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phee

FHOG and the housing market.

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I was reading a thread in another forum about how the FHOG (First Home Owners Grant) is effecting the market at the moment with FHB (First Home Buyers) going nuts and snapping anything up that they can 'afford'. I found it very interesting and thought I might extend the discussion into this forum to see how the opinions change. At this stage, the FHOG is set to end mid year, but there is talk it could be extended.

 

Is this such a good idea??

 

The options given in the other forum are:

 

 

  • Rudd announces an end to (or cuts back) the FHOG. Frenzy continues to end of June then all of a sudden the market dies in the arse. Rising unemployment and lack of brain dead FHB's sees prices settle, quite possibly fall.
  • Rudd decides to continue the grant. f**ktards decide there is no longer any real urgency and market dies in the arse. Rising unemployment and lack of brain dead FHB's sees prices settle, quite possibly fall.
  • F**ked if i know, i'm an idiot and am reading it wrong.

 

Being a FHB myself I have been watching the market for a while now, but a lot more closely in the last couple of weeks. The amount of houses going up for sale is almost impossible to keep up with, but what is amazing is how many of them are going under contract or being sold not long after being advertised. We have decided NOT to buy, but to sit and wait to see what happens.

 

Personally I can't see how the market can recover overnight, and I don't think that housing prices will be going up anytime soon. I think if the FHOG ends, or is cut back to 7k, the market will become slow moving again, and with the economy the way it is, prices will stay the same, or drop off, as people try to get out of investments or morgage payments due to unemployment.

 

If the FHOG is extended, it will be good for a while, but the panic has only started now, so once again I think the market will slow until the second extention of the FHOG begins to run out. If the FHOG ends completely, and is cut off. I don't see anyone buying anything until the prices fall dramatically.

 

If you want an investment I would invest in the share market at the moment, and housing when / if the prices fall.

 

What does everyone else think about the FHOG and what will happen to the market?

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Prices jumped immediately after the grant was announced, as expected.

 

First home buyers did not benefit at all from the grant, the vendors who upped their prices to match the grant are the ones who really got the money.

 

I have owned my home since before the interest rates got their massive reduction, back when they were still rising.

 

I weathered that storm, i'll weather this one too.

 

The only people that are hurt by the market downturns, are those who over-extended themselves with massive loans. Funny thing is, that behaviour is the very reason Sydney's home prices are as inflated as they are.

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i am kind of hoping it is extended as i want to get my first home sometime this year maybe early next and the end of the FHOG is the only thing tempting me and i don't reall ywant to rush, so if they extend it i will wait a bit and then take the plunge, but first i have to finish the car so i can save for a deposit have most of the thing i need for moving out beside a fridge and a couch.

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I bought my first house in September 2007. At the time I was earning about 40K and my boyfriend a little more. Even at that time the banks were offering us about 700-800K. This was at a time when interest rates were high. However the housing market was almost at it’s lowest point (it fell to the lowest point about 3months later as more and more people couldn’t re-pay their mortgage and more properties were being listed and a lot more mortgagee sales were popping up. Mortgagee sales are good for buyers as the house is often sold for a lot less than it’s worth as the banks need to recover as much debt as they can, but as quick as they can). The house we bought ended up being just over 300K, there was no way I was going to commit to a debt of 700k at 22 years old, even though I knew rates would drop, they still have the ability to rise.

 

I think what you need to keep in mind is how long do you plan to live in the house. Since buying my house it hasn’t dropped in value but has risen, not a lot but given today’s market any rise is good. Realistically I’ll probably live here until I have kids, maybe even life there when my first child is still young but we’ll need a 4th bedroom soon after. So that would mean I’ll be looking for a house no sooner than 2011. So we’ll have been in the house about 4 years.

 

I may sell the house or keep as an investment property. I would be more inclined to keep it and rent it out if the market is still in a slump. And since 2007 I have obtained a higher paying job and so has my boyfriend so we have a lot more ability to do this.

 

The FHOG didn’t really help us, and like Chappy said above the vendors just raise the price of their houses around the same amount anyway, so in most cases you are not really in any better position.

 

Only tip is do your research on areas and price. Look for areas that may rise in value (look for transport links, infrastructure being built etc as this can show new upcoming popular suburbs). And DO NOT loan above your means. Even though the rates are low now, plan for the future the rates aren’t always going to be this low.

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The options given in the other forum are:

f**ks sake, how many forums are you whoring yourself around?!

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I bought my first home with (my now ex) partner for $300k in September 2007. The FHOG back then was only $7k and barely covered half of the costs involved with purchasing a property. We got in just after the market started to skyrocket and just before interest rate hikes became a common thing.

 

tThe FHOG rising to what it is now is a good thing because it covers the costs for owning a house or gives you a substantial start on getting necessities like furniture...and big tv's :lol:

 

I am now the sole owner of the house which I am renting out and at this stage plan on keeping it as an investment / superannuation policy. At the moment it is costing me money as rent

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As you said I think House prices will drop as soon as the FHOG ends. As for how much who knows. I think once interest rates stop falling aswell, which I think will be soon, the market will lose a bit of momentum and hopefully house prices drop as people realise that interest rates will go back up.

