House prices

tubeshooter wrote:

Received one from "John" today , but the peasant only has $2M to spend,, good luck

Tell John the peasant to fck off and come back when he's got 3 times that in his pocket!! ;)

flollo wrote:

Cash crunch will have to happen at some stage and it will be interesting to see how it plays out.

This says it all!!! Grab the popcorn and lets sit back and watch.

gsco wrote:

Note: The "best case outcome" in all of this is if inflation is relatively transitory (as central banks keep saying), interest rates don't really need to be increased too much to counter it, the economy keeps growing, governments are able to pay off their debt without default or rolling it over too much, asset prices don't burst badly, and over time the ratio of government debt to (growing) GDP slowly falls like it did after WWII, and all is well...

Perhaps this is the exact reason most governments around the world are saying the current round of inflation is exactly that....transitory, so they can keep doing exactly what you've just said. But what happens if it's not transitory but they keep saying it is and keep doing what you've said above......that my friend is where crashes come from!!!

freeride76 wrote:

And even if they do, they are at record lows.

it would take many rate rising cycles to come back to historical norms.

I think you're missing the fact that the banks will act independently of the RBA. They already have done this just this month.

freeride76 wrote:

Inflation favours asset holders.

Agreed but only for those that "own" the asset. Ask yourself who owns most of the property assets bought in 2021. It aint individuals, it's the banks!!!

Banks have a vested interest in expanding their house loan books, not contracting them.

It's the RBA that is forcing tightened lending standards on them.

Banks will not choke their own necks.

"Inflation favours asset holders."

sure does... or seems to...

pretty sure I've been reading the dude gsco has been reading, amongst others

as freeride says, the advice is preserve your money wealth in assets...

but the guru dude says the tech. index has a long long way to fall... dragging others with it...

house prices at record highs, massive stock correction needed, the guru talked of 3 or 4 simultaneous bubbles, pretty hard to see any / all of them weathering the storm...

but I dont know shit really

but I do know shit has been artificially propped up, all sorts of shit... lots of it... for a long time...

donweather wrote:

freeride76 wrote:

Inflation favours asset holders.

Agreed but only for those that "own" the asset. Ask yourself who owns most of the property assets bought in 2021. It aint individuals, it's the banks!!!

The banks own the loan, they don't own the equity increase in the value of the asset.

Thats why inflation suits assets holders, even debt financed one.

One thing most are not talking about is the impact of interest on business operations. Most businesses service their current cash flow needs through some form of a line of credit. If the cost of that line goes up the business might be forced to cut costs somewhere. This is where history is not our best friend as there were plenty of instances where people lost jobs so the business can remain solvent and therefore, survive in the market.

Current history suggests the opposite forces in play though.

Increased demand for goods and services and an economy rebounding.

Which leads to businesses needing to employ people to service that demand.

"Agreed but only for those that "own" the asset. Ask yourself who owns most of the property assets bought in 2021. It aint individuals, it's the banks!!!"

there's a lot of talk of 'cash buyers'...

not sure if that actually means piles of cash (not literally) offered...

or just not subject to finance?

if 'cash buyers' means money in the bank.... geez there's been a lot of crew sitting around with piles of cash in the bank!

or is this a result of the gerry harveys of the world getting their bank balances propped up to the point of bursting on government money like jobkeeper?

Thanks flollo & gsco for your opinion on the article I put up , appreciate it .

freeride76 wrote:

And even if they do, they are at record lows.

it would take many rate rising cycles to come back to historical norms.

That would be true if the average mortgage was in line with historical norms. As a multiplier of income it has never been greater. 50 basis points will feel like 75-100. Of course, we have a whole generation of buyers who have never seen a sustained rate increase regime, so 75 might feel like the end of the world to them. Uncharted waters

sypkan wrote:

"Agreed but only for those that "own" the asset. Ask yourself who owns most of the property assets bought in 2021. It aint individuals, it's the banks!!!"

there's a lot of talk of 'cash buyers'...

not sure if that actually means piles of cash (not literally) offered...

or just not subject to finance?

if 'cash buyers' means money in the bank.... geez there's been a lot of crew sitting around with piles of cash in the bank!

or is this a result of the gerry harveys of the world getting their bank balances propped up to the point of bursting on government money like jobkeeper?

