Reserve Bank Agrees There is a Housing Shortage in Australia

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So what if the possibility of a major wipe-out in shares looms? Let’s all buy houses! Today’s Daily Reckoning will continue the discussion we began yesterday. But before we can sort out what Australian investors should do in another major bust, let’s review what happened overnight.

First up is gold’s 1.27% decline in the futures markets. We’ve written about this in a special note that goes out later today. If you miss that note here’s the short version: don’t worry. The fear that China won’t buy IMF fold is a red herring. China is buying plenty of gold. But you might be surprised to find out who the seller is.

What shouldn’t surprise you is that fewer Australians are taking out mortgages to buy new homes. That’s what happens when prices rise, interest rates head up, and the government stops shovelling tax payer money into the market. You can only “bring forward” (steal) so much demand from the future.

The number of people taking out loans to buy new homes fell by nearly 8% in January, according to the Australian Bureau of Statistics. First home buyers fell as a percentage of new lending to 20.5%. That’s down from the high of May last year of 28.5%. And here in Victoria, only 525 Victorians borrowed money to buy a new home in January (see the table on page 10).

Don’t be discouraged, though. The Reserve Bank agrees with the realtors and housing industry spruikers that there is a housing shortage in Australia. RBA assistant governor Philip Lowe said in a speech in Sydney yesterday that constraints on home building are restricting the supply of homes in Australia. The shortage is one factor keeping prices up. Nothing was said about the lending boom.

Lowe said that, ”With population growth above average, and growth in the housing stock below average, it is not surprising there has been upward pressure on housing costs…If we are to build more dwellings, we need to ensure that planning guidelines and infrastructure provision can accommodate this.'”

Blah blah blah. We’re not going to rehash all of this again. But if anything, Australia has already sunk too much of its national capital into housing. Maybe investors have over-invested and locked out first time buyers while also damaging affordability. Who knows?

The river of liquidity that has floated Aussie house prices higher has its source waters overseas in the wholesale borrowing by Aussie banks from foreign lenders. This is what accounts for the financial sector’s massive share of Australia’s net foreign debt. Another global credit squeeze (the implosion of the shadow banking system) would block off those head waters. And where would that leave Aussie housing?

This is not to say or imply that homeownership is an unworthy goal. Yale Economist Robert Shiller points out in New York Times article that home ownership can promote good citizenship, a broad sense of equality, and even a sense of personal liberty in a society. That’s why in Australia and America, homeownership is THE personal financial dream.

But Shiller also points out those are cultural and not financial values. The desirability of homeownership shouldn’t be confused with the financial wisdom of it. The more leveraged a housing investment it is, the more vulnerable you are to getting wiped out on falling asset price falls. This is why nearly 16 million Americans are underwater on their mortgages.

In the mortgage boom years from 2004-2004, it wasn’t hard to get a loan-to-value ratio of 90% or higher with less than a 5% down payment. You didn’t have any equity. But the animal spirits of the housing bull encouraged people to believe prices would just keep going up.

They didn’t, of course. And instead of having equity, most of the borrowers ended up with a big mortgage and a falling asset. This is what soured so many mortgage backed securities and collateralised debt obligations. And the fact that Americans can walk away from underwater mortgages – letting the bank seize back the house, which is the collateral on the loan – in some ways made the financial gamble sensible for people. Maximum upside, zero downside.

You can’t walk away from the loan in the same way in Australia. But that doesn’t’ mean Australians aren’t gambling on higher house prices. Loan-to-value ratios are coming down as banks get more cautious (this restricts new lending as well). But they are still high. And first home buyers remain especially over-leveraged – facing higher interest rates on variable rate loans.

But you know all that. So we won’t yammer on about it. We’re just saying…house aren’t safe as houses, no matter what the RBA says.

So what is safe? Well, as a reader pointed out yesterday, cash isn’t bad. Here’s one response to yesterday’s essay:

Hi guys,

I read you latest anti-deflationist polemic today. You raised many good points.

