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  • » Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

#1 2015-06-09 06:04:54

Bullion Baron
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Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

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Adam Carr had this to say on housing affordability in Australia (via Business Spectator)...

    "...housing is still actually very affordable."

Carr was prepared to dive head first into showing how an $800,000 property is affordable on a $100,000 salary.

    "A household on $150,000 could afford a $1 million-plus house -- no dramas. Someone on $100,000 could afford anything in the vicinity of $650,000 to $800,000. A lot depends on the loan-to-value ratio they're taking -- I've used 70 per cent -- but it can be done."

Ok, let's break this down. $100,000 would be roughly $73,000 net, $1403/week. Carr is working from a position that they've saved a 30% (+ costs) deposit. Using $32,000 for stamp duty and fees (I went with NSW figures) and ignoring any other transaction costs (such as legals)... that's $272,000 required in savings (the deposit) before we can even start checking the affordability of the remaining mortgage... Read More

CONTINUED: Adam Carr Wrong on Australia's Housing Affordability

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#2 2015-06-09 06:12:50

silver kook
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

According to Mr. Hockey you just need to find a better job.  Or preferably two of them. One during the day and another at night. What is wrong with you? Have a go!

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#3 2015-06-09 06:37:34

tozak
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

Try not to get too bogged down with complicated compound interest calculations, interest rate averages, CPI figures, average wage increases, deposit rates, cost of living changes etc. etc.

It's just one simple calculation

An $800,000 house is affordable today so long as a $900,000 is affordable next year, that's it, the bank will make up the rest.

We have now entered a period where the system it completely dependent on liquidity through perpetual and exponential debt expansion where the failure to meet an expansion requirement will see the start of systemic deflationary collapse. Yes house prices are way overinflated now but there is a higher mathematical chance they will need to be even further inflated in the future.

Most Governments around the world are currently conducting feasibility studies on potential negative official rate interest rates as low as -6% and then the need to switch to a global cashless society to achieve this to prevent a cash bank run. This tells me they are not quite ready to let the prices come crashing down anytime soon.

Last edited by tozak (2015-06-09 06:38:04)


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#4 2015-06-09 19:03:32

aleks
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

300k can nearly buy you retirement in a lot of reasonably developed countires

Last edited by aleks (2015-06-09 19:07:28)


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#5 2015-06-12 18:59:14

SpacePete
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability


Catus amat piscem, sed non vult tingere plantas

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#6 2015-06-12 19:50:24

mmm....shiney!
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

Very bored with these endless news stories and commentaries on housing affordability for those living in Sydney (so I thought I'd add my own tongue ).

Who the turtle cares????? Just get over it. It's expensive, no one is forcing anyone to buy a house, just like no one forces Big AD to buy the brand of shoes he does.

Last edited by mmm....shiney! (2015-06-12 19:50:45)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#7 2015-06-12 21:42:00

Bullion Baron
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

mmm....shiney! wrote:

Who the turtle cares????? Just get over it. It's expensive, no one is forcing anyone to buy a house

The government controls basically every aspect of the market, from the cost of debt, rules for banks, allocation of land, tax policies that push and pull demand, fees and costs associated with development, what you can and can't build and where... so yes constant articles are important to sway opinions and push for policy changes.

The title's on my threads give you a pretty good idea of content... if you're bored with it, don't read smile

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#8 2015-06-12 21:45:57

mmm....shiney!
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

Bullion Baron wrote:
mmm....shiney! wrote:

Who the turtle cares????? Just get over it. It's expensive, no one is forcing anyone to buy a house

The government controls basically every aspect of the market, from the cost of debt, rules for banks, allocation of land, tax policies that push and pull demand, fees and costs associated with development, what you can and can't build and where... so yes constant articles are important to sway opinions and push for policy changes.

The title's on my threads give you a pretty good idea of content... if you're bored with it, don't read smile

Not a criticism of your article as such, just that anyone would think there is only one housing market in Australia - Sydney.

