Firstly, the kids today that you are all complaining about are probably yours, the kids of the 'baby boomer' generation (22-30/33 age range). And yes the fact of life is that they will have it tougher than the baby boomer generation. They will be paying the baby boomer generations excesses today (excessive speculation, free education, free healthcare, free almost everything). Im not having a go at the baby boomers at all, its the governments, regulators and central banks that have allowed the excesses to happen. Only a complete fool would think that the young generation are nothing but spending freaks and thats why they dont have anything- probably some of them are, just as not all baby boomers are asset and cash rich. The fact of life is that today you have to spend a lot more for essentials, i.e insurance, health care, education, registrations, 2 people per household working, child care coz nobody is home etc etc etc etc. These things in the past were either free (health care and education) or you didnt need them (the many things that have to be insured etc nowadays - think morgage insurance, income insurance, child care coz mum or dad were home etc). In not talking simply about the $ cost of these per somebodys income, its the percentages that are paid from income on these 'esentials'.
Asset (i.e housing) prices in this country have increased from SPECULATION, get that through your heads, NOT fundamentals (except restricted land supply which is artificial anyway). They are higher because you can borrow whatever you want to purchase them. They reflect your borrowing level and not purely what you can save or earn. This means that every man and his dog can earn the same asset, a fact non existant in the past. This debt will be something that future generations will pay for one way or another, whether your rich or poor. Anyone ever wonder why Australia has the highest home prices relative to income? We have SOOOOOOO much land so its a land shortage is it? The government is so deep in it now that they actually have to restrict land more(as they have always done) to keep this merry-go-round continuing. As debt levels on housing have increased so much that it would be chaotic to stop it continuing.
Im a property bear when it comes to housing fundamentals. As there is only so much a person can borrow before it just becomes too much to service - and i believe we are getting close to that point. But i am also a realist. That is to say, that i believe that, yes, we could have property go up again 100-300% before it falls, purely to keep the rollercoaster going because like i said if it falls off its tracks (and it will) then we will ALL pay for it. Whether it will be because we have leveraged too much and you lose it OR because the government will do smoething silly again and give away $50-100K of taxpayers money for new home buyers again or a bail-out (what an absolutely idiotic idea that home owners grant is).
I feel for my young friends that have borrowed $500K in last 2years to buy their properties. I think that those interest payments could be better spent elsewhere, but i guess thats just my opinion. To think that this debt will be serviced (more likely than not!) for the next 30yrs beggars belief to me. Savings from income are supposed to go back into our wider economy and not on interest payments to a few hands.
A society of too many have and have-nots will cost everybody and thats exactly what we are creating, hence some of the emotional arguments on this thread.
The REAL credit crunch is yet to happen, late 2007 was just the taste of it and im happy i have cash, gold, gold stocks, savings etc as i strongly recommend others to have as well, and if not, then start.
