Residex's Dec report - median price for Melbourne & Brisbane to reach $500,000 in 08

[Shadow]

I have to say I agree with most of the posters here. There is no such thing as an affordability crisis if FHBs would simply lower their expectations... no you can't have the big car and plasma TV and brand new high-end furniture, as well as the $500K McMansion as your first home.

I rented from when I left school at 17, until I bought my first house in my thirties, saving as much as possible for that first deposit during those years.

My parents first house was basically a two room barn way out in the countryside 40km from the nearest town, which they bought for 1000 pounds (a lot of money to them back then). The house had one bedroom upstairs, and one living area/kitchen at the bottom, and it was attached to a cattle shed, with no electricity, no phone and only one tap for running water (which happened to be outside the house!). I was born during their first 6 months in this house, and it was a full year before they got electricity or running water and two years before they got a phone! Those are the circumstances under which they had to raise a child! That is a true story.

So to all the FHBs who say it has never been so hard to get a first house, I would say just consider what type of first house your parents or grandparents had to make do with, and then consider downsizing your expectations.

Cheers,

Shadow.

 

[hobo-jo]

Hobo Jo We paid off the block of land not the house and land. It was the only way we could afford to get into the game. I was a fitter and turner still on apprentices wages and my girlfriend at the time soon to become my wife was a bank clerk. I cant believe you have to pay 500 to 600k to get into the housing market. You only have to pay this much if you are unwilling to start small and work hard that is my point. I have no sympathy for anyone who is not willing to do the hard yards.

Of course you don't have to buy for $500-600k. My partner and I certainly didn't. We paid $290k for a 900sqm block with 3 bedroom house 8km from the city. Todays wages as a bank clerk and apprentice would probably translate to around $65k joint ($40k/$25k). A quick look for cheap QLD land appears to be out of suburbia, theres a place called jimboomba, where prices are around the $150-160k mark, quite reasonable really and nicely central to both Brisbane and Gold Coast.

So $65kpa - $15k tax - $8k rent - $15k living expenses = $27k leftover
so minimum 8 years if every spare cent could be put into paying it off (ie unlikely)

So explain to me how someone today (in the same situation) can pay out a piece of land in a couple of years...Unless theres something I'm missing it does seem it was quite a bit easier to buy and payoff land in years past.

 

[BayView]

starting small is the way to go. For example, if you are 2 adults and a kid, buy a 2 bedroom apartment. Whatever you do, just start.

In Victoria, there are net 1000 people coming into the state each week so housing is in high demand and booming. So get in asap before prices keep rising.

Try Springvale, a real up & coming suburb with real potential. good shops, and good public transport, near major roads, multi cultural community.

But Springvale isn't cool.

Now, with my investor brain engaged... Springvale; mmmmm!

 

[Bazza]

House? You were lucky to have a HOUSE! We used to live in one room, all hundred and twenty-six of us, no furniture. Half the floor was missing; we were all huddled together in one corner for fear of FALLING!

You were lucky to have a ROOM! *We* used to have to live in a corridor!

Ohhhh we used to DREAM of livin' in a corridor! Woulda' been a palace to us. We used to live in an old water tank on a rubbish tip. We got woken up every morning by having a load of rotting fish dumped all over us! House!? Hmph.

Well when I say "house" it was only a hole in the ground covered by a piece of tarpaulin, but it was a house to US.

We were evicted from *our* hole in the ground; we had to go and live in a lake!

You were lucky to have a LAKE! There were a hundred and sixty of us living in a small shoebox in the middle of the road.

They were the good old days......

Cheers,

Bazza

 

[hobo-jo]

Let me guess...you had to hike from your shoe box to school every day through waist high snow, uphill, with no shoes, while dodging man eating snakes?

 

[Bazza]

And you try and tell the young people of today that ..... they won't believe you.

 

[VYBerlinaV8]

The 'housing affordability crisis' is a really interesting problem, especially for us property investors who have a vested interest. The reality is that supply and demand drives price, so if the market driven price means that properties still get bought and sold, the implication is that people can, in fact, raise the funds to buy.

That said, there's no doubt that it's probably harder to get into the market as a first home buyer now, due mostly to what is considered the minimum acceptable standard of living.