However, you conclude that the beginning of hyperinflation may be deflation.

I think you need to tell your readers that timing is absolutely critical. Because all longs on the inflation trade may well be utterly destroyed and wiped out.

It may well be that as the meltdown unfolds, there will be a sudden and massive asset implosion that will destroy many. In this case, the governments’ RE-actions will be rather slow and ineffective initially. Hyperinflation probably comes AFTER the meltdown. So Prechter is quite possibly right.

To own cash before the governments react to the implosion may well position people to make “once in a century” purchases of hard assets. Those who can time it will do more than survive.

You guys really need to outline several scenarios IN DETAIL, with the time-flows and mechanics in DETAIL.

Cheers

John Pope

It’s a good point. We’ll deal with it tomorrow. Although it’s going to be hard to predict the future…in detail. That won’t stop us from trying! Until then.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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Comments

  1. ” “once in a century” purchases of hard assets. Those who can time it will do more than survive. ”

    OK, now that got my attention…. I don’t think I can abate my breath for long!

    Reply
  2. “Let’s all buy houses!” – Can’t help but suspect Mr Denning is being sarcastic? :) Still, he did go all the way back to Colorado recently to get his loot out of the country if my recollection of that is correct. So I guess he’s got something planned for it. Maybe we’ll hear tomorrow …

    Reply
  3. Interesting, isn’t it? When the contrarians drop their counter-cyclical stance and start spruiking property, it’s probably time for bulls to sell…! :)

    “I guess he’s got something planned for it. Maybe we’ll hear tomorrow … ”

    Well, his assignment here is to promote gold… so he can really only do that, Ned. He can hardly push the only other serious tangible, property.
    (But if he does, I’ll start putting up For Sale signs… ;) )

    Biker Pete
    March 11, 2010
    Reply
  4. Interesting, isn’t it? When the contrarians drop their counter-cyclical stance and start spruiking property, it’s probably time for bulls to sell…! :)

    “I guess he’s got something planned for it. Maybe we’ll hear tomorrow … ”

    Well, his assignment here is to promote gold… so he can really only do that, Ned. He can hardly push the only other serious tangible, property.
    (But if he does, I’ll start putting up For Sale signs… ;) )

    Biker Pete
    March 11, 2010
    Reply
  5. I was charting the fortunes of some US Dow listed asset vs non asset (services) businesses in the same sectors today. I charted against the Dow and expanded it to both a 5 and a 10 year view. The Dow came in at 0% exactly for 5 years (ASX 18%), and guess what? It came in at 0% for 10 years (ASX 32%). Just trying to do Watcher7 proud here!

    The services businesses of interest came in at 200-300% gain over 10, the asset businesses at 0-120% over 10. Not many understand services businesses, especially analysts and the FASB. Revenues are reported gross when other than for cashflow management purposes nett revenue is the primary factor. I wasn’t charting any of the consumer discretionery & corporate compliance & financial services that have bubbled ever since Volcker surrendered the brown belt, but ethics might even align with investment smell for those soon, but my interests lie elsewhere. I am testing, if still undecided, on whether to adjust my 2008 resolved views.

    Another point in my views today was that ASX 2010 volume has dived. It is way less than half average 09 volume levels and is back to 03-05 av levels.

    US imports shrinking, Chinese exports up, but the latter including curious commodity exports/reexports. US in trade disputes with Brazil and doing the protectionist-unionist enforcer (Boeing-EADS tankers and Chinese Steel) even at the same time it seeks to export its way out of trouble with “partners” it is in trade disputes with.

    Carefull how we longs go.

    Reply
  6. 09 volumes had the capital raisings but still ….

    Reply
  7. I hope Prechter’s right – I have some big shorts on silver v $USD, ASX 200 index and S&P500 index!!

