Compound growth in house prices over ?
 

http://www.news.com.au/money/money-m...-1226395093277
Interesting comments by the Boss of Westpac......

Re: Compound growth in house prices over ?
 

The housing boom was always a double edged sword. It benefitted those who were already financially established and allowed them to grow their wealth whilst freezing out new homeowners and pushing house prices through the roof. If it is over, it's a good thing.

Re: Compound growth in house prices over ?
 

Have to agree... if its over ... good!

Its everyones right to be able to own a home, however in the past 7 or 8yrs its become just a pipe dream for some to be able to;
a) afford to buy one...
b) be able to actually pay it off

Re: Compound growth in house prices over ?
 

It won't be over. Maybe not to the levels as before, but it will still exist.

It has stopped over the past 1-2 years (depending who you ask), but as long as there are incentives to invest in property (tax offsets as generous as they are) there will always be someone with more coin than you possibly vying for the same property.

I think people have realised that the "value" they are placing on property is well above its true value.

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Man I'm glad I have a cheap mortgage.

My wife can stay home, we are comfortable, well fed and have a nice car and a hack ..;-)

Our house isnt the biggest or the best but it's home and we can afford it ..

Unlike some of our friends who both work , have nice houses, nice cars, drop the kids at day care or school and have HUGE mortgage and are miserable...the reality of the Aussie dream....

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It's called living within your means. Well done. Australian Crawl had a song called "Live now, Pay later". Sums up a lot of Australia.......

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Exactly.... a LOT of Australians (without causing a stir), especially those in the mining boom, who make a $100,000 a year, seem to be all whinging they cant afford to live... "really" I say in reply??

I wonder why?

3 or 4 cars, a jetski, a boat, two trail bikes, 5bedroom home in the most expensive part of town, a plasma in every room..... hmmmm

Re: Compound growth in house prices over ?
 

I was talking to someone who is pretty clue'y about the economy and investing, his retired so its what he does..hehe

Anyway, he mentioned that Australia has the highest housing debt (cant remember if thats the correct term) in the world..anyone know which set of figures represents that?

From a young person who was in the market, and got out and now is going back in it is a bit of a joke. We brought such a nice house in Launceston for what you couldnt even buy a 1 bedroom apartment/town house for in Vic.

I think one of the issues is that outer suburbs are just hard to get to..I mean I live 40mins NW of Melb and on a good day I can drive straight into the CBD of melb in under 40mins. Problem is that quickly turns to 1.5hrs if the traffic is stuffed.

Ive never heard anyone in mining say that cant afford to live though.

Re: Compound growth in house prices over ?
 

House values have been going up at a steady rate since the early 1900's, the rate of increase of value of homes has been consistent for the last 50-60 years, ie the percentage gain of value has not changed over that period when averaged out in the long term.

Obviously ignoring booms like we had in the early 2000's and recessions like in the mid to late 80's, these booms and recessions have since evened out, remembering the housing market is a LONG TERM investment not a point in time.

Re affordability, I believe housing is more affordable these days, people are just expecting more, my parents bought a house in the early 80's for 60K, 1/4 acre block, three bedroom no garage, no air con, fairly small compared to the 4-5 bedroom walk in wardrobes, ensuite, three car garage, ducted air and heating people expect as a first home today.

If new home buyers bought/build small 3 bedroom homes similar to what I have grown up in they could easily afford it.

Re: Compound growth in house prices over ?
 

The most recent housing boom will not be repeated for a long, long time!

Favourable demographics, easy credit availability and govt. policy created a huge asset bubble that is now finally starting to deflate.

Australian household debt is 150% of GDP!

This hardly sustainable and anyone who actually thought it could go on forever was, and still is, deluded.

The property sector does bring in considerable revenue for state govts so I am sure that we will see plenty of attempts at re-inflating the bubble, just like NSW recently announced.

