First-home buyers in the eye of a storm

I know, not another doom and gloom thread.  I’ve been watching for some time now what’s been unfolding and quite frankly, I don’t like it neither, but it’s a reality many of us will have to accept.  The boom is turning to bust and in all likelihood it will be major.

First-home buyers in the eye of a storm

THE Australian housing market is facing the prospect of a “perfect storm” of financial pressures – including high mortgage debt, overvalued homes and rising unemployment – in which prices could eventually fall by as much as 30 per cent, investors have been warned.

Research compiled by international analysts has indicated that while domestic house prices held up well amid the breaking global financial crisis, in the impact of the worsening local downturn they have come off their peak.

Prices are beginning to slide in line with declines in the US and Britain, the report suggests.

There, the fall in housing values has exacerbated recessions and prices have started dropping below or sharply back to what is described as “fair value” levels after nearly 10 years of soaring property costs.

The special report was compiled by BCA Research in Canada. It shows that the residential market fell 25 per cent in the US and 18 per cent in Britain last year.

By contrast, Australian prices slipped a “mere” 4 per cent from the all-time highs recorded in the first quarter of last year.

The authors of the report say the “ferocity of the price collapses” in the US and Britain was made worse by the meltdown in the financial services industry – a factor that is affecting Australia’s two financial centres, Sydney and Melbourne.

“The housing market is looking particularly vulnerable, with overinflated prices, deteriorating affordability and slowing household income growth,” the report says. “There is an increasing possibility of a major housing bust in Australia.”

And what were the government thinking when the upped the first home – buyers grants?  God only knows.  The other explanation was the RBA and Federal Government hoped it would prevent a rapid price deflations in housing.   They’ve got it wrong, and maybe now might be a good time for them to re-focus on the bigger picture of housing affordability in the long term.

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74 Responses

  1. @joni:
    OK, this is ridiculous. John knows he’s going outside the bounds of the agreement he made (he just about says so first line). It is obvious now he does not intend to keep his word on it as there has been a single day between his posts (twice as good as before but definitely not the “one thread a week” he said he would do).

    Is there a way to stop this please? It should be painfully obvious by now he won’t do it himself.

  2. John

    I tend to agree with BT… This should have been under yesterdays housing thread.

  3. Frankly, the issue of banks and there parasitic behaviour is just another element of this issue that needs to be aired. And Ben wonders why he’s having so much trouble. Ben, the banks are more interested in sucking the life out of first-homeowner grants than bothering about people such as yourself. F%*kers like Ralph Norris know the downside yet have not been able to help themselves – now they’re finally talking..

    Worst is yet to come but banks strong, says Norris
    Eric Johnston
    March 18, 2009
    http://business.smh.com.au/business/worst-is-yet-to-come-but-banks-strong-says-norris-20090317-90zu.html

    THE Commonwealth Bank says the Federal Government’s sweetener on the first-home buyers grant should not be open-ended, given it could encourage into the market some who may not be able to afford home ownership.

    The bank’s chief executive, Ralph Norris, also warned the Australian economy was likely to deteriorate before it improved. But the banking sector here would emerge through the downturn stronger than rivals in the US or Europe, he said.

    “There’s no doubt that the toughest period in the Australian economy still lies ahead of us,” Mr Norris told a Finsia business lunch.

    “Unfortunately, the unemployment rate will rise, and defaults will increase.”

  4. Guys

    I know alcopop taxes is important to some. As discussed also, everyone’s free to join in or completely ignore if so desired. Threads should be allowed to live and die on their own merits.

  5. I’m staring to feel that eveytime I post that some people react as though I’d raped their favourite pet or something.

    If this is the case ‘I swear, it wasn’t me’ Lol

  6. Have you guys thought about the comments above and how they may turn people off joining in? Perhaps it’s best to say nothing and focus on areas you’re interested in.

  7. I think it’s in the public’s best interest to know what’s really happening, just as John Wilson does.

    Dispossessed dentist paints anti-bank slogans on property
    http://www.news.com.au/dailytelegraph/story/0,22049,25202054-5013110,00.html
    March 17, 2009 12:00am

    DECLARING “banks are thieves” and the judges supporting them “traitors”, John Wilson has turned his repossessed North Rocks property into a giant billboard.

