Poor first home buyers Sydney

[skater]

I'm not really sure why we're having this whole affordability argument AGAIN, but I'll add my 5 cents.

I started from scratch to be able to afford a good start. I worked hard and smart and saved for a deposit and got my first property this year all within 2 yrs of finishing uni..

OK, you are young, fresh out of Uni & you've been able to save for the deposit on your first home. Congratulation! You've done what most people your age wont do, to get you where you want to go.

Nobody's saying it wasn't hard back then, but if you're telling me it was harder then than now then you're delusional and wanna make yourself feel better about the state of the housing market and how crap it is for the future generations to come.. Come back to me when affordability is calculated on one income again rather than two. And then come back to me after that when wages grow as quick as property does in Sydney..

This part I have a problem with. You didn't live back then, so you are not seeing the struggles we had back then.

Affordability WAS calculated on one wage, it's true. That's because most women DIDN'T WORK, or stopped working as soon as they married/or had a child. Those that did work, mainly only worked part-time. Women mostly COULD NOT GET A LOAN. So, if you were a single woman, you had no option other than to rent.

The cost of living was much, much higher in terms of percentage of your wage than it is today. There are snippets that I remember, like my school formal (just a dance back then without any of the pomp, that there is today). I was sooooo excited because I bought a dress for only $10. It was nothing special! Just a normal cotton dress. You can buy one for a similar price NOW at KMart. I was 16 years old at the time!

My first pair of skates (I was 15) cost me $100. I had to save for months to get them, as my parents couldn't afford to buy them for me. I sell skates today that start at $79.

My first full time wage, I was 19. I got paid $96 per week. I thought I was rich!

My first fridge, I bought second hand. Looked like it was made in the 50's. It cost me $50. This was around 1980. My first TV cost $500, again around 1980.

My first house cost $56k. I was single at the time. The only reason I was able to get the loan was because I worked for a bank. A couple of years later I was married, had lost my job (because I was pregnant), and property went through a boom. I remember talking to Hubby, just like you are now, wondering how on earth people would be able to afford property, and how lucky we were that I'd bought when I did.

I spoke before about the lack of quality of that home. It was situated near a large housing commission area in Wollongong and was on a main road. We couldn't afford ANYWHERE in Sydney at that time.

What I was saying about changing the way we live is why does a 22yr old have to pay 8 times his income for a unit in Fairfield when back in the day it was 3 times your income for a detached house...crap house prices will affect the way we do business in the future. Bigger mortgages, less ability to spend on business or everyday things to stimulate the economy..

It all depends on the TIMING of the purchase. A couple of years ago most of Sydney was half the price that it is now. In 10 years, things will be considered 'cheap'. It is a never ending cycle. There's a whole range of things that change the affordability as well. The biggest variable is the interest rates. Be thankful that you didn't have to (and hopefully won't have to) pay 17.5% that we did.

For instance, $100k @ 17.5% over 25 years is $1478 per month to repay (we didn't have 30 year terms, and we didn't have IO)

That same $100k @ 5% over 30 years is $537 per month. Interest only, it is $417 per month.

So, as you can see, that is a HUGE, MASSIVE difference.

And to clarify this all, I believe every city in this country is affordable except Sydney.. That's why I been telling my mates to get the hell out of the Sydney market as much as they can.. I'm still gonna invest but it's gonna take a lot for FHB to get into the sydney market in future.

Yes, Sydney is stupid at the moment. Give it around 5 years, and you will start to see a difference. Of course, prices won't go back to what they were a few years ago, but they will stagnate or be more flexible with prices when people start to feel the pain.

The good news is that if wages continue to be slow, then eventually the prices will stagnate/correct a bit.

Hehe, and it's not just me saying this either.

Just my opinion.. Times change bu the great Aussie dream of owning your own home will slow die for our future generations until of course all the baby boomers are dead and all their properties hit the market haha

It's not dead. BUT, I think people need to get back to basics. A small 3 bed home, in an undesirable place will always be affordable, but you MAY need to time the purchase.

