I'm not really sure why we're having this whole affordability argument AGAIN, but I'll add my 5 cents.
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.
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.
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.
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.
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.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..
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.
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.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..
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.
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.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.
Hehe, and it's not just me saying this either.The good news is that if wages continue to be slow, then eventually the prices will stagnate/correct a bit.
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.
True! There was NO WAY we could have afforded to move to Sydney, back in the early days.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.
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.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.
Exactly! If Sydney is your target DON'T BUY NOW! Wait! AND SAVE. The time will come when Sydney makes sense again.So FHB's now have a good opportunity to get ready with a strong savings plan.
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.
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.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.