    Richo (the Second)
    March 12, 2010
    Reply
  8. I feel that the Australian economy is over committed to storing value in real estate, which currently is causing high housing prices that will subsequently be a drag on overall economic development as mortgaged home owners have less available discretionary cash to spend and invest in other areas such as superannuation, shares or direct investments in business.
    If you consider that tax-deductibility should be a tool that is aimed carefully at providing benefits to the community that foregoes the tax that would otherwise have been collected, why isn’t tax deductibility on rental accommodation limited to the provision of new houses? It seems to me that allowing tax deducible investment in existing properties causes no benefit to the community. The outcome is to increase the competition between investors (who can negative-gear the investment) and homeowners who have to pay tax to purchase the property leading us into the potential for a damaging bubble to occur. The community needs investment in new housing, so why not limit the investment tax deductibility to this specific category. I feel that it would lead to less pressure on the cost of existing housing, and the potential to target the development of new housing that will reduce price pressure in the future. The less our community pays for housing the more funds that become available for other purchases and for investment in other Australian investments.

    Reply
  9. Richo, the words leaked to market say that Norris came back from NY cockahoop and that his Wall St mates are going to undo all the capital standards & proprietary curbs & trading the otherside of what they underwrite. These leaks go 100% this way or that of the truth but the thing is that they will have a plan and it is not likely to be one where they grind it out.

    The US tax receipt situation is indecent & not covering 50% of outlays. Many of the social spend programmes are supposed to be capped by receipt levels. Social unrest is at Muni level, Washington is some otherworldly cesspot for most. Denninger raised the fact that unfunded liabilities sink the whole ship if they try to inflate their way out of it and even mainstream CNN now agrees http://money.cnn.com/2010/03/10/news/economy/inflation_debt/index.htm .

    But in the back of my mind is … Wall St has a plan. They lined their pockets well enough for a decade with the Dow doing 0% gain. That was a plan.

    Reply
  10. A poster named Mako bring s the below comment on Zerohedge

    quote

    New Fed Z1 report out… system is in a deathspiral. Credit creation in negative for 3rd staight quarter, the only player left at the table is the US government.

    http://www.federalreserve.gov/releases/z1/Current/z1.pdf

    Q1 52882.7

    Q2 52686.7

    Q3 52549.1

    Q4 52416.7 $-134B

    It’s over folks. :) Time for liquidation.

    The price for using compounding interest will be beyond anyones worse nightmare.

    unquote

    Reply
  11. I recently saw a short video of Prechter spelling out his deflationary thesis. All good except for the most important player, the Federal Reserve.

    The Fed IS the market maker, for them to now decide prudence is the best policy (Prechter’s thesis) would be going against everything they have done for a least a couple of decades, if not their entire existence.

    Will the Fed allow the money market to collapse? I don’t think so. Try to let it unwind slowly? maybe, but then asset prices go nowhere for an indeterminate amount of time? sounds politically unpalatable.

    As in all recorded history, my money is on inflation of the currency. The situation is no different here in Oz, the RBA is having a hard time keeping the term of their loans under control… not a good sign.

    Reply
  12. If the Labor Socialist Nanny State government wants to pump up their voter base by opening the multi-cultural immigration floodgates then they will have to accept opening up national parks to housing development.
    You can’t have policies to deliberately double the population and expect to be able to lock up so much land in so called national parks.

    Reply
  13. The theory of a shortage in housing s the same theory that saw religion evolve. A select few find a benefit in conning the majority. No one has ever see any evidence of a true hosing crisis, i have not seen homeless levels rise nor have i seen homes with 10-12 people living as there is no where else.

    It’s just an ideology an for that we run ourselves in circles until we are so disoreintated by this garbage we just accept it as true. We do have a high immigration inflow but do yourself a favour and check out how many are leaving. the balance is not as heavily weighted as we are led to believe.

    People by in large are suckers Enzo Ramaindo tells everyone that there is a massive shortage of rentals and a huge supply of new homes every weekend to buy and rent out, ‘it’s an investors playground’ apparently. The maths really doesn’t add up.

    There is no land shortage we are just lambs to the slaughter!!!!