    The dentist, deregistered and with no surgery to work from, could be jailed for public mischief over his fight against the banks.

    “People should know what’s happening and how banks are illegally repossessing homes,” Mr Wilson said.

  8. Yes John, it’s all doom and gloom. Here there and everywhere. But wait. What’s this?

    Dow up 2.5 pct; S&P 500 up 3.2 pct; Nasdaq up 4.1 pct

    Dow up, S&P up, Nasdaq up 4.1%. Dow up 5% for March. 13% up from its low. Why? They say that things won’t turn around until the Housing Market recovers. And look:

    an unexpected leap in housing starts pushed Home Depot … The Dow Jones home construction index .DJUSHB rose 6.3 percent after data showed housing starts jumped 22.2 percent in February,

    Housing starts up 22.2%? Unbelievable. And there’s more. It is:

    the biggest percentage rise since January 1990, and also the first increase since last April.

    http://www.reuters.com/article/marketsNews/idCAN1730612120090317?rpc=44

    Sorry to rain on the tea-party! LOL. Yes I know another dead cat bounce.

  9. Nature 5, on March 18th, 2009 at 8:23 am Said:

    Perhaps premature as usual Nature5?

  10. Nature5

    Lol Home starts up wow! Would that have anything to do with the grants?

    Watch the dead cat come back down to earth very soon

  11. Lol Home starts up wow! Would that have anything to do with the grants?

    I wasn’t aware of ‘grants’ for housing starts in the US. Or could it be the case you didn’t read the linked article. Good news too painful, perhaps?

  12. John

    For heavens sake you and I have agreed on many things but this is now out of control.

    Who cares what the family home is worth ( other than sensationalist reporters) if you intend to live in it. It is a non event. This is truly hysterical fear mongering at its best.

    My mothers home was worth $16,000 40 years ago and now worth $220,000. She couldn’t care less if it was worth $1. It does not matter to her, or any of us for that matter.

    The rental market has boomed with rents being increased every 12 months at a rate of over 10%.

    Rentals here on the sunshine coast average $450 to $550 per week for a 4 bedroom home.

    $550 per week will pay off a $380,000 home loan in 22 years shaving 8 years off the 30 year term.

    A person can purchase a brand new 4 bedroom home for $400,000. Receive $21,000 from the government and borrow $380,000 from the Bank. Pay NO Stamp Duty or Government fees.

    Their rent of $550 per week will slowly give them equity in the home. After 1 year they will have 8% equity. After 2 years 9.97% after 5 years 18%.

    I would much rather a person take a risk and try to own something than be beholden to rental barrons for the rest of their lives.

    As for having a job, no one knows if their job will exist next week, but you turn up and hopefully still have one. If not look for another job.

    House prices have risen and fallen since they were a tradeable commodity, yet people have still bought their own home, even when interest rates were 17%.

    I know some will lose their home if things turn for the worse for them but please some perspective here, the reporting is as though anyone who gets a loan will lose their home and this is simple sensationalist.

    I have also covered numerous times the difference between home loans in the USA and home loans in OZ. The responsibility issue is a major factor in our lower foreclosure rate.

  13. John

    Home starts are also up 21% in the USA. Your thoughts on that. ?

  14. Speaking of the US of A, economic analyst Michael Hudson has a few home truths to tell:

    While Mr. Bernanke’s “60 Minutes” interview was being broadcast, the government was releasing the counterparties on the winning side of the Wall Street casino in bets that A.I.G. lost. To deflect the widespread voter disapproval of giving $160 billion to A.I.G., the Treasury finally released the names of the “counterparties” who ended up with the funds A.I.G. paid out to winning betters. Confirming rumors that had been circulating for the past few months, Mr. Paulson’s own company, Goldman Sachs, headed the list at $13 billion! Followed by Merrill Lynch ($7 billion), Bank of America ($5 billion), Citigroup ($23 billion and the much-loathed junk-mortgage lender Wachovia ($1.5 billion). So as Treasury Secretary, Mr. Paulson turns out to have represented not the U.S. interest but that of his own firm and its Wall Street neighbors.

