Some good points there Sandune, you are dead right with your comments. The different here is in the late 80's people borrowing money at the top of the interest rater cycle were able to enjoy the rates falling for over a decade.
I took on two property loans 8 years ago, and was advised to choose variable rate loans that continued to fall from approx 8% to 5.5%. Over that period of time the industrial property that I purchased for $200,000 (borrowed $140,000) is now valued at $600,000. and I have $58,000. left to pay out. The other residential property that I bought for $142,000. (borrowed $128,000.) is now valued at $320,000. and I have $62,000. left to pay out.
Any person that has purchased a house over the last 3 years has paid between $300,000. to $500,000. and they are also looking at rising interest rates for the forseeable future. The cost of living has risen noticably over the last 3 years, we were able to buy our weekly food for around $170 per week, now we are paying around $250 per week. Petrol is also eating into the family budget.
Wages have risen to meet these extra cost, 10 years ago I was paying a tradesman $13.50 per hour, now I'm paying them $30 per hour and having trouble keeping them. The community is paying for these wages rises in more ways than one.
In two years time we will see lower demand for labour hence lower wages, at the same time people nursing these large home loans will be trying to keep up with increasing interest rates.
I was lucky enough to get into the market when land prices were low and interest rates were declining but I think It's going to be a very tough decade for the new market entrants. Imagine paying off your home loan and after 10 years it's still only worth what you originally paid for it.
