Tag Archives: sydney real estate news

bursting the security bubble on insight

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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.

greed, stupidity or suffering?

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I was so stoked to see my letter to the editor about this article in the Courier Mail today, along with one from a fellow bubblepedian. I love the headline too.

Update (19/08/2008): I re-read it today and noted that I was quoted at the top of the page as well. Even better!

melissa ketcell: what were you thinking?

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It sickened appalled me to read Melissa Ketcell’s article in the Courier Mail today report that speculative property investors are “suffering with rental returns at their lowest in a decade”.

Article by Melissa Ketchell

Article by Melissa Ketchell

How can any journalist compare the suffering of a renter worried about being able to find an affordable home for their family with the supposed suffering of greedy, speculative property investors who are provided with generous Government taxation concessions including negative gearing and capital gains tax exemption?

When an investor buys a Brisbane investment property for the median price of $450,000 they know that the median Brisbane rent is $18,200 and that it will cost them $32,625 in interest per year. But they still do it! You can’t say that they are suffering.

I think some people in the media really need to take a good close look at their behaviour. They’re hardly being responsible or ethical.

australian interest rates and rent increases

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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.

proof that australian property prices can, and do, fall

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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?

Well, no:

From onthehouse.com.au:
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 nowexternal link 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.