The middle-class versus the rich

[octave]

6 minutes ago, onetrack said:

A lot of younger people today have no idea what it's like to deal with 17% inflation as we did in the Whitlam era, nor pay 16%-23% interest rates, as I've done, in the "bad old early 80's".

I feel this is balanced out by the astronomical cost of houses now. I got my first home in the mid-80s and the interest rates were enormous but the price of a house was a lot more manageable. My loan for my first home was I think $55000.  I recently looked at a valuation of my first home that I sold in 1990 online and it is now valued at over 1 million. This is for a 3 bedroom house, nothing special. 

[facthunter]

The houses today are MUCH larger and FULL of carpets air conditioners and modern furniture. People today don't want to go without anything and they borrow too much . Nev

[octave]

 

Whilst I think that expectations regarding house size and features have some bearing on the massive jump in house values I don't think it is the only driver and in fact perhaps not the major driver.   House prices have gone up by different amounts in different cities which suggest to me that issue of availability may play a part.

 

The long period of low-interest rates also drives up prices as people are able to get bigger loans to ensure their purchase in a tight market.

 

if you follow the value of your own house you can see it rising rapidly over the years without massive improvements being made to the property.

 

My own property has almost doubled in value over the last 6 years.

 

 

 

 

 

[onetrack]

Quote

My own property has almost doubled in value over the last 6 years.

And with a long-term average increase in property values of around 3% annually, aren't you wary of a property value increase that has been over 16% annually?

Historical records tell us at some time - maybe not for a little while yet - but possibly within your lifetime, property values in Australia will take a dive back to normal increase levels. It's a Dutch Tulip mania - only this time, it's Australian property.

[octave]

35 minutes ago, onetrack said:

And with a long-term average increase in property values of around 3% annually, aren't you wary of a property value increase that has been over 16% annually?

I am actually not particularly interested in the valuation of my place, I don't intend to sell it or borrow against it so its value is only of interest to the beneficiaries of my will.   

 

The value of a house is a complex thing.  It is a coincidence that we are discussing house prices as today I have just sold my mother's house (on her behalf).   The house sold the day after it was listed and went for the asking price which I thought was overly optimistic. The buyer is desperate to move in ASAP.  The lack of other available properties in this price range has made this modest house more valuable than it perhaps would be if there were more properties on the market.

 

I have been doing a little reading today about this issue and the reasons for the inflated housing market are numerous and complex.  It is simplistic to point the finger at particular groups such as younger buyers or immigrants but these are not the biggest drivers.  They do however contribute along with older folks using their super to buy investment properties or downsize but keeping their old properties to rent out.

 

The increase in house prices applies not only to new fancy larger houses but also to small unimpressive houses like mine.  It is mostly a question of supply and demand.

 

https://www.yourinvestmentpropertymag.com.au/market-analysis/the-6-key-drivers-of-property-prices

 

 

Edited June 5, 2023 by octave

[spacesailor]

My last post has , ' changed slightly ' in the last sentence,  not to worry , it must be . A bloody I ( eye ).

My humble abode is $ 1 million & a bit ! , but it won't pay the bills,  like NRMA ' home & contents ' , $ 2,400. Up $ 800 from last year.

 spacesailor

[octave]

14 minutes ago, spacesailor said:

My humble abode is $ 1 million & a bit ! , but it won't pay the bills

 

I was in a similar position (although not $1 million)  We sold our property and bought a much smaller manageable place that is cheap to heat and cool and very easy to maintain.  With the proceeds, we were able to retire at 57 and concentrate on having fun.

[Jerry_Atrick]

As Onetrack says, rich (in terms of sustained wealth) is a relative thing. In London, I am average; where I live, I am fairly wealthy - in theory, anyway. I think there is more to being rich than simply the assets one has - and I am not talking about having a loving family, etc. To me, it is a bit about a state of mind. @pmccarthy put it nicely when he said he went through some tough (lean) times and some good times. In the good times, he didn't squander it, but invested for the future. This, I think is one of the big differences. There's a saying (that may even be on these forums somwhere), that the difference between rich and poor is that rich people live like they are poor and poor people live like they are rich..