Re: Compound growth in house prices over ?
 

hopefully this doesn't mean house prices drop too much. i have a nice(ish) house and two nice cars (i just bought my SS after waiting over 10 years to get one).

i would like to move closer to newcastle (currently on the central coast) but just can't afford it.. to buy a house similar to ours in the area we want we have to fork out an extra $150k+. for the money i could sell my house for i could buy an older house that needs work done (and i work 6 days a week to pay for the house so no time to renovate).

anyway, just have to wait and see what the market does

Re: Compound growth in house prices over ?
 

Whether you own your house outright or are makeing payments you are just a temporary visitor.

Dead people do not care if they have $1,000,000 in the bank or are in debtor for $1,000,000..........

Re: Compound growth in house prices over ?
 

You don't think the person in debt might care that they'll be passing that burden on to their family?

Re: Compound growth in house prices over ?
 

We saved and saved while other borrowed and borrowed.

We now have a house that was half payed for in cash and an easy mortgage of 1000 a month, while the others are sweating each repayment and doing the sums on selling their brand new Audi/BMW (to me hopefully at a nicely deflated price)



reminds me of the tortoise and the hare...

:)

Re: Compound growth in house prices over ?
 

sorry, just read my post. I sound like a ****** above.

I don't wish for anyone to be in mortgage stress.

Re: Compound growth in house prices over ?
 

What burden?

The family do not have to pay anything unless they want to keep whatever has money owed on it.

If it is the house they are living in then it is their turn to pay or do you expect to get everything for free and let someone else pay for it.......

Or they could sell or even walk away from the house and live "within their means" in a shoebox in the middle of the road. Their choice.

Re: Compound growth in house prices over ?
 

Well in your example above, there are two very different outcomes when the person dies.
1) the family can sell the house to share the inheritance
2) the family can sell the house to clear the debt

I wonder which the dead person might have preferred.

Re: Compound growth in house prices over ?
 

The dead might not care, but the living certainly do... or at least they should care.

Especially as you get older and less employable, the security of owning your house and the knowledge that if you are unlucky enough to find yourself out of work, at least you wont lose your house is a great comfort.

Not having to make huge loan repayments also frees up a significant portion of income, allowing for greater financial freedom and better resultant mental health. The sad reality is that many Australians are just a paycheck or 2 from defaulting on their loans. Have you seen some peoples minimum monthly repayments :eek:

If the GFC had hit hard in Australia... this country would have been so far up the proverbial creek.

Re: Compound growth in house prices over ?
 

Well lets see.

Did the family enjoy all the advantages gained by this debt?

If so then it is now their problem and they can continue to enjoy the advantages but now thay have to pay for them.

If not then they have nothing to lose......well except for not gaining a windfall to which they did not contribute. So they sell the house and buy a shoebox in the middle of the road.


The botton line is, live your life how you wish to and stop trying to tell everyone else how to live theirs.......

Re: Compound growth in house prices over ?
 

Why go off on tangents when someone disputes your claim?
You said the dead wouldn't care, I'm saying they would.
It's not about what the surviving family do with it, or how they choose to view life, or whether they're spoilt brats, your examples are in the hands of the owner.

Simple fact is, of your two examples, I'm sure the owner would prefer to leave the family some money rather than the resposibility to sell and clear the debt. You may be surprised to learn this, but some people do actually have a heart and care about their family.


You could learn a thing or two by listening to your own advice in that last line.

Re: Compound growth in house prices over ?
 

This is something I have marvelled at as well. My first house (which we're still in I might add, but we're currently in the process of tarting it up to sell and move into something bigger and better) is a 45 year old 3 bedroom duplex half. Now, being in Perth, we're acutely aware of the impact the housing boom has had on affordability but some people simply won't consider something older and more modest and everything has to be bells and whistles type stuff, and then complain about affordability.

