-up ex-pats living overseas have returned to Australia because of covid, and they are increasing the demand and many can afford to do so.
    3. People believe WFH is possible so a sea/country/farm change is possible especially if it promotes lifestyle
    4. People 'perceive' they can afford it as the economy is appearing to do well (given all the hundreds of billions being splashed out under the excuse of covid)
  • SF3 on 02/04/2021 - 11:34
    +5

    Won’t change until interest rate goes up.

    Right now savings interest is almost zero.

    Dividends is also poor.

    Property would been seen as easier option to get into for returns and capital gain.

  • Hardlyworkin on 02/04/2021 - 12:02
    +5

    Given the government takes a do nothing approach on almost everything I don't see it changing.

    NZ are at least trying to make housing affordable, whether it will be successful is another story.

      • CheapandUsed on 02/04/2021 - 12:54
        +34

        I don't know how people can call the Australian housing market 'free' with all the policy intervention that gets thrown at it.

        Just off the top of my head there is; negative gearing (being treated slightly different to other types of investment), first home buyers grants, first home builders grant, stamp duty exemptions, and first home savers accounts.

        So much policy and money thrown at the housing market surely changes market behavior.

          • Drakesy on 02/04/2021 - 16:48
            +6

            @brendanm: Negative gearing allows you to reduce your yearly tax (basically get a refund) every year you lose money on your property while in the long run you "could" eventually make money on it. hence the speculation. People basically getting paid to hold onto loss making properties.

            • brendanm on 02/04/2021 - 17:17
              +2

              @Drakesy: You have to make a loss to get a refund on it. Eg, you are in the highest tax bracket, lose $10k on your investment property, you get $4500 return. You are still down $5500. Yes, you would hope to get capital gains, but it isn't making money out of nothing.

              • twinbag on 02/04/2021 - 18:31
                +4

                @brendanm: Mostly the tax loss is from being able to depreciate an appreciating asset.

                • brendanm on 02/04/2021 - 18:55
                  -2

                  @twinbag: Are you saying that all its in a house, and the house itself, never degrade, and never need repairs? That's excellent news.

                  • Euphemistic on 02/04/2021 - 19:24
                    +6

                    @brendanm: Negative gearing property is all about reducing your taxable income. You then hope that the capital value increases more than the costs of ownership. Ie if you get rent of 10k per year, it costs 12k per year but the value increases at 15k per year you are still in front.

                    The rich and corporations spend a lot of effort to reduce tax payable.

                    • brendanm on 02/04/2021 - 19:47
                      +2

                      @Euphemistic: I understand the point of it, it's simply that to be negatively gearing, you are losing money no matter what way you twist it. Yes, the idea is that it mostly pays for itself over time, and you make a capital gain at the end.

                      I know people with investment properties that are worth the same now as they were 5-10 years ago. Not much capital gains there if they were negatively geared.

          • downbythecreek on 03/04/2021 - 00:49
            +5

            @brendanm: You understand that subsidizing losses will have an impact on demand though, right?

            Do you not understand what a free market is?

            • brendanm on 03/04/2021 - 10:10
              +1

              @downbythecreek: I don't even agree with negative gearing, just pointing out that it's not a licence to print money like some people seem to think.

        • derrida derider on 02/04/2021 - 20:50
          +5

          Subsidies like first home buyers grants, first home builders grants and stamp duty exemptions get immediately capitalised into prices. Give buyers an extra $1000, home prices jump by $1000 because buyers can afford that much more.

          Hence the money is actually a free gift of taxpayer's money to SELLERS, not buyers.

          • BartholemewH on 06/04/2021 - 22:04

            @derrida derider: Not only that, the prices increase by the leveraged amount the buyer's borrowing ability increases. Give a buyer 1000, prices go up 5000+.

      • smartazz104 on 03/04/2021 - 16:29

        So why should they do anything, expect this one thing…

        • brendanm on 03/04/2021 - 17:18

          What?

          • smartazz104 on 03/04/2021 - 18:28

            @brendanm:

            Why should they do anything about a free market?

            The only thing they should do is limit foreigners from buying Australian property.

            I just summarised what you said…

            • brendanm on 03/04/2021 - 20:01

              @smartazz104: No you didn't, you said to expect something? I now see you probably meant except. They should do that "one thing" because it makes sense, as we are wanting better housing affordability for Australians, not for foreigners to buy and rent out, or leave empty and visit once a year.

  • ndea on 02/04/2021 - 12:49
    +1

    House prices will fall when governments and banks tighten the money supply, which is never.

    A poor economy might actually might be good for the real estate golden goose, because it'll mean even more funny money.