Last edited by mmm....shiney! (2015-06-12 21:46:25)


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#9 2015-06-12 22:10:24

SpacePete
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

mmm....shiney! wrote:

Very bored with these endless news stories and commentaries on housing affordability for those living in Sydney (so I thought I'd add my own tongue ).

Who the turtle cares????? Just get over it. It's expensive, no one is forcing anyone to buy a house, just like no one forces Big AD to buy the brand of shoes he does.

The issue is bigger than Sydney and is bigger than Melbourne. The staggering level of private debt and a rigged financial system pose a massive and growing economic risk. If it all comes tumbling down, people outside of Sydney will certainly feel the pain.


Catus amat piscem, sed non vult tingere plantas

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#10 2015-06-12 22:45:01

mmm....shiney!
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverPete wrote:
mmm....shiney! wrote:

Very bored with these endless news stories and commentaries on housing affordability for those living in Sydney (so I thought I'd add my own tongue ).

Who the turtle cares????? Just get over it. It's expensive, no one is forcing anyone to buy a house, just like no one forces Big AD to buy the brand of shoes he does.

The issue is bigger than Sydney and is bigger than Melbourne. The staggering level of private debt and a rigged financial system pose a massive and growing economic risk. If it all comes tumbling down, people outside of Sydney will certainly feel the pain.

That's different to housing affordability.

The majority of those calling for government intervention in the housing market are quite happy to see continuing interference in our financial markets by governments and their crony=capitalist bed partners.


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#11 2015-06-16 01:10:46

hawkeye
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

Bullion Baron wrote:


The government controls basically every aspect of the market, from the cost of debt, rules for banks, allocation of land, tax policies that push and pull demand, fees and costs associated with development, what you can and can't build and where... so yes constant articles are important to sway opinions and push for policy changes.

But what you are asking the government to do is precipitate a financial crisis.  Why would they do that?

Think about it.  Think about all the people with investment properties facing their own personal financial crisis as they watch the value of their properties deflate.  Think about the effect it will have on prospective investors.    And if this happens it's just a hop, skip and a jump to a national financial crisis.  Remember that phrase which goes something like "if you owe the bank a million dollars you have a problem, if you owe the bank a billion dollars the bank has a problem" (adjusted for inflation).  How much money is collectively owed to the banks? 

No amount of eloquent writing will get the politicians to deliberately bring this about.  In fact, what they will do is try to stave off price drops as long as possible.  The only question at this point is, will they be able to stave it off indefinitely?  I feel like the answer is no, but then again I thought it would have crashed by now so who knows where it is going?

As for those pining over wanting to buy an affordable house, my suggestion is to get over it.   People need to examine why it is so important to them and not just go along with the general consensus or worry about what people say.  And I speak from experience on this, I let the idea go a few years back and I'm just fine now.

Last edited by hawkeye (2015-06-16 01:12:57)

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#12 2015-06-16 02:17:33

SpacePete
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

hawkeye wrote:
Bullion Baron wrote:


The government controls basically every aspect of the market, from the cost of debt, rules for banks, allocation of land, tax policies that push and pull demand, fees and costs associated with development, what you can and can't build and where... so yes constant articles are important to sway opinions and push for policy changes.

But what you are asking the government to do is precipitate a financial crisis.  Why would they do that?

Think about it.  Think about all the people with investment properties facing their own personal financial crisis as they watch the value of their properties deflate.  Think about the effect it will have on prospective investors.    And if this happens it's just a hop, skip and a jump to a national financial crisis.  R

...  In fact, what they will do is try to stave off price drops as long as possible.  The only question at this point is, will they be able to stave it off indefinitely?  I feel like the answer is no, but then again I thought it would have crashed by now so who knows where it is going?

Assuming there is a problem with the current situation, the longer the government kicks the can down the road, the worse it could potentially be when the edifice of government control collapses and brings the nation down with it.