    (Michael Hudson, Counterpunch,

    Read ’em and weep. Kinda makes ya sick to the stomach.

    more here:
    http://www.counterpunch.com/

    ————

    BTW, Hudson has a half-decent track record:

    Hudson’s April 2006 Harper’s cover story, “The $4.7 Trillion Pyramid: Why Social Security Won’t Be Enough to Save Wall Street,” helped defeat the Bush administration’s attempt to privatize Social Security by showing its aim of steering wage withholding into the stock market to reflate stock market prices for the benefit of insiders and speculators – and to sell to the pension funds. His May 2006 Harper’s cover story, “The New Road to Serfdom: An illustrated guide to the coming real estate collapse,” was the first major national article forecasting – in precise chart form – the bursting of the real estate bubble and its consequences for homeowners and state and local government solvency.

    (Wik ipedia)

    “You can straighten a worm, but the crook is in him and only waiting”
    (Mark Twain)

    Time for Obama to say ENUFF & send out the G-Men full bore.

    N’

  15. Or, perhaps John, you should look at Blogocrats as a community blog. Letting each thread stand or fail on it’s own merits only works so long as you are not swamping out the other subjects with your own pet subject.

    You agreed to limit your threads to the one economic one per week. You started the other thread on housing prices not two days ago. And you are the one starting yet another thread on the doom & gloom in our economic climate. Just as “Tom of Melbourne” could kill this blog by posting a daily anti-union rant, you are killing participation by turning this blog into “John’s Blog of Financial Doom”. If I wanted to read a daily post on that subject – I’d go elsewhere. And, frankly, I’m thinking of going elsewhere because I’m sick of the negative financial posts.

    @joni / reb:
    Seriously guys – there must be something that can be done. John is clearly unrepentant and is not going to change. Why is it he can post what he likes (contrary to an agreement to do otherwise), but more flexible, interesting subject matter by others must go through Reb?

  16. Proverbials, damned proverbials, and statistics

    The bounce in both groundbreaking activity and future building plans comes in the wake of a severe slump that has helped push the financial sector into crisis.

    But compared to a year ago, housing starts had slumped 47.3 percent in February and permits were off 44.2 percent.

  17. G-Man (short for Government Man) is slang for a Federal Bureau of Investigation (FBI) agent. The word “Government” stands for the United States Federal Government, as opposed to state or local government police agencies.

    Legal authority

    The FBI’s mandate is established in Title 28 of the United States Code (U.S. Code), Section 533, which authorizes the Attorney General to “appoint officials to detect… crimes against the United States.” Other federal statutes give the FBI the authority and responsibility to investigate specific crimes.
    (Wiki pedia)

    Some of the FBI…aka G-men’s priorities are supposed to be:

    Combat public corruption at all levels;
    Combat transnational/national criminal organizations and enterprises (see organized crime);
    Combat major white-collar crime
    (Wiki pedia)

    If these financial & insurance & war-mongering execs and their CABAL at the top levels of the Bushevik government haven’t contributed to all of the above then I don’t know what else you’d call it…bar GRAND THEFT.
    N’

  18. B.Tolputt
    What’s stopping you from submitting a topic of your choice? Reb and Joni have put the invitation out there many times.

    Looking forward to your post…

  19. John,

    I agree with Ben & Joni.

    Why the need for repetitive posts?

    You posted on the housing crisis just two days ago.

    In all honesty I can’t see the need for two posts in the same week on the same subject, so can you please delete one of them?

    Thanks.
    reb

  20. shaneinqld, on March 18th, 2009 at 8:47 am Said:

    John

    Home starts are also up 21% in the USA. Your thoughts on that. ?

    Wow Shane. their bubble bust perhaps? Ours is yet to perhaps?

  21. Ben

    @joni / reb:
    Seriously guys – there must be something that can be done. John is clearly unrepentant and is not going to change. Why is it he can post what he likes (contrary to an agreement to do otherwise), but more flexible, interesting subject matter by others must go through Reb?

    I’m one author, should we really go down the path of censuring. And although Joni and Reb may agree that “i’m being repetitive, that’s not the case, there are many dimensions to this crisis, and the least of which is our utter unpreparedness and unwillingness to deal with the fallout.

