Confidence in Australian Housing Market

[recruit2]

Got the feeling we are at a critical time where fortune could be made for the brave. While most people look at the problems and become negative, I believe there are remote signs that we may see a boom in a few years time, but to take action now you need to take calculated risks.

Some of the factors that will come into play in a year's time (or couple of years) include:
- very little construction happening now
- no end to very low vacancy rates
- household disposable income rising sharply
- huge savings now being accumulated needing to find better returns
- rebounding economies in Europe and US
- company profits now being accumulated looking for outlets
- India taking over from China while China still experiencing above 5% growth
- share market back to pre GFC levels, etc...

General negativity in the populace is a great time for moving ahead if you focus on the next stage of the cycle.

I 100% agree with you truong.

If prices dip down too much, people will snap up the bargains anyway. It is going to self level itself while ever the economy is strong. And all the indicators for that are looking very healthy. Property is going to stay expensive. I am getting my "stupidly low offers for motivated vendors" ready.

 

[recruit2]

You are cheery, aren't you. Again, I repeat, that my parents were always there for me should things "have turned to crap". That is what being a parent is. Perhaps you had a bad experience in that department? I don't know why you are so negative.

If things turn to crap for him, and we were not able to help him out, he would sell the unit, probably make a little profit, but even if not, at least he had a good go at it.

On ABC radio last night Paul Clitheroe took a call from a 42 year old man, with no assets except a car (with a car loan), a credit card debt of $10K and other loans. Sounds like someone who was too scared to take the first step to me. Forced savings into a housing loan is very good training.

I cannot see "crap" happening. His salary will rise in time, his room mate will pay more as time goes by in line with the market, his loan will stay the same. He will have to work to a budget, which is a good thing. Of course, if the sky falls in, then we are ALL in deep trouble, but I think if everyone plans for that scenario, nobody would buy anything.

We are not helping him except for signing a bit of paper guaranteeing a small part of his loan. If he had not been paying much more on his car loan we wouldn't need to do even that. Or are you suggesting that our moral and emotional support is somehow stunting him?

If he decides to return to uni, he can move back home or rent a room from a friend and rent the whole unit out. We have covered all likely scenarios and he'll be fine.

What I am particularly proud of is that this son is rather "aspirational" and I used to worry he would want everything to be "top quality". I have been pleased to see him graciously accept a second hand fridge, decide the carpet is good enough to stay, decide the kitchen doesn't have to be replaced just yet, even though it is a bit daggy and not to his taste. He is growing up .

You seem rather "glass half empty".

Agree Wylie. You are being a good parent here by making him do it all himself, but backing him up with the sense of support by just offering to be there. But you're still teaching him how to fish, not giving him free fish. Way to go. Yes the other guy is definitely a glass half full dud.

 

[recruit2]

So a 21 year old on 38k borrowing 300k on interest only with a parental guarantee and promised support if things go wrong is the new definition of housing affordability. I've got to chuckle to myself about that one. Guys ? Really ?

Go to other countries and see how many 21yo's are buying their own properties. Try Tokyo? First of all they live at home with their parents almost forever, and if they ever buy something, it is a tiny apartment. Things in oz certainly aren't the same as they used to be, but they are still damn good when you compare what you actually get to the rest of the world. A 21yo borrowing 300k for his own place is awesome and lots of kids in other countries would be very jealous. You can't expect the same old huge 3/4 bed houses to go for the same old cheap 150k price that you paid back in 1998 forever? Do you really think that inflation won't happen and everything stays easy forever? As populations grow, more people are competing for the same stuff and that is the same phenomenon in any international city anywhere.

 

[recruit2]

Yeah, they *had* succcess in 1990 when a house was 3 times your income. Lets see how they'd go buying that same three bedder as a young person today.

I listen to other people in similar situations to myself not millionares who can't do basic math who got into the market 20 years ago.

I'm not even whinging. I'm just stating facts. I either save or earn more until I can afford a house. Right now, it is simply unaffordable. All your positivity doesn't change the numbers mate. You guys are just in a little bit of denial about the whole affordability issue, thats all.

What I would say Beebop is that its perfectly normal that as time progresses, what you are really seeing is just sprawl. People can still find houses for 3 times their income, they just have to look further out and make a (wait for it) *SACRIFICE*

No you can't buy where your parents did and no you can't buy where investors did even as recently as 10 years ago. Sprawl keeps happening and those properties are worth more and now you have to look further out.

