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When it comes to personal debt Credit Suisse would beg to differ with you, their latest wealth figures have Australians handily richer per capita than every oth

When it comes to personal debt Credit Suisse would beg to differ with you, their latest wealth figures have Australians handily richer per capita than every other country in the world bar Switzerland. As far as shop fronts are concerned; I live in the UK at the moment, the average town centre here has 25% of shop fonts boarded up, in some towns that figure exceeds 55%. In Australia you might get isolated areas where you get lots of boarded up shops due to local economic factors but you don't get a complete country wide phenomenon like the UK. Property prices in Australia are due to people wanting to live in big properties. Again in some places in Europe I have seen the equivalent of two up two down terrace houses of less than 100m2 in size converted into 4 separate flats. I think you could easily argue that Australians are spending their wealth on a better lifestyle. A fairly wise decision when you remember that you can't take it with you.

weeksie 15y ago
Property prices in Australia are a result of Aussies selling each other properties to generate wealth, financed by loans they can't afford. Private debt in Oz has been insane since the mid 2000s and has only gotten worse. The economy is fine at the moment, but as soon as China steps back in any real way things are going to get ugly.
- jbarham 15y ago
  Having moved from California to Australia a year ago, I'm amazed that Australians deny that there is a property bubble. Anecdotally, in the neighborhood I'm living in, it costs at least twice as much to buy a house as to rent. I live in a lower middle-class suburb in Melbourne, and a couple of weeks ago a two-bedroom, one-bathroom house up the block sold for $600,000. Keep in mind too that mortgage interest rates in Australia are higher than they are in the U.S. (7% vs. 5%) and they don't have long-term fixed interest mortgages. The amount of debt home buyers are taking on is insane. Needless to say I'm renting and waiting for the bubble to pop.
  - hartror 15y ago
    A good % of me and my friends are all sitting on our hands and waiting as well. We're all about the same age as our parents were when they got their first house (late 20s early 30s). The prices are nuts, at least the market has flattened out of late, but with the population growth rates we are seeing around the country the pressure for housing isn't likely to lift any time soon.
    - robryan 15y ago
      Yeah I don't see an end to it, if you want to be around and work in the inner city there only a reasonable distance away you can buy before it becomes prohibitive. The majority of that land is either already in use or running up $300,000+ just for a regular block of land.
      - damncabbage 15y ago
        Half an hour out from Sydney, you're lucky to get a two-bedroom unit for $400,000. Actually getting land seems like a dream.
    - psyren 15y ago
      I'm not convinced that waiting is the best strategy. In my case I'm a 26 year old developer in Perth. I bought my first 2x1 apartment 13 months ago in a nice area 7km from the city and have now paid it off to the point where if I were to rent it out, it would pay for itself. Now all my savings still go into the loan (offset account), but they are essentially a deposit for my next property which I will be able to buy around 28-29 (2-3 years).
  - vacri 15y ago
    There are plenty of Australians who shout about the property bubble. The problem is that there is so much middle-class wealth tied up in it, that any political party that steps forward and eliminates negative gearing is basically signing their own death warrant - they won't be a player for 10-15 years.
  - feralmoan 15y ago
brc 15y ago
Australian personal debt and debt/disposable income ratios are now one of the highest in the world. http://www.bis.org/publ/bppdf/bispap46e.pdf http://www.bis.org/publ/bppdf/bispap46e.pdf From the linked paper: "During the 1980s, the ratio of debt to disposable income for Australian households was fairly stable at around 45% (Graph 1). But since 1990, this ratio has risen rapidly, reaching 157% in December 2007. Housing debt accounts for the bulk of the increase, with the ratio of housing debt to disposable income rising from 31% to 134% over the period. By comparison, the ratio of personal debt to disposable income increased from 13% to 22% over the same period. The ratio of debt to assets has also risen sharply over the past two decades, from 8% in December 1989 to 17% in December 2007. Many advanced economies have witnessed a large rise in household indebtedness over the past two decades. However, the increase in Australia has been particularly pronounced. The ratio of household debt to income in Australia went from being one of the lowest in the advanced economies in the late 1980s to one of the highest in December 2007 (Graph 2). " It's an older article (frustratingly newer is harder to find) but since 2007 many of the countries in comparison have suffered badly in property value write-downs. Basically, my point is this : household debt/income ratios are one of the highest in the world. This is mainly because of the most unaffordable property market in the world. As has been seen in the USA, Spain, Ireland and elsewhere, a breakdown in the property market has very wide implications for the wider economy as much of the current spending has been due to debt spending. As things are the excess income is being channeled towards debt reduction, which in effect is a negative savings rate, which has major implications for things like consumer spending. Australia cannot remain at the top of the 'most unaffordable housing' and 'highest debt/income' ratios forever. What goes up must come down. Even a 10-15% drop in housing prices will not only severely undercut consumer and business confidence, it will also undermine the banking sector stability because most of the major banks are heavily weighted towards residential property lending, meaning their capital bases are underpinned by the values of property. A fall in housing values would wipe out many of the statistics in the parent linked article. Yet people continue to say what happend in Europe and the USA cannot happen in Australia - but I'm yet to hear a convincing economic argument as to why not. Right now low unemployment and a strong dollar are underpinning teh property market (to some extent) but also so are (quiet) changes to government policy which include allowing banks to package up more residential backed mortgage securities (yes, those very things that brought the USA undone) and sell them to both pension funds and treasury as AAA investments. They have also changed the rules to allow superannuation funds to now borrow and fund purchase of property, something that was strictly prohibited before. Some mortgage brokers have estimated that super-backed borrowing makes up 20% of their business now. Even a slight fall in house prices and/or income levels will have major ripple effects. Yet this is not being discussed at all, as it is continually hand-waved away with 'oh that's not a problem, this time it is different'.
damncabbage 15y ago
Again in some places in Europe I have seen the equivalent of two up two down terrace houses of less than 100m2 in size converted into 4 separate flats. Around here we call that "Newtown", or "Ultimo".
- tankenmate 15y ago
  Ahh memories of the Duck and Swan in Chippendale...