You can't compare a 2x1, or a 3 bed townhouse etc in an inner suburb, because even way back then the inner suburb demand was there and prices were unaffordable to the majority of folks.

True! There was NO WAY we could have afforded to move to Sydney, back in the early days.

A bigger mortgage is a choice. If the Banks suddenly said you could only have a 79% lend, then folks would have to do it. But no; they can get a 90%, or more with LMI, and buy a more expensive you-beaut house.

Imagine what they would look at buying if they opted to only get a 70% lend.

This does have an effect on prices. As prices are a direct result of supply and demand, the demand for the higher priced properties would dwindle if people couldn't get the finance.

So FHB's now have a good opportunity to get ready with a strong savings plan.

Exactly! If Sydney is your target DON'T BUY NOW! Wait! AND SAVE. The time will come when Sydney makes sense again.

I agree with this below, but I do know many wishful FHBs who will never own a property because they are not willing to do it.

the steps required are not being recognised by the FHB's.

The steps are;
1. Start saving hard and early.
2. Take on more work to facilitate step 1.
3. Cut out spending to facilitate steps 1 and 2.
4. Lower expectations about property type, condition and location.

This will get them into property no.1

Then, like everyone else has had to do; you continue on with the above plan, and then upgrade to the more you-beaut property later on if you wish.

Baby boomers who have done well have followed the above plan. FHB's may want to learn from this instead of slagging them/us off and tall-poppying them/us.

But it's not just Baby Boomers. At the latest meet-ups in Sydney, I have seen many YOUNG people doing extremely well. Mind you, most of them are not your run-of-the-mill Aussies. These people are different, with a different mind set. They are young and hungry, and willing to sacrifice to get where they want. Many are of ethnic origins, and recognise the opportunities that Australia holds for someone who is motivated. These people are going places, and I have the utmost respect for them.

 

[BayView]

But it's not just Baby Boomers. At the latest meet-ups in Sydney, I have seen many YOUNG people doing extremely well. Mind you, most of them are not your run-of-the-mill Aussies. These people are different, with a different mind set. They are young and hungry, and willing to sacrifice to get where they want. Many are of ethnic origins, and recognise the opportunities that Australia holds for someone who is motivated. These people are going places, and I have the utmost respect for them.

Keep it under your hat.

We don't want the already victim mentality element to feel worse.

 

[hobo-jo]

What does the cost of airfares or roller-skates from decades past have to do with the cost of property? Honestly it's like a whinge fest in here. Whinging from boomers that their cost of living was higher in the past... welcome to the benefits of technological advancements, globalisation and the exploitation of people in countries with low wages.

Regardless of the cost of anything else or individuals spending habits, the price of houses in real terms has exploded higher over the last couple of decades.

Sure with interest rates as low as they are, easier lending policies and ability to borrow with two wages, a mortgage might be almost as obtainable as two to three decades ago (if you ignore the period required to save the deposit), but buyers are taking considerably more risk, especially in Sydney. Also lower rates with higher price is a more expensive proposition than higher rates and lower prices over the term of a loan.

& I think it's reasonable to expect government policy to change in response to that.

 

[Biz]

No graph? I am dissapoint.

 

[BayView]

What does the cost of airfares or roller-skates from decades past have to do with the cost of property?

it relates to what folks do with their money, and/or time.

Many young folks spend a lot of time and money travelling these days. It's great. My first O/S holiday occurred when I was 26 - to Fiji.

But 2 or 3 or more generations ago it was basically unaffordable, so folks didn't do it....more funds available to save towards a property.

Nowadays, folks can jump on flights and travel a lot for not much - so they do.

I know of young folks (our customers, for one example) who work for 6 months so they can save to travel for 3 months etc. Come back and repeat.

They are in that 20-30 year old age group.

I have no problem with that lifestyle - I wasted a few of my 20 something years too.

But don't whinge about it when you can't buy a house until you are 30 or older after pizsing your money against the side of the plane for years on end.

Honestly it's like a whinge fest in here. Whinging from boomers that their cost of living was higher in the past... welcome to the benefits of technological advancements, globalisation and the exploitation of people in countries with low wages.