A helluva lot of people have made an insane amount of money from Real Estate.

Something they bought for a hundred grand which is now worth 1.5-2 million.

They cash that in and buy outright with change.

Thats almost the norm now for boomers buying up property in the Northern Rivers.

freeride76 wrote:

Current history suggests the opposite forces in play though.

Increased demand for goods and services and an economy rebounding.

Which leads to businesses needing to employ people to service that demand.

Yes, that is correct currently. Record unemployment and a booming economy across multiple indicators.

The big question is: are those coastal properties that were 500 grand a decade ago are now worth millions going to go back to anything like that?

If there is no wholesale wealth destruction and no mass unemployment and interest rates just creep upwards over 2/3/5 years and massive demand from O/S buyers comes back into the market, it's damn hard to see it crashing.

So many, many people are sitting on huge windfall profits.

freeride76 wrote:

Govt's don't set wages in the private sector, there's no law saying wages need to keep paces with rates.

and

kaiser wrote:

Govt certainly doesn’t set wage rates. The market does.

pls note that the Fair Work Commission sets the minimum wage in Australia, and this does have some impact on general wages growth. Interestingly the minimum wage has tended to slightly outstrip inflation, and I believe their rule of thumb is to maintain this general agreement between inflation and min wage increases:

donweather wrote:

Perhaps this is the exact reason most governments around the world are saying the current round of inflation is exactly that....transitory, so they can keep doing exactly what you've just said. But what happens if it's not transitory but they keep saying it is and keep doing what you've said above......

Actually this raises a very important point. Two important tools the RBA uses to manage inflation are:
(i) inflation targeting via the cash rate and
(ii) managing people's expectations.

Regarding inflation expectations, the theory (and practice) is when people start to believe inflation is going to increase and become a problem, then businesses tend to start increasing prices whenever they can to keep up, employees tend to try to demand higher wages to keep up, etc. Then inflation does become a problem: a self fulfilling prophesy.

So the RBA is kind of always trying to talk down inflation in order to try to keep people believing that inflation won't be a problem. I'd argue that it's a strategy that has tended to work pretty well historically, but maybe not anymore nowadays due to out of control media hysteria, speculation, clickbait and fear mongering... The RBA is currently getting criticised for continually talking down inflation but there's a reason for it...these RBA guys are the least stupid of all...

freeride76 wrote:

Banks have a vested interest in expanding their house loan books, not contracting them.

It's the RBA that is forcing tightened lending standards on them.

Banks will not choke their own necks.

Banks setting their interest rates in and/or out of step with the RBA cash rate is actually done in fairly complicated consideration of a number of factors from international and other non-domestic-deposit funding costs, external regulatory capital requirements (Basel), profitability and interest rate margins, liquidity considerations, portfolio/sector loan exposures and diversification, internal modelling and self-imposed loan quality requirements, competition and market share considerations, etc. At times banks will actually need to "choke their own necks" in certain ways in order to meet regulatory and self-imposed risk and loan quality standards etc.

freeride76 wrote:

sypkan wrote:

"Agreed but only for those that "own" the asset. Ask yourself who owns most of the property assets bought in 2021. It aint individuals, it's the banks!!!"

there's a lot of talk of 'cash buyers'...

not sure if that actually means piles of cash (not literally) offered...

or just not subject to finance?

if 'cash buyers' means money in the bank.... geez there's been a lot of crew sitting around with piles of cash in the bank!

or is this a result of the gerry harveys of the world getting their bank balances propped up to the point of bursting on government money like jobkeeper?

