Housing Crisis in Australia

[Aliantha]

Although we live in a wonderful country, it's getting harder and harder for some families to live in this wonderful country. With record numbers of people suffering what is referred to as 'mortgage stress' - meaning that people are finding it hard to pay their mortgage and other bills whilst maintaining the same lifestyle - the Rudd government has come up with a plan to tackle the problem.

In an article in the Courier Mail today, the plan is outlined:

Investors will be offered $6000 tax breaks for 10 years - not the five promised before the election - if they rent out their new properties at 20 per cent below the market rate.

The aim is to cut rent on a new average three bedroom unit to $280 a week from the current $350 - a $70 saving.

This is good news for those who might be looking at renting down the track, but what about those people now who can't afford the rent or mortgage? Our inflation continues to climb, pushing interest rates up and up to the point where after today, it's likely that most people will be paying more than 9% interest on their mortgage.

I don't think we'll be needing Mr Rudds new plan. I think a lot of people are going to be forced to sell their homes and live somewhere more affordable.

[smoothmoniker]

Originally Posted by Aliantha

I think a lot of people are going to be forced to sell their homes and live somewhere more affordable.

I guess I don't see how that qualifies as a crisis. Having to modify one's standard of living to continue affording basic necessities is not a crisis, it's a part of being a grown up alive in the world.

Let's hold off on the phrase "Housing Crisis" until the supply of housing shrinks so far below the demand that roving bands of armed indigents fan out through the suburbs slaughtering home occupants and moving in, 15 to a room. Then, we can call it a crisis.

Right now, it's a correction. You know, like markets do.

[Aliantha]

So your advice is sit back and wait till it reaches epic proportions before its worthy of being labled a 'crisis'?

I think when average income earners with steady jobs can't find somewhere affordable to live there's a crisis.

At least, that's how it is here.

[classicman]

It's Bush's fault.

[Aliantha]

No, I don't think so. It's partly cyclic, but it wouldn't have the potential to be so severe if our previous government hadn't created a situation where inflation and interest rates were forced down for so long that it has become a pressure cooker situation.

There's really no alternative than to allow events to cool off which probably means ripping the lid off and letting it all boil over.

There's going to be a mess to clean up though.

[classicman]

Then its Cheyney's fault

[lookout123]

well it damn well must be someone's fault. you certainly can't expect these people who were innocently minding their own business before someone forged their signatures on documents and stuck them with overwhelming debt an... what?

they bought the houses knowing what the selling price was, you say? oh, they're still living in these houses? and they still have electricity for their tv's? oh, well carry on then.

[Aliantha]

Too many people living too high on the hog for too many years after being lulled into a false sense of security by the previous governments financial decisions.

[xoxoxoBruce]

The aim is to cut rent on a new average three bedroom unit to $280 a week from the current $350 - a $70 saving.

$350 is so cheap, I'd take a dozen.

[Aliantha]

That's not near the city. I don't know how to compare actual prices, but families are spending on average, over 30% of their total income on either rent or mortgage repayments.

I don't know what the percentage would be in the US, but that'd probably be the best way to compare the values.

[HungLikeJesus]

In the US, we can spend 30% of our income before breakfast. And that's just for PopTarts (tm).

[smoothmoniker]

30% of income seems really, really low.

[lookout123]

in your neck of the woods 50% isn't unheard of though smooth. the rest of the nation the target has been around 35% for some time. until they all folded you could easily get a loan qualification that would take you to 50% total Debt/Income ratio.

[Aliantha]

There are plenty of financial analysts who suggest that the amount should be no more than 25% of gross income and moving over 30% is what's caused the problems you're having in the US and what has also caused the problems we're having here.

Yes I know that the problem is exacerbated by 100% financing of home loans, but that's not the only reason this problem has occured.

You also have to look at the fact that some incomes are high enough to support a 50/50 ratio as you're suggesting - if the mortgagee lives within their means. Most don't. - but an average income is not.

[Clodfobble]

Our monthly mortgage (which includes a property taxes escrow) is currently 42% of our monthly net income if you count just my husband's salary, or about 38% if you count the average of my net income, which is sporadic and unreliable in any given month.

Somehow we do just fine, and were never 'lulled into a false sense of security by our government's financial decisions.'