You can always blame someone else

That’s one of the great things about life.

From this story about “mortgage stress” which appears to be the SMH topic du jour:

The biggest myth about mortgage arrears and home repossessions, according to Mr Young [a financial counsellor for Lifeline Parramatta], is that the problem is confined to single-income, struggling families.

“It’s not just the down and outers, a lot of the people I’m talking to are your upwardly mobiles where the thing to do is buy your investment property,” he said.

Successive interest rate hikes and spiralling living costs have combined with falling house prices across much of Sydney’s west, he said.

Abbotsbury father-of-two Gil is a victim of this cycle. [emphasis added: loose writing alert – what cycle?]

The 55-year-old steel industry manager bought a two-bedroom townhouse at Rooty Hill in 2003 as an investment, in the hope of having some “money on the side” during retirement.

He fixed the majority of the loan at 7.19 per cent but the rest is variable and currently sitting just above 9 per cent.

Gil, who did not want his surname published, says the real estate agent’s “flashy and glittering sales pitch” about the potential capital growth and using equity in his first home, plus a loan to minimise his tax burden, were false promises. [emphasis added: false or just turned out not to be the case?]

His initial investment of $305,000 would now fetch just $265,000.

“When the property market was going up and up I thought I can’t lose,” Gil said.

“It was a bit late for me to do it, then I should have realised (the market) was too high. My only hope to keep this property is if the banks start lowering their rates in conjunction with the RBA.”

Mmmmm. Well, he bought it, and in the process he presumably outbid somebody else who maybe only needed a home, not an investment (albeit that a home is also an investment, but of a different kind). Now somebody else can have it for less than he paid for it. That’s what investments are like.

He says the big banks’ reluctance to pass on rate cuts was insulting.

“It’s the banks thinking they won’t have to put our interest rates down that really pissed me off,” he said.

“Why don’t they look within their smug little world and see what they can do to fix the problem because that’s where it stemmed from and it was their decision-making that got us all in this predicament.” [emphasis added again]

Whose decision-making?

It all depends on what you mean by “us” and “this predicament.” If people like him hadn’t all been paying too much for homes they didn’t need to live in to be financed on the negative gearing and ultimately rewarded on the concessionally taxed capital gain, a few more people who actually needed a home to live in might have been able to afford one.

Personally, I’m rather keen on falling house prices – if only there were more a bit closer into town than Rooty Hill!

Of course, I have my own axe to grind. Meanwhile, discussions with my landlord about the rent increase are continuing, surprisingly cordially so far.

2 Responses to “You can always blame someone else”

  1. Gus Says:

    I have to agree. I don’t really have a lot of sympathy for investment buyers when I can’t afford to buy my first house.

    The situation is a lot worse out in McMansionVille (Bible Belt / Castle Hill / etc) where families over-extended their borrowing capacity to buy $1m dollar “McMansions”, and now they are being revalued at under $600,000 only 3 years later.

  2. Legal Eagle Says:

    I feel the same, Gus – and I believe that the investment buyers played a large part in blowing that property bubble…

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