  22. Ben

    Joni and Reb have every entitlement to determine which direction this blog goes in. They also have every right to block the access I have to posting threads.

    I care little really, but will I remain unrepentant? Probably!

  23. Shane

    What about the housing affordability crisis? If the government takes it seriously, then maybe we will see a healthy increase in new start ups. But as it is, once the bottom feeders don’t have the first homebuyer grants to prey on, you can expect start ups to absolutely plummet. Then again, the banks know that plenty of existing mortgage holder are going to default hence the reason for CBA CEO Ralph Norris’s latest comments:

    HOME owners who lose their jobs will be thrown a lifeline by the nation’s biggest mortgage lender, which yesterday announced interest deferrals of up to 12 months to stop customers falling into arrears and triggering a wave of forced sales.

    The Commonwealth Bank initiative, announced by chief executive Ralph Norris at a business lunch in Melbourne, follows recent discussions between Wayne Swan and the major banks about measures to assist families hit by the global recession.

    With CBA itself predicting last month that the jobless rate could blow out from its current level of 5.2 per cent to a peak of 7 per cent late next year, Mr Norris said that it was not in the bank’s interest to see people “get into trouble”.

    And you shane are one of the most informed about the types of problems that exist than many I know.

    The Australian Housing Crisis 2009

    shaneinqld, on March 17th, 2009 at 9:26 am Said:

    “Whose Accountable”

    Many of us are accountable. The rich bosses who increased their wages from 30 times the lowest paid worker in their organisation to 260 times the lowest paid worker. Thereby altering the so called “average wage” statistics forever. The true multiple of earnings for a new home for the average worker is more like 9 or 10 times, not the 7 quoted by statisticians. I speak from analysis of my over 300 clients.

    The citizens by changing their requirements from a 3 bedroom home with 1 loungeroom 1 Kitchen 1 bathroom and 1 dining room, with possibly a verandah. To a mansion containing no less than 4 bedrooms 2 or 3 bathrooms 1 media room 1 study 1 family room 1 formal dining room 1 laundry room 1 sewing room etc etc.

    The change from a social society to a greed society where everyone is for themselves and the keep up with the Jones’s ethic exploding.

    The Government for introducing negative gearing, allowing the wealthy owning investment properties to offset any losses against their other income and therefore giving my tax dollars to those who own more than one property. If they pumped this money into assisting home owners the benefit to society would be far greater.

    We were told that rents have to rise because interest rates were rising. Well those same rates have dropped by almost 50% yet rent is increasing by 10% or more per year. We are now told it is due to low availability. Any excuse will do to screw the renter who has no hope of saving a deposit while paying rent.

    The finance industry for relaxing credit policy in the face of competition to maintain market share and taking on riskier borrowers. Lend Lend Lend. Although this is now starting to reverse.

    The buy it all now society, for telling first home buyers they also need the best of everything in their new home NOW.

    The expectations by borrowers that they should be given loans simply because they have assets. To them it should not matter that they cannot service the loan. A dangerous cocktail of destruction.

    There will always be homeless as there are people that will not better themselves under any circumstances and will simply squander whatever they have and whatever they earn. I have these type of people in my own family.

    The greed of many Real Estate Agents and Mortgage Brokers ( remember I am one of these) who, rather than exercise caution and do the right thing by their clients simply tell them anything to get a sale and the resulting commission.

    Until the equlibrium between the top bosses and the avergage workers comes back into sync and the government stops the negative gearing rort and people get back to the basic home, for their first home requirement, things will not change.

  24. RN

    Thanks, I agree completely.

  25. The title of this thread is appropriate, why do I get the impression we’re in the eye of a political shit storm?

    And no, I didn’t start it obviously!

  26. RN

    Open invitation to email me any time, I can pass on some documents that will help keep you informed and educated.

    johnmcphilbin@live.com.au

  27. Apologies TB, I was just trying to point out what our forces are up against.

  28. …wrong post

  29. The best way to counteract John McDoomngloom is with this – Good News:

    Call off Depression 2.0.