 

But even that is superficial in some ways. It is a complete mindset. There are times when someone is broke - that is not poor; it is a point or duration in time where one has not enough money to live. They are working to remedy the situation. Then there are those that are poor- which is a mindset that will keep them that way. There may be reasons for it, but it is the difference. And most of us are indoctrinated into the latter through school - we are taught to be obedient, prompt, do our work and go home, and taught that 9 - 5 is the way to go. We are taught to trade our time for money; not to use our time to invest into making money - it is a subtle but different characteristic.

 

Consider that old saying - a fool and his money are soon parted... A poor (state of mind) person wins the lottery - how many go on to lead fruitful and wealthy lives? Most have it spent in two years and destroy their lives in the process.

 

There will be upper middle class to come for some time thanks to professions that pay well for time. But,  thanks to AI and robotics, they will be largely displaced over time (AI is not quite there yet).

 

In response to Bruce's original question - the (real) rich have already won - long ago.. How else would you describe an increasingly wealthy world with such inquality of income, and all the problems to boot. I am very much a capitalist (of the caring nature); and I do believe in risk v reward. But the rewards these days are very much disproportionate to the risk, and the greed of wealthy people is unfathomable..

 

BTW, for the first time in my life, I get to meet a true billionaire next week; son of a bloke who was totally self-made. I am going with adoption papers in hand 😉

 

 

 

 

Edited June 5, 2023 by Jerry_Atrick

[old man emu]

One item that is often overlooked when comparing house prices "back them" to those of today is that today you can't buy a block of ground that isn't abutting a kerbed and guttered, sealed road; has a connection to a sewer system, and has phone connectivity - maybe even NBN.

 

Back then, we waited for kerb and guttering and sealed roads in the suburbs. Dan the Sanny man drove up once a week in his 24-door sedan. Connection to a landline was either a luxury or a necessity depending on the occupation of the sole breadwinner.

 

The provision of these utilities costs big bucks, and for the home purchasers, those buck come from their pockets.  If you go to a housing display village, you'll find that the bricks and mortar aren't a major part of the house and land package.

[facthunter]

Trump takes the risks with other peoples money. He says the bankruptcy Laws have been GOOD to him but obviously he's NOT worried about the people he owes money  to. There are risk takers who come good. You will never be rich on wages. What you  save up is eaten away by INFLATION and TAX on an imaginary profit. IF I were DA KING I'd deduct inflation before taxing the profit to be fair to people. The GAME is rigged for the average $#1T Kicker. What's a FINE for a billionaire?? just part of doing business.  Nev

[spacesailor]

Sorry to say !. " Risk v reward " .doesn't work for the Poor .

How could a person with empty pockets & two , three or more kids , put One bloody Centine , towards anything other than the Next  meal.

I remember well, those days when we were sent to bed without food . Or going to sleep at school due to malnutrition. 

THEN & only after the police or hospital staff! Have sent us kids to ' homes ' were we were fed three times a day .

I was so Jealous of the children in a ' orphanage.  '  New cloths, good food, and their OWN bed to sleep in  ' not four in a bed with your cloths for blankets .

 spacesailor

[pmccarthy]

My kids are less cautious than I. I could not sleep at night owing what some owe, but they say they are backed by good assets. My parents were frugal, I am cautious, my kids are risk takers perhaps. My wife and I could take a European holiday and maybe we will, but we will think carefully about it. We have never been to Bali, or Fiji, or Malaysia, but we could if we chose. We go flying in our plane, we tow our van, we feel like rich people.

[Jerry_Atrick]

1 hour ago, spacesailor said:

Sorry to say !. " Risk v reward " .doesn't work for the Poor .

How could a person with empty pockets & two , three or more kids , put One bloody Centine , towards anything other than the Next  meal.

I was going to say it certainly does reward the poor.. but you're right Spacey - and that is because being poor is largely a mindset; it is not their fault by the way, but it is the way it is.  But, I would contend that giving the poor money alone will not alleviate things.. .its a bit like give a man a fish and he will eat for a day, teach a man to fish and he will eat for a lifetime.

 

When the pennies are tight, it is not easy - of course not, but it can, and has been done with people in similar positions; and today easier than ever before.. although still requires work and sacrifice. The problem is a lot of people still think the best way to go about things is to trade your time for money , and that isn't the best way.

 

Just look at the many immigrants who have come with little more than the clothes on their backs and with kids mouths to feed - and despite popular belief - no government handouts.. Yet, they managed to build a rather wealthy life.

