Yab again,

Yes Graph 9 only refers to owner-occupiers (overall) so:

A. As the RBA document says:
"If comparable figures on debt associated with investment properties and margin loans were available, they would almost certainly further skew this distribution of debt" and:

B. It needs to read in context with Graphs 8 & 10 (plus text) to see that (once again) the debt-servicing burden for "people in the bottom half of the income distribution" has increased from around 20% in 1996 to 30% currently.

No I'm not just concerned with owner-occupiers specifically but this entire topic & all of its implications.

As for your saying:
“What the rba says is that whilst the build up of household debt is portrayed as being driven by young couples buying their first house, in fact its mainly being driven by older, richer people who are trading up etc”

Yeah I know – because I told you! (Jesus H!)

Right there on page 15 of this thread
just after the post where you were saying that older people were more cautious about borrowing & a new generation were living large, driving up the debt on easy credit & low interest rates (check it & see).

Then you continue to push this idea that speculators aren’t driving the bubble, that its owner-occupiers investing in their houses to make so-called “profits”.

Once again – the only way they can make a “profit” is by trading-down to a cheaper home & pocketing the difference.
Yet on the same page you acknowledge that the phenomenal household debt level is “being driven by older, richer people who are trading up etc.”

So if you read your own script you’d see that among the owner-occupiers in that age/wealth category the ones that are trading-down to gain an advantage are not in the ascendancy.

More commonly they are borrowing heavily to trade-up.
Well – who would’ve thought? So the RBA’s remarkable revelation puts another convenient misconception to the sword.

continues.

continued from above..

As I said on page 15 “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..”

But its not just owner-occupiers is it? Owners-occupiers don’t make capital gains, landlords do & they haven't driven the speculative boom, speculators have.
The owner-occupiers are passengers in that dynamic.

The key fundamental in property prices is rental return, that’s where the property market’s equivalent of a price/earnings ratio lies.
When prices are far higher than justified by rental values, when home-ownership is declining, some of us here are going to be far more interested in the things that have fuelled the bubble &
distorted the market than we are in bloody Cranbourne.

And a pointless remark like:
“Of course there is no way that young first home buyers can compete with double income high earning yuppies in their 40-60s ! Duh.”

Beyond being like Groundhog Day infinitely recurring - Does nothing to address the fact that prospective first-homebuyers would now pay up to 8.5 times annual income for a median-priced home when people in their 40’s –60’s paid half that or less.

And the point about my “little old heritage suburb” is that it has virtually no McMansions or gross add-ons & those things have nothing at all to do with the prices here or in many other places.

McMansions (cultural factors aside) are largely a result of building costs being cheaper relative to land prices. But it is often very low-spec, low quality building. They are super-sized junk – hence the term, McMansion.

“Your flaw it seems” (one of them) is that you have tried to make out that McMansions and extensions are making homes less affordable and yet those things are less common in “areas closer to the CBD” where the most expensive homes are.
In those areas (& elsewhere) the homes are the mostly the same size, same old assets – merely overvalued.

-MrSmith

Yabby wrote: "If the housing bubble bursts, so be it, houses will be cheaper."

I find this to be typical of your callous indifference to the plight of others.

This glib statement disregards the fact that there is a political imperative to maintain the astronomical current housing values so that those who were duped into buying homes at hyper-inflated prices would not lose the values of their assets.

If land speculators and property developers had not seized the political agenda decades ago, then Governments would have taken prudent measures to have avoided these current circumstances having come about in the first place, instead of rejoicing in them as one particularly loathsome former Prime Minister did as recently as 2004.

In fact, I myself was one such person caught in such a way. In the late 1980's my then partner and myself, believing that housing prices were only going to go on rising borrowed heavily to buy a flimsy run down shack.

Immediately after the market slumped and we were left paying high repayment for many year afterwards.

Thank you Mr Smith for your tenacity and perseverance.