Exploitation of low-income wage earners around the world has been happening for centuries, HJ.

I for one have never whinged at any stage that our lives were harder back then. They were hard in different ways than today.

What I have always tried to do here is point out that our lives were just as hard as the younger folks think their lives are now, and tried to point out that even in those days it required a lot of sacrifice to get oneself into a position to buy a property.

Us old b@stards have been there and done that, and can only pass on what we did, as compared to what the young folks have to do now.

We are not trying to "Four Yorkshireman" anyone (at least; I'm not). I am merely trying to illustrate that it wasn't easy then, nor is it easy now....but the FHB's think it was easy then, so we have to explain that it wasn't.

The whinging is from the FHB camp - not our camp. We didn't whinge; we got on with the job.

I'm in my 13 year old son's ear all the time about saving 20% of his pocket money for investing, waiting until the XBox games are on special at the local EB Games shop, getting a part-time job and saving 20% towards his first house, etc - so he has a chance to get ahead of the crowd when he hits the workforce.

With any luck he will hit 20 years of age and be one of the group who get on with the job and buy his first property, instead of whining how impossible it all is.

Yes, property has gone up in real terms, but so has the income from one to two in many cases.

So, a FHB cannot look at a property that a dual income property might buy - and don't forget - gay couples with dual incomes and no kids have been around for decades as well; raining on everyone's parade?

No one points a finger at those guys/girls, and rightly so.

But no; it's the baby boomers, and the greedy investors, and the double income Mum and Dads.

Key word being blame.

Keep blaming, and stay away from property.

What do you propose the Gubb should do? Tell everyone they cannot have a dual income household anymore, or tell folks they can't earn $200k per year any more, or stop O/S investors from buying anymore, or tell folks they can't buy an IP anymore to provide for their future, just so the newbies can swan in and buy an easy PPoR?

Oh wait; let's get rid of NG.

Seriously

 

[skater]

No graph? I am dissapoint.

I know, right?

 

[pieman]

Damn investors with their equity!!!

Don't worry, soon they'll be able to buy a Vic cottage in double bay for 400k after the crash because brilliant economists like Steve keen said that is the fair price.

 

[skater]

What does the cost of airfares or roller-skates from decades past have to do with the cost of property? Honestly it's like a whinge fest in here. Whinging from boomers that their cost of living was higher in the past...

It matters because housing affordability isn't as linear as some people make it out to be.

THE COST OF LIVING, IN REAL TERMS, IS LESS THAN IT WAS for many items, which by default, had a bearing on how high prices housing prices were back then.

It is all relevant. The wages, the amount of discretionary spending, the interest rates...etc. You can't just say it was X amount in year Y and Z amount now without looking at the whole picture.

The cost of housing, was, and is, governed by supply and demand. Housing cost a certain amount back then because that was what the demand called for in the day. By the same token, it is what it is today, because that is what people today are willing to pay for it TODAY. Nobody is holding a gun to anyone's head & telling people to bid higher.

it relates to what folks do with their money.


I have never whinged at any stage that our lives were harder back then.

What I have always tried to do here is point out that our lives were just as hard as the younger folks think their lives are now, and tried to point out that even in those days it required a lot of sacrifice to get oneself into a position to buy a property.

Us old b@stards have been there and done that, and can only pass on what we did, as compared to what the young folks have to do now.

We are not trying to "Four Yorkshireman" anyone (at least; I'm not). I am merely trying to illustrate that it wasn't easy then, nor is it easy now....but the FHB's think it was easy then, so we have to explain that it wasn't.

The whinging is from the FHB camp - not our camp. We didn't whinge; we got on with the job.

Exactly!

 

[ej89]

All I can say is thanks for the opinions and giving me some different insights to the way you guys all lived and made your success work. I appreciate the stories and the fact that success wasn't handed to you.