My bank balance was negative every fortnight just before pay day to buy my first property while paying hecs up front and going through uni 3/4 full time simultaneously. How hungry are you??

 

[wally]

Yeah, they *had* succcess in 1990 when a house was 3 times your income. Lets see how they'd go buying that same three bedder as a young person today.

I listen to other people in similar situations to myself not millionares who can't do basic math who got into the market 20 years ago.

I'm not even whinging. I'm just stating facts. I either save or earn more until I can afford a house. Right now, it is simply unaffordable. All your positivity doesn't change the numbers mate. You guys are just in a little bit of denial about the whole affordability issue, thats all.

Beebop, you are basically implying that all the investors here are close minded as they cannot see your views on the future. Well the overall impression i get from these forums are that most are way more open minded than you are. They listen, research, research again and make their decisions.
My investment decisions aren't based on the assumption of 10% capital growth every year! and if properties drop 20%, 25%, 30%+ i am better off overall than had i sat on my hands.
1990's affordability???
My father bought a terrace house in 1971, when he first arrived here, he couldn't afford it on his own with his wage. So he bought together with his father. They split the upstairs and downstairs sections and then rented out the upstairs and lived in the rest of the house.
Is that situation affordable in your eyes?
An average house wasnt easily affordable on an average 6 days a week wage.

Maybe these days we shouldn't expect one average income earner to be able to buy a "median" house.

 

[Ben P]

Thanks for sharing that article Ben.

I do not see anywhere mention of a particular city or region, so do not believe it is referring to the Gold Coast at all.

The article alludes to a generic national market. Personally the only tight rental market in a general sense is Sydney I reckon.

Having just returned from Broadbeach and having been up there three times in as many months, the general market there is over-supplied, units worse than houses both in terms of rentals and, houses for sale versus actual (real) buyers.

It may have reached bottom or nearly there, however if you have any different sentiment to share, I would be glad to hear it. Personally I don't see recovery there any time soon.

Agreed Broadbeach/ Surfers Paradise is oversupplied in highrise units; next time your up do a little digging around the Pacific Pines, Coomera to Ormeau belt and I'm sure you will see that there is a real demand for housing.

I'm not at all interested in units/ townhouses of any kind in Broadbeach/ Surfers so I really don't keep tabs on how they are performing..

 

[.toe]

Yeah, they *had* succcess in 1990 when a house was 3 times your income. Lets see how they'd go buying that same three bedder as a young person today.

I listen to other people in similar situations to myself not millionares who can't do basic math who got into the market 20 years ago.

I'm not even whinging. I'm just stating facts. I either save or earn more until I can afford a house. Right now, it is simply unaffordable. All your positivity doesn't change the numbers mate. You guys are just in a little bit of denial about the whole affordability issue, thats all.

I'm with you, in the late 90's my wife & I lived in a caravan to save our first deposit, prices rose faster than we could save. The market flattened enough for us to catch up, we used the extra time to learn how to renovate and bought a run down place, 5 years later we were'nt sorry. We've since used that tactic again to great effect.

The property market goes in waves of smaller markets, it's a mistake to listen to the major media cause they only focus on the waves in capital cities and the suburbs with most of their audience. If your area went up before you could buy then that's unfortunate, but you'll turn it to a life long advantage if you work out how to progress regardless. That's how I became an investor, I learnt how to solve a problem and then kept doing it. Actually it's about time I looked for new problems.

If you're looking for a place to live just remember that no areas keep going up for ever, you can catch up, and that areas that are now trendy may once have been subprime, areas that are now subprime may soon be trendy, do some research on the drivers of that change

If you're looking to invest you have more options, you can have any suburb in Australia, don't get fixed on the ones that just went up big time, look for the ones that should've gone up but didn't yet.

You could research how to pick areas for growth and affordability. If you're not sure how to do it, you can use Terry Ryders hotspotting website, the ugly ducklings report identifies areas likely to move up from subprime. He also has reports on how to identify drivers of demographic growth. Another person who's great at this is Margaret Lomas, her books have advice on how to identify demographic drivers. In her regular webcast seminar she talks about what suburbs to watch and why. And on Monday nights on Sky she has a property program where she often talks about areas and issues driving them and it's podcast for free.

