RSS

Monthly Archives: March 2014

February 2014 – To buy, or to rent?


What’s happening in our economy … How are financial markets doing … And a question from one of our readers; “To buy, or to rent?”

Dear Readers,

Thanks to all of you for accepting our invitation, for accessing our blog, and for your participation and feedback. Your positive feedback inspires me to explore new ideas and topics. We look forward to more of your active participation.

We have all been conditioned by now to the paradigm of assigning names to different generations, then treating them as some homogeneous group with little or no individuality amongst them, then imposing generalities on their outlook, behaviour, motivation, etc.
First there was the ‘pre-war’ generation (pre 1914, ‘first world war’ era)
Then what is called the ‘lost’ or ‘silent generation’ (between 1922 and 1942)
Then came the ‘greatest generation’ (the war period, between 1942 and 1946)
Then came the ‘baby boomers’ (post second world war boom in population; 1946 onwards)
Then supposedly the ‘generation jones’ or ‘joneses’ (kids growing up to adulthood around 1960’s)
Then came ‘generation X’ (people born between the 60’s and late 70’s)
Then supposedly the ‘XY cusp generation’ or ‘MTV’ generation (kids born in mid 70’s to late 80’s)
Then came the phenomena loosely indicated as the ‘boomerang generation’ or ‘why generation’ (people growing up in the 70’s and 80’s) – Remember them (or the ‘boomerang phenomena’ itself, we shall come back to them again later)
Then there is you (dear ‘young’ readers) – ‘Generation Y’ or the ‘millennium generation’ (born in the 90’s and beyond, closer to the millennium).
Then there is a grouping of the ‘iGeneration’, all of you fitness challenged, internet and gizmo obsessed ones (only joking); people growing up around the millennium and beyond (late 90’s to date).
And finally (but not the last), ‘generation Z’; the youngest of you all.

A whole school (several of them) of psychobabble have devoted lots of time and effort, over the past 100 years or more, with enormous outputs of literature, on this subject. Fortunately this is not our ‘subject of the month’.

We shall look at the “boomerang effect”, at “boomerangs” and ‘kippers”, at the property markets, prices, affordability, supply and demand perception, etc.; and think aloud on the dilemma of whether to buy your own home or to rent for the rest of your life ….. But first …..

The Big Picture

Global Overview: We have consistently maintained our views on the global challenges we face in term of a fundamentally flawed monetary system, and its effect, over the last 100 years or more, on all aspects of global economy and finance.
Pl take time to browse our ‘Global Overview’ section, in our previous 20 blogs (since April 2012) for more information and views.
In spite of enormous availability (some would say deluge) of ‘money’ in global financial markets, and continuation of creating (some would say ‘out of thin air’) even more ‘money’ by most central banks, the demonstrable positive effects of this ‘stimulus’ is hard to see.
It seems that a lot more (and ever increasing) ‘bang’ (stimulus, or money printing) is being needed to produce little or no ‘buck’ (meaningful, sustainable, productive growth in the economy).
People, businesses and even nations are either reluctant to borrow more, or do not have the capacity and rating to do so.
The ‘velocity effect’ is just not happening. Meanwhile gross distortions and bubbles in various asset markets are being seen; and savers, the most productive and prudent section of any prosperous economy, are being driven towards higher risks for lower and diminishing returns.

Local Impact: Please take time to browse our ‘Local Impact’ section in our previous blogs to get a consistent view of the local impact on our economy.
A stable federal government, with indications of responsible budgeting and governance is a positive sign of hope, at this point in time.

Topic of the Month:
I have recently been working with a lot of ‘youngsters’, what is loosely called ‘Gen Y’ clients, in relation to property and first home purchases. It has been a set of very lively and interesting conversations.
Several interesting points came up, which most of us may have not thought of, or connected together as a bigger picture.
I have attempted to do so in this month’s blog.

Of ‘kippers’ and their ‘boomerangs’: There used to be a golden time, when kids would be independent and leave home at the age of 18-21, find jobs, make (or buy) a home, and look after themselves ever after ……. At least in most cases.
The 70’s and 80’s came to be known for a growing trend; of kids leaving home in their late teens, seeing the world, doing their bit to change (or save) the world ….. And then return back to ‘the nest’, to the comfort of ‘mum and dad’.
Why? There are many theories and voluminous observations written and talked about, over 50 years or more, about this. Fortunately, this is not the subject of our discussion today.
But one aspect of this trend is relevant to our topic, the financial/economic angle.

The “It’s too hard” syndrome: For many reasons, and probably because these ‘golden children’ were brought up in ‘good times’;
With parents pandering (some would say overtly) to their whims and fancies;
With the economy not doing very well;
With inflation – and property markets being hard to enter;
With unemployment high and jobs not stable;
Some kids tended to ‘boomerang’ back to the parent’s home, as a comfort zone, a sanctuary.
And many of them reconciled to the concept of ‘renting’, rather than owning their home.
And this trend is felt acutely even today; The question “to rent or buy” is as much relevant today as it was 50 years ago, probably ever more so.

But there are some sobering, long term, financial questions to answer;
‘Where are we today’?
‘Where do we want to be in 15-20 years’ time’?
‘What if we just keep renting’?
‘What are the advantages of renting’?
‘What are the advantages of buying’?
‘What should we do’?
And a thousand more “what if’s”.

Well, bunkering down in ‘mum’s’ place is not a long term option.

We leave the forum open to you now.
What are your thoughts on all of this?
What is your experience?
Come, join the discussion, and share your ideas and experiences.
I look forward to your opinion, counter argument, response, constructive criticism, feedback, etc.

Looking forward to hearing from you

Hari

 
Leave a comment

Posted by on March 5, 2014 in Uncategorized

 

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,