23 March 2009

Don't buy a home now unless you have a ton of equity

So while The Boost may give a temporary fillip to the bottom end of the housing market, the construction industry, and the economy, when unemployment continues its unexpected (there’s that word again!) rise, many First Home Buyers will be at the head of the dole queues. And as well as being unemployed, they will also be homeless and bankrupt.

Had they not been enticed into the housing market at absolutely the worst time by a misguided Government policy, they would still have lost their jobs. But at least they would not also be facing bankruptcy as well.

There are multiple influences that have enticed a flurry of First Home Buyers into the market–falling mortgage rates, and the ceaseless spruiking of The Australian Dream amongst them (the latter reminds me of the promo for the Terry Gilliam movie Time Bandits: “Like all the dreams you’ve ever had. And not just the good ones”).

But The Boost clearly was the major force behind the 4% jump in the proportion of housing loans going to First Home Buyers in November 2008. The extent to which First Home Buyers have been used as pawns by governments of both political persuasion to reflate the housing bubble is obvious in the following chart:

Read on

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