A helluva lot of people have made an insane amount of money from Real Estate.

Something they bought for a hundred grand which is now worth 1.5-2 million.

They cash that in and buy outright with change.

Thats almost the norm now for boomers buying up property in the Northern Rivers.

oh yeh... that cash

still, there seems to be a lot of crew buying second, third, etc. property 'cash' ....that's a lot of cash getting around...

I think people underestimate the wealth that is present in Australia, particularly amongst the baby boomer cohort.

it's insane how much money is sloshing around.

At least around here.

yeah, Joe Sixpack might not be able to afford a new jetski next year but it's doubtful he won't be able to make his mortgage payments.

It’s debt. Debt has never been cheaper, and shitloads have filled their boots with it. The thought being that if it gets too expensive to service, I’ll lock in my gains by selling. By selling into a market where service costs are higher than when they purchased. And what if a lot of others have the same idea (or need), all at the same time?

Ps maybe the jet ski was bought with the equity from the house? And the Ranger to tow it with?

then it all comes crashing down.

"The big question is: are those coastal properties that were 500 grand a decade ago are now worth millions going to go back to anything like that?"

who knows?

but the guru Ive been reading has been giving this term 'perceived wealth' a flogging...

and many oz market commentators have mentioned 'the wealth efect' a lot of late...

....where increased asset prices (houses) give this impression of wealth, so people in this position spend more...

I guees this includes discretionary spending and on assets...

so, I think your dream may eventually come true, ...eventually... ...be it a very scaled down, long long awaited one...

it's completely mad, the access to credit now.

Bought our place end of 2020 down on the Surf Coast, moved in March. You know the market is crazy when I'm pretty sure I now wouldn't be able to afford my place at current market value if I tried to buy it now, only 12 months later. Already have a lot of equity in it according to a recent bank valuation, won't touch that though!

worked in finance many moons ago. back in the day (and i don't think much has changed) if you saw a young person driving a beemer there was a good chance it was a lease car. reckon a lot of todays cars especially Euro makes would be the same. as stated 'perceived wealth'

I just punched some basic numbers on a standard car loan on Westpac's website. $100k car over 7 years no deposit down will cost $1484 per month.

flollo wrote:

I just punched some basic numbers on a standard car loan on Westpac's website. $100k car over 7 years no deposit down will cost $1484 per month.

Surely 50K will do the job?

800/month, 200week.

That's cheaper than rent, especially if you can park up and shower at Mum and Dads every so often.

I mean it must be affordable because every second 20 something is doing it.

And I can't see many ads for car repo men.

Yeah, $50k can easily do it. For example, you can get a brand new Mazda CX-3 for $40k (top model, Instagrammable one, even cheaper for the basic one).

And don't forget about the balloon payments which again make monthly payments much smaller. Look at below from loans.com.au. So for $600 per month you get a brand new $40k car.

With balloon payment Without balloon payment
Loan amount $40,000 $40,000
Loan term 5 years 5 years
Interest Rate 4.67% 4.67%
Balloon payment $10,000 (25%) n/a
Monthly payment $600.53 $748.82

Mid '70's did Perth to Bedourie QLD via SW coast , Esperance (3 months) and Adelaide , in an Austin Cambridge Wagon- Cost $120 . Did no work on it. Lost 3rd gear somewhere north of Tibooburra - Birdsville track washed out.

Drove an old Sigma across the Nullabor , never missed a beat till I hit a fat wallaby near Margs one morning.

Plenty of people round here don't seem to having a problem coming up with $1K + for 'rent'. Lots of places now going for $900 - $1200 p/w round here.
As a tenant ,I'm lucky my 'owners' are bloody cool and haven't jacked my rent right up, as they could have , or sold up , or moved in like many investment owners have.. Touch wood nothing changes there. But I'm certainly aware that my lifestyle and living arrangements are on shaky ground living where I do.