 

[Beebop]

Beebop, young people have been working out how to buy their first home for decades, and each one thinks it's tough at the time. You talk about 1990 being reasonable prices. I did my first one in 2000, ten years after you said it was last reasonable, and guess what? It was affordable to me on a low graduate wage. I wonder what the young generation in 2020 will be saying... that we had it easy in 2010 perhaps? If you want it, you'll work out a way to get it. It sounds like you do, as I remember another thread of yours where you are actively looking to purchase. So, just remember, it is possible (you may need to sacrifice) and goodluck.

2000 was also affordable.

 

[Beebop]

I'm with you, in the late 90's my wife & I lived in a caravan to save our first deposit, prices rose faster than we could save. The market flattened enough for us to catch up, we used the extra time to learn how to renovate and bought a run down place, 5 years later we were'nt sorry. We've since used that tactic again to great effect.

This is not the lat 90s though is it ? This is the peak of a boom, and most likely the top of a small bubble. Please do basic math before you comment.

Graduate salary ~45k. Take home about 700 per week. Repayment on 350k is 1261 per fortnight, plus ~80 for bc and rates, 675 per week, lol, and forget about the fact teh banks would not loan you 350k on 45k anyway.

Que the links to 2 bedroom units and falling about houses in rural areas as proof housing is cheap in the country (nevermind the 300k price tags for even those).

AMP Chief economist and investment strategist says housing is expensive in this country. I guess you guys know it is cheap somehow ?

 

[.toe]

OK I give up. You win, I lose, you're smart I'm dumb. You have convinced me that you can't succeed.

This is not the lat 90s though is it ? This is the peak of a boom, and most likely the top of a small bubble. Please do basic math before you comment.

Graduate salary ~45k. Take home about 700 per week. Repayment on 350k is 1261 per fortnight, plus ~80 for bc and rates, 675 per week, lol, and forget about the fact teh banks would not loan you 350k on 45k anyway.

Que the links to 2 bedroom units and falling about houses in rural areas as proof housing is cheap in the country (nevermind the 300k price tags for even those).

AMP Chief economist and investment strategist says housing is expensive in this country. I guess you guys know it is cheap somehow ?

 

[lizzie]

This is not the lat 90s though is it ? This is the peak of a boom, and most likely the top of a small bubble. Please do basic math before you comment.

Graduate salary ~45k. Take home about 700 per week. Repayment on 350k is 1261 per fortnight, plus ~80 for bc and rates, 675 per week, lol, and forget about the fact teh banks would not loan you 350k on 45k anyway.

Que the links to 2 bedroom units and falling about houses in rural areas as proof housing is cheap in the country (nevermind the 300k price tags for even those).

AMP Chief economist and investment strategist says housing is expensive in this country. I guess you guys know it is cheap somehow ?

sheesh and yawn - what a troll - your closed mind hasn't read anything that is factually pointed out to you by those on the coal face.

i am sure in 2000 there were people whinging about lack of affordability (i didn't take any notice). just as pointed out that affordability was a problem in the 70's. it was also a problem in the 60's due to single income families. it was also a problem in the 80's due to high interest rates (when i was first buying). it was also a problem in the 90's due to unemployment. it was a problem in the 00's due to lack of supply keeping prices up. it will be a problem in the 10's, 20's and 30's. no generation has had it "easy".

you have also had it pointed out to you actual affordable home's on major city edges, but still harp on about the only thing affordable are dumps in the outback.

you have had it shown to you that a young fella, with NO financial backing from his parents, on a low income, can enter the market and afford to buy.

you also claim we are at the peak of a boom - wow - for some reason i seem to have seen around 3-4 of those booms in my investing lifetime of a mere 20 years. although some areas of australia are in boom, others are coming off a boom, others are just going into a rise, some areas a flat ... can't define the country as a whole.

some people are just determined to fail just to prove a misguided point i guess.

 

[Luv2Travel]

Graduate salary ~45k. Take home about 700 per week. Repayment on 350k is 1261 per fortnight, plus ~80 for bc and rates, 675 per week, lol, and forget about the fact teh banks would not loan you 350k on 45k anyway.

This is the problem with your figures in my opinion, you're aiming too high. The property I mentioned I bought 10 years ago would be worth about $270K today. Let's say I lived at home for five years and was able to save $10K a year, that leaves me with approximately $50K deposit. Let's say $10K for buying costs after government grants (I have no idea what these are at the moment... $7K at least?). So my loan would be $230K, quite a bit less than the $350K you're talking.

 

[zed_kid]

Oohh subscribed to this. Love a bit of GenY bashing and also GenY whinging.

