The investor is the one who looks greedy, and turns up in a Beemer X5 or similar or higher.
Potential negative gearing changes
- Thread starter pickle pickle
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Well, after losing the crappy house due to our Business, buying the next PPOR, but never living there because hubby got work elsewhere, then the Letho place (again, we didn't WANT to live there, but circumstances said we'd be stupid NOT to, even though we could have stretched & bought in a better area), now this one. So....number 4 for us.
And wearing a suit! You've got to look the part, you know!
We always go to Bunnings wearing paint-spattered clothes.
We go everywhere (except to work) in paint-spattered clothes, they are the only kind we own. I went to an auction up the road from home once, just to suss out the whole auction experience. They were dammed lucky that I didn't turn up wearing my flanno PJs and woollen slippers, being a Saturday morning in the middle of Winter. We don't usually do auctions in Brisbane anyway.
We go everywhere (except to work) in paint-spattered clothes, they are the only kind we own. I went to an auction up the road from home once, just to suss out the whole auction experience. They were dammed lucky that I didn't turn up wearing my flanno PJs and woollen slippers, being a Saturday morning in the middle of Winter. We don't usually do auctions in Brisbane anyway.
More accurate.
Skater and I were being sarcastic of course...
I think the Gen Y perception of an investor is some rich and greed Corporate type/s who spend 3 months in Aspen ever year, and so on...and doesn't deserve NG, or some other perceived "advantage".
The reality is that most folks who are investors are yer middle-aged Mum and Dad types and working professionals, who have worked bloody hard to get to their position in life - and often from a humble beginning or even less.
The reality is that those who work bloody hard, study hard, make sacrifices and try to make good life decisions as they go; usually end up with the cream....it doesn't come to you on day 1.
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Only partly!
Years ago, a couple we know dropped into the skating rink to collect their child. They were dressed to the nines & looked like they were going to a wedding. When we asked where they were off to they said they were going to Sydney for a presentation on an investment property, so it was important that they dressed nice to look 'successful'.
LOL!Only partly!
Years ago, a couple we know dropped into the skating rink to collect their child. They were dressed to the nines & looked like they were going to a wedding. When we asked where they were off to they said they were going to Sydney for a presentation on an investment property, so it was important that they dressed nice to look 'successful'.
I went to one of the Henry Kaye 5 day seminars at Darling Harbour a millenium ago...
It was hysterical watching all these wangers turning up in trenchcoats and suits and super-highly polished shoes and brief cases and gloves etc.
I guess it's better than seeing swarms of bogans in trackies and mockies etc down at the mall/or everywhere.
Does anyone exist in the middle who is just...normal?
Only partly!
Years ago, a couple we know dropped into the skating rink to collect their child. They were dressed to the nines & looked like they were going to a wedding. When we asked where they were off to they said they were going to Sydney for a presentation on an investment property, so it was important that they dressed nice to look 'successful'.
Whether good or bad the herd mentality of keeping up with the Jonses is a big part of driving our property markets....and mothers group discussions...
As I get older and watch people (in general) and thier interactions and choices they make it becomes more obvious that we all tend to act more similarly than we do differently.....to fit in (massive generalisation I know)
No different in our property markets methinks.
So what about this example: http://somersoft.com/forums/showthread.php?t=108578
You and some others in this thread are kidding yourselves by projecting your own limited anecdotal examples and preferences onto the entire investor section of the market.
Investors are absolutely competing with FHBs every day in every property market. To deny that would be foolish.
My limited anecdotal examples cover 30 years, over 12 purchases and 10 sales during that time, covering a fair portion of this City (and 2 x IP's interstate). I have been able to witness a decent amount of activity over that time and space.
Again; it comes down to position, demand and expectations..
Is Marrickville out on the fringes where things are less in demand and cheaper?
Me, my parents, their parents, etc - when they were buying their first home, the position of choice was no doubt the outer suburbs.