weeksie 15y ago

Property prices in Australia are a result of Aussies selling each other properties to generate wealth, financed by loans they can't afford. Private debt in Oz has been insane since the mid 2000s and has only gotten worse. The economy is fine at the moment, but as soon as China steps back in any real way things are going to get ugly.

jbarham 15y ago
Having moved from California to Australia a year ago, I'm amazed that Australians deny that there is a property bubble. Anecdotally, in the neighborhood I'm living in, it costs at least twice as much to buy a house as to rent. I live in a lower middle-class suburb in Melbourne, and a couple of weeks ago a two-bedroom, one-bathroom house up the block sold for $600,000. Keep in mind too that mortgage interest rates in Australia are higher than they are in the U.S. (7% vs. 5%) and they don't have long-term fixed interest mortgages. The amount of debt home buyers are taking on is insane. Needless to say I'm renting and waiting for the bubble to pop.
- hartror 15y ago
  A good % of me and my friends are all sitting on our hands and waiting as well. We're all about the same age as our parents were when they got their first house (late 20s early 30s). The prices are nuts, at least the market has flattened out of late, but with the population growth rates we are seeing around the country the pressure for housing isn't likely to lift any time soon.
  - robryan 15y ago
    Yeah I don't see an end to it, if you want to be around and work in the inner city there only a reasonable distance away you can buy before it becomes prohibitive. The majority of that land is either already in use or running up $300,000+ just for a regular block of land.
    - damncabbage 15y ago
      Half an hour out from Sydney, you're lucky to get a two-bedroom unit for $400,000. Actually getting land seems like a dream.
  - psyren 15y ago
    I'm not convinced that waiting is the best strategy. In my case I'm a 26 year old developer in Perth. I bought my first 2x1 apartment 13 months ago in a nice area 7km from the city and have now paid it off to the point where if I were to rent it out, it would pay for itself. Now all my savings still go into the loan (offset account), but they are essentially a deposit for my next property which I will be able to buy around 28-29 (2-3 years).
- vacri 15y ago
  There are plenty of Australians who shout about the property bubble. The problem is that there is so much middle-class wealth tied up in it, that any political party that steps forward and eliminates negative gearing is basically signing their own death warrant - they won't be a player for 10-15 years.
- feralmoan 15y ago

brc 15y ago

Australian personal debt and debt/disposable income ratios are now one of the highest in the world. http://www.bis.org/publ/bppdf/bispap46e.pdf http://www.bis.org/publ/bppdf/bispap46e.pdf From the linked paper: "During the 1980s, the ratio of debt to disposable income for Australian households was fairly stable at around 45% (Graph 1). But since 1990, this ratio has risen rapidly, reaching 157% in December 2007. Housing debt accounts for the bulk of the increase, with the ratio of housing debt to disposable income rising from 31% to 134% over the period. By comparison, the ratio of personal debt to disposable income increased from 13% to 22% over the same period. The ratio of debt to assets has also risen sharply over the past two decades, from 8% in December 1989 to 17% in December 2007. Many advanced economies have witnessed a large rise in household indebtedness over the past two decades. However, the increase in Australia has been particularly pronounced. The ratio of household debt to income in Australia went from being one of the lowest in the advanced economies in the late 1980s to one of the highest in December 2007 (Graph 2). " It's an older article (frustratingly newer is harder to find) but since 2007 many of the countries in comparison have suffered badly in property value write-downs. Basically, my point is this : household debt/income ratios are one of the highest in the world. This is mainly because of the most unaffordable property market in the world. As has been seen in the USA, Spain, Ireland and elsewhere, a breakdown in the property market has very wide implications for the wider economy as much of the current spending has been due to debt spending. As things are the excess income is being channeled towards debt reduction, which in effect is a negative savings rate, which has major implications for things like consumer spending. Australia cannot remain at the top of the 'most unaffordable housing' and 'highest debt/income' ratios forever. What goes up must come down. Even a 10-15% drop in housing prices will not only severely undercut consumer and business confidence, it will also undermine the banking sector stability because most of the major banks are heavily weighted towards residential property lending, meaning their capital bases are underpinned by the values of property. A fall in housing values would wipe out many of the statistics in the parent linked article. Yet people continue to say what happend in Europe and the USA cannot happen in Australia - but I'm yet to hear a convincing economic argument as to why not. Right now low unemployment and a strong dollar are underpinning teh property market (to some extent) but also so are (quiet) changes to government policy which include allowing banks to package up more residential backed mortgage securities (yes, those very things that brought the USA undone) and sell them to both pension funds and treasury as AAA investments. They have also changed the rules to allow superannuation funds to now borrow and fund purchase of property, something that was strictly prohibited before. Some mortgage brokers have estimated that super-backed borrowing makes up 20% of their business now. Even a slight fall in house prices and/or income levels will have major ripple effects. Yet this is not being discussed at all, as it is continually hand-waved away with 'oh that's not a problem, this time it is different'.

damncabbage 15y ago

Again in some places in Europe I have seen the equivalent of two up two down terrace houses of less than 100m2 in size converted into 4 separate flats. Around here we call that "Newtown", or "Ultimo".

tankenmate 15y ago
Ahh memories of the Duck and Swan in Chippendale...