Distress

Building companies going under, builders revealed as fakes, boomers without a clue and another end of the world prediction missed. Had those christian loons bothered to ask, I could have told them there's only one day the world can end - a Tuesday. More specifically, the first Tuesday of the month.

The past few months has produced a constant stream of bad building news in Tasmania. The obvious - dwellings built per person and the doubling of an industry inside ten years - has been ignored. Ok by me, because something else has been revealed - shonks, fraudsters and weasels have been cashing in and now they're being exposed.

If you've ever taken a cursory glance at Minsky & Kindleberger's bubble framework, you'll know the forth stage is the critical stage. Where financial distress begins to be revealed and this is also the stage where fraud begins to rear its head...

NEW-HOME owners are being left with defective and incomplete houses after falling prey to shonky Tasmanian builders who use false registration details.

The MBA alleges builders are "shopping out" their accreditation details to unregistered tradies. In one case, the alleged price was $25,000. Unregistered tradies are fraudulently using licence numbers without the consent or knowledge of builders. A salesman with no building qualifications has built at least 10 houses under someone else's building licence. No one has been prosecuted for fraudulent use of a building practitioner's accreditation number since the Building Act began in 2004.

While new homeowners find themselves out of pocket trying make sure their roof doesn't collapse on their head, others ponder the weight of the debt on their arthritic shoulders...

I’m a single woman aged 59. I have a large mortgage of $397,000, which equates to a payment of $1300 a fortnight. This is almost half my fortnightly net income. The property is worth $500,000. My super is worth $200,000. I’m thinking I’d be better off selling the property and renting something smaller for $450 a week, putting more into super and ‘‘living’’ a little.

As Noel says, by his calculations there's about 25 years left on that loan. I dunno about you, but paying off a home loan until age 84 doesn't sound much fun, nor even feasible. But we've got lending standards in Australia, that's why 59 year-olds can find themselves using almost 50% of their income servicing a loan that won't be paid off until they're drinking lunch in an assisted living facility. This loan could only have been approved on the basis of one idiotic idea - the property in question will continue to appreciate in value.

Congratulations to Granny for cluing in. As sight and hearing have probably waned, it seems the mechanism that senses the dangers of debt has kicked back in one last time. Be it too much debt or too much house, some boomers will start to realise their last exit opportunity is drawing away from them because eating bricks and mortar will do untold damage to their already suspect colons.

Finally Ellen writes in...

I've been reading your blog for a while now, and do find it informative and interesting. I was just wondering if you have ever taken a look at the real estate situation south of Hobart. We live in the Huon Valley, and I watch the market down here - particularly land, 20 plus acres - and although there are some properties that have been sitting there for a couple of years, I've only seen one drop it's price. New stuff coming onto the market is just as pricey.

When you hear, "they're not making any more land", knowing about the Huon Valley allows you to say, "oh really..." In addition to an abundance of land, it also has an abundance of hippies. So, if you're like Ellen and want your own piece of land and not submit to the commune, what do you do? 

First you need to understand the type of people who hold land in these areas. Larger pieces of land have often been in someone's hands for decades, even floating through the family. If you're after a more specific definition, think a someone who walks into a store and pays with $100 notes that feature Mawson on one side. Older. Rural. Stingy. Likely to stroke their chin for six months while mulling an offer before dismissing it. Pulling anything from their ice-cold hands is futile until they've got motivation to discount and often that's not until discounts are common place.

However, there's no shame in lowballing for lulz - and this goes for all property. If the offer gets to the vendor they get some personal feedback on what someone thinks their property is worth. That could be particularly jarring if their melon head has been swanning around in the clouds. Even if it's dismissed, consider the fact it will be a point of conversation in that house and maybe to a wider circle of friends.

If they weren't aware something had changed, you just made them aware.