Or; if they were really doing well; a closer in dump that they could afford.
That whole idea that you can buy your first property in the desirable locations is those who are really fooling themselves.
I can't believe you are getting sucked into all this noise about "affordability" at your age.
Anything that is inner-suburbs, and in demand - will not be affordable for a FHB and it never was.
I'm sorry; but that's the reality.
This says it all; loads of competition that will always drive the prices up for the rent and the property value....
Or; pick an area that is cheaper and less demand.
Will it be close to everything?
No.
And these places (cheaper) never were. My mother was offered the house she was renting (in Glen Iris) when I was approx 7 years old..I think for $18k. Glen Iris was a middle-outer suburb back then, and she could not afford it as a single Mum. It was a suburb for middle-lower class folks back then.
Now, it is on the edge of the CBD practically in terms of time to get to the city etc, and is very desirable by many.. A FHB could not afford to buy there in most cases.
Now; just so were are talking real life so you can see what our anecdotal examples actually represent; here is a similar house to the very first property I bought back in 1985 in Bornia.
Boronia at that time was a "blue collar" cheaper end suburb, waaay out near the base of the Dandenong Ranges - an hour by train to the CBD. It is still the same, but now the freeways have extended out closer to the suburb - to Ringwood actually - so it has actually improved in terms of transport into town;
http://www.realestate.com.au/property-house-vic-boronia-119391819
Would you call this house unaffordable?
Is it a desirable location and property selection for a FHB??
Not for the aspiring CBD-centric FHB.
But, it is a house, on some land, in Melbourne, reasonably close to transport, and affordable.
Or this; in my own suburb - an hour drive to the CBD:
http://www.realestate.com.au/property-unit-vic-dromana-119715947
Not close enough to Docklands or Southbank, or St.Kilda, or other cool locale?
Also; both of these areas are not really desirable for investors - the rent yields are pretty awful, and if I was going to buy an IP in an "outer area" or somewhere "regional" such as Dromana Boronia to rent, the yield would need to be a damn sight better than you can get in both suburbs...maybe if it was development sit, but that is not the type of first investment in an IP for most Mum and Dad investors - which are the majority of investors out the "competing" with FHB's for a joint to buy.
Dromana as one example; is seeing a good number of younger working class families moving in and buying - very few single, early 20's buyers though...I wonder where they are looking?
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BV, if you can't admit that property is substantially more expensive than it was 30 years ago then you are not only lying to everyone here, you are also lying to yourself. Again, look at the first 3 charts in this post and tell me prices are not higher relative to size of the economy, incomes and in inflation adjusted terms:
http://www.bullionbaron.com/2015/04/australian-property-market-secular.html
They are also more expensive compare with rent & about any other real measure you would care to use.
I have owned and can easily own again in the current market. My personal circumstances are not getting in the way of my view here, but they do seem to be clouding yours.
This house reportedly sold in 2001 for $145,000. Now advertised 2.5x higher when wages haven't even doubled over the same period.
The house is 9.5x average incomes ($38k) in the suburb according to one site I found. 30 years ago it would probably have been 3x.
Prices in the area have grown about 20% over the last 3 years.
Yes it is unaffordable.
Could many FHBs service a high LVR loan on the property? Likely yes, but that doesn't make it affordable for the reasons I outline here:
http://www.bullionbaron.com/2014/09/why-serviceability-affordability.html
You say these areas are not desirable for investors and yet in the marketing for both you linked:
Perhaps an investor will buy these, perhaps they won't, but to suggest real estate agents would market a property to types of buyers who just aren't in the market is silly.
This is where you have twisted the argument.
For the average income of that area, the house is arguably more expensive. I paid $76k in 1985. I have no idea what the average income was for that area back then.
However, I have not ever seen a news report yet that focuses on a FHB who is looking anywhere else but in the highest demand areas. Places like Boronia or Dromana are never mentioned in these reports/arguments as a possible place to buy for a FHB.
