So I was on t.v. tonight which was weird considering I don’t really watch t.v. It’s International Tenants’ Day today too, how fitting.
Why I choose to rent and why rent money isn’t dead money.
The whole corporate bailout thing happening in the US and now Australia really pisses me off. So I was glad they published my letter to the editor of the Courier Mail today.
The whole bail out situation smells fishy to me:
“It’s not based on any particular data point, we just wanted to choose a really large number.”
- A Treasury spokeswoman tells Forbes.com on how they came up with US 700 billion dollars as the bail out figure.
I guess that’s how Wayne Swan came up with his four billion dollar figure to “boost competition in the mortgage market”.
Mark Stacey of Sorrento in WA put it really well in today’s Australian newspaper when he said:
It is sad to see the major political parties squabbling to claim ownership over a bad idea, namely the use of taxpayers’ money to increase lending for mortgages. If lending money for house purchases was the route to a propserous and secure future, we’d already be in financial nirvana.
Malcolm Turnbull doesn’t get it. Wayne Swan doesn’t get it either. It’s all rather worrying.
Where else will the Washington Mutual equivalents in Australia get their money?
Update: Banks in Britain are having the same sort of financial problems and other banks there have “… refused to buy mortgage loans that customers are struggling to repay” (link), unlike the Australian Government who is proposing to do just that, with taxpayers’ funds nonetheless.
Update (2 Oct 2008): I sent PM Kevin Rudd a letter and got a standard response saying that they’ll take my opinions on board and send me an official response.
It was interesting frightening to watch Bursting the Bubble on Insight tonight. I still can’t get over how much debt Australians have taken on; Insight mentioned that we as individuals have seven times greater debt than during the recession in the early nineties: scary!
I read a lot about housing unaffordability in Australia and I have read lots of stories about Australian families who have bought overpriced housing (what housing isn’t overpriced) because of the alleged security that a house provides.
The one thing that Insight successfully showed tonight is that an expensive house with a large mortgage doesn’t actually provide security at all, it just quite the opposite. How can any person with a large mortgage requiring multiple incomes and uninterrupted employment just to service the debt at current interest rate levels feel any bit secure? Isn’t that what security is about, feeling secure?
I would feel insecure with a mortgage large enough to pay for the apartment we rent. I would feel insecure buying any apartment in Brisbane at the moment knowing that we would need two full times jobs for 30 years just to service the debt. I feel secure renting a place knowing that we have a few years rent in savings in case something goes wrong. I feel secure knowing that I could quit my job tomorrow and we could still easily afford rent and living expenses from just one salary. Now that’s security.
Another fellow bubblepedian got a letter to the editor published in the Courier Mail today. She got quoted on the headline too. Well done Shery!
I was having a discussion with a colleague today about how the big banks are continuing to raise their interest rates regardless of what the RBA does, including ANZ who raised theirs today to 9.62 % p.a.
He was of the opinion that the interest rate rises are small in comparison to how much rents are increasing. I told him it wasn’t so but he just thought that I was trying to bend statistics to suit myself.
So I thought I would follow up here on a post from this blog from November 2007 where I showed the current ANZ interest rate and how much it would have cost to borrow money for our apartment compared to renting it. Back then, with interest rates at 8.32 % p.a. the weekly repayment would have been $956.06. Now, at 9.62 % p.a. it’s $1074.19 per week. That’s an increase of $118.13 per week.
Now look at our rent situation. Last October we signed a 12 month fixed term lease at $420 per week. So last November we were paying $420 per week, and right now we are paying $420 per week. That’s an increase of $0.00 per week.
To be fair, we were clever to lock in the rent we did when we did. But even if the landlord raises the rent $50 per week come November 2008, he will still be at least $70 per week worse off compared to a year ago, not even considering that Brisbane City Council inner city rates rose by up to 20 % recently.
And if anyone still thinks that rent money is dead money they should know that total repayments for our apartment at current interest rates total $1,675,736 (yes, that’s $1.675 million!) and interest alone is $1,125,736. Now that’s dead money!
I can’t see how it’s not clear.
I am really into Bubblepedia because it’s committed to collecting and presenting facts & data about Australian real estate and property prices, not just spreading speculative industry propaganda like all the news sites do.
I love how they provide links to all these propagandist articles but correct the headlines. My favourite correction this week read: Umbrella Manufacturer’s Association says we need a million new umbrellas over the next five years and calls for increased umbrella production despite falling umbrella sales.
I also enjoyed reading Dan’s blog post today about a place that is listed for sale in Bulli, near Sydney, at the moment:
A colleague pointed out this beautiful spot for sale in a beachside community outside Wollongong. We often see the argument that apartments in dodgy spots might fall in price, but prestigious lifestyle locations will be protected, but it is exactly those locations that are even more overpriced than dodgyville.
For those who don’t know the area, you can ride your bike along a seaside path into Wollongong from here, catch the train to Wollongong or Sydney very easily.
Surely a house over the road from the beach, bike track and cafe must be safe from price falls?
8 TRINITY ROW $1,000,000 19-07-2005 493 RESIDENCE
This house was advertised for 1.1million a few months ago and here it is now advertised for 750 000.
Yep, that’s right, the asking price is $250,000 less than the purchase price three years ago. So if the owners eventually do sell, they will lose about $500,000 all up on this house. And as the blog says, it’s not even in dodgyville. It’s something to think about.