The biggest problem as I see it is that most Australians don't know or understand the one simple thing that would allow them to buy a home at some stage, and go on to gain financial independence later in life. I call this RULE ZERO, and I've written it, as I understand it, below.

RULE ZERO: Spend less than your total income and invest the leftover money in something that generates return with both yield and growth components.

This is what I have done, and it has worked out great. If people were genuinely willing and able to do this, and invest in anything that generates a total return of more than the growth value of their desired property, then eventually they would have enough equity to purchase a property. This is because the investment would increase by both the yield and growth components, and yet the cost of property only increases in line with the growth component.

But Australia is not an investment oriented nation. Australians, typically, are guilty of rampant consumerism. And this is why a small number of us are able to purchase multiple properties and grow wealth that far exceeds that of the typical Australian.

FWIW, I am always happy to explain to people how I managed to generate my present level of wealth, and to point them in the direction of doing it themself. Inevitably, most of these people try to pick holes in my approach, and convince themselves that I don't know what I'm talking about. But that's ok, because we choose our own paths, and I'm not going to be the one working my backside off in 20 years time paying for debts on worthless consumer items.

 

[komstak]

So explain to me how someone today (in the same situation) can pay out a piece of land in a couple of years...Unless theres something I'm missing it does seem it was quite a bit easier to buy and payoff land in years past.

Me and my partner came to Australia just over 3 years ago. We both started with "average" wages just totalling 110K a year. We were renting in Blacktown for $240 until we got a termination notice as the owner wanted sell his house to his brother who wants to live in the unit.

In our first two years, we saved as much as we can not really having a goal but just wanting to live comfortably in the future and have some buffer for a rainy day. We were thrifty but not to the point of depriving ourselves of some "luxuries" every now and then. We bought a car (which was necessary for work) and went back home for a holiday after a year.

After 2.5 years, we already had 100K in savings and so when we got the termination notice we decided to buy a house instead of renting again so that we won't have similar problems/inconveniences in the future. We were looking for a 400K house in a "safe" suburb but went on to buy a 500K brand new house (complete with A/C, landscape, lights, etc) in the Sydney NW area. We paid only 80K in deposit but after some negotiations with the bank, we were able waive the LMI. There was no stamp duty since the price is still on the 500K border for first home buyers, and we had a 7K FHOG.

After settlement, we still had 20K+ on-hand and we placed it on an offset account. Now, after 8 months, we have around 80K on the offset account which considerably lessens our monthly interest. I thought it would be hard but it's really not. We are still thrifty but still have those occasional "luxuries." One just to have discipline in achieving a goal.

At this rate, we'll be able to pay-off our loan in 7-8 years, 10 years at most. We were thinking of buying an IP a few months ago but we decided just to cash-up at this stage, concentrate on paying-off our loan, build equity and get ready for a Sydney recovery.

My point is if we, who started with nothing 3 years ago, are able to "comfortably" pay off a 500K loan, why can't others, who've lived and worked here for so many years, afford to buy even a 2 bedroom unit in an "average" place? I know we don't have kids but there are so many couples who are in a similar situation but can't seem to get their act together.

The main problem, I suppose, is not the affordablilty but the discipline and attitue of people towards money and their preference on immediate over long-term satisfaction.

 

[Nth Brisbanite]

It's a self servicing market. If people can't afford to pay so much for a piece of property then plainly and simply they won't, and just like in any free market, prices will come down, or they will saunter until people can afford it. Prices aren't dictated by sellers, they are dictated by buyers, which is why the arguement previously made, that 90% of people can't afford the median price, is flawed.

I know that your arguement is based on FHB's but i still maintain that there are plenty of affordable housing for these families, especially considering i know a few close 4-5 person families on one parent incomes that are purchasing at the moment. It's never easy, all you need to do is ask your parents or grand parents what they had to go through, and they will tell you the same.

I used to think the same way as you. Most of the posts to this thread say that the principles of home ownership haven't changed much over the years ie that if we work hard enough, spend less than what we earn, scrimp and save etc then we'll be able to afford a house. I don't agree - things have changed and changed dramatically over the last few years. How can people afford a house when prices go up by a predicted 50% in 3 years and wages go up by 15% or less?