 

Edited June 5, 2023 by Jerry_Atrick

[Old Koreelah]

2 hours ago, pmccarthy said:

My kids are less cautious than I. I could not sleep at night owing what some owe, but they say they are backed by good assets. My parents were frugal, I am cautious, my kids are risk takers perhaps.

Me too, PM. My wife and I have inherited much of the frugality that got our parents through The Great Depression.

I’m currently staying with the kid and reflecting on the massive difference of their lifestyle. Sixty years ago they’d have been termed very rich, but today, just comfortable middle class.

2 hours ago, pmccarthy said:

My wife and I could take a European holiday and maybe we will, but we will think carefully about it. We have never been to Bali, or Fiji, or Malaysia, but we could if we chose.

Do it while you can.

 

[facthunter]

The Best reason to go overseas is to appreciate what we have here when you come back.   Nev

[spacesailor]

Unless it,s !.

New York. 

Then,  see that Big gulf,  between wealth and poverty .

spacesailor

[old man emu]

This has to be the definitive answer:

 

https://www.msn.com/en-au/news/australia/what-makes-someone-rich-in-australia-in-the-cost-of-living-crisis/ar-AA1c8cV1?ocid=wispr&pc=u477&cvid=1da40448dcf44c34afaa9b7a0880e1af&ei=142

[old man emu]

One way to live rich on a pittance is to cook all your own food. Raw ingredients don't carry GST. The packaging is minimal, so that's a cost saving. If you are retired, your time spent cooking has no dollar value, and you don't have to put aside money for income tax, super, sick leave and long service leave that is proportional to the time you spend shopping for ingredients and cooking them. Plus you know exactly what is contained within the food you cook and can control your sugar, salt and preservative intake.

[Old Koreelah]

Even better, grow your own food, a skill that many of us have lost.

[Jerry_Atrick]

I am trying, OK,. but I can't seem to find the plant that makes the polystyrene trays 😉

 

On the matter of the middle classses versus the rich, this is a good video and what I mean by how school stops you becoming rich (of course, I would never advocate not going to school - but even on these forums, there are examples of home taught, and in my case, self-taught professionals (when I was a programmer and even in finance) who have not done too bad.

 

 

With the plethora of easy access to material and ideas, it is increasingly that state of mind... And as Robert Kyosaki of Rich Dad Poor Dad fame says, "If you want to be rich, don't go to school". Also, check out Mark Tilbury on YouTube... started life as a sparky apprentice..

 

 

[onetrack]

Interesting article below - the things that young people in particular think make you one of the "rich" is quite puzzling to me. I don't know anyone who earns the kind of money they're talking of, as a "satisfactory" income.

 

Vast numbers of people are quite content on less than $60K or $70K a year, it all depends on what you think you "need" to live comfortably. A new Landcruiser is not something I see as necessary to reflect my social status, or to "live comfortably".

 

https://www.msn.com/en-au/news/australia/what-makes-someone-rich-in-australia-in-the-cost-of-living-crisis/ar-AA1c8cV1?ocid=wispr&pc=u477&cvid=1da40448dcf44c34afaa9b7a0880e1af&ei=142

[facthunter]

With a lot of this STUFF, the question is DOI really NEED this or is it more a whim of fancy? Pretend you have bought the item and see how you feel. You'll save a lot of money. Trading your OLD clunker in before it's worth nothing is a con that gets a lot of people in. Every day you keepdriving you old fully amortised vehicle you are saving money.

  I got a 3,000 dollar NO trade in discount on one particular vehicle as well as a discount just for the asking. That was  a while ago when that was a fair bit of money. Nev

[spacesailor]

The ' LAW ' states you Have to have a vehicle Large & heavy enough to tow your ' mobile House ' on wheels

So , the LAW makes you buy that $ 100,000 Landcruiser. ( V8 with long-range fuel tank )

As it is Unlawful , to tow the Large caravan that weights more than twice the weight of your Tesla 3 .

Lots of " greyNomads " now have to go over the police weigh-bridge .

spacesailor

 

[pmccarthy]

And once we could tow anything with a Kingswood.

[spacesailor]

Not today's monstrosities,  side walls that extend, !.( two on one side plus one on the opposite side , 39 Feet long 8,& a half feet wide on the road .

Air conditioned with everything from the house ,

And I've seen one with a tiny car in the back  !.

A Denning motorhome ls for sale in Perth $ 275,000  38 feet long , plus trailer and the whole works .

spacesaillor

 

Edited June 7, 2023 by spacesailor
AI attack again