    What shortage
    March 14, 2010
    Reply
  14. Australia’s housing shortage has been created by the Labor party trying to buy green votes by locking up all available land while at the same time encouraging immigration from groups that are specifically targeted for their propensity to vote Labor.

    Reply
  15. What can you do when none of the major political parties represent what you want?

    Reply
  16. Traditionally, people facing that situation have either formed a new party, or emigrated. With so many new arrivals here and so many really cheap homes abroad, that last solution seems highly attractive, doesn’t it? I’ve often wondered why the emigration isn’t to all these other countries, where the lawns are so much more verdant.

    Is it true that Mexicans are now fleeing south, back into Mexico?

    Reply
  17. You might be right John

    It seems like they both just favour the rich these days, and stuff anyone who was born too late, we don’t get a chance

    I would consider myself a Labor supporter to the right fraction

    I support a free market I guess that’s Capitalism (I know some may think that contradicts the fact that I support Labor but yeah) ,

    I generally don’t support government handouts or middle class welfare things like the baby bonus, first home owners grant and all that sort of nonsense that distorts the property market, I also do not support the state governments deliberately holding back and not releasing enough land (once again this isn’t a free market, its interference)
    so its not free and not fair.

    I support everyone to have the chance of having a fair go and to get ahead in life, something that we don’t have anymore

    Reply
  18. …half the “floor” area of any house is actually called a ceiling…most homeowners are unaware of the potential benefits associated with the use of the ceiling,ok…fan…chandelier…but that’s about all there is yet…these days…

    Reply
  19. …Q…there’s a shortage of housing in australia!! where will the people live??…A…let them live on the ceiling…

    Reply
  20. Recent comment: “Q…there’s a shortage of housing in australia!! where will the people live??…A…let them live on the ceiling…”

    Interesting. We can’t even agree there’s a shortage of housing in Australia. One blogger above suggests that there is no shortage. Another states there is. Others point to locations where there are scores of unoccupied homes and rentals. It seems to vary widely across Australia.

    What seems likely is that in some Oz locations accommodation is scarce… and expensive; and others it’s cheap(er) and there are no queues. Faced with that situation early in life, I moved to where it was cheap and readily available. Never had to park on a ceiling… . :)

    Biker Pete
    March 16, 2010
    Reply
  21. “Q…there’s a shortage of housing in australia!! where will the people live??…A…let them live on the ceiling…”

    You have to ask yourself this, if there really is a housing shortage in Australia (just like there was in USA and UK a few years ago)
    then where are all the excess people living????

    Has there been a significant number of homeless people, NO

    So I say its just another form of property spruking nothing more than that

    Reply
  22. Agreed. No problem then!~ :)

    Biker Pete
    March 16, 2010
    Reply
  23. The housing shortage is just created from the fact prices are rising. The dumb money always chases things that have huge rises, creating an artificial demand. When house prices begin falling the cycle will inevitably reverse. I know ppl in the states who put off buying a house simply because they are unwilling to buy property that is falling. You also see credit tightening in such a scenario as there is a rush to the exits and values fall — a dominoes effect contagion.
    Apex of bubbles are usually characterized by excessive pricing, optimism, and long periods of above average returns. In the “calm before the storm” you see justification of why prices shouldn’t fall and denial that prices are too high.
    It happens in all markets … and is currently occurring in the base metal and oz housing markets. And i’m sure Greg would say Gold too ;).

    Above not advice just banter, seek a financial adviser for decisions etc etc.

    Reply
  24. So you agree that there is no housing shortage Biker Pete?

    Reply
  25. You don’t have to speculate about whether there is or isn’t an undersupply. Just go to the ABS website and compare the population time series with the new dwelling time series. It is blatnatly obvious from the REAL data that we have over-built in Australia by in the past 20 years. There has been some minor under building in the last year but it in no way compensates for the previous 19 years.

