bbloff, this is an extract from a First National RE webpage on bubblepedia inrelation to a confrence by Phil Ruthven.
Phil Ruthven, Chairman of IBIS World, discussed his predictions for the property market at the First National Annual Convention held in May. Ruthven believes Housing Affordability will be resolved as long as house prices "drift down by around 10-15 per cent over a year or two and wages grow by the normal 6 per cent, we will see affordability come slowly back down to 2.5 times (average household income) over a six-to seven-year period".
I still find it interesting that the 2.5 times household income. so based on $100,000, a couple should be paying only $250,000 for the average 20 square home.
i find this very unreal. So if they borrowed 100%, they would have an interest expense at 8% of $400 a week. A couple earning $100,000, which aint uncommon means that under the current tax rates that would have take home pay of some $1500 a week leaving $1100 disposal.
So interest becomes 30 or so % of the take home pay.
The only problem is that firstly it costs, when carpet curtains and extras are included some $250K to build the average home. Accordingly, land and infrastructure is costed at zero. The average block, ie some 400-500 sq m, in a green fields site costs between $90 to $110K to service and then there is the cost of the grenfields land.
A $400,000 house seems the average and the house that most couples aspire and purchase which is 4 times household income for the average couple. Given that loans are some $300k, peole are finding on average $100k in deposits from either family, inheritance, savings etc. so at $300K, the interest is $24,000 or $480 a week still below the $1500 in disposable income for the couple.
And here is problem 2.5 times is wishingful thinking and must be based on a house that doesnt exist for the reaosn pointed out. accordingly 4 times household income is seemingly a more realistic measure and we aint that far away.
Please provide some realistic comments, even from those anti property to explain the anomly. Please no idealogical views