    While still far from health, the U.S. economy is showing some encouraging signs of life as consumers tiptoe back to the shopping mall, home builders pick up their hammers, and manufacturers clear out inventory.

    That suggests the soon-to-be-completed first quarter will be as bad as it gets, and apocalyptic fears of another lengthy, painful Great Depression look unwarranted.

    😉

  30. While you’re at it Reb and Joni, you can take me off the author’s list.

    Cheers

  31. Up you nose with a rubber hose Tony.

  32. I’m betting you’ve not even acknowledged the facts Tony.

  33. You mean the dead cat bounce, premature Tony, premature.

  34. John

    The major word in the CBA comment is “COULD” happen.

    The fact is anything could happen. We have had unemployment well above 7% before.

    I will look forward to the next 12 months and then discuss the outcomes with you. Till then I see no reason to rehash.

    While I may offer reasons as to the current situation that does not mean I believe we are all headed for the toilet.

  35. Shane

    I look forward as well.

  36. premature Tony, premature

    Maybe, John, maybe.

    While you’re at it Reb and Joni, you can take me off the author’s list.

    That wasn’t a dummy-spit was it? (What took you so long? You’re one of the thickest-skinned sonsofagun I ever did see.)

    🙂

  37. Lol Tony, I’ve been locked out from authoring so I thought we may as well go the whole way.

    I’m still thick skinned (wink)

  38. Nasking,

    On AIG (careful, that link is to Fox Business 😉 ):

    While the Senate was constructing the $787 billion stimulus last month, Dodd added an executive-compensation restriction to the bill. The provision, now called “the Dodd Amendment” by the Obama Administration provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009” — which exempts the very AIG bonuses Dodd and others are now seeking to tax…Separately, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.

  39. ….Unrepentant to the end…stop!

  40. AIG: Arseholes In Greed

  41. RN

    What a brilliant example, and everyone’s got fingers crossed it won’t happen here.

  42. RN

    Manipulating the Market – The Central Banks.

  43. Hi John

    What about presenting your economics thread once a week and including in that a ‘link dump’ where you place as many financial subjects and points of interest as you like (no need to cut and paste, just link) in the one post. We can then read about the topics we are interested in and you will still keep to your agreement and everyone remains civil.

    Just a thought anyway.

  44. Kitty

    I really do need to retire from authoring on Blogocrats simply because I’ll have so little time coming up. If Reb and Joni want to post a thread on Mondays I should be able to find times when I can join in.

  45. Shane it didn’t take long for contradictory information to flow through.

    Jump in US housing starts doesn’t signal bottom

    US housing starts rose for the first time in eight months in February as mild weather and apartment construction ignited a surprise surge.

    But the stunning 22.2 per cent increase didn’t reverse the grim fundamentals of an ailing sector made sicker by a deep recession that’s giving rise to deflation fears.

    A separate report did ease worries somewhat on falling prices. Labour Department data showed wholesale prices rose a second straight month in February, inching 0.1 per cent higher. Core prices rose 0.2 per cent.

  46. John McPhilbin, on March 18th, 2009 at 12:20 pm

    Like I said…if you start with 10 splodges, and your splodges shrink to 5 splodges, and then grow to 6 splodges, have your splodges really grown by 20%? Expect plenty more splodge ‘growth’ like that.

  47. Legion

    The shrinking of ‘Splodges’, exactly (lol)

  48. I was going to write something deep and meaningful. However, I will have to go with Legion on ‘splodge’. Save the Splodge!

    ‘ang on a mo’..Swan is on Sky. Me thinks to do with some sort of limit on executive payouts.

  49. I’m just sick and tired of people like John McWeelallberuned talking down the splodge market.

  50. John

    I never said a jump in starts signalled the bottom. Just wanted your opinion on some good news within the overwhelming bombardment of negative reports and you didn’t let me down, you still came back with a negative.

    I do however think it signals a slowdown in the falling ( plunging) prices and puts a light at the end of the tunnel which may be some way off yet.

  51. For Joni..for midweek. Maybe a thread on the Splodge. While I agree that the splodge isn’t oft mentioned, I believe that it is a worthwhile topic.

