CommenTree

Uneducated, but can google at least.

Posts Tagged ‘interest rates

Michael lashes out

with one comment

Considering that any traffic this site gets relates to a fictional character that managed to capture the imagination of news.com.au readers, I think it would be remiss to mention another character that has cropped up. However, I am not sure whether he is taking the piss. In fact, the tone of his comments suggest quite the opposite. He seems deadly serious, which is scary in itself.

His main discussion revolves around property. It seems that every single news story that revolves around houses is a buy signal to him. Or some story about the economy, regardless of the type of news it is, it’s yet another factor that favours buying property. I am referring to Michael of Sydney.

In the beginning it seemed that we should all marvel at his business acumen. When the Reserve Bank slashed rates, Michael jumped quickly up to the podium to thank the academy for providing him with this great reward for his tireless work.

RBA slash rates

Early in 2009, when things started to turn a little less peachy, it did not phase Michael in the slightest. Just like the true Aussie battler he is, a stiff upper lip in the face of adversity was maintained. And with such humility, too…

2009 write off

That link also has a clueless and sarcastic tirade by Yours Truly. You see, I’m just not smart enough to get into property like the good capitalist men of steel like Michael of Sydney.

The year progresses and things continue to look shaky. The stiff upper lip of Michael begins to tremble just a little, I feel.

home buyer doubts

Retards, eh? Of course, in any business there are always the corporate rivals that must be smitten into dust like the insubordinates they are. I mean, we all know that the property mogul’s natural enemy is the evil, twisted and ultimately carefree debt-free “Renter”. Through their insidious use of the evil practise of “saving” and their laughable fear of the holy “Equity”, they will bring society into disarray, one two-minute-noodle cup at a time. However, I’m pretty sure that even Republicans don’t stoop to the level to be claiming their adversary as having a disability.

But the recent news where the ABS announces a decrease in the price of property is met with some skepticism.

ABS

Much has been discussed about “housing affordability”, especially on news.com.au. What Michael describes here is the mortgage stress o’ meter which denotes that anything greater than 30% of a household income is simply far too much for the Battler family to withstand. I’m not exactly sure what the median house price was in 1970, but I’m pretty sure that in Sydney today it is roughly $500k-ish.

Let’s say that you borrow $500,000 at the RBA rate of 3% (even though I’m sure they don’t scatter about money for Bob Punter to buy bricks) for 30 years. A simple loan calculator vomits out this:

500k

$2,000 a month, eh? So, an individual would need to be earning roughly $6,000 a month (after tax) for it to be on the threshold of “mortgage stress”? Roughly $72,000 (very roughly) a year? I’m pretty sure that an IT Consultant isn’t the average Sydney vocation, especially when “lowly” Software Engineers are fetching around $51,000.

I think Michael assumes that the two people in the house want to work full time for their entire lives, kicking their kids off to child care so that Shazza and Sebastyen’s Bonanza Play Pen can rear their sprog to be good, functional and drunk members of society.

But “property doubles every ten years” is an interesting thing. It’s up there with “property never goes down” or “people always need a place to live”. On the surface, these claims seem to be fairly basic and in some cases fundamentally true. However, I’m not concerned with the validity of the claims as I’m sure that people with far better understanding of economics would be better to analyse these than me. What concerns me more is how widespread these claims go, and how often they are repeated. I am also concerned at how property moguls often denigrate those outside their circles.

The never ending flow of information that they are required to purchase. The never ending seminars they must attend. Venerated “experts”. Black and white answers. People thinking that they’re better than the “have-nots”. Idioms that are accepted truths repeated over and over again in a chant-like manner… property doubles every 10 years… rent money is dead money… property always goes up…

Property investment… it’s a cult. Seriously.

Advertisements

Written by Andy

May 9, 2009 at 12:39 am