    In the Australian context there is no 'safer' place for that money to go than bricks 'n' mortar.

  • morse on 02/04/2021 - 13:29
    +2

    Everyone seems to be saying they’ll continue to rise since money is cheap to borrow and that doesn’t look like that will change anytime soon. I am a little skeptical that there are enough people who can afford the prices houses are going for. I do think politicians will do what they can to keep prices high, since they will look after their own interests and that of their friends. I’d like to think prices would at least go back to pre-covid prices (which were still pretty high) mostly for the sake of people who are yet to buy their first home - it’s probably wishful thinking though.

  • Ghost47 on 02/04/2021 - 14:53
    +4

    House prices will never drop. If you don’t own a house now and you’re not earning $200k or in c-suite of some company you’ll be poor forever, especially in Sydney.

    The sooner people resign themselves to this mentality the better. The middle class will disappear as time goes on and you will only the rich and the poor, with the main differentiator being how many houses one owns.

    • Hybroid on 02/04/2021 - 14:57
      +4

      The sooner people resign themselves to this mentality the better.

      Why? Isn't the more appropriate action to acknowledge that buying within the large cities/demanded places is out of reach and move further out instead?

      Instead of buying a tiny old apartment nearer to CBD, I'm now considering 30-40 mins drive out West and get more for my money with a decent house instead. What's wrong with that?

      • Ghost47 on 02/04/2021 - 16:04
        +11

        Because maybe then they'll realise that there's something wrong with this country, it's no longer about a "fair go" it's about a "fair go for the rich and only the rich".

        Never said there was anything wrong with moving further out from the CBD, I don't know why people would want to live near the CBD in the first place (especially the Sydney CBD) unless it shortens their commute exponentially.

      • brendanm on 02/04/2021 - 16:11
        -6

        Ghost47 wants to pay $100k to live in a penthouse in the CBD, don't mind him. God forbid people don't get to live in a mansion in their favourite suburb for a first house.

          • brendanm on 02/04/2021 - 16:36

            @Ghost47:

            But hey you live in Queensland where people in Sydney and Melbourne could easily buy 2-3 houses there

            Exactly, which is what a lot of them are doing now. They then have the added bonus of not having to live in Sydney or Melbourne. Has the added added advantage of increasing the value of my place by 20%+ in the last 6 months or so.

            Shut up you idiot.

            Obviously didn't get around to blocking me sweety :)

            there are places going for hundreds of thousands of dollars over reserve the past month.

            Yeah, in Sydney and Melbourne. Buy somewhere else.

              • brendanm on 02/04/2021 - 17:20
                -5

                @Ghost47: Nice abusive PM champ, while being so soft that you've made it that I can't reply to you. Try to harden up, and maybe have a few less smashed avos, eventually you'll be able to buy a place.

                Also, I don't get lucky, I purchased somewhere well within my means, that had potential overlooked by others, like you, who just have to live right in spatial cities, or their lives will end. So rather than crying like a sook that I couldn't afford a mansion on 50 acres like I wanted, I started somewhere that I could actually afford. Now, you are stuck in the same place as you were, still nowhere closer to your goal.

                  • brendanm on 02/04/2021 - 17:27

                    @Ghost47: You pay an extortionate amount to share an apartment. The smashed avo is a metaphor.

                    No, I put the PM into the same section as your other posts, under my "whinging entitled millennial/gen z" folder.

                      • brendanm on 02/04/2021 - 17:30
                        +1

                        @Ghost47: Your PM suggest otherwise re: remembering 😁

                        Keep on with your current ways of complaining while doing nothing at all, it's obviously working wonders 😂😂

                          • brendanm on 02/04/2021 - 17:38

                            @Ghost47: You haven't made sacrifices, unless you count the hours you've sacrificed with your "woe is me" and "anyone who has a house is selfish" stories.

                            I'll be a huge piece of shit with a house 😂

                            Realising that a suburb is vastly undervalued, and then buying there, is hardly luck. It's just different to your blind view of only looking to buy in one massively overpriced place. Btw, it's +50% in 3 years if that makes it better.

                              • brendanm on 02/04/2021 - 17:50
                                +1

                                @Ghost47:

                                I might pay an "extortionate" amount in rent, but it's nice to know I own your pea sized brain and live there. RENT. FREE.

                                At least you can live somewhere rent free I suppose. It's not very roomy though, but it's the best I've got.

                                List the massive sacrifices you've made. I know you won't 😉

      • serpserpserp on 02/04/2021 - 16:17

        As long as you don't work in the city. Great.

        But a 30-40min drive West in Sydney is Parramatta these days. Nothing cheap there.