    Affordable housing is in short supply because people use it a speculative investment and the govt has happily handed out billions in tax dollars to support it

    http://www.theage.com.au/news/national/landlords-tax-bonanza/2008/03/18/1205602384109.html

    And in recent times has created a short term ponzi demand bubble by offering tax payers money as bait to con 100,000s of young (read: naive ) aussies into making a purchase they may not have actully been able to afford. ALL AT ONCE. There is now some pretty good evidence that this little epolicy has been as about as successful as the US cash-for-clunkers program. ( Re: new finance fall of cliff after boost disappears. WOW who knew that would happen?? , oh thats right anyone with half a neuron.)

    You can argue all you like about other parts of housing but the undersupply issue is a load of BS.

    Reply
  26. Well, what I said previously Steve, is: “What seems likely is that in some Oz locations accommodation is scarce… and expensive; and others it’s cheap(er) and there are no queues.”

    I was never one to pay too much for _any_ commodity, so, in a situation similar to yours (prices I couldn’t afford, where I wanted to live) I adjusted flexibly… and moved to a location I could afford. From what Don says, if I lived on the east coast, I’d probably move to Cairns(!)

    There may be a generational difference between our perspectives: delayed gratification vs. more immediate gratification. I don’t mean that unkindly. I have two sons myself… I recognise differences…. and think our culture has selfishly and progressively conditioned young people to ‘get things’ sooner… .

    Biker Pete
    March 16, 2010
    Reply
  27. Comment by Simon on 16 March 2010:

    You can argue all you like about other parts of housing but the undersupply issue is a load of BS.

    In some areas there is a shortage of housing… inner suburbs of Melbourne are expensive because there is high demand to live there and not much available stock..
    simple supply/demand pressures

    Houses in Melton, Pakenham, Sth Morang, Epping, Cranbourne, Dandenong are significantly cheaper because there is less demand to live in these areas
    Pqrts of Sydney are the same as for most areas..

    Comment by Biker Pete on 16 March 2010:

    There may be a generational difference between our perspectives: delayed gratification vs. more immediate gratification. I don’t mean that unkindly. I have two sons myself… I recognise differences…. and think our culture has selfishly and progressively conditioned young people to ‘get things’ sooner… .

    There is a large proportion of “now” midset in the younger generations.. They want the McMansion, the nice car(s) big screen TV’s throughout the house
    all the things that mummy and daddy have now, with no thought to the fact that mum and dad may have been working and saving for 35 years to get what they have.
    THis is part of what I have tried to say in many of my posts… They have all these things but are in debt past their eyballs, many have poor to no
    history of savings, government grants, parents pay house deposit or worse go guarantor on the loan and then fill the nice new house with furniture on
    interest free period finance… the older ones among us that saw the 80’s and 90’s downturns are a little smarter.. the even older ones that saw the 70’s recession know all to well also
    that things can and do go bad in economies.. the younger ones today have not experienced “bad” times… well I think they are about too if they have not already.

    Stillgotshoeson
    March 16, 2010
    Reply
  28. Simon: “…this little epolicy has been as about as successful as the US cash-for-clunkers program… ”

    THE FHOGs have had some positive effects for tenants (rents plateaued as 200,000 rental homes progressively became available); for construction (our unemployment rates half those of the US and UK); and for our economy (interest rates double those of the northern hemisphere, assisting SFRs.)

    Comparison between cash-for-clunkers and FHBGs is flawed. The former did little to save the US economy; the latter has has helped Australia attain a high level of economic well-being, including high employment, a high tax yield and high wages, compared to much of the rest of the world.

    Biker Pete
    March 16, 2010
    Reply
  29. “Debt is the slavery of the free” (Publilius Syrus)

    as suggested the “need” for instant gratification has created a whole generation of debt slaves.

    one could argue that creating a lot more slaves is good for the economy.

    At least you get a load more worker bees tied to conforming and working. One could say a this is a pitful existance…but who are we to judge?

    One can only hope for their sake that inflation takes care of their slavery to a large enough extent that they can be realeased from their bondage within 10-20 years.

    Reply
  30. I was never one to pay too much for _any_ commodity, so, in a situation similar to yours (prices I couldn’t afford, where I wanted to live) I adjusted flexibly… and moved to a location I could afford. From what Don says, if I lived on the east coast, I’d probably move to Cairns(!)

