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Page added on July 31, 2006

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Trading in housing futures

…Gemma and Sam currently rent a home in the inner suburbs of Melbourne. There is no way they could afford to buy a house anywhere near as close to the city as they now live. They will have to choose between staying close to work and continuing to rent, buying a flat or unit in the inner suburbs, or moving to a house with a backyard on the urban fringe. So far, this is a similar choice to that faced by their parents and siblings.

However, a major new factor in their thinking will be the skyrocketing price of oil. Many predict that we are close to peak oil production and petrol at the bowser will soon double in cost. Certainly, there is no expectation that its cost will go down. This makes the option of a cheaper home on the city fringe look somewhat less attractive. What is saved on the mortgage, and possibly more, will go straight into the tank.

Gemma and Sam may be pleased to find that a renovated home unit in the outer suburb of Greensborough is within their price range, as well as being close to the railway station. They figure that buying is better than renting because the rental market remains tight all over the city. And they realise that, despite the huge increases in house prices over recent years, there is little prospect of the significant falls that have followed previous booms. After all, new home building is not even keeping pace with underlying demand. They



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