Skater, you have challenged me well with reason and I appreciate your thoughts. To the rest, I'm over the whinging and the whinging about others whinging haha

I'm having a crack at it all myself and hopefully get to where you succesful investors are..atm my whinging comes from a position of trying to make investing work at the same time as owning my own business and looking to get married and live on one income as my girlfriend is studying.. I'll find the right balance soon enough by forcing my income to double otherwise I can't do the things I want in the time frame I want to do them.

Thanks again for your thoughts and experiences

 

[hobo-jo]

No graph? I am dissapoint.

haha I was actually going to do one, but realised I've run out of new ones to post

Many young folks spend a lot of time and money travelling these days. It's great.

Some of my flights overseas have cost not much more than skater's first skates.

I can do a trip to Bali or South East Asia and it could cost me less than a road trip holiday in Australia. What looks excessive to boomers isn't always so.

But with real house prices well over double (e.g. measured against wages) what we've seen in the past, there is no arguing against the fact that saving a deposit for a first home is much harder today even if a saver spends nothing on luxuries.

 

[JohnHenry]

Damn investors with their equity!!!

lol, that's hilarious mate ;-)

 

[skater]

All I can say is thanks for the opinions and giving me some different insights to the way you guys all lived and made your success work. I appreciate the stories and the fact that success wasn't handed to you.

Skater, you have challenged me well with reason and I appreciate your thoughts. To the rest, I'm over the whinging and the whinging about others whinging haha

Haha, thankyou!

I get so sick of some people thinking us oldies had it easy, so I just wanted to throw in some examples of things as they were. It was hard then, it's hard now, and it will be hard for the next generation as well. But the thing to remember is that it is doable.

When the next generation are out there buying stuff, they will jump up & down & say how easy it was because, um....maybe the low interest rates?, but won't understand everything else that is pertinent TODAY. We don't know what issues they will face in the future, only that they will have their own struggles.

I'm having a crack at it all myself and hopefully get to where you succesful investors are..atm my whinging comes from a position of trying to make investing work at the same time as owning my own business and looking to get married and live on one income as my girlfriend is studying.. I'll find the right balance soon enough by forcing my income to double otherwise I can't do the things I want in the time frame I want to do them.

Thanks again for your thoughts and experiences

 

[BayView]

Some of my flights overseas have cost not much more than skater's first skates.

That's what I mean; so loads of folks are spending loads of time and money on their O/S travel.

I'm not saying it's bad (unless you are exploring the opportunity cost of investing in property). But they then come back to Aus, settle down, get a job, and find out how hard it is to buy, then wail at how the investors and the boomers and the DINKS, etc have stuffed it up for them.

You admitted yesterday that you had plenty of cashflow, and I've seen from your extensive study on the subject, the endless graphs etc - that you have the knowledge as well.

But you still don't buy anything?

WTF, HJ??

If you are waiting for things to return to "normal", you will be waiting a long time.

I can do a trip to Bali or South East Asia and it could cost me less than a road trip holiday in Australia. What looks excessive to boomers isn't always so.

You're assuming that boomers don't spend any money and time on travel - only the young folks do?

But with real house prices well over double (e.g. measured against wages) what we've seen in the past, there is no arguing against the fact that saving a deposit for a first home is much harder today even if a saver spends nothing on luxuries.

You continually say this, yet you never specify what a first home should be....or where.

Skater and I and other oldies (sorry Skater for the loose description) continue to give examples of housing that is doable by FHB's.

The problem is they are not 3x2 townhouses in Albert Park.

While you continue to convince yourself that property is so undoable, folks are buying it and making themselves more wealthy over time (maybe not in Sydney right now )

Have you tried analysing your analysis paralysis?

 

[2FAST4U]

Another day another article about Sydney housing affordability.

http://www.smh.com.au/nsw/sydney-ta...extra-to-live-in-emerald-city-20150606-ghhb3z

It's good to see people take action instead of just complaining. It's easier said than done to 'move where you can afford' but in the future more working class and average income families living in Sydney will have to do that. And by 'moving to where they can afford' I don't mean out further west I mean interstate or regionally.

With population growth of 80,000 people a year Sydney will always have people in it. I liked this phrase to describe it-
"It's almost like the Manhattan effect, you only attract rich people on to the Manhattan island, and the rest live out in Brooklyn etc."