    You know Pete its a bit hard to expect me to pack up and leave my family and friends to go and live in Cairns. and only if you lived on the east coast, Pete Cairns is almost as far away as Perth is to me.

    Reply
  31. I also don’t think you would find the 14% unemployment too pleasant either Steve :(

    Reply
  32. Comment by Biker Pete on 16 March 2010:

    Simon: “…this little epolicy has been as about as successful as the US cash-for-clunkers program… ”

    “Comparison between cash-for-clunkers and FHBGs is flawed. The former did little to save the US economy; the latter has has helped Australia attain a high level of economic well-being, including high employment, a high tax yield and high wages, compared to much of the rest of the world.”

    Sorry BP but you are mistaken…

    1. House prices rose by as much if not more than the grants on offer in the areas most FHO bought.. so they had to spend more than they other wise would of.
    2. The grant “brought forward” FH purchases so now we are seeing a reduction in home sales due to a) FH buyers finding it harder to get “easy” credit, no grant, no savings history and house prices further out of reach.
    3. Roughly 1/2 of the purchasers that took advantage of the FHOG’s over the last 18 months are in financial stress already, rising interest rates, an unemployment rate that is not going to improve until AFTER those that had hours reduced during this GFC are returned to normal working hours.
    4. As rates continue to rise, some of those under financial stress will lose their homes, others that are not yet in financial stress will be..
    5. Higher interest rates on higher value mortgages reduce discretionary spending…

    Stillgotshoeson
    March 17, 2010
    Reply
  33. Shoes, we disagree on your points 3, 4 and 5.

    Point 1.) While I agree that many families may be in ‘mortgage stress’, asking the populace if they would like more concessions on lifestyle costs will probably elicit the same percentage. Stats which suggest that if you’re paying more than 50% of income into shelter you’re in ‘mortgage stress’ are interesting. For the last thirty years we’ve paid over 80% of THP into ‘shelter’.

    On Point 2 it seems that east coast city prices rose as a result of the FHBGs. We never saw this here. We did see a helluva lot of FHBs building, though… . We also lost a quarter of our tenants to those new homes.

    Points 3 – 5: We were ‘personally affected’ by the FHOG. Once the program was in full swing, the queues for our rentals disappeared! :) Many WA families not only took the $21K, to build, but entered shared equity programs (60/40) with the state government. Result? They’re now paying far less than they were for rent. They have much more disposable income.

    As in all money matters, a look-before-you-leap policy is advisable.
    Our own kids never took up the FHOG offer; despite a.) my advice to do so;
    b.) their ownership of investment properties. One of them is still happy with that choice; the other has taken on one of those ‘mortgage saver accounts’ to get the 17% interest tax-free. If he doesn’t proceed, the cash is ‘banked’ into his Super.

    Biker Pete
    March 17, 2010
    Reply
  34. Steve, as Don suggests, Cairns is probably not a good choice!~ :)

    I guess it’s that age-old problem, that locations with high employment, in highly desirable areas, are destined to remain expensive. In our own case, we’ve moved construction from an area with high capital growth, to one where income is higher, rents are higher and population is growing more rapidly. This area has more services, more entertainment and facilities, more nightlife.

    Competition for location can only get worse. Oldies are living longer; the young are attracted to more urban (rather than rural) living; and most new arrivals appear to be heading for larger regional centres and cities.
    Wouldn’t be my first choice, but obviously it’s nearly everyone elses… .
    More demand, higher prices… .

    Biker Pete
    March 17, 2010
    Reply
  35. Equity programs are not available in NSW and Victoria where 60% plus of the population of Australia resides… NSW and Victoria do not have “resource booms” happening in their respective economies..

    Stillgotshoeson
    March 17, 2010
    Reply
  36. Shared Equity in WA disappeared for a while, Shoes. We _actively_ campaigned for its return… even though it _cost us money_.* It’s back… the WA Libs having initially dropping it after taking power… then wisely relaunching it much later.