        • brendanm on 02/04/2021 - 16:37
          +2

          Why do people insist on living in Sydney and Melbourne then? Get paid a bit more, but have to pay twice as much for a house in the middle of nowhere with a 1+ hour commute. Sounds great 😂

          • serpserpserp on 02/04/2021 - 16:39
            +2

            @brendanm: Yeah it isn't ideal. Some peoples jobs are only in the major cities though.

            But now I don't have that problem and can move anywhere. However given my house is only 30 minutes from the CBD I'm ok with where I bought.

            • brendanm on 02/04/2021 - 17:28
              -5

              @serpserpserp:

              Yeah it isn't ideal. Some peoples jobs are only in the major cities though.

              Then don't they just have to deal with it if that's the path they've chosen? Is it someone else's fault those chose a career that can only be pursued in one or two very expensive parts of the country?

              • brendanm on 02/04/2021 - 19:04

                @brendanm: Some upset people with an entitlement complex in here 😁

              • serpserpserp on 02/04/2021 - 19:58
                +1

                @brendanm:

                Is it someone else's fault those chose a career that can only be pursued in one or two very expensive parts of the country?

                Usually the jobs that can only be pursued in these cities pay really well so people who do those jobs aren't complaining.

                People live in Melbourne and Sydney because that is where the family is. Also certain university courses, lifestyle options etc.

                There are obviously lots of pros to living in those cities, that's why people stay. I guess they'd like to buy a nice house in those places too. Don't blame them. Having been born and and lived in many areas of QLD, I can see how some people might not go for the lifestyle up there. Brisbane is a quaint place though.

        • Hybroid on 02/04/2021 - 16:47

          Chipping Norton/Moorebank area is approx 40 min drive into CBD via M5.

          You can get a 4 bed detached with garden (even pool) for less than $1m.

          • serpserpserp on 02/04/2021 - 20:00
            +1

            @Hybroid: Not during peak hours. that crush getting out of the city past the airport is a nightmare.

          • May4th on 03/04/2021 - 07:49
            +2

            @Hybroid: have you seen eastbound m5 in the morning? i count more days when it's a carpark than not. good luck getting past the airport tunnel in less than an hr

    • serpserpserp on 02/04/2021 - 16:16
      +1

      If you don’t own a house now and you’re not earning $200k or in c-suite of some company you’ll be poor forever, especially in Sydney.

      Well if house prices stop rising (and I don't mean fall, I just mean after this barrage stay fairly stagnant for 5-10 years) if you earn a lot of money you still have a lot of money at the end of the day.

      But yes, no more turning your 1mln dollar house into 2mln dollar house in 24 months kinda stuff.

      • netjock on 02/04/2021 - 22:14

        It is the plan. You earn a lot of money but making you pay must of that on a mortgage guarantees you need to work until 65. Can't let you get ahead and retire at 45. They need the minions.

    • Drakesy on 02/04/2021 - 16:53
      +6

      Median income of australia is $50,000
      Median mortgage size of Australia is $500,000
      That's 10 years of 100% of your salary going into your mortgage + interest (which is next to nothing at the moment.)

      If we increase that interest to say 5% you're paying $25,000 a year before you even touch your mortgage . I feel this is what home buyers aren't comprehending.
      The second interest rates kick we're going to realise who's been treading water.

      Btw the RBA doesn't dictate interest rates in Australia, the banks do. The RBA is merely a guide, if the banks want to increase rates, they're well within their rights to. With the state of the international economy, this is looking increasingly likely.

      • brendanm on 02/04/2021 - 17:24

        That median income includes part time, casual etc. Median full time is around $77-78k.

      • [Deactivated] on 02/04/2021 - 17:49
        +1

        Who is buying a home with only a $500,000 mortgage, exactly? That seems like a fraction of the borrowing required to get into the home market today.

        • brendanm on 02/04/2021 - 19:09
          -1

          Lots of people that don't live in Sydney or Melbourne.

          That is also an average, some people will owe near $0, some will owe $500k, some will owe millions.

          People buying up to the limit the bank will lend, are absolutely stupid.

          • serpserpserp on 02/04/2021 - 20:02

            @brendanm:

            That is also an average,

            Median is not the average.

            • brendanm on 02/04/2021 - 20:39

              @serpserpserp: True, I don't pay enough attention there and missed the median.

          • Tyken on 03/04/2021 - 15:54

            @brendanm: We borrowed 90% for a 1.15 million dollar house last year.

            The house is now 1.36 mil in value.

            We now own more than 25% (including repayments and capital growth).

            I didn't think borrowing to the limit was stupid.

            If we sold now we would be 150k net gain, which is a great deal!