Silly cow in my office has been crapping on about buying a house for 3 years. She's one of these loud talkers on the phone who makes sure everyone knows she and her partner are looking at (or WERE looking at) 5, 6 and 700,000 dollar houses (for their FIRST home). But guess what, 3 years on, they're still renting, but won't accept advice about maybe scaling back their expectations so they can get their foot in the door with something cheaper.

You can lead a horse to water, but you can't make it drink.

Re: Compound growth in house prices over ?
 

My view is now and has always been:

You are responsible for your life not everyone else's.
As you do not like to be told what to do neither do others although there seem to be many who take delight in trying to control what other do or think.

I put forward my ideas and you can chose to agree or disagree with them, I really don't care in most cases.

I just get annoyed at those who want everyone else to solve their problems, blame everyone else for anything that happens and most importantly believe that anyone who does not think like they do or follow their standards should be forced to comply.

But back on to the original topic, I disagree. Most of us want to improve ourselves and tend to buy better. Just look at how many one here have bought a new XT as opposed to XR6/G6/G6E all of which are basically the same thing but cost more.

I am just about to buy another rental property as prices are good at the moment although they are starting to rise again here.

Yes it will be a debt but it will pay for itself and in the end EVERYTHING goes up in price.

(and before someome cites electronics as getting cheaper, they aren't, only the older technology stuff is cheap, if you want ACTUAL leading edge technology it is still VERY expensive)

Re: Compound growth in house prices over ?
 

Who said anythig about being responsible for others? My comments are based around consideration for others, not their responsibility.

I never told anyone to do anything, so I don't know what you're getting at there.

It certainly seems like you care this time because I put up a contrary view and you jumped at the opportunity to expand from your original comment to try and make my view come across as wrong.

Again, I think you need to take some of your own advice.
I'm sure there's a lot of people on here that don't like being told that their opinion is wrong, and that everything should be done your way.

Re: Compound growth in house prices over ?
 

There is a HUGE difference between telling you that you are wrong and you should do it my way and FORCING you to do it my way.

Re: Compound growth in house prices over ?
 

Lets all settle down, we don't want another MOD shutting down another thread

Re: Compound growth in house prices over ?
 

GFC was nothing, patience please......

Re: Compound growth in house prices over ?
 

It's funny this comes up because I was just talking about it on another forum.

I was saying as the older people start to retire (excluding those in CSS fund which most would be laughing) prices should come down because they need the money and probably have to sell investment properties and/or downsize their own home. We may see demand at the worst meeting supply.

Most soon to be retirees would have been far behind in super to begin with and then they are exposed to the share market which is taking a flogging at the moment unless they changed their investment strategies.

Re: Compound growth in house prices over ?
 

You've got me a bit confused with that... are you making a joke that I'm just too thick to understand, or are you serious?

The GFC was an unmitigated disaster. Australia got through it relatively unscathed largely because of the structure of our economy, the surplus from the previous government and good government policy/stimulus (guaranteeing deposits in financial institutions, etc).

Re: Compound growth in house prices over ?
 

You could probably lead a life on minimum wage without issue, it all comes down to living within your means, you want a lavish lifestyle you're going to have to work your *** off for it.

I own my three cars outright, I've paid for since having a job since 15, and two jobs since I was 18. I've got no debt, no finance, no credit cards, but I live with my parents so I have it pretty damn good.

I was saving up for a property, but I'm going to blow all my savings on another new car when I'm off my Ps in 2014, just one last time before I have to get serious :yelrotflm.

I want to be in my own house by the time im 25.

Re: Compound growth in house prices over ?
 

I took it as that the GFC was nothing compared to what will come.

Re: Compound growth in house prices over ?
 

what does "compound growth" mean in this context?

I always thought compound growth meant when one reinvests interest earned in the previous period to accrue interest in the next.

How does one do that with a house?

Unless she means that because the increase in value of the house is stored it is implicitly reinvested in perpetuity.

But then by that definition saying "compound growth is over for good" means that housing prices will only remain constant or go backwards???

Please explain Gail

Re: Compound growth in house prices over ?
 