I had a friend who wanted me to drive his (now ex) Girlfriend back to Walpole because she wouldn't fly.

Bought a HQ panel van for her and paid for fuel- I drove her home from Broken Head to Walpole.

he said "I'll pay for fuel!"

I think it was the Cocklebiddy Roadhouse where the fuel subsidy dried up.

Then the HQ broke down trying to make a run for before the next cold front hit.

She had this blue heeler, savage as fcuk towards any other dog, that sat on the bench seat and went missing almost every bloody day.

haha classic.
I had a girlfriend who wouldn't fly. It didn't last either.

Drove a FB '61 holden panel van across the nullabor in 74 i think it was, half of it was dirt with big dust bowls marked with 44 gallon drums, plenty of abandoned cars left on the side of the 'highway'. That car just kept going, hit a couple roos but those big chrome bumpers took car of the small ones. Hit a cow on dusk one day up in W.A on an unsealed section of the 'highway' which stove the bonnet in, cows arse slide all the way up to the windscreen before sliding off and running away, fortunately the radiator was still undamaged so she made it to Darwin where i sold her for more than i paid for her......they were the days haha

freeride76 wrote:

I mean it must be affordable because every second 20 something is doing it.

https://www.drive.com.au/caradvice/instant-asset-write-off-2020-car-tax-...
This is a big reason why, has been extended until mid next year. Its saved my wife a shitload of tax this year

600 m squared blocks down here at legoland were priced to go on the market last Nov for $550-650K

Being released next week for 1.2 million per block.

Blowin wrote:

When young crew are throwing $30K plus into doing up a piece of shit van for their Tiny Home ( complete with twee nickname ) you know the dominoes are all in line and ready to fall.

It screams three things :

1 / Young crew have given up on owning a real home.

2/ Eye-watering debt is not an impediment to their whims.

3/ It’ll be a waterfall of shit flowing across the land when financial realities hit home.

Not hard to see why so many young crew have decided to give the idea of the $750K mortgage the flick and hit the road instead. Can’t be seen on Instagram doing it in a station wagon though!

Whats the average income of most young people now 18-30yr most i know are well under the $60.000 mark annually?

Blowin][quote=freeride76 wrote:

600 m squared blocks down here at legoland were priced to go on the market last Nov for $550-650K

Being released next week for 1.2 million per block.

Add in a $400K house build on top cause you’ve just GOT to have a home theatre, gameing room and gym.

So it’s a $1.5 million mortgage on top of the $100K you borrowed off Mum and dad to get a foot on the property “ladder”.

The onus of paying off your mortgage means you work flat out and drink hard to ease the stress cause you’ve got no time to relax by surfing. You get fat and unhappy. Your missus feels bored, stressed and lacking in attention so she roots your mate whilst you’re doing overtime.

Cost of building has risen substantially, costs,time ,labour and land etc. Plus the above is a sad case of reality for some. Why has it become so normalised? Gluttony in overdrive, fear of missing out, she jumped i'll jump?

Abc todayhttps://www.abc.net.au/news/2022-01-29/garry-living-in-van-working-homel...

$500.00 a week is fuck all

Robwilliams wrote:

Abc todayhttps://www.abc.net.au/news/2022-01-29/garry-living-in-van-working-homel...

$500.00 a week is fuck all

Don't know Gary or his story.

Robwilliams wrote:

Robwilliams wrote:

Abc todayhttps://www.abc.net.au/news/2022-01-29/garry-living-in-van-working-homel...

$500.00 a week is fuck all

Don't know Gary or his story.

but it's a growing trend

freeride76 wrote:

600 m squared blocks down here at legoland were priced to go on the market last Nov for $550-650K

Being released next week for 1.2 million per block.

sounds about right given 400m2 blocks at Casuarina advertised for $2.4m!!

3 Mill on front row
https://www.realestate.com.au/property-residential+land-nsw-casuarina-20...