Catus amat piscem, sed non vult tingere plantas

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#13 2015-06-16 02:19:15

SilverBullet8241
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

You do realise approximately tho thirds of Aussies own property and a third rents. The majority of Aussies are better off if prices don't become more affordable (drop)

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#14 2015-06-16 02:32:32

SpacePete
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverBullet8241 wrote:

You do realise approximately tho thirds of Aussies own property and a third rents. The majority of Aussies are better off if prices don't become more affordable (drop)

Right, but with such a large exposure to property, you'd want to avoid a disastrous crash so dealing with any issues earlier rather than later is essential if you want to have a hope of managing any correction.


Catus amat piscem, sed non vult tingere plantas

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#15 2015-06-16 02:39:57

hawkeye
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverPete wrote:

Assuming there is a problem with the current situation, the longer the government kicks the can down the road, the worse it could potentially be

That's certainly true but it is like a runaway train now.  Pulling the brakes could end up in derailment too.   Hard for anyone to judge how bad it actually is, or potentially could be, and without that hard information I don't think any politician will be willing to stick their neck out, certainly not a majority.

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#16 2015-06-16 02:43:58

smk762
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverBullet8241 wrote:

You do realise approximately tho thirds of Aussies own property and a third rents. The majority of Aussies are better off if prices don't become more affordable (drop)

When you say "own" do you mean outright, or as a debt slave?


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#17 2015-06-16 05:33:16

Lovey80
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

What they could do is begin restricting lending requirements to where they should have always have been. Starting off with a minimum 10% (fully saved from wages ) deposit and increase it over time to 20%.

Secondly, begin the end of negative gearing against personal income. Grandfather existing NG'd homes but make them principle + Interest only with a minimum reduction in principle each year to remain negatively geared against income. Otherwise they can claim losses against investment/capital gains income just like any other money losing investment.

Of course they wont do this. They want the train to go full steam ahead into the end of the unfinished tracks so they can claim it was the lack of regulations that caused this instead of blaming the government for the banks wilful destruction of the Australian economy. They will implement ridiculous regulation that will see the banks blow the next bubble somewhere else and when that bubble pops they will do it all over again.

Each and every time the dollar buys less and less and less and the poor people who are struggling to put food on the table are falling further behind the ever ending inflation curve.

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#18 2015-06-16 05:41:59

jcanuck
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

Just as an aside, the Royal Bank of Canada how much can I afford mortgage calculator (https://www.rbcroyalbank.com/cgi-bin/mo … d.pl/start) suggests that with a $200,000 down payment, with no other payments and a $100,000/yr salary could afford a maximum of $551,619 for a new home.

For those of you not familiar with Canadian currency and house prices, I'd suggest the Vancouver market would be quite comparable to Sydney and $1 AUD = $0.97 CAD.

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#19 2015-06-16 05:44:36

Bullion Baron
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverBullet8241 wrote:

You do realise approximately tho thirds of Aussies own property and a third rents. The majority of Aussies are better off if prices don't become more affordable (drop)

Owners who intend to upgrade in the future would benefit from lower prices as it reduces the gap between the value of their existing home and the new one (along with reducing all the costs associated with buying, owning and selling; lower stamp duty, lower council rates, lower RE fee to sell their existing place, etc).

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#20 2015-06-16 08:00:47

SilverDJ
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

hawkeye wrote:

But what you are asking the government to do is precipitate a financial crisis.  Why would they do that?

No one  thing the government does it going to bring about so instant a financial crisis that everyone is going to say "Look, you did it! You changed xxxxxx and the system crashed!", the system isn't that fragile nor instant. It can take a long time for the panic of the herd to set in and the market to substantially change direction.
For instance, upping interest rates by 0.5% isn't going to do squat except scare a few people, been there, done that before, no problem.
Nor is bringing about tighter foreign investment laws, or the holy hot potato grail of making changes to negative gearing.
So a responsible government can certainly change things without bringing down the house of cards. Indeed it has the obligation to do so if it seeing a train wreck coming.