  52. Hi John,
    just an example i tried to ask you a question on housing a couple of days ago, and no answer.
    Cause there was a new thread, i really cant keep up

    Cheers buddy

    @7.43am, the camel swears it was you.

  53. Aqua

    You should know me by now, I do get carried away on occasions. Apologies mate, it wasn’t intentional – I probably didn’t know the answer so I’ve been trying to hide from you (just joking)

  54. its cool John.
    (removes Johns photo from the dart board) 😉

  55. Min

    I have a hard enough time cleaning up the splodge at home let alone here on the blog.

    And would that make us Slodgocrats?

  56. Aqua

    Phew just in the nick of time.

  57. Well joni..the splodge is an important issue. However, I do appreciate that time and space is a problem on the blog. And anyway if the splodge was put before the Senate then Fielding would probably vote against the splodge anyway.

  58. A tale of two splodges, in more ways than one…

    housing-starts

    starts-big

  59. My concerns exactly

    Housing market – bubble or buy?
    http://business.smh.com.au/business/pros-and-cons-of-granting-a-fiscal-favour-20090320-94eg.html?page=-1
    The first-home buyer’s incentive must be applied responsibly as the grant causes distortions.

    Despite his bank being one of the major beneficiaries of the latest mini-boom in lending, Norris is concerned about the likely distortions caused by the grant and even more so its impact on the mainly young borrowers enticed to jump on the house-buying bandwagon.

    One-off cash hand-outs of up to $21,000 (for those first-timers who purchase a new home and therefore help underpin the building industry) may be all well and good in hard times, the Commbank boss argued this week, but there is a danger they can make it tougher for the recipients when the economy turns upwards.

    Drawing a parallel with the US, where the now infamous subprime housing loans encouraged millions of people to borrow money they could not repay, Norris warned some first-time buyers here could eventually find themselves in a similar position.

    Coupled with cheap home-loan interest rates – just over a year ago they stood at more than 9 per cent – and therefore low monthly repayments, financial problems could emerge when those bills started to rise in line with higher borrowing costs.

    “The first home buyer grant has provided a stimulus to this point but we have to be careful that this doesn’t become a situation where this is an open-ended offer,” Norris told a business lunch in Melbourne on Tuesday. “All of us have had to make sure we’re lending responsibly to first home buyers.”

    Norris choose his words carefully. But many market observers took his comments to be a thinly veiled warning of an emerging “bubble” in the property market: one where the grant already appears to be pushing up house prices just as the downturn is pricking some of huge inflationary pressure of the boom years.

    The grant’s pros and cons and its hothouse price effect on homes in the $500,000 range dominate debate across many industries inextricably linked to the property market.

    Its effect understandably took centre stage at a mortgage finance seminar organised by Australian Banking And Finance magazine in Sydney on Thursday at which the word “bubble” was liberally used to describe the likely downside of the Government-backed package – which otherwise attracted praise for helping the depressed domestic property industry.

    James Sheffield, the general manager of mortgage wealth at the Commonwealth Bank, was cautiously optimistic about the seemingly positive signs in the housing market, but he also cautioned about the quality of the lending that will emerge over the next three to four years.

    It was generally felt the market was doing better than expected, but Sheffield said it was important for mortgage financiers to “focus on the risks” involved – these could end up “biting lenders in Australia on the bum”.

  60. Don’t be surprised if next week everyone will have an opinion.

    First home buyers face ‘sub-prime’ crisis
    http://www.news.com.au/dailytelegraph/story/0,22049,25222434-5001021,00.html
    By Glenn Milne and Nick Gardner

    March 22, 2009 12:00am

    AUSTRALIA is facing its own version of the US sub-prime housing crisis, with thousands of young home owners risking bankruptcy as a result of Kevin Rudd’s economic stimulus package.

    That’s the grim warning from the economic expert who first called the debt crisis that is driving the global financial meltdown. Dubbing the looming crisis “Sub-Prime Lite,” Professor Steve Keen told The Sunday Telegraph Australia was making the same mistakes as the US.

    Professor Keen said that in trying to avoid an economic crisis caused by too much borrowing, Australia was in effect encouraging the poorest in the community to take on even more debt.