Why should we expect young people to uproot themselves from all their support friends and support structures and move to undesirable locations? Friends and peers mean everything to young people these days. Quite often they don't have a family close by and if they do, quite often it is dysfunctional.

I think that some of the posts to this thread are harsh on the growing number of people who can't and will never be able to afford a property. Stanmunro, you may know of a few close 4-5 person families on one parent incomes that are purchasing at the moment.I also know of battlers who have followed so many of the principles mentioned in this thread and still can't afford a property.

 

[alexlee]

Why should we expect young people to uproot themselves from all their support friends and support structures and move to undesirable locations? Friends and peers mean everything to young people these days. Quite often they don't have a family close by and if they do, quite often it is dysfunctional.

Tough. Reality is what it is. It's either buy a place further away or rent forever (AND watch rising rents push you out anyway). Lament the breakdown of the nuclear family all you want. Won't change the reality.

I think that some of the posts to this thread are harsh on the growing number of people who can't and will never be able to afford a property. Stanmunro, you may know of a few close 4-5 person families on one parent incomes that are purchasing at the moment.I also know of battlers who have followed so many of the principles mentioned in this thread and still can't afford a property.

And there are plenty of people on this forum who started with nothing and DID get rich. Heck, living below your means, saving some money and buying as cheap as you can must be better than wringing your hands about it!

You know, maybe not everyone is supposed to own a property. Income distributions HAVE become more extreme over the years because of the change from a manufacturing economy to a knowledge-based economy. If you think that's the problem, agitate for more protectionism. I honestly doubt you'll reverse the trend, though.

Play the game as the rules really are, not as you think they should be.
Alex

 

[tubs]

The median price is a reflection of what people CAN afford and are CURRENTLY PAYING.

So, if the median is increasing, it is only because people CAN afford it. Hence, no affordability crisis.

It seems as though somebody else sets the median price, and people have to pay it, rather than it simply being a measure of what people are paying now.

 

[alexlee]

Exactly. Supply and demand.

It may well be the case that as economies develop the % of people who cannot afford decent housing (anyone seen a bedsit in London? Yuck) increases. That's unfortunately, but that's reality.

Everyone just make sure that YOU are on the nicer end of the stick. Not everyone will be.
Alex

 

[Ausprop]

it's the market being efficient, yet govts that have to pander to minority group demands will attempt to fiddle with it and 'make things right', such as the WA labor govt insistence on plonking state housing thru the exclusive perth western suburbs. one apartment there could buy 3 in the outer burbs, however that is irrelevant as everyone has the right to live in cottesloe!

 

[lizzie]

Moving away from friends, family and a safe environment is easier said than done. The reason why some of areas are so cheap is because of poor infrastructure, higher crime rates and poor transport. Many people cannot move into these areas because it is too far away from work. Many people cannot move into these areas because of crime problems. Many people cannot move into these areas because the schools provide such a poor standard of education.

hey - i moved country at 18yr old and didn't know anyone here except boyfriend. it's not "that" hard.

and all your "cannot's" need to be changed to "choose not's". what you have said is all a bunch of excuses put forward by those to soft and weak to sacrifice in the short term for long term gain ... and the definition of an excuse is "a lie to yourself" to justify your choice.

i was watching an interesting show on sbs the other night, of a school in a poor project area in the usa, and the teacher was teaching the kids the difference between needs and wants - very interesting - needs are food, shelter and anything that is required for basic survival. wants are the things we would like to have but can live without.

that's why the reasons you have put forward are merely excuses (lies to yourself). they are "choose not's" because they are wants - not needs.

 

[Land]

Man - Nth Brisbanite, do you think all the young kiddies out there spending $150 per night on drinks on Friday night, $400 on a pair of Deisel jeans on Saturday shopping, not to mention $400 week on repayments on their Audi S3 should also be able to afford a sprawling pad 3kms from the CBD.

By the way, I am 28 so I know what my peers are doing.