About time...houses are still way overpriced, but are still falling in a lot of areas. We've been watching the house market in Rockhampton for about four years now, and prices have fallen steadily (despite what frightened looking real estate agents say in the local paper:lol ). We just sold a house in Bundaberg...we bought it in 2000 for $75,000...a pretty normal price at the time...and sold it for $169,000 needing some reno work. Houses are cheap in Bundy, around the corner from my mothers place is a five bedroom house on a decent block fully renovated for $260,000...pretty expensive for Bundy.

We've seen the same houses for sale for a loooong time in Rocky, with the price slowly dropping month to month. We'll probably buy later in the year, but they'd better expect some drastic reduction in the offered price we make...it's a buyers market and has been for some time.

Re: Compound growth in house prices over ?
 

Doubt it's more affordable today.. actually quite the opposite.

I can't remember the exact statistic... 4-6 decades ago the average house cost 3.? times the average wage.

Now the average house costs 8-9 times the average wage.

Then, think of all the other gadgets / dsitractions / financial commitments we have these days to add to the cost of living that wasn't around back then???

We get paid heaps more these days, but the money buys less...

Re: Compound growth in house prices over ?
 

My 2c

While you have a commodity that's in demand it cannot be a dead set certainty that its value won't increase.

The demand for housing can only increase where there are net increases in migration and no commensurate increase in building activity. However in the mix this time is the fact that many who would otherwise be buying or upgrading are holding on to their cash, not borrowing (or not adding to their existing borrowings) and instead seeing what happens regarding our current econonic problems. As we all know, unless you're in an area positively impacted by the mining boom things are pretty bad right now economically. I suespect most if not all of the Eastern states are in recession.

Re: Compound growth in house prices over ?
 

Re: Compound growth in house prices over ?
 

Bundaberg? You mean the city with the most bankruptcies in QLD?

Try buying a house in Buderim or someone like that.....

Re: Compound growth in house prices over ?
 

that's a good point. if the government expanded the department of housing & took control of the real estate market we could all exercise our right to home ownership

Re: Compound growth in house prices over ?
 

We actually do have the right to housing, but not home 'ownership' as such. Although in a broader sense, we also have a right to own 'property'.

It comes under the United Nations UDHR (Universal Declaration of Human Rights). Says something to the effect of having the right to a standard of living adequate for health and wellbeing, which includes housing amongst other things. So affordable housing is a basic human rights issue.

Re: Compound growth in house prices over ?
 

...Or brought in rent control as has been done in other countries. It's frankly criminal that houses in my area are being rented out at up to nearly $4000 a week in some towns. Ones in my town are nearly a grand a week, ones in Blackwater are well over that. Moranbah is eye-watering.
The trick is, a house...cheap kit homes like they throw up in weeks...don't cost much more to build out here than down the coast, and land isn't that much more either. It's just greedy landlords snapping up old houses and filling them with miners.
One house recently sold in our town and eight miners have moved in. Another sold and at least four or five will be living there...god knows what the landlord is charging the mines for them.

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The housing market in any area that the resources sector has impacted is so messed up its not funny.

Re: Compound growth in house prices over ?
 

Have to love the coverups by the lenders:

http://www.youtube.com/watch?v=mgVda...eature=related

Re: Compound growth in house prices over ?
 

Get rid of negative gearing to solve a few issues.
Australia would have to be the only country in the world that negatively gears property investment surely?

Re: Compound growth in house prices over ?
 

Dave289 was right.

Re: Compound growth in house prices over ?
 

While that clip is over a year old a lot of what is said is still correct today IMO.

I was going to do a little buying and selling over the next few months, I'm seriously considering not doing both to be honest.... It's all crystal ball stuff, but my reckoning is that it will make me more short term money now by holding on to what I already have, and save me in the long term if prices do go down.

I don't see rental costs going south any time soon, purchases prices?? Undecided. If there is a housing deficit as the experts say rentals will always be sought as more people would be in the rental market rather than the buying market should things be uncertain.

