Hi everyone

The huge rise in the property market has got me thinking?

Are our children and grandchildren going to be able to afford to purchase their own homes?

I have been watching a DVD called 'what i didnt learn at school but wish i had' - and despite my initial skepticism i have actually found it to be quite interesting.

Has anyone here seen this DVD or read the accompanying E-book?

I would love to get some other peoples opinions on this information?

You can order the DVD (and download the E-nook) for FREE from

http://jamiemcintyre21ca.com

Looking forward to hearing your thoughts

Cheers JJ

I suspect a downturn in world commodity prices will scare off the foreign creditors currently financing Australia's property price bubble. Foreigners will be less inclined to keep lending to Australia if our ability to meet our debt servicing commitments is in decline. A credit crunch would be enough to deflate the property market.

The last steep rise in the terms of trade came to an abrupt halt in the late 1980s, resulting in "the recession we had to have". Sure, it hurt, but property prices returned to more affordable levels in the 1990s. As long as we remain solely a primary producer with an addiction to foreign capital, the "boom and bust" cycle will remain.

Will our children be able to afford to buy their own homes?
They sure will, but not if they want to live in Australia.

I think it depends upon a lot of things. Perhaps, at some macro level, a lot of things are out of people's hands, and in particular, I'd like to see a re-assessment of all the government charges tacked on to housing prices, as well as the government imposed scarcity of land release that drives up prices.

However, in response to the question of housing affordability, at a personal level, I don't see why not. I know housing prices relative to incomes are at historically high levels. However, we also need to look at the fact that thirty years ago, people were financially more prudent. This country didn't haven't credit card debt driven by the "need" to have consumer goodies, restaurant meals and overseas holidays. My grandparents' generation, and until recently, my parents' generation, didn't have these things, but they had no difficulty in owning houses. In the past, Australians' "needs" were defined much differently.

I know it's anathema to say this, but there are people in this country (I know some) who are in their twenties or thirties, work pretty ordinary jobs, and are well on their way to owning a home (or already own one or more) because they've realised that you can put your money into one set or the other of the above "needs", but you probably can't have both.

It will be interesting to see if we can or will return to being a more financially prudent society. I suspect not, but I tend to think that will be our own silly faults then.

Interesting question.

>>Are our children and grandchildren going to be able to afford to purchase their own homes?<<

Because we live in a market economy, as opposed to a command economy, the laws of supply and demand tell us that if they can't, someone else will.

If house prices are high, there is every incentive to build more. So supply will continue until prices fall. If prices fall, the question goes away.

So we have a situation where the question is not the affordability of the homes themselves, but exactly *who* is able to buy them.

Here are a couple of scenarios.

The folk who have benefited most from the rise in property values are the children's parents and grandparents. One solution will therefore obviously be that parents find a way to either finance their kids' first property from this increased and unearned value.

Banks are already promoting this approach. Once on the property ladder, the kids will stop moaning about high house prices, because they are now themselves beneficiaries of property price inflation. It's amazing what a bit of self-interest will do to one's principles.

Alternatively, we could stop viewing the ownership of our own home as the Holy Grail, and live with the idea - as many other countries do quite happily - that renting is a satisfactory alternative.

Simple economics of "what the market can afford" will keep prices within reasonable limits, which will in turn act to cap prices at which such properties will change hands.

This all comes back to that persistent myth, affordability.

Property is by definition "affordable" - in the same way that a litre of petrol at $1.50 is "affordable" - just so long as people continue to pay for it.

One problem that the first scenario creates is that parents these days are quite happy to liquidate the assets that they would once have passed on to the next generation, in hedonistic pleasures.

While governments may be able to tinker with economic policy to impact house prices, there is no way to legislate against selfishness.

While I know that a percentage of the baby boomers or (the parents) may liquidate the assests, there are probably a fairly huge percentage out there who arent prepared to do this, myself and my husband included. For a start a lot of baby boomers are quite contented to live in their family homes and have enough super and possibly the odd investment property or two to liquidate for extra funds. So this means that the younger generation stands to own all of the baby boomers homes when they die so I don't think they'll be that hard up in the long run.

Then there is the problem of the longevity of the baby boomers those whose parents die younger will probably benefit earlier I suppose. Then again if you take notice of the ages of people who die in the funeral notices in the paper or well known people who die on the news there are always a quite a lot who die in their late sixties or younger