Sell your house, retire TODAY!

Bought my first house in Sydney in 1988 as a young engineer.
I was making about average motza for my age and degree.

Paid about 4 times my pre-tax annual salary, was a nice abode.

Right now, for a young engineer of same age and average salary, the same house would be at least 7 times the yearly pre-tax intake.

So while I admire people who started early, the elbow grease speech, "in my days" and all the self-congratulary stuff, the financial context has changed, it was easier then. (Don't disagree with the Y gen not wanting to work for it though.)

Mark summarized in an earlier thread: "laws that allowed people to treat housing as an investment for tax writeoffs combined with the low interest rates meant all the baby boomers could go and buy multiple properties...". To which I would add: laws brought in by Hawke and Keating made it so that we're competing with overseas buyers on our own soil.

I don't like these doccos that are simply one sided. Too much demonization.

I'd like to compare the living standards of the past 200 years without banks..

Yes, Banks create money by re-lending deposited funds, but the banks take on the liability and are also at the mercy of asset devaluation.

Thus there is regulation in Australia and many other countries as to the maximum ratio that banks can lend based on total deposits.

Funny how that wasn't talked about.

Biased doccos never tell a true picture.

That is the true formula for calculating housing affordability.

Cost of abode -:- by annual income = x

X has been rising over the years.

Whether that is due to government policy (as Mark asserts) or not is debatable.

The availability of housing lots has certainly been affected by government policy (federal, state and local council) with arduous development requirements.

Example:- A developer subdivides X number of lots on the condition that he curbs and channels bitumen roads, runs underground water, power and phone lines and on top of that pays for head works for drainage, water, parks and local road improvements.

Then when a young married couple buys their "dream block" they have to pay another $6,000 or more in head works charges before they can have their house built.

The first home housing grants are a con job.

So then you go and ask a landlord what his annual nett %age return on his property is. If he says anything more than 4% he is lying, cheating or basing it on what he paid for it 20 years ago.

I do not advocate that buying houses is a good investment. I do advocate that buying the real estate upon which a house sits or can be sited MAY be a good investment.

Better if it has a commercial building on it, especially if it is readily releasable but vacant.

I know 3 or 4 singles and couples who can't afford to buy a first home and all the rest have managed it.

House prices were rising so fast that they couldn't keep their deposit savings at the same percentage of house prices, ie their deposit was getting smaller even though they were adding to it.

Funny thing though, all of them live in the inner city. And can't possibly conceive of buying something outside the inner city - 10 minutes on public transport or it's too far.

When you scratch a bit below the surface, ask them why do they need to be in the inner city? Because they are always out drinking, eating, going to gigs and generally wasting away the money they should be saving for a deposit.

It's not specific to Australia, we experienced the same easy lending conditions as other countries and the added bonus of encouragement from the government with tax incentives like negative gearing, 1st home bonus...

But the banks provided the easy money, and activity contributed to real estate asset bubble, so as to grow their own balance sheet.

An example: I know two builders... one's small house/extension builder, the other a larger (platino.com.au).
Both were telling me they weren't able to get finance for new development projects, but had no trouble leveraging themselves to the hilt to buy existing properties.

So if you owned most of the property in a country, would try and make it as expensive as the economy would support?

I'm not sure you've got your facts right... maybe you should watch the doco.

Anyway:


Leverage Ratios of Selected Major Banks
(total assets / shareholders equity)

Bank
Leverage ratio

U.S. Federal Reserve
110.1
Mizuho Financial
37.2
Deutsche Bank
37.0
Credit Agricole
33.8
Credit Suisse
31.3
Barclays
28.9
UBS
27.7
Mitsubishi UFJ
25.7
BNP Paribas
25.3
Sumitomo Mitsui
24.8
Societe Generale
22.2
Lloyds Bank
21.8
Royal Bank of Scotland
19.1
Commonwealth Bank of Australia
18.4
National Australia Bank
17.3
HSBC Holdings
16.8
ANZ Banking Group
15.3
Westpac Banking Corporation
14.8
Bendigo & Adelaide Bank
13.9
UniCredit
13.7
Goldman Sachs
13.5
Macquarie Group
13.2
JP Morgan Chase
12.8
Intesa Sanpaolo
12.1
Reserve Bank of Australia
12.1
Citigroup
11.1
Bank of America
11.0
Wells Fargo
10.1

Sources: Forbes, WSJ, Bloomberg, Wren Research, Sep-2011

Yeah. I did that a lot when I was younger. Spent all my money on wine, women, drugs and holidays.
The rest I wasted.

Love it, and agree totally. Substitute work around the world for holidays and that's me too.

But if you're *still* doing that in your 30's then you can't expect a house too.