 

I feel for people I know who are looking for houses now, I thought it was bad enough when I brought our house in 2006, but some of the prices in Melbourne at the moment are pretty high for what people get.

 

As for shares unless you are willing to invest allot of money you arent going to make any worthwhile gains.

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Personal opinion:

 

Remove the grant>house price crash now

Keep the grant>house price crash later, but a bigger crash

 

www.globalhousepricecrash.com

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There is never a bad time to purchase a house or property. There's just better times than others.

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Prices will not 'crash' if and when the FHOG gets cut back, the low to middle bracket houses prices will stabalise in the short term.

 

You may see a rise in some areas and larger decreases in other areas, particulary the far outer green belt areas.

 

Three years from now we will see the effects of the current situation (low interest rates + large govt. handouts). Many people will start to default on loans as they borrowed too much money when interest rates were low and with little to no personal deposit. As rates rise they will feel the squeeze and many simply wont be able to afford the repayments. I have already heard so many stories of people borrowing 50-150k more than would have 1 year ago - these people need to think forward 2, 5, 10, 20 years ahead when making decisions like buying a house.

 

If you want an investment I would invest in the share market at the moment, and housing when / if the prices fall.

 

What does everyone else think about the FHOG and what will happen to the market?

 

There are good investment opportunities in every market - at high and low points - its just knowing when and where to invest your cash.

 

Real estate will provide strong returns over the long run and carries much less risk than investing the same amount of cash in the stock market over the same period of time (although trends show the stock market would generate a higher return). It provides so much room to move in terms of tax planning and structuring, which is extremely important once you start to build your portfolio.

 

I wouldn't be waiting to buy a house until house prices fall, just pick a sensible point in the market and think long term.

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Personal opinion:

 

Remove the grant>house price crash now

Keep the grant>house price crash later, but a bigger crash

 

www.globalhousepricecrash.com

 

Nah

 

 

 

 

Jase..

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i enjoy reading yours posts for some reason deej

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You are right about vendors upping there price which is why they aren't moving that many houses. At this point in time only the lower end of the market is moving being solely stimulated by the First home owners. Houses 500k+ are not moving, and they have fallen in prices but not as drastic as people think. 30% drop is armageddon, if it does happen its the worse case scenario. So the likelihood fo that happening is slim to none.

 

Right now is a prime oppurtunity for the lower end of the market to afford a home, sure after the FHOG there will be a dip. Give it 18 months and it will recover.

 

So far things are no where near as dire as people make them out to be. In Australia that is.

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Deej f**k off and get an economics degree, when you have one you might know as much as I do...

 

Your 'Bubble is going to burst' mentality is ridiculous... It doesn't take into account the fundamentals...

 

The Australian housing market is different from the American in a number of key areas.

 

1. In the USA a Mortgage is 'Non-Recourse', google 'jingle mail'

 

2. In Australia there is currently a limited supply of houses and a strong demand for ownership...

 

3. Australian banks are very strongly capitalised, in fact they are probably the most secure financial institutions in the world... Google ('BASEL requirements')

 

4. We have a government that has proved it is willing to step in and stimulate the economy... Making Australia not soley dependant on monetary policy. (Google Monetary Policy and Fiscal Policy)

 

5. The RBA is run much better than 'The Fed', the RBA is not scared to up interest rates when they need to.

 

 

While house prices in Australia are already expensive by global standards, and there is a high level of leverage associated with the pricing there is little evidence we are going to see a massive drop...

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I bought a house using the FHOG. Without it, I simply could not have bought a place. While people may argue it inflates the pricing of houses by the dollar value of the grant, it's actually more the fact that it paid the stamp duty for me which I would not have been able to afford that and a deposit together.

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I bought a house using the FHOG. Without it, I simply could not have bought a place. While people may argue it inflates the pricing of houses by the dollar value of the grant, it's actually more the fact that it paid the stamp duty for me which I would not have been able to afford that and a deposit together.

 

It actually inflates house prices by more than the value of the grant... Each dollar of deposit lets you borrow another $4 and maintain an 80% LVR....

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I bought a house using the FHOG. Without it, I simply could not have bought a place. While people may argue it inflates the pricing of houses by the dollar value of the grant, it's actually more the fact that it paid the stamp duty for me which I would not have been able to afford that and a deposit together.

 

It actually inflates house prices by more than the value of the grant... Each dollar of deposit lets you borrow another $4 and maintain an 80% LVR....

 

Either way, it enabled me to buy a house, and have some money left over for things I needed for said place.

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Are you sure about that given the massive amounts of exposure that our economy has to the United States and how intertwined we are with the rest of the world.

 

Did you know that Iceland has already declared bankruptcy? And alot of other nations are about ready to throw in the towel, you dont hear this on the evening news.

 

http://www.telegraph.co.uk/finance/finance...to-Baltics.html

 

http://www.vanityfair.com/politics/feature...4/iceland200904

 

30 percent is realistic.

