Australia doesn't have a housing affordability crisis

You assume buying a $4m house is like a rich Chinese tourist buying a $3000 Gucci on Pitt Street like a takeaway coffee
I'm suggesting it's anything but
It's 2 individuals who have a massive mortgage and not much buffer to meet their monthly repayments
I've heard others suggest aussies always pay down their home loans and cut back on other expenses. Nobody defaults
Well one man's spending is another's income. If you stop getting $80 lunches and $120 haircuts the economy goes down.

 

Yawn! Yawn!! Yawn!!!

 

How do you know it so well?

Assumption, guessing, no factual data, ... I give up. Haizz.

 

Thins was my hole pain it and I quote you." A home should be for shelter but this glorious nation has turned it into a speculative bubble. "

Why are you treating your home as speculation?

Buy what is nice raise a family in it and don't worry about the fluctuations.

 

There is a lot of myopia when it comes to housing prices, as though housing is immune to other price signals in an economy.

All asset prices are inflated in this economy. In fact, housing is less inflated than many other key asset classes.

This why I show the gold/property ratio, to illustrate that when comparing asset prices to other asset prices, (Sydney) real estate is currently at it's long term average and well off its peaks.

Now I don't like it either, but we have very loose monetary policy, and many prices are at multi year highs.

So it is not fair to single out real estate as a unique distortion, because there many assets are frothy, and in relative terms, real estate is at long term averages.

 

@John@bridgetobricks are you sure that gold isn't an inflated asset too?

As for Mosman homes, I suspect that a lot are owned by people who've ridden the property boom as they've ascended the ladder. They might have an income of $300K or $400K, a big mortgage, and several million in equity.

There's probably a fair amount of speculative buying going on, even if it is a PPOR.

 

Yes, I am saying that all assets, including gold, are inflated. That's why we need to compare assets to assets, and on that basis, real estate is no more inflated than anything else.

 

People are buying what they can afford at the very margins of their affordability. That is my point. Very little buffer for when things become uncertain

 

A more correct interpretation would be that the risk premium on the debt used to support those asset valuations is mispriced.

 

Yek, yes risk premium mispriced, intertemporal preference distorted as well. Spot on.

 

I’ve got relos who bought in Castlecrag. Homes there are minimum 2.5/3 mill typically.
Maybe the suburb went down in value. But would they care? I doubt it.... they bought around year 2000 when it was 500k....

 

What about someone who bought for 2.5 with a 20 percent deposit. Family income 500k pa. One of them made redundant because they are the national sales manager for a furniture store and the business goes under as people stop spending.

 

I reckon best not to buy a 2.5 mill PPOR with only a 20% deposit.... we bought our home during this cycle, but we were trading up from a nearby property and our debt on the first home was well under control (6% LVR) and the price differential on the two was relatively low.

I would not leap into a 2.5 mill home without having a lot of assets already.
Anyway, I’m sure they must have some rooms to rent out (if push comes to shove)

 

Most likely the 80% of the population who earn the median income and below, who don't live in $2.5m homes, couldn't care less about the ones who do.

If your national sales manager loses his job and has to sell their home, he and his family will have a meltdown. When they get over it, they will want another home, this time in the price range of the 80%ers. The "affordable" price bracket could stay bobbing along without too much disruption.

Or they will (shock, gasp) rent. This will also keep the housing economy bobbing.

 

Sometimes, **** happens.

Geez, we have copped our fair share over the last 60+ years. It either makes you or breaks you.

In our case, we are more knowledgeable, more experienced, more resilient, our marriage is a lot stronger, ... due to the the “curve balls” life threw our way.

They should be fine as long as they batten down the hatches, cut-out/minimise their discretionary spending, etc.

They aren’t the first nor will they be the last to find/get them into such a situation.

It is all part of life .

 

This is Austraylia, Maate. When the going gets tough, we burn another $5m worth of fireworks, look at Celebrities cooking in the jungle on TV and consume enough alcohol to fill Sydney Harbour. Next day we go to the Footy and do it all over again. She'll be right.