Keep on Rockin' in the Free World: Part 5 of 5
Creative Commons License photo credit: DrWurm

A term employed in Vagrancy statutes to test whether an individual has any apparent ability to provide for himself or herself financially.

The Law frowns upon people who make their living outside formal employment. Yet it bows deep before land and property.

Irrational confidence has inflated property prices so far they bear no relation to what they might rent for. A nation of speculators, their vision fixed on the gains to be seen in their rear vision mirror, have bought and bought and bought.

The rent-price ratio is a key measure valuers use in more normal times. If a property’s rent covers the mortgage, the owner is bullet proof. If she had to move away for work, renting it out would protect both her and the mortgagor.

The house price boom has separated prices and rents. Gross yields are currently about 2.5 per cent where I live in leafy suburban Balwyn. Subtracting agents fees, rates, taxes and something for depreciation leaves … nothing.

I say, Australian real estate has no visible means of support. It has entered a vagrant state and ought be locked in a jail.

People ask me regularly: When should I buy? My answer is easy: When you have a twenty per cent deposit and rents equal mortgage payments – when the property has the apparent ability to support itself.

They look at me as if I had uttered a heresy: house prices are a million miles from that! Well, that is how much they will change; that is how far they must travel.

Anyone purchasing on those terms is bullet proof, even if prices keep falling.

Don’t Buy Now!