Seems to me the only ‘easy’ or ‘good’ time to buy RE is 5 years ago or best time would be 10 years ago, armed with todays wages and hindsight in tow it would be oh so easy... unfortunately its not the real world. In the real world owning a house is not a right, it’s a privilege, sacrifices must be made.

My parents bought in to the ‘top of the boom’ in 2001 then again in 2003, 2007... also bought in to the ‘crash’ recently in late 2009. To them it doesn’t matter, they are not looking to flip the property, they are buy and hold investors. They probably lost money on their latest purchase but the magic of time will iron that out, the numbers stacked up so they bought it.

EDIT: also agree with Biggles. The 1st property my parents bought was a 2 bedroom apartment, hardly a ‘median house’ and the 3 of us lived in that apartment as a family... maybe lower your expectations?

 

[lizzie]

popped into my head a few moments ago.

bop - look up rumpled elf on here. she and her partner have 3 kids, unemployed (low income) with a little top up from internet work, have managed to get themselves 1 positive geared ip, 1 ppor which the positive gearing on the ip pays for most of the mortgage, and is currently building a new ppor and will keep the current one as ip #2. all over the last 5 years or less.

not bad on a very low income.

 

[SuiCid3]

Go to other countries and see how many 21yo's are buying their own properties. Try Tokyo? First of all they live at home with their parents almost forever, and if they ever buy something, it is a tiny apartment. Things in oz certainly aren't the same as they used to be, but they are still damn good when you compare what you actually get to the rest of the world. A 21yo borrowing 300k for his own place is awesome and lots of kids in other countries would be very jealous. You can't expect the same old huge 3/4 bed houses to go for the same old cheap 150k price that you paid back in 1998 forever? Do you really think that inflation won't happen and everything stays easy forever? As populations grow, more people are competing for the same stuff and that is the same phenomenon in any international city anywhere.

Whilst I agree with your other posts, I find it unfair to compare Australia to the rest of the world where our values are completely different.
In Japan, property investing rarely crosses the mind of most Japanese. Their society and values are so different from ours it's just not possible to compare property ownership with them.

The property market goes in waves of smaller markets, it's a mistake to listen to the major media cause they only focus on the waves in capital cities and the suburbs with most of their audience.

If you're looking for a place to live just remember that no areas keep going up for ever, you can catch up, and that areas that are now trendy may once have been subprime, areas that are now subprime may soon be trendy, do some research on the drivers of that change

Exactly. Yet all the bears will listen to and then repeat are the media drivel that is posted everywhere. They blindly take in all this crap that's being printed that they cannot see or understand there will always be pockets within Sydney that will rise while others will fall.

 

[Spectre]

Interestingly, stats for FHBs arent horrid. They're actively marketed by lenders and new loan products/policies come out for them more than what they do for your investors.

As well what I find is pretty much all of my FHBs - my lowest income earner is around $60k a year with combined incomes across the portfolio up to $180k a year. So in all they're often better risks as they earn the big bucks where you'll find a lot of the mom and dads may earn that but they're 40-50.

(I should say this was the case before NCCP and that field will likely change as well)

 

[Corey Batt]

Beebop just go buy yourself a crack house and shut up.

 

[lizzie]

Whilst I agree with your other posts, I find it unfair to compare Australia to the rest of the world where our values are completely different.

i agree - the issue is that the nay-sayers are comparing to australia to the rest of the world and saying that we are unaffordable.

if you truely compare like for like, then we are very affordable.

actually - while i think about it - rumpled elf was very negative, doomsayer and (ahem, forgive me RE) whinging about unaffordability. but then she eventually took on what was being said, bought something, and hasn't looked back.

maybe there's hope for bop after all.

 

[tom32]

In Japan, property investing rarely crosses the mind of most Japanese. Their society and values are so different from ours it's just not possible to compare property ownership with them.

I don't know that their investment psyche is different to ours around housing. It is now because they have seen a 20 year period of deflation.

I think the primary driver of their market v ours is a difference in demographics and population growth. They have less workers per retiree and a working population that is shrinking. We have neither at this time.

 

[recruit2]

I live in Japan and have discussed property with J friends and been to property investment seminars here. There is a big property investment scene here, but its all about yield as yes due to the circumstances with their economy/population etc there is zero or negative growth.

They definitely do have different (better imo) values, but no they all aren't perfect little Mr Miyagi's wearing kimono who just burn incense all day and don't think about money or investing. They would love to own huge houses like Aussies do if it was possible.

Ultimately Aussies still get huge houses and awesome value for the money outlaid.