tag:blogger.com,1999:blog-5613349802102193582.post5933030654971664164..comments2023-12-22T23:56:04.826+11:00Comments on Houses and Holes: Is Aussie Mac real?David Llewellyn-Smithhttp://www.blogger.com/profile/01762856583909059662noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-5613349802102193582.post-6246574580022928372010-10-29T13:36:48.368+11:002010-10-29T13:36:48.368+11:00Anonymous, keep in mind that real house prices did...Anonymous, keep in mind that <i>real</i> house prices did decline in 1989-1990 (and were quite flat until 1997).<br /><br />Take a look at the chart from http://www.unconventionaleconomist.com/2010/09/australian-housing-bubble-in-search-of.html (search for "real house prices")<br /><br />Here a more official reference for the same data http://www.aph.gov.au/library/pubs/rn/2006-07/07rn07.htmAnonymoushttps://www.blogger.com/profile/06340403723350864929noreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-10259533357175303412010-09-28T23:53:57.625+10:002010-09-28T23:53:57.625+10:00You often hear Investors say "INTEREST RATES ...You often hear Investors say "INTEREST RATES WENT TO 17% IN 1990 & PRICES DID NOT CRASH PEOPLE STILL COPED". The inference they draw is that rates can rise again & people will cope? Interestingly a 7% home loan interest rates in 2010 is equal to over 22.5% interest rate in 1990 (when Comparative Incomes / Loan Size / ...Percentage of Income to loan payments etc are applied). Just imaging people thought it was tough back in 1990 when rates got up to 17% but at a 7% rate in 2010 is equal to a 22.5% rate in 1990. FYI in 2008 interest rates were 9.5% . A 9.5% interest rate would be the equivalent of a 30.5% rate in 1990 terms. Affordability will inhibit the capital gains that INVESTORS need to make Negative Geared Rentals work. Without large Capital Gains Investors will start flooding the market. Now travel back to 1990 & ask yourself would you enter the market at a rate comparable to 22.5% with forecasts saying it will go to 8.5% which is a 27.29% 1990 rate..Food For Thought?<br /><br />In Jan 1990 interest rates hit a record high of 17% & people managed to keep their homes then so how would this compare in todays housing market?...The 1990 Median house price was $100K with a 20% deposit & a loan of $80K payments @17% interest over 30 yrs would be $1140 pm or 32% of wages with average family wage of $42K pa...so in 1990 @ 17% the worst interest rates in Aust history payments only ever got to 32% of average family income...Fast Fwd to 2010 Median price is $500K less 20% deposit & a loan of $400K payments @ 7% interest over 30 years are $2661 pm or 43% of wages with average family wage of $75K...in 2008 interest rates were 9.5% this would work out to payments of $3365 or 54% of current wages .... Now historically for the last 30 years interest rates have averaged 10.11% this would works out to payments of $3545 pm or 57% of wages going to mortgage payments ....So summing up current housing mortgage payments @ 7% is still worse than when rates were at 17% but just imagine what will happen when rates rise? AFFORDABILITY will not allow future CAPITAL GROWTH & investors will D*U*M*P __ P*R*O*P*E*R*T*Y because without MASSIVE CAPITAL GAINS Property investment WONT WORK!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-56542356179970175112010-09-28T00:20:37.445+10:002010-09-28T00:20:37.445+10:00Great article - when I talk to my friends, the ...Great article - when I talk to my friends, the 'housing always goes up' mentality seems so firmly lodged in people's minds, its hard to imagine the impact on Australian society when this little bubble is popped.Chrisnoreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-82890206000220210282010-09-27T19:50:27.506+10:002010-09-27T19:50:27.506+10:00Thanks for the website to track the guaranteed deb...Thanks for the website to track the guaranteed debt, David. Very useful. <br /><br />It's nice also to see the mainstream media finally acknowledging the banks' offshore funding risks that you have been warning about for years.Leith van Onselenhttps://www.blogger.com/profile/02398609396035352262noreply@blogger.comtag:blogger.com,1999:blog-5613349802102193582.post-76224035611829678652010-09-27T19:22:45.716+10:002010-09-27T19:22:45.716+10:00Well done David. I am glad someone is thinking abo...Well done David. I am glad someone is thinking about these things. I am just amazed that we are walking into a situation almost identical to the 1890s.<br />Its very scary, I think the shock to the Aussie mindset when it comes will be the biggest hit.<br />I think the trigger is very acurate to Calculated Risk had a excellent blog recently on the probability of a major sovereign default. The upshot was probabilities are easy to gather when we have hundreds of years of default data to work with. ( A major one is about due)I dont like our chances of getting through it with anything less then 15% unemployment.<br /><br />Cheers<br /><br />SteveAnonymousnoreply@blogger.com