Those folks in the reports are most likely able to afford the house in Boronia, yet choose to never look in those areas, then whine how they can't afford anything, and the investors are shutting them out.
It is standard R/E bullsh*t marketing to include anyone in their list of potential buyers.
I have looked at literally thousands of properties over the last several years, and the volume that have had the description of "astute investor" attached is absurd.
R/E's think a 5% yield is a good yield. How many R/E's could fund a 5% yield on an IP? How many investors can as well?
How many investors could fund the cashflow drain on even 3 or 4 of these 5% yield beauties?
Very, very few. Their serviceability would hit a wall very fast unless they were higher income earners, and we all know that this represents a very small percent of the population.
Most r/e's don't even own an IP, and yet sprout that slogan all day long, all week long; they wouldn't know an astute investment if their @rse was on fire.
You and I both know it is just waffle and bullsh*t., and they would pawn their own Mother if they could get a sale from it.
Here's an interesting scenario;
A young guy is living at home with Mum and Dad, and has just landed a full-time gig in IT earning $50k per year.
Using traditional lending practices, the Bank only allows him to use 35% of his gross income for loan repayments - $17500 p/year.
Based on today's interest rates of say; 5% he has an approx monthly serviceability of $1450 per month.
This $1450 would allow him to borrow approx $350k at the moment.
But, let's assume he has lived at home for the last 2 years on this wage, doesn't go out partying every other night, doesn't blow it all on a car, or his girlfriend, or clothes, or his IPhone, or holidays to Bali..but instead dedicates to putting his equivalent loan repayment funds away each month towards his First Home deposit, and after 2 years has accumulated a nice cash deposit of say: $35k in 2 years.
Assume 5% of the purchase costs are included in the $35k cash he has saved...he now can buy something worth $360K.
An anecdote; when I bought my first house, I had a business where I worked approx 70 hours per week. It allowed me to save a decent deposit in a shorter time than yer average folks on 40 hours per week, I'd wager.
Now; let's say this young bloke does the same - IT job, plus second job for 2 years doing 20 hours or so per week on average on top at $15 per hour (barman or similar)....total of 70 hours per week...
Is that hard work? Frackin oath it is; but it's what you do if you want to buy a property in a relatively short time after you enter the workforce.
Incidentally; I wasn't living at home with Mum and Dad....not bragging; just making sure we are comparing apples with apples.
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So forgetting the local income completely (which is completely relevant, I'm not "twisting the argument")... using the average wages from here: http://upload.wikimedia.org/wikipedia/commons/0/00/Real_Melbourne_House_Prices_1965_-_2010b.JPG
1985. $76k / $23,500 = 3.2x incomes
2015. $360k (may have gone higher) / $70k = 5.1x incomes
Can you admit that property is substantially more expensive than it was 30 years ago in real terms?
These stats show Boronia has a similar home ownership rate to Australia's average:
http://www.propertyvalue.com.au/own_or_rent/vic/boronia/3155
So it's not a hot pocket for investment (rentals), but investors are absolutely in that market whether you would care to admit it or not.
Don't worry, they can just buy 100km from the CBD and spend 4 hours commuting each day!
http://www.dailytelegraph.com.au/ne...341849252?sv=82e3f7cb390e5ef9cf92e86a49744735
http://www.dailytelegraph.com.au/ne...341849252?sv=82e3f7cb390e5ef9cf92e86a49744735
Sydney real estate's great wall of unaffordability: Map shows how first-home buyers are locked out of suburbs within 50km of Sydney CBD
Entry-level buyers cut off from owning anything within 50km of CBD
Limited to arc stretching from Gosford to Penrith and Camden.
45 per cent of Sydney buyers are currently investors
Sydney's median house price rose 3.6 per cent over March quarter
YOU won't find it on any map.
