*now the banks get it instead.*

Ah Mr Smith, but the banks don't keep it! Look up the top twenty
shareholders of our banks, they are nearly all super funds.
Those super funds hold 1.2 trillion $ on behalf of Australian workers.
So that money is tucked away, for the benefit of the retirement
of the workers, whom it was taken from in the first place.
1.2 trillion $ is about as much as the whole ASX is worth.

As to house prices, one could assume that they would have been
relatively low in 1997, in the first place. Many of that borrowing
generation had been severely scarred by 18% interest rates and that
includes some banks who had lost billions. People had learned to be
cautious about borrowing too much money.

Now we have a whole new generation, who have only known good times
and relatively low interest rates. We have record employment levels,
a booming economy, easy money available and people have borrowed
to the limit. Yup, in some areas its a housing bubble, and no doubt
it will eventually pop, as the Economist predicts.

Clearly housing costs have not increased the same in all areas.
More people, perhaps concerned about the peak oil claims, are heading
to live within 15km of the CBD, or on the coast. Outer areas which
are less popular, have moved more in price in relation to the cost
of building. It might now cost 3 million to buy a house in Toorak,
but outer suburbs of Melbourne still have houses in the 200k price
range. Location matters more, as the real estate people have claimed
all along. More householders are aware of that and are including that
information, when it comes to their decisions about investing in
houses.

I am less concerned about the peak oil story. Australia still has
huge amounts of gas in the NW. How many people
have converted their cars to gas? At 80c or so a litre, it makes
for reasonable transport costs.

Yabby,

I marvel at your ability to pack so much fallacy into a short space & remain so determined to cling to it.

We don’t have “record employment levels’ even JW Howard referred to it as a ‘33 year low in unemployment’. The generation that owns most of the property had full-employment from the late50’s through to the early70’s.

What we do have is rental vacancies at a record low & interest repayments (as a proportion of household income) at a record high.
Most now recognise that the significance of the interest rate is relative to the price of the property (& the size of the mortgage).

Gentrification & decreased affordability are not the same thing, one affects specific locations while the other affects all locations to varying degrees.
The fact that there are cheaper places on the remote outer fringes of some cities does little to compensate for a system that so blatantly serves to disadvantage first-home buyers generally.

At times I have found myself telling younger people not to be abusive toward baby-boomers & landlords, that its not personal its about policy - then other people tell them black is white, there is no problem, that they are a “generation, who have only known good times” & that just makes it that much harder.

As regards the borrowing habits of the “scarred” & the good time generations Deputy Reserve Bank Gov. Ric Battelino recently observed that:

“household debt is often portrayed as being driven by young couples trying to buy their first home, a more accurate description is that it is mainly being driven by older, higher-income households that are trading up to higher quality or better located houses, buying investment properties and taking out margin loans to buy shares”.

and that:

“it leaves them exposed to economic or financial shocks that cause asset values to fall and/or interest rates to rise”

http://www.rba.gov.au/Speeches/2007/sp_dg_250907.html

That doesn’t imply that mortgage stress isn’t a problem for the 1st homebuyer. It confirms the degree to which wealthier households are using a greater debt servicing capacity to advantage - risks notwithstanding.

Mr Smith

Mr Smith, my point is that this argument is far more complex,
due to a number of variables, then what we are being told,
which is basically:

“Ah those poor first home buyers, its all the fault of those evil
baby boomers”

The biggest change that I can see is in fact the change in
expectations by the younger generation of Gen Y etc.
They want it all and they want it now! Hey, we worked for
30 years to get to this point and it did not come easily.

In the 70s it was extremely difficult to get yourself into financial
difficulties, as nobody would lend you the money in the first
place. Banking was highly regulated, unless one saved a substantial
amount with a bank, applications for loans were simply rejected and
there were few other options. In today’s deregulated banking this
has all changed, even the unemployed can buy a new plasma screen
on credit. No wonder that more people are getting into financial
difficulties.

Sorry if I forgot to specify “33 years” in terms of record employment.
Given 350 word limits, I thought the gist of the argument mattered
and would be understood, not the minor details. Fact is that when
I look around as to what is happening here in WA, I don’t think anyone
has ever seen anything like it. Young people have more opportunities
and options then ever before. I wish our generation would have had
the same. The present young generation perhaps don’t realise just how
fortunate that they are.

Our generation, unable to obtain loans, found solutions, not just blame
another generation. We worked, we compromised, we thought outside
of the square. We might have been broke, but we were young and had
our lives ahead of us, to find solutions, which most of us did.

Yes average houseprices have increased, mainly in the Yuppyville
districts, close to the CBD or ocean. If first home buyers want to
buy in these areas, it will cost them. Affordable houses are still available
in other areas, if they lower their expectations.