            • brendanm on 03/04/2021 - 17:23

              @Tyken: If you've borrowed to the limit, and rates go up, or you have a problem with employment, and accident etc, you are now stuffed.

              I'd personally much rather go well under my capacity, and not have to worry if something happens, can also pay it off quicker, or turn into an IP and buy elsewhere.

              • Nyclix on 04/04/2021 - 13:13

                @brendanm: I can understand both your points of view. I bought a house off the plan last year for 530k in June. It's a week or two away from completion but similar properties in the area are now selling for 635k so I imagine mine will be valued at 600k or so making it a good investment.

                I did however need to borrow to my limit with a 20% deposit. If interest rates hit 7% or so I couldn't service the loan on my current income. Luckily I've locked it in for 5 years at 2.24% and if in 5 years the rates are 6-7%% I can rent a room or two out to help cover the additional costs, or even rent the entire house out or sell it for a hopefully significant gain. Overall I see it as a good decision. I'm planning on studying in the mean time so hopefully have a much better paying job down the road and I'm used to living frugally so I should be okay. :)

      • derrida derider on 02/04/2021 - 21:07
        +5

        "Btw the RBA doesn't dictate interest rates in Australia, the banks do. The RBA is merely a guide, if the banks want to increase rates, they're well within their rights to. "

        Complete misunderstanding of how it works.

        It is complicated, but the RBA basically sets the interest rates the banks pay for the money they will lend out (by forcing them to buy some government bonds, the interest rate of which are set by the RBA). Its true that the banks can then set any margin they like, but if they get too greedy then other banks can undercut them because their competitors will have exactly the same cost of funds. So bank mortgage rates usually go up and down with the RBA interest rate fairly closely.

        • serpserpserp on 03/04/2021 - 11:55

          (by forcing them to buy some government bonds

          In a regular market they are not forced to buy government bonds.

          At the moment they are close to free so yes, that is where they tap the market for money and given it doesn't burden their prudential requirements. Double bonus.

        • RecklessMonkeys on 03/04/2021 - 22:32

          The RBA has been buying bonds from the banks. They don't need to force the banks to sell them because they're over priced and you'd be mad not to sell them.
          This is Quantitative Easing. It manipulates rates lower and hands free money to the banks.

          Our banks rely heavily on offshore wholesale funding. If this dries up it will be a problem.

          The only reason our banks don't gouge the bejeezus out of mortgages is that they will kill their hosts.
          Everybody can see that if higher rates are forced upon the banks, we're up shyte creek.

    • [Deactivated] on 02/04/2021 - 17:48
      +6

      The sooner people resign themselves to this mentality the better.

      This is the lie used to coax otherwise sane people into incredibly risky investments… because your current investment is only worth what someone else is willing to pay.

      First things first: if you can't afford a 20% deposit don't even think about buying. You need insulation from a falling market.

      Second thing: the current market is highly volatile. Right now that volatility benefits sellers. But volatility is like sailing in a rough ocean. Sure, maybe it works out in your favour by getting you to your destination sooner. Or maybe the ship sinks. You want to take that chance?

      Ask yourself: are you better off just buying Bitcoin? After all - that's equally as frenzied a purchase in today's crazy capital markets.

    • Mistredo on 02/04/2021 - 19:30
      +1

      If the rich are smart, they will never allow that. The worst that could happen to the rich class is hordes of pissed poor people.

      • bargain huntress on 03/04/2021 - 15:03

        Re: Re:

        @Ghost47

        House prices will never drop. If you don’t own a house now and you’re not earning $200k or in c-suite of some company you’ll be poor forever, especially in Sydney.
        The sooner people resign themselves to this mentality the better. The middle class will disappear as time goes on and you will only the rich and the poor, with the main differentiator being how many houses one owns.

        @Mistredo

        If the rich are smart, they will never allow that. The worst that could happen to the rich class is hordes of pissed poor people.

        Sometimes you see the metophorical guillotines being sharpened.
        Politicians like bernie sanders and elizabeth warren.
        But it's always just talk that goes no where.

        How far are we from literal guillotines though? I'm guessing still a looong way off.

    • cashless on 05/04/2021 - 16:55

      House prices never drop?
      Roll the clock forward and let’s see what rising inflation & full employment does for interest rates.
      It will happen, it’s just a matter of how soon/quickly/catastrophically

  • orangetrain on 02/04/2021 - 16:04
    +1

    Inflation going out of control, RBA decision? Kept lowering rates. Nice bubble we're getting here!

    • serpserpserp on 02/04/2021 - 16:13
      +2

      Inflation going out of control,

      You might need to look up how the world measures inflation.

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