    We know that SE and FHOGs were the chief reason we lost three months rent on one brand new (very high-quality) rental, Shoes. We also let it go for $20.00 per week less than our target rent… . :) There is no question that the FHOGs’ freeing-up of 200,000+ rentals kept Australian rents in check. Its cessation has meant that rents (here) are now steadily rising again… .
    * Not really an i$$ue for us, with high offsets… .

    Biker Pete
    March 17, 2010
    Reply
  37. Biker how much leverage do you use? If its too personal I understand, just curious tis all ;)

    Reply
  38. Not offended, Anon. Our equity varies, project-to-project. Some properties we own outright; some we own 60 – 90%; a few we went into with just 25%. Those latter homes have a much higher offset backing. Makes $en$e.

    The house which sat idle for three months is a _classic_ example of being ‘caught-out’ at the top of a (high-rent) cycle. Superb home (I let the missus go for it; rents were peaking through-the-roof; families were continually stopping cars to ask ‘the digger’ about possible completion dates(!) A woman even offered us $25.00 per week above our target rent, if we could speed it up. We couldn’t.

    Then… kerthunk!! :)

    Within three months the rental market slowed to a trickle. Scores of new FHOGs and FHOG/SEs homes were completed simultaneously, as the grants neared their end… .

    We’re not at all worried about getting a thousand lower than original target. Of all our homes, this is near the top in terms of likely capital gain. Superb location, large home, great design.

    I note that our latest projects _are_ smaller, though!~ ;)

    Biker Pete
    March 17, 2010
    Reply
  39. Give me ten good reasons that rents will go up in the medium term Biker Pete and i’ll give you ten counter arguments that say you don’t know what you’re talking about.

    The only reasons rents might go up in the short-term:
    – too many foreclosures, no-one to buy them and rent them
    – Govt implements a rental assistance scheme (eg, like the FHOG, but for rent)

    Keep dreamin’ :)

    Reply
  40. Pete: “Give me ten good reasons that rents will go up in the medium term Biker Pete”

    Nope. Can’t be bothered, Pete. My point was that rents plateaued and even fell in some areas, due to the FHOGs and SEs here. We don’t need rents to go up. If they do, I’ll persuade our agents that a minimal increase will suffice. We just did that a fortnight ago… . :)

    Biker Pete
    March 17, 2010
    Reply
  41. That is the nature of WA I guess Biker. High incomes (from things like mining) mean that people can afford and also prefer to get their own place. Get a professional couple together and combined incomes might go 200-300k, enough to blast through most mortgages in short order :)

    Reply
  42. Don: “Get a professional couple together and combined incomes might go 200-300k…”

    Or much, much more, Don. And you’ve got to admire those who can put aside the comforts of the ‘known’ for the possibilities of the unknown. Too often we get pretty ‘fixed’ in our ways… accepting what happens to us as our lot… . The poem ‘Invictus’ pretty much sums up our attitude to life.*

    To be honest, I’d never fully considered the possibility of multiple income streams, despite creating and adhering to flexible long-term plans. I just didn’t have the vision to see all the possibilities… .

    Right now we’re watching _young mining couples_ pulling incomes around $250K+ per annum. The really, really cluey ones saw the $21K as a nice gift, a launching pad; and built quality homes which they’ll soon rent to others, after the six-month qualifying period. Their equity and additional rental income mean it’s a breeze to build more.

    I can honestly say that no week goes by without my learning increasing. Last week I learned that I’ll never, ever have to dig up a septic well by hand again; having installed surface level access. The bears will laugh at such thrift, of course… but that’s how we became ‘comfortable’… . :)
    * Everyone experiences setbacks. IMHO, the ability to put them behind us and move on is one of the critical keys to success.

    Biker Pete
    March 17, 2010
    Reply
  43. Please help, I move from NZ, I am now in the market of purchasing a house. should I buy now or wait for a few months hope the price may come down !

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