Comments on: The Great Australian Housing Market Debate Rages On

By: justin

justin — Thu, 10 Apr 2008 12:51:31 +0000

Australian housing prices are most certainly a symptom of the credit bubble currently deflating. There is no housing shortage in this country. I offer my parents as an example;

Selling their house in Sydney two years ago, they bought a beautiful, huge old triple brick monster, on 350 acres of prime basalt country for half the price of their place in Sydney. They were the only bidders at the auction.

Building a new house of that magnitude today would cost far more than what they paid for the house and the land.

By: barry

barry — Wed, 09 Apr 2008 10:35:51 +0000

I couldn't agree more with the previous comment. I felt sorry for the couple but they were victims of their own greed. However what can one expect from a society that encourages rampant materialism as a way of life and govt's go along with it, terrified that if they preach restraint they'll be tossed out of office.
When people cut back on the number of children they have just so they can afford to buy a biger home or have the latest reno' they get what they deserve. The sad part is that is what they've been told from babyhood particularly as mum and dad used tv as a babysitter allowing the poison of consumerism to infect them subconsciously from infancy.
We have 4 children who never knew of tv until about 5 or 6 years of age. Now married with children only one has tv and that is tightly controlled. Non carborundum bastardum (dont let the b's grind you down)

By: Luke Clements

Luke Clements — Tue, 01 Apr 2008 07:13:32 +0000

I agree with some of what Pete says above. Greed and envy(I add) inducing eveyone to want a 4 bedroom, 2 bathroom home. With 2 kids of my own, I still can't see the need for such silly extravagence. Although I felt very sad to see those poor people lose "their" homes on 4 Corners last night, I couldn't help but shake my head at what they had bought in the first place. From memory they had 2 kids, and yet they forked out at least 650k on a four bedroom, 2 bathroom(one of the bathrooms had a massive spa bath), double garage, 2 level home. What on earth for? I'm sure if they reflect on this, they will realize they they simply tried to keep up with the Jones, and put all their faith in materialism. How sad it was to see the mother crying that they had lost "everything" with a beautiful little girl hanging on her arm. Message to kid "You are (worth)nothing". As for the house, I would have taken the 610k offered at auction, payed off most of the debts, and worked hard to pay the other 40k. I dread finding out what happens to that family. I'm no psychologist, but the father looked like a suicide candidate. I only hope for their childrens sake they work things out. As for fools who took on margin loans getting burnt. Zero sympathy from me. Anyone taking on a margin loan simply hopes to get rich quick, and the risk is always they will get poor quick. I don't know what the answers are for fixing the easy credit availability, but the market seems to be correcting this folly. Left alone to function, I'm sure the markets will correct house prices lower, and make credit much harder to get. But I have doubts the market will be left to function freely without silly government interventions to try and stop it. Unfortunately there is too much vested interest in not letting house prices fall. My bet is the market will win, but it will be a long battle! Cheers, Luke

By: Chris

Chris — Tue, 01 Apr 2008 06:54:49 +0000

I have only ever taken out one loan (apart from a mortgage)in my life and that was from my father for £50 to buy a motor scooter many years ago. He charged me interest and it took me much longer than I expected to pay him back. Parents don't teach their kids lessons like that now, as it is the reason that I am totally clear of debt in spite of owning my own house and being a totally self funded retiree. When I was working I never earned more than $20,000 a year, but then I was brought up during the war years and learned a great deal from my parents about budgeting and only buying things when I had the money to do so.

By: Pete

Pete — Tue, 01 Apr 2008 05:38:33 +0000

Paul M: I agree with what you say, apart from "The only "cure" for affordability is to flood supply."

That is one possible cure, but is it really?

The problem with affordability is that with easy credit, houses at their current price are still considered affordable. Imagine if no-one could get 100% loans for 35 years, or there were no Low Doc & Sub-prime loans available? Where would these home buyers get their money to buy the houses? The answer is, they couldn't.

Also imagine if interest rates were half of what they are, and banks were even more keen to lend: Prices would be even higher. Also try and imagine a scenario where banks would lend up to 800K as Low Doc loans...house prices might go even higher still as people suddenly realise they can afford houses that are even more expensive.

There are two basic factors at work on these prices:
easy credit & greed

It seems harsh to say greed, but people are. People want their very own 4 bedroom house, even though they are not in a position to really own one. Bring in easy credit and then all of a sudden people are given the means to make their badly thought out wishes come true.

Just like the 17 year old kid who buys a brand new Falcon Ute on credit he can barely afford (lacking strong parental advice) things turn nice and sour when he writes the car off a week later and still has the debt to pay off (assuming no insurance?).
Besides that being the worst analogy ever, I think a lot of new home buyers are like that 17 year old, with no parental figure to warn them of the pitfalls.

By: Paul M

Paul M — Tue, 01 Apr 2008 02:24:16 +0000

Here are just a few issues to be aware of with Australian housing. First, when supply is lagging demand every subsidy for "new home owners" goes straight onto the price, every form of assistance goes straight onto the price. The only "cure" for affordability is to flood supply. But that then depresses value of homes already hocked. Second. Real Estate agents or "experts" are yet to be regulated in the way Financial Services Licensees are regulated with detailed plain english disclosure of costs and risks and commissions in formal documents called Statement of Advice. When one area of high level asset selling is tightened up, the "sharp talkers" gravitate to the areas that are not so constrained... eg residential real estate and the financing of it. Third. As the "mortgage broker scandal" in Western Australia a decade ago showed, the weak link in any lending is the valuer. This is a normally honourable profession, but if the hot promoters find themselves an unprofessional "compliant" valuer they keep him very busy and "successful". Overvaluing for loan security then amplifies credit crunch when it comes. About 50% of Australian homes have no mortgages on them.

By: LL

LL — Tue, 18 Mar 2008 08:02:21 +0000

>We have, though, been thinking about lowering our rent here in Elwood by digging a bunker in Coober Peddy, producing some extra income from our opal operations, and resuming our reckoning there.

Don't bet too much on it. The supply of dugouts in/near Coober Pedy is scarce and the council are adding onerous red tape on digging/fitting new ones. If the new mines in region come on stream (China story again) then expect prices to keep going up. Good luck with the opals though as they are like gold ... the demand (driven by US) has dropped which means fewer miners and the relatively trickle of good stuff coming out will hold long-term value.

By: Estate Agent in London

Estate Agent in London — Wed, 20 Feb 2008 13:59:04 +0000

Interesting issues. It's the same here in London. There is a long way to go with the credit crunce. There's a lot that still doesn't make sense. The money supply has been inflated and now they want it all back.

By: Iain

Iain — Tue, 12 Feb 2008 12:38:30 +0000

Australia is merely a subset of the wider global explosion in asset values (inflation). This will readjust as under performing loans are unwound and asset values fall. Many see rising property prices as virtuous and yet react in horror when other living costs rise. They are one in the same - inflation.

By: Paul

Paul — Mon, 11 Feb 2008 13:05:02 +0000

i remember seeing a tv article many years ago which found that real estate agents were going to different regions to stand in the crowd of hopeful home "mortagers" and push the bid up a bit. this started in sydney and melbourne. a long time of little "bits" adds up to overvaluation of property and rich real estate agents... ya know i love fantasy stories where certain societies evolve by "killing all the lawyers", im waiting for a story of a society with no real estate agents real or unreal.