 

Did you know Iceland has 320,000 people? Its like a third the size of Adelaide ffs. Hardly representative of real countries. But anyway... as far as I can see Australia is doing well compared to most other countries, this doesn't mean that the next couple of years aren't going to be hard, its just we're lucky our country is so awesome. ;)

 

And listen to kez180.

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Phee I think you're over-analysing it WAAAAAY too much. You want to buy a house so you can live in it right? Find a house you like that you can afford then buy it?.............What's the big deal, it's only money lol.

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I bought a house using the FHOG. Without it, I simply could not have bought a place. While people may argue it inflates the pricing of houses by the dollar value of the grant, it's actually more the fact that it paid the stamp duty for me which I would not have been able to afford that and a deposit together.

 

It actually inflates house prices by more than the value of the grant... Each dollar of deposit lets you borrow another $4 and maintain an 80% LVR....

 

Either way, it enabled me to buy a house, and have some money left over for things I needed for said place.

 

Sorry, not having a dig at your decision to buy or the price you paid... I think you have your head screwed on right and I am sure you got a good place for a good price...

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As far as the FHOG is concerned I think we will see a drop in house prices when it is removed... around 5%

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Hmmm, property is a long term investment, has anyone pointed this out yet?

 

Property prices have been doubling roughly every 10 years. In that period there are good years and bad years. So there are a few bad years, people will lose a bit of money if they are intent on selling and the property is in an area which has seen negative growth.

 

The first home owners grant has indirectly increased the price of property, because there are suddenly more people who can buy into the market. The effect of more buyers and fewer properties is an increase in price of the lower value houses.

 

I have 2 properties (living in 1 renting the other) and am not considering selling either of them, even though I am the only one paying the mortgages. Property is a long term strategy, the hey is to find a house that you like and are willing to live in for a few years, pay off extra on the mortgage so you can borrow against the capital growth to purchse another.

 

If this step is repeated then you can buy another house every 3-5 years comefortably - and I will be looking in another 3 years for a third house.

 

Back to the first home owners grant. Housed up to $350k are booming, and may experience a drop in price depending on how many people have borrowed too much / wether they keep their job. Houses between $350k and $700k are stagnant, these are the people who are waiting for the market to stabalise before selling or who are not sure if they can make the repayments so are not buying, and are not first home obuyers anyway. The right properties above $700k are selling but slowly.

 

If you are a first home buyer, and you see something that you like, and can make the repayments if interest rates go up to 9%, buy it. It's only going to go up in value (about $30k-$35k per year).

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Personal opinion:

 

Remove the grant>house price crash now

Keep the grant>house price crash later, but a bigger crash

 

www.globalhousepricecrash.com

 

Nah

 

 

 

 

Jase..

 

 

Its,

 

 

Nah

 

 

Deej...

 

I apologise if you are unable to see past your own blinkered closed-minded existence to witness some clever word play.

 

 

nah..

 

 

 

 

Cush..

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Did you know that Iceland has already declared bankruptcy? And alot of other nations are about ready to throw in the towel, you dont hear this on the evening news.

 

For f**ks sake, Deej. Stop perverting facts inorder to support your case.

 

Iceland's economy is run off the backs of FISH! Of course they're going to be vulnerable.

 

They don't even have trees!

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I bought a house using the FHOG. Without it, I simply could not have bought a place. While people may argue it inflates the pricing of houses by the dollar value of the grant, it's actually more the fact that it paid the stamp duty for me which I would not have been able to afford that and a deposit together.

 

I bought a house using the FHOG, I had factored in what I could properly afford to borrow - remembering interest rates could jump at the drop of a hat (they were still around 9% at the time).

I hadn't properly calculated what it would cost at settlement on the place, and without the FHOG theres no way I would have been able to afford it.

Saving for a decent deposit (37k) was hard enough.

 

I received 29k of FHOG, of which probably 2k I actually spent on furniture and things to help get me setup in the house.

The rest went on stamp duty, conveyancing, rates, etc etc etc.

 

I did make my final offer a few days after Krudd announced the FHOG increase though, so guess it was good timing for me with missing the price increases etc :P

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Did you know that Iceland has already declared bankruptcy? And alot of other nations are about ready to throw in the towel, you dont hear this on the evening news.

 

For f**ks sake, Deej. Stop perverting facts inorder to support your case.

 

Iceland's economy is run off the backs of FISH! Of course they're going to be vulnerable.

 

They don't even have trees!

 

UM NO. You look into the facts before you put forward a comment.

 

Their economy WAS finishing based and then they moved in finance. They essentially stopped fishing and became international bankers.

 

And their 300k strong population of fishermen and women was unable to support the huge banks which became the backbone of their economy.

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Lets talk about the Australian market.

 

What happens in Iceland, stays in Iceland.

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It's different here.

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Iceland had the problem of massively leveraging itself to buy everything. 300,000 population and every man and his seal had a range rover, house, everything all on credit. The problem came when their dollar tanked as the credit was from overseas and they suddenly found themselves owing double what they paid for things.

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Yah Iceland isn't a true comparison, but I still think this country has it's blinkers on.

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