Some other OLO posters clearly act on the assumption (as did a certain former Australian Prime Minister as well as a certain Propaganda Minister from Germany in the 1930's) that a lie repeated often enough can come to be regarded as the truth.

As I myself have complained before, this repetition bloats the size of these forums and degrades their worth. It's a shame that a rule to prevent such abuse of OLO could not easily be devised and enforced.

One suggestion would be to have a voting facility. Against each post could be a link to a form where other users could express approval or disapproval for the post. If a sufficient threshold of OLO users express severe disapproval of a particular post, it could be moved from the forum and place on an another location, say within http://waffle.onlineopinion.com.au and only a link to the at post would remain in the forum itself.

Thus, as an example, I would expect Yabby's most recent post at:

http://forum.onlineopinion.com.au/thread.asp?article=6697#101608

... would be very quickly moved to:

http://waffle.onlineopinion.com.au/thread.asp?article=6697#101608

This forum would be rapidly cleaned to largely consist only of posts which actually add to the value of this discussion. It would amount to censorship as those who are truly curious could still follow the links, but those of us, who already know what to expect from a post by the likes of Yabby would know not to bother.

Smithy, your continued confusion continues, because as you stated earlier,
you think that owner occupier homes were “ a household expense, a consumer
item.” or similar to a wedding ring.

I can assure you that a great many homeowners don’t see things that way, that’s
one reason why they keep ploughing money into their houses. If they thought
that all these investments were consumed, as happens to consumer items, they
would not be doing it.

If you (as in anyone) were to fall off the proverbial perch tomorrow and their
little heritage home in Yuppyville was worth a million or two, those kids who
inherit all that would not see it as a past consumable either, but would rent
out or cash in for top Dollar.

Houses are assets like anything else. I know of homeowners right now, who
have cashed in their overvalued Yuppyville houses and bought a thousand
acres of land with a house thrown in, as they see farmland as undervalued.
Have they traded down? Nope, they have simply traded what they consider
an overvalued asset for what they consider an undervalued one. The rising
price of grain which will affect the price of farmland, might well prove them
correct.

Given that rents often cover less then half of interest payments on a house,
let alone rates, land tax, insurance, repairs,etc investors are clearly fulfilling
a role by providing capital for those who choose to rent, relying on the
chance that they one day might make some capital gain. They are choosing
to take a risk, if house prices decrease, why should I be concerned?

My contention is that in your little heritage suburb, most likely full of
cashed up yuppies from the finanacial and similar industries, ( look
at the growth in that sector in Sydney), people investing in their own
uptraded homes have had a far larger effect then the investors which
you want to blame.

Yup, with so much cheap money and people investing in their homes,
the median house price has increased, but there is still cheaper housing
available for first home buyers,

Col Rouge's housing investment model with "15+" variables seems to include everything but "location, location". Does it account for the effects of tax policy on prices, rents, interest rates, and "capital" growth rates? Mathematical models, however sophisticated, are only as good as the assumptions on which they are based.

Col then wrote: "Small government and strong individual reliance always produces better societal outcomes than big, meddlesome and interfering government and weakened individual reliance, in every area of human endeavour."

Hear, hear. What a pity that Col's investment strategy relies on increases in the value of one's land due to OTHER people's efforts, and on BIG-GOVERNMENT tax policies that give favourable treatment to parasitic gains while penalizing the fruits of labour.

As a Georgist, I am more than willing to have my small-government credentials compared with those of any right-wing libertarian. See e.g. http://grputland.com/talking/privacy.htm , http://grputland.com/subs/ipart.htm#transparency , http://grputland.com/subs/ipart.htm#compliance .

If I were redesigning the tax system from scratch, I would have a system in which the government would not demand any information for tax purposes unless it needed the same information for other purposes. Of the taxes favoured by right-wing libertarians, the only one that passes this test is the odious poll tax.

And in case you're wondering, I have never used any hallucinogenic substances!