Re: Compound growth in house prices over ?
 

Julia Gillard rules out scrapping negative gearing tax provisions for property investors By Larry Schlesinger
Tuesday, 12 June 2012

Negative gearing tax breaks for property investors will not be removed, says Prime Minister Julia Gillard.

Gillard says her government has ruled out removing the tax break.

It was in response to a question asked on the ABC’s Q&A program.

“We didn’t agree with the Henry Tax Review,” Gillard said.

“We think that an abolition of negative gearing will cause distortions to the property market that we did not want to see,” she said.

The federal opposition also appears loath to remove the tax break, with Coalition spokesman Joe Hockey tweeting after the broadcast that negative gearing “holds down rents... just ask Bob Hawke and Paul Keating. They tried to get rid of it and reversed their policy.”

However Sarah Toohey, spokesperson for lobbying group Australians for Affordable Housing, disagreed with Hockey, tweeting that “rents only rose in Sydney and Perth when Keating changed [negative gearing].

“[Rent rises] have been nationwide if that [were true],” she tweeted.

Property buyers’ advocate Catherine Cashmore agreed with Toohey, tweeting that negative gearing needed to be phased out.

“No other country has such a generous gearing policy – it does nothing to ease housing affordability,” she tweeted.

Negative gearing was used by around 2 million property investors in the last financial year to reduce their tax bill, according to ATO figures.

A property is negatively geared when the costs of owning it – interest on the loan, bank charges, maintenance, repairs and capital depreciation – exceed the rental income it produces.

The Henry Tax Review called for a raft of investment tax breaks – including negative gearing – to be replaced with a 40% discount on the marginal tax rate.

I think there's no chance it being abolished. Labour doesn't want to smash the battlers and Liberals don't want to smash the mum and dad investors.

Only chance would be if the Greens got a majority somehow

Re: Compound growth in house prices over ?
 

No, it would re-balance the property market, not distort it. It's currently distorted because of negative gearing. She doesn't want to remove it because it would be massively unpopular with the upper-middle class and lead to losses for these people who have invested in property with the aid of negative gearing.

That is not what Hawke/Keating found in the 80's.. Negative gearing doesn't hold down rents. Rent didn't rise across Australia after they abolished it, rent only rose in Sydney & Perth and this didn't have anything to do with the abolishment of negative gearing. The REIA led a strong campaign in the lead-up to the 87 election and Hawke/Keating had to reinstate the policy to stem the political damage.

Negative gearing creates a housing bubble. It spawns investors who compete to buy property, thus pushing house prices up. More rent then has to be charged to cover those larger investor loans.

Re: Compound growth in house prices over ?
 

Thanks for that arcticle. I knew a lot of Australians are negatively geared at the moment in properties, but 2 million last financial year staggers me, that is a huge figure, no wonder neither Labour or the Liberals wan't to upset any property investors.

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But at the same time they're happy to forgo millions in tax revenue.

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Doesn't negative gearing encourage investment in essential infrastructure?

We can still continue to build more houses (albeit further out) as long as people want to buy them.

It's a genuine question? I don't know the answer.

Someone will say that removing negative gearing will push property prices down making housing more affordable for buyers and pushing rents down.

But if people are going to miss out on the tax benefits of investing in housing they will need higher rents to offset it or will invest elsewhere. Then you will have housing shortages

You could chase your tail all day on this stuff. There will never be consensus amognst Economists even if they were able to decide without any political influence other than to come up with the best outcome.

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The problem is that a lot of investment properties are purchased as established homes. One suggestion is that negative gearing should only be allowed on newly built homes as this encourages numerous econmic benefits. I don't know if this would work though because an investor isn't just interested in the tax breaks and rent money, a smart investor want's to see a return in property value also when they choose to sell, newly built properties 50-60km from a cities CBD don't offer such sweet returns as the inner city/fringe suburbs do.