I thought it was an interesting article anyway.

 

[BayView]

With population growth of 80,000 people a year Sydney will always have people in it.

Everyone wants cheap housing (to buy), but want housing to grow (for wealth)

And almost everyone here on SS (except me it would seem) wants the population in Aus to increase by many millions

This level of population increase per year will never be good news for anyone wanting to buy in Sydney as a first up.

 

[hobo-jo]

But you still don't buy anything?

I am starting to see some reasonable deals around given interest rates & yields... as I said, likely to buy in the next couple of years: http://www.bullionbaron.com/2015/05/rent-vs-buy-adelaide-cost-comparison.html Haven't really missed out on anything in Adelaide over the last 5-6 years.

If you are waiting for things to return to "normal", you will be waiting a long time.

Skater and I and other oldies (sorry Skater for the loose description) continue to give examples of housing that is doable by FHB's.

I don't think income to price ratios will return on a sustained level to that of the 1980s/90s (but who knows what could happen temporarily in a proper credit crunch/recession), but I'll continue highlighting that it's more expensive today than in years past, something many on here seem able to comprehend, but you keep skirting around. Finding an example here or there which doesn't seem that expensive is a meaningless anecdote to counter the reality that real prices are substantially higher today than 20-30 years ago.

 

[2FAST4U]

First time posting images/graphs so hopefully they link up.

 

[lizzie]

THE COST OF LIVING, IN REAL TERMS, IS LESS THAN IT WAS for many items, which by default, had a bearing on how high prices housing prices were back then.

hahahaha - very relevant ... back in the day D) we were excited to get a toaster for a wedding present - or sending away your hairdryer to get fixed - because new was so expensive. My 21st birthday present was an ironing board.

My parents bought their first toaster on hire purchase!

I know this isn't a very good example to gen Y, but I remember as a young girl desperately wanting a barbie doll ... I would stand in the shop and just stare at them ... I would touch the wrapping the dresses were in and dream ... barbie dolls cost $30

Years later I got my first full time adult job - and earned the princely sum of $100/wk

As said - it's not the best example - but really sticks in my brain. Now, 35 years later in the same job, I'd earn around $1,000/wk and barbie dolls cost around $9 and my daughter had a dozen of them.

It just goes to show how the cost of "things" associated with living have decreased enormously ... toasters, cars, furniture, travel.

 

[2FAST4U]

hahahaha - very relevant ... back in the day D) we were excited to get a toaster for a wedding present - or sending away your hairdryer to get fixed - because new was so expensive. My 21st birthday present was an ironing board.

My parents bought their first toaster on hire purchase!

I know this isn't a very good example to gen Y, but I remember as a young girl desperately wanting a barbie doll ... I would stand in the shop and just stare at them ... I would touch the wrapping the dresses were in and dream ... barbie dolls cost $30

Years later I got my first full time adult job - and earned the princely sum of $100/wk

As said - it's not the best example - but really sticks in my brain. Now, 35 years later in the same job, I'd earn around $1,000/wk and barbie dolls cost around $9 and my daughter had a dozen of them.

It just goes to show how the cost of "things" associated with living have decreased enormously ... toasters, cars, furniture, travel.

I guess everything was more expensive back than because Australia had protectionism to prop up manufacturing and insulate the economy from international competition. These days the economy is a lot more free market so we benefit with consumer goods. The other thing I love about today is technology. I don't know how I'd survive without a computer and internet, which has also helped boost the nations productivity. The price of phones has come down as well and calling etc.

What was the price of gas, electricity, and water like? I'm assuming food would probably be cheaper today. I'm just curious because after the mortgage the utility bills seem to be one of my largest expenses. Edit- Also petrol, insurance, registration etc.

 

[wylie]

What does the cost of airfares or roller-skates from decades past have to do with the cost of property? Honestly it's like a whinge fest in here. Whinging from boomers that their cost of living was higher in the past... welcome to the benefits of technological advancements, globalisation and the exploitation of people in countries with low wages.