    “Yet these low-paid first-home buyers are the people who are most vulnerable to the economic downturn,” he said.

    The top end of Sydney’s housing market has been suffering for some time as mass redundancies within the financial sector have forced owners to sell.

  61. Reb or Shane

    Do you guys own investment properties?

  62. John..you also mention rental unaffordability. That is, in the ye olde days when it became too expensive to rent, one decided to pay the extra to purchase.

    And so what happens now? If people cannot afford a modest home loan assisted along by the First Home Buyer’s grant..then where do they live? They can afford neither to purchase nor to rent.

  63. That’s right Min, not everyone can afford to either buy or rent anymore without having their disposable incomes squeezed quite substantially.

    * A 2007 report by St Vincent de Paul says around 50% of people seeking help from homeless services across Australia are working families who cannot pay the rent.
    * A 2007 report by the Housing Industry Association found that by the end of the decade 750,000 Australians will be classified as under rental stress.

  64. And so John McP..the solution is???

    I don’t understand this subprime thingy, but to me it means that we/us/the nation have to do our best to prop up the weakest sector so that the bottom doesn’t fall out.

    I think that was it was Ross Gittins who said that just because Australians used bonuses to pay off debt, that this wasn’t a bad thing. It still means ‘money in the bank’.

    You asked a while back John, what makes this recession different. The answer is, personal household debt eg. those who have maxed out on their credit cards with no asset to show for it (eg os holidays). A plasma you can sell, an os holiday you can’t.

  65. John

    I do not own an investment property.

  66. Shane

    But you livelihood depends on the housing market remaining firm?

  67. Min

    “And so John McP..the solution is???”

    First, people need to acknowledge there’s a real problem. It often comes in the form of a painful wake up call.

    The solutions have to address the problems.

    The Housing Crisis
    Volume 284, Issues in Society
    http://www.spinneypress.com.au/284%20The%20Housing%20Crisis.html
    Owning your own home has long been the ‘Australian dream’, but for many it comes at a great cost, while for others it remains simply an unattainable dream. What are the impacts of changing interest rates, high demand and limited supply having on Australia’s housing market? This book explores key issues shaping the current and future state of housing in Australia, including mortgage stress, housing costs, rent affordability, housing assistance and supported accommodation, and the rise in homelessness. Which Australians are struggling to find and maintain a roof over their heads and what can be done about it?

  68. John,

    Yes I own an investment property.

    I view it as a long term investment whereby the rental income will eventually become a retirement income for me and my partner.

    I cannot imagine that in 20 years time, the aged pension will exist, or it will be so difficult to qualify for, that you’d have to be on the bones of your @rse to get it, whatever measley pittance it happens to be at that time.

  69. It’s also a great way of minimising one’s tax payments between now and retirement too!

  70. John

    My livelihood does not rely on the housing market remaining firm because if the prices drop others can borrow. My livelihood relys on people having jobs and the Banks continuing to deal with brokers.

  71. As much as it pains me to say it, it looks like John McPhilbin has been right all along.

    House prices have fallen sharply in recent months and are expected to decline further after the extension to the FHOG closes:

    Australian house prices fell by a record annual amount in the three months through March as the nation’s first recession since 1991 and surging unemployment sapped demand for property.

    An index measuring the weighted average of prices for established houses in the eight capital cities slumped 6.7 percent from a year earlier, after dropping a revised 3.9 percent in the fourth quarter, the Australian Bureau of Statistics said in Sydney today. It was the biggest decline since the bureau began recording prices in 1986.

    http://www.bloomberg.com/apps/news?pid=20601081&sid=aKEK8cOcvqC8&refer=australia

  72. As much as it pains me to say it, it looks like John McPhilbin has been right all along.

    In fairness to John, if you throw enough mud at the wall, some of it’s bound to stick.

  73. On the other hand:

    The increase in the first home owners grant has encouraged first time buyers to enter the housing market.

    December and January saw in excess of 20% increase in mortgage sales to first home buyers, though broader economic stability would be needed before another surge in prices is seen.

    In addition, the low level of supply of new housing, high immigration rates and a limited stock of existing dwellings may be enough to prevent a broad collapse in house prices.

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