There are a couple of realities at play. The first is supply and demand: there are more people in Australia than 20 years ago. Therefore, if you want to live the same distance from CBD as your parents, then you are going to have to settle for an apartment rather than the house and the pool (which incidentally you don't deserve anyway because you're young and you should accept that you're actually at the BOTTOM of the chain, not the middle or the top). Of course, if you want the same size house, then get on your bike and head further out. What the hell is wrong with an apartment anyway, my wife and I love the convenience.

The second thing is that people in their 20's have a morbid obsession for spending like there's no tomorrow, and for consumer debt which is a killer. My wife and I personally get a kick out of saving as much as possible every pay day, and our reward is that we'll be buying another place after Christmas. Incidentally, my first house was a $290K jobbie in the blue mountains because that's all I could afford 4 years ago. It hasn't gone up since I bought it, but rather than complain, we have just saved hard for the next one as there isn't any equity to access in the first.

The final thing which you are completely forgetting/ignoring is wage growth!! Wages have increased DRAMATICALLY in the last 5 years. For people in their 20's like me, wage increases across the board have been coupled with the ability to ascend the career ladder at an astonishing rate from the age of about 22 to 30.

So there are no excuses. Affordability problem is complete crap and it's an insult to all of us who have done the hard yards to suggest it is too difficult for the poor little Gen Y's who are coming along now. You will find that EVERY investor on this forum has done significant hard yards at some point to achieve their goals.

 

[Ausprop]

not forgetting that these projections are just projections, which are usually wrong anyway. no point getting worked up over somehting that may not even happen

 

[Dis]

Using the median house price as a measure of affordability is silliness perpetuated by journalists who (a) want to sell stories and (b) are too lazy to use a statistical measure more relevant to their arguement.

If the median Car price was $30,000; nobody would say cars are unaffordable. They would simply point to the budget end of the market. Likewise when speaking of affordability, people should be talking about the 90th percentile prices.

Telling people that they should look at homes below the median is a bit like telling them that their IQ is below 100. Nobody likes it but by definition, it applies to 50% of the population.

 

[lizzie]

IWhy should we expect young people to uproot themselves from all their support friends and support structures and move to undesirable locations? Friends and peers mean everything to young people these days. Quite often they don't have a family close by and if they do, quite often it is dysfunctional.

oh dear - i am so sad - what a lot of self-pity wallow trash.

my ex-grandparents-in-law came out from holland after suffering a horrific time during the war (don't get me started on those stories!). didn't know a word of english, seven kids in tow and then dumped out in the immigration camps of greta, in a tin shed, in the middle of an australian summer (having just left a european winter).

if you don't know where greta is, then it's about 1.5hrs inland from newcastle and was around 38degrees in summer. they ended up (40 years later and lots of hard work) selling their very successful dairy farm to retire.

our first house was a "new" shoebox on the side of a cliff - and was 3 years before we could afford to cover the chipboard floors with cheap carpet. it was also an hours' bus trip each way to work. currently we're looking at uprooting our family and moving to china for a work opportunity - don't know a soul there, or the language, or the customs - so what, we'll survive! my parents moved country 3 times in 5 years for work, with 3 preschool kids in tow because they chose to make the best of their opportunities.

why shouldn't we expect young people to grow up and take responsibilities for their own lives, make sacrifices to give themselves a better future life, to be contributing members of society, if that is what is required of them? or is staying snuggled up with their peers more important than their future.

goodness me, nth b, stop being such a wet wig and grow some backbone! why do the current generation of fhb-er's think they should have it easier than those in the past?

 

[Dis]

IWhy should we expect young people to uproot themselves from all their support friends and support structures and move to undesirable locations?

Thats the whole point isn't it? Everyone wants to live in the most desirable locations. People without much money (typically those starting out in life) can't out bid the rest of the market so they need to find a less desirable place to live at will be more affordable. Note: I dont say undesirable. You say it beacuse in your mind you wont consider anything less than the high standards to which you have come accustomed.

Why should we expect young people to afford to live in a house that most people take years to buy?

 

[alexlee]

What I don't get is, Nth Brisbanite is an older guy, no? WE'RE the Gen X and Ys here. Why is NB lamenting that young people can't buy the properties they want and WE'RE saying just suck it up and get on with it? I would have thought it's usually the reverse. Of course, people on Somersoft aren't all that 'normal'.
Alex