Regardless of the cost of anything else or individuals spending habits, the price of houses in real terms has exploded higher over the last couple of decades.

The graph seems to show it is harder, but I wouldn't say "exploded". So much has changed, women working through choice rather than forced to resign when marrying etc. So much that everybody probably already knows and understands.

haha I was actually going to do one, but realised I've run out of new ones to post

Some of my flights overseas have cost not much more than skater's first skates.

I can do a trip to Bali or South East Asia and it could cost me less than a road trip holiday in Australia. What looks excessive to boomers isn't always so.

But... many of us "boomers" (I am 55) couldn't even afford a road trip holiday in Australia. That was excessive for us. Our kids thought one week at the coast was a holiday. We stayed at home because we couldn't afford to go anywhere. We didn't mind either. But to assume a family with one worker and stay at home mum and three kids could afford to do a road trip... pffffft!

But with real house prices well over double (e.g. measured against wages) what we've seen in the past, there is no arguing against the fact that saving a deposit for a first home is much harder today even if a saver spends nothing on luxuries.

I believe the "luxuries" of today are overseas travel and upgrading the car every so often. The things I think could be classed as luxuries (cable TV, mobile phones, new computer every two years) are not luxuries to my kids but things they would struggle to go without. But they could do without them if they really wanted to save hundreds per month to get into a house.They are all choices. My kids don't see these as luxuries. They are standard, but my kids also scoff at my $17 monthly phone plan. We each do what suits us, but someone with a $70 per month phone plan will get no sympathy from me when they could manage by using the home internet for rather than have both. They don't see it as discretionary. My kids will not do without cable TV either. Or a fancy car. More choices that take money every month that we didn't spend (didn't have a choice on cable TV, internet or mobile phones of course). They could downsize all that stuff or do without and save so much quicker, if they choose to. They don't.

First time posting images/graphs so hopefully they link up.

It isn't just we baby boomers whinging. I believe this whinging thread was started by one of those younger folk? Yes?

The cost of airfares from decades ago is pertinent because compared to a flight to England today which can be bought for about $1.7K, the same flight would have cost me the equivalent "back in my day" of over $8K. I could buy a house or I could travel. I could NOT do both.

My 26 year old son has (within the space of five years) bought a unit, bought a house with his partner, done it up and sold it, and bought another house with his partner and they are looking at spending around $700K on a major renovation. It will be worth over $1.5M finished. They have been to New York on one trip (cheap airfares, stayed with friends most of the trip) and London and Paris. I say "good on them" but refuse to acknowledge when they whinge (and they do) about maybe not being able to afford a $40K kitchen. I say put on a cheap bench top until you can afford stone. They say "no".

They will not compromise on the quality of the finishes for the renovation no matter how much we try to hose it down a bit.

Aged 26, I had bought a quarter share in a house, half share in a unit (had to sell both when family members needed their money out) and my first "all mine" house for $46K. It was 7 squares (size of a smallish unit), hideous kitchen and bathroom. I couldn't afford to renovate anything.

So, you see the comparison of "extra" things like travel is very important because these days, many younger folk want both, and can do both because it is so much cheaper. And good on them. If I could have done so I would have renovated rather than travel, but I couldn't afford to do either. My friend's parents (now in their 70s) also could not afford a toaster and put it on hire purchase when they married in the 50s.

The comparison is not as a whinge, but to try to help younger people get some sort of understanding of how very different things were even 30 years ago. My kids are amazed that a toaster bought in Woolworths for $20 would one day have had to be bought on hire purchase with a signed contract.

I recall very clearly that once I had a mortgage, I had no discretionary spending money for many years. Then I married and had kids and it is really only when I hit my 40s that things freed up a little. Now I can pretty much do what I like, but it was the early hard work and sacrifice that has put us in this position, not luck.

I'm so over this boomer bashing. I wasn't even a boomer until they changed the dates. Now I feel old .

So many things have changed, not just house prices, that to compare today with even the 1980s is like comparing apples and grapes. It was just as hard back then, just in different ways. I couldn't easily et a loan as a woman for starters in the 1980s.