But to first-home buyers it is as real as the former Berlin Wall ? an impregnable fortress of market forces circling Sydney and denying thousands of young couples the Australian dream of a humble home within driving distance to jobs and the CBD.
Hi HoboJo. I totally agree with you that affordability in Sydney went out the window many many years ago. You live in Adelaide, I live in Brisbane. What is unaffordable about homes in both Adelaide and Brisbane, though? And in outer Melbourne? Honestly, my Gen Y son who is a third year Uni student has worked out that he will be able to afford his first house by the age of 30 as long as he buys a unit in suburban Brisbane or a real house in the regional city where he will no doubt get his first job after graduating out in the regionals somewhere.
My son lives on a CentreLink youth allowance which is significantly less than Austudy. He reckons that once he gets his first job he will be able to keep living a similar lifestyle to now and save around $20K per annum. After five years that is $100K for a house deposit. He will be a lowly male science school teacher, not a merchant banker or other high income earner.
My son lives on a CentreLink youth allowance which is significantly less than Austudy. He reckons that once he gets his first job he will be able to keep living a similar lifestyle to now and save around $20K per annum. After five years that is $100K for a house deposit. He will be a lowly male science school teacher, not a merchant banker or other high income earner.
Adelaide prices are much lower than Sydney or Melbourne, but relative to the past are still a larger burden on FHBs (and all PPOR buyers really) than they need to be.
I saw a 2 bedroom house advertised the other day, agent had used the POA advertising method, so sent a message to see what they were asking. They wanted $250-270k. Seems cheap right? Perfect entry level home, only 15km to the CBD. It last sold in 2000 for $55k, 1/5 the asking price and with no major renovations carried out since last sold (at least not any obvious ones). I'm not saying that FHBs can't alter their expectations and buy something smaller or further out, but I am saying that relative to the past, housing is far more expensive today than it has been and that goes for all capital cities, not just those which are currently booming.
IMO an end to negative gearing for established properties is one policy that could be used to take the heat out of the bubbly markets (Sydney & Melbourne) and continue to subdue excessive speculation from spreading to other markets.
I saw a 2 bedroom house advertised the other day, agent had used the POA advertising method, so sent a message to see what they were asking. They wanted $250-270k. Seems cheap right? Perfect entry level home, only 15km to the CBD. It last sold in 2000 for $55k, 1/5 the asking price and with no major renovations carried out since last sold (at least not any obvious ones). I'm not saying that FHBs can't alter their expectations and buy something smaller or further out, but I am saying that relative to the past, housing is far more expensive today than it has been and that goes for all capital cities, not just those which are currently booming.
IMO an end to negative gearing for established properties is one policy that could be used to take the heat out of the bubbly markets (Sydney & Melbourne) and continue to subdue excessive speculation from spreading to other markets.
You assume everyone wants and needs to commute to the city, and the media also assumes that everyone wants to live in and/or be near and/or work in the city, hence their reports which always portray that angle.
It makes great news stories.
Anyway, the ones who want to see housing as unaffordable will experience their reality.
All the rest will go out and find a place to buy, and find a way to afford it...hard work, saving and sacrifice and a realistic expectation is usually the formula.
Here's a question for you then; if property prices have gone up so high that they are unaffordable, how come they are still selling?
The Banks all have a fairly similar model for lending, based on LVR's and DSR's....risk
levels and property values are factored in to their assessment of each applicant.
Therefore, every house sold is sold to someone who can afford it in the Banks's view, with the respective risk level covered to the Bank's satisfaction.
Sure, some folks have LMI, but this is at the very risky end of the scale, and also very expensive, which would stop most buyers. A smaller volume of all buyers I would say.
So, something does not equate; unaffordability is rife, yet properties are selling like there is no tomorrow.
My prediction is that the affordability issue will balance out when folks can't afford to pay the amount asked.
Then we will see a dead market until affordability improves.
Apparently that hasn't happened yet - according to latest auction clearance rates etc.
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