Well I'm certainly not blaming baby boomers for investing in housing - my mother is one of them, and given her lack of superannuation, and the fact that from a taxation point of view it simply made far more sense than investing more into alternatives, she did the logical thing, and I would have done the same in her place.
I don't think any individual of any a particular generation who makes a decision on where to invest their money can sensibly be blamed for a situation that they couldn't have reasonably predicted.
In fact I'm not particularly interested in blaming anyone, I just want to see the government take some realistic steps to ensure that a) the fall-out from the eventual bubble deflation isn't too catastrophic and b) a similar situation is prevented from reoccurring in the future. And you can argue all you like about how it shouldn't be the government's responsibility to look after us all and ensure we're sensible with our money: that may well be the case, but the fact remains that government has tremendous influence over what investment options individuals consider attractive, and therefore much take a share of the responsibility in determining the collective result of how those individuals choose to invest their money.
And if a government can't insure against serious market distortions and economic instabilities and inequalities, then it's of little use at all.

And Yabby, I challenge you to come to Melbourne or Sydney and spent a week trying to find a house that the average young family looking for their first home would be reasonably be able to afford. And if you can't find something that is considerably better than the house you first bought 30 years ago, then what on earth has the last 30 years of economic growth been good for?

Wiz, you might not have blamed baby boomers, but some have. The way
I see it, there are major changes going on in real estate, as our population
grows, especially in ever larger cities. 15km to CBD has become prime
real estate with the most capital gains, so that’s where a lot of investors
are investing. So are yuppies, dinks, higher income individuals who
need to work and want to live near the cbd. If you work for say Maquarie
Bank, you probably earn enough to live in this area, if you are a teacher,
a nurse, a dentist, etc, you can work wherever there are people. There
are now many industrial estates, logistics centres etc, in outer areas.

Billie made an interesting observation:

*The staff who live in the inner suburbs commute to the outer suburbs to work while the resides of
the outer suburbs commute to the inner suburbs for work.*

Perhaps as energy becomes more expensive, people will take more trouble
to find employment closer to where they live.

Things certainly have changed for the better in 30 years, but don’t forget
that young families have often only just left home, they have their lives in front
of them and earning capacity ahead of them. They will benefit for the rest of
their lives, but sadly it’s a bit much to expect it all already in one’s twenties,
even today.

I’ve taken up your challenge and gone internet shopping :) First stop was
Mirvac and Australand, both property developers for first home buyers.
Reasonably priced new homes are available in outer suburbs. In Melbourne
Australand have their Cranbourne development. Unlike your claim, there
are plenty of shops, schools and other facilities there. Clearly they would
employ people too. The median house price for Cranbourne is 230k$.
When you are young, you have to start somewhere. That sounds affordable
to me, one can always trade up later on. Where am I wrong, according to
you?

Yabby ,

- Yes, there are complex “variables”, primarily: Liquidity, Deregulated lending, Population, Planning, Demographics, Fiscal / Tax policy etc.

We know that, its been extensively covered.

You say:

“Our generation, unable to obtain loans, found solutions, not just blame
another generation.” etc. etc.

“Young people have more opportunities and options then ever before. I
wish our generation would have had the same.”

“Things certainly have changed for the better in 30 years”.

And I still marvel. Blaming another generation” & their allegedly excessive expectations is all virtually all you’ve done.

“30 years” again? – I’m old enough to remember 1977 & it was great. I don’t see what’s so bloody marvellous now. Life was easier, more fun & more affordable. Give me a time-machine & I’d happily zap straight back & the only thing I’d miss is this internet gizmo.

This whole we-had-it-tough thing is absurd. That line belongs to the people that battled through The Great Depression & WW 2 – the seniors not the baby-boomers.

The baby-boomers got (at various stages) post-war prosperity, full employment, the social & cultural revolution, free love, free education & the overwhelming influence that comes with being the biggest demographic.

Subsequent generations (at various stages) got rationalism, unemployment, HECS, AIDS, “family values” & unaffordable housing. They will bear the burden of global warming.

“Evil baby boomers” ? Hmm - another unedited quote.

‘(ANZ Chief Economist, Saul) Eslake says the biggest demographic in Australia – the baby boomers – will continue to influence policymakers particularly in an election year.
“Essentially its about the baby-boomer generation which for about half its life has been happy to rearrange the intergenerational flow of funds to the expense of other generations”

Financial Review ‘Perspective’ 31/3/07

That was referring to superannuation, spending priorities, well, everything really.

One needn’t react defensively though. A bit of objectivity doesn’t cost anything & it doesn’t hurt. Rather than assume we had it tough you might pause to consider if we actually had it easy.

- Mr Smith