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#21 2015-06-16 09:12:39

hawkeye
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

Lovey80 wrote:

Of course they wont do this. They want the train to go full steam ahead into the end of the unfinished tracks so they can claim it was the lack of regulations that caused this instead of blaming the government for the banks wilful destruction of the Australian economy. They will implement ridiculous regulation that will see the banks blow the next bubble somewhere else and when that bubble pops they will do it all over again.

Unfortunately, that's what the Australian public want.  Few understand credit cycles and the necessary corrections that occur from them.  Most people think the boom period was normal and the correction/recession is abnormal.  They don't recognise the boom as being abnormal and the recession as a necessary return to normalcy.  Moreover, the market can never fully correct because of all the government interference and taxation that remains and so the blowing up of a new bubble becomes a necessity.  Which of course leads to the same cycle repeating.

The only way out that I can see is to start asking questions about the necessary role and function of government in our society.

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#22 2015-06-16 09:27:39

hawkeye
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverDJ wrote:
hawkeye wrote:

But what you are asking the government to do is precipitate a financial crisis.  Why would they do that?

No one  thing the government does it going to bring about so instant a financial crisis that everyone is going to say "Look, you did it! You changed xxxxxx and the system crashed!", the system isn't that fragile nor instant. It can take a long time for the panic of the herd to set in and the market to substantially change direction.
For instance, upping interest rates by 0.5% isn't going to do squat except scare a few people, been there, done that before, no problem.
Nor is bringing about tighter foreign investment laws, or the holy hot potato grail of making changes to negative gearing.
So a responsible government can certainly change things without bringing down the house of cards. Indeed it has the obligation to do so if it seeing a train wreck coming.

It's hard to identify what exactly breaks a market but it doesn't take much to spook investors and once they start to head for the doors it can quickly turn into a stampede if you are in a bubble situation.   The question is, are we in a bubble or not?  It looks like one.   If it is a bubble then trying to prick it is a dangerous proposition.   I would bet officials look at it and hope that it's not going to burst.  If they even suspect it's a bubble I doubt they would want to be the ones who might be seen as destroying thousands of peoples investments.  Probably not a lot of re-electability potential if that happens.   Better just to wait and have the cover story in place if things do go drastically wrong.

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#23 2015-06-20 20:01:54

MikeHagerty
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

SilverPete wrote:
mmm....shiney! wrote:

Very bored with these endless news stories and commentaries on housing affordability for those living in Sydney (so I thought I'd add my own tongue ).

Who the turtle cares????? Just get over it. It's expensive, no one is forcing anyone to buy a house, just like no one forces Big AD to buy the brand of shoes he does.

The issue is bigger than Sydney and is bigger than Melbourne. The staggering level of private debt and a rigged financial system pose a massive and growing economic risk. If it all comes tumbling down, people outside of Sydney will certainly feel the pain.

I agree 100%. The current high levels of private debt will put a massive downward pressure on the growth of people outside the greater Sydney area.

Well said, Pete.

Cheers.

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#24 2015-06-20 21:17:29

mmm....shiney!
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

MikeHagerty wrote:

will put a massive downward pressure on the growth of people outside the greater Sydney area.

What does that even mean? hmm


The woolgrower's target shall be the good thriving of his flock and its pastures, and so of himself and those whose livelihoods depend on his enterprise.
"The Woolgrower's Companion", 1906.

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#25 2015-06-20 22:35:53

bordsilver
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Re: Bullion Baron: Adam Carr Wrong on Australia's Housing Affordability

mmm....shiney! wrote:
MikeHagerty wrote:

will put a massive downward pressure on the growth of people outside the greater Sydney area.

What does that even mean? hmm

It means we'll have more dwarfs due to the weight of debt stunting their growth? Didn't NR call them "fiscal pygmies" or something tongue


The only good tax is a repealed tax.

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