My street was filled with fancy cars. The canetoad-like BMW SUV. The Nissan 350Z. A Maserati. A Porsche Cayenne. A couple of Range Rovers that looked as if their only experience with rough terrain was running over the top of the nearest roundabout. Mine was not among the fancy, valued at just $15,000 on the last NRMA comprehensive insurance bill.
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But this is not about cars. It is about houses.
The men, women and children in the cars were on their way to the biggest competition of all - one to snare a home just three kilometres from Sydney's CBD. As a professional stickybeak, I went to the open house in my street to see how our country's overheated property market was coming along.
To be honest, it wasn't just in my professional capacity. I like to call the day I went to this house inspection the first day of downsizing. The house, up for auction in a few weeks, has fewer bedrooms, bathrooms and kitchens than our house. (That is to say, it has no kitchen of any tangible kind.) Whatever it gets at auction will be a good indication of what our house is worth.
The open house was nuts. Men and women pushed each other to get a view of the non-existent garden. Children cried, parents reprimanded. Arguments started outside my door and went something like this: "Stop crying. We have to find somewhere to live and you are coming in whether you like it or not." Boxing Day sale. The box being the place they plan to live in for the rest of their lives.
I sat on our fence, delivering a commentary to anyone interested. "Minimal plane noise. Maximum public transport utility. Plus, if that all goes to hell in a traffic jam, it's a 40-minute walk to the Queen Victoria Building. Schools, shops, universities, parks, water. Free babysitting." (At this point, parents of small children hugged them tighter and ran away.)
The real estate agent, a charming young man called Chris, tells me the house will sell for north of $2 million. With no discernible kitchen. And no, he doesn't know when the market will peak.
So is it a bubble? I'm not an economist but decided to see if could figure out for myself if this fitted the chaos of the economic crashes over the course of my lifetime.
Firstly, the housing market in Sydney and Melbourne has always been robust. The cost of housing occasionally declines in the cities but does not collapse. Houses are always worth something because we live in them and people want to live in capital cities. We don't have an oversupply, in fact you could argue that close to CBDs across Australia, we have an undersupply.
Most recently, the RBA has said the housing markets in the rest of Australia are subdued. There is no bubble in Lithgow or Goulburn.
Secondly, are we borrowing too much? If everything goes pop, will we be left with nothing?
The answer to this really surprised me. But here it is. If you look at what the big banks tell us about how we are going with repaying our mortgages, we are doing really well. Westpac says nearly three-quarters of its customers are ahead of their scheduled mortgage repayments. And just over one-fifth are more than two years ahead. That's us too. My sainted aunt left us some money and we popped it straight into the house.
OK, ahead on payments. But what about the value of those houses or flats? Westpac says we borrow about 70 per cent of the value of the house when we do the whole home loan thing. But on average, right now, Westpac says that we only owe 43 per cent. And the vast majority of home loans are for less than 80 per cent of the value of the house. ANZ is about the same. And that bank for the fancy, NAB, says 60 per cent of its customers are more than a year ahead in home loan repayments.
So is it a bubble? Are the repayments on our houses so grinding that we can't manage to pay them off? I'm no economist but I do, with my beloved, run a household budget. And the most recent things I can find on the Reserve Bank of Australia website say that we are not running into repayment problems.
Here are the nerd numbers, if you are interested. The ratio of housing debt to household income rose from 136.1 per cent in the March quarter of 2014 to 137.1 per cent in the June quarter of 2014. The ratio was 133.3 per cent in the June quarter last year. The ratio of housing interest payments to household income remained steady at 7.2 per cent, quarter on quarter. The ratio was 7.6 per cent in the June quarter in 2013. We've also had two rate cuts since these figures, which helps by reducing home loan repayments.
In other words, as far as I can figure it out, our ratio of debt to earnings is going down, not going up. The RBA also says that the stuff we are borrowing for - houses, apartments, flats, land - is growing in value much faster than the debt.
But the real worry for all of us is not about whether there is a bubble or not, it's about what our kids will do when they want to buy a house. No matter how I do the figures, I can't turn that $2 million into the equivalent of the $75,000 we spent 30 years ago when we bought our first house.
And that's our real problem - that young people can't buy into cities. And our cities are turning into ghettoes for the old.
Twitter @jennaprice or email jenna_p@bigpond.net.au
