Residex's Dec report - median price for Melbourne & Brisbane to reach $500,000 in 08
- Thread starter Nth Brisbanite
- Start date
I think 500K is some sort of psychological barrier. I think after this ceiling is reached in Brissie, we will have to wait for inflation to up our jobs..so steady low percentage annual cg growth at roughly inflation levels of 2-5% is likely IMO.
Yield, in those days the population was about 5 million for the whole country.
In the late 60's, I was around 7 or 8, and my Auntie moved into a new housing subdivision in Burwood, in Melb at the end of the tram line.
We used to go visit her, and we had to get off the tram and walk the rest of the way to her house down a dirt road. It was the end of civilisation.
Now Burwood is practically an inner suburb of Melb. So you can't use the distance analogy to draw a comparison with this housing debate. As the population increases, the city expands either upward or outward.
If it expands upward, the accomodation gets smaller, and the demand increases the cost. You get less house for more money.
Things are no different now; if you want the new, affordable house with a few bedrooms and a yard for the kids, you have to move out to the fringe of suburbia where the trees are small, the gardens are new and bare and the shops are a bit of a drive still.
People in L.A are commuting from hell-holes like Riverside; 2 hours from the city, because it's the only place they can afford the 3 x 2 house and yard. it's a very big city with a lot of people. Nothing you can do about it, other than earn more money and then buy closer in.
The problem is, the young kids see all the tv stars "living the life" on shows like MTV, Cribs, The Hills and so on, and think it's their right of passage to start off the same way; 2 mins from the clubs and cafes, and drive around in a beemer.
Oh yeah; here's a 30 sec search for a property within 1 hour of Melb CBD. Frankston; 40 mins:
http://www.realestate.com.au/cgi-bi...eader=&c=20843890&s=vic&snf=rbs&tm=1198194329
Marc, great post! YM, I think what Marc's said is really fair. Also, as population expands at exponential rate in general, the 'long term median trend' does not have to be a straight line anymore.. It can skyrocket at an exponential rate too. Of course, that trend can be 'adjusted' by building more high density dwellings, so that the land size decreases accordingly.
I think if you had decent planning and infrustructure policies you end up with multiple CBDs. Larger city does not necessarilly mean higher prices.
I don't know Adelaide. My world revolves around Brisbane, Sydney, Melbourne. So I'm sorry to include the fine city of Adelaide in my anti-family evil city list!
I guess the question for everybody out there is this - in principle, is a rising median house price a good thing or a bad thing for the economic well being of society? I'd argue strongly it isn't but I should transfer this discussion to the economics thread. Deep philosophical / economic arguments are loads of fun but not for everybody - I am conscious of that.
I'm sure Adelaide's not that much different, just much smaller for the time being.
That's where we differ YM, I don't see an increasing median house price as a problem. At least not at this point of time in our country (who knows 30yrs from now). We have given you countless ways and examples of FHB'ers who are still out there every day buying houses (call the state revenue office in each state and find out how many FHB grants were given away last month). If they can do it, then obviuously the problem is not at crisis point, despite what all the press and bleeding hearts say.
I'm not denying for a second that all mummy and daddy's precious angels can't afford the house 5 streets over!
This is not a debatable point in my mind - if thousands of FHB can get their first place every year - then where is the problem? Have you thought perhaps it's because the others who whinge don't plan ahead, don't consider alternatives, and just generally DON'T THINK about their future (I know, that seems to be asking a LOT of some people these days!).
So do you think it's fair to somehow keep median prices in check (not that I believe it's possible) so that the slacker FHB's can get their s&#t together to the detriment of other FHB's who do (& I'm sure the young couple who bought their first home last year want to see the price rise as opposed to sit flat), and to everyone else who is already in the REA market?
That is my main question to you.
PS Hmmmm I like the term "slacker FHB's" - distinguishes between them, because they're certainly not all slackers!
Not if the increasing immigration come from Asia. I migrated from Asia myself and where I came from, it's even less acceptable to rent than Australia. It might drive down size expectation though as many of us are used to living in smaller houses compared to the properties here.
Using your figures then, you need to use a different 'loan calculator', and use $400 per week as an interest only payment instead, which at a 8% pa variable interest rate, would equate to $260000 in borrowings that you could afford to service. Add on any cash savings and you can then afford to service a purchase of 260k+. So you could do much better than you're figures would suggest...
Hurrah, someone else who may agree with me!!! Yieldmatters, you are number 2
Did you see the following article in today's news from the REIA?
Housing affordability falls almost 10pc
December 21, 2007
HOUSING affordability declined by almost 10 per cent over the past year, a report shows, and there appears to be little relief in sight for renters and those looking to enter the property market.
While welcoming the renewed focus on the issue of housing affordability, the Real Estate Institute of Australia (REIA), which this week released its annual summary of residential and commercial real estate markets, warned that renters and buyers alike still faced an uphill battle.
"The REIA looks forward to the introduction of the Rudd Government initiatives including the first home saver scheme, housing rental scheme, and housing affordability fund,'' REIA president Noel Dyett said.
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The issue is still around FHB who are trying to punch above their weight...a first home buyer, in my opinion, should be aiming at outskirt prices, currently in Brisbane, thats around the low 300s in the Logan area and just a touch more on the northside, at lets say Kallangur. This is FHB territory, not Bardon, Indro or Kenmore and definitely not a trendy CBD unit. But who wants to live in the burbs? Not Gen X and Y....and as I continue to say it, we need renters...
You guys may agree, but I seriously doubt the situation is going to change. What's the point of wringing your hands and cluck-clucking over something that you can't change? Sure it's nice to find people who share your views, but I prefer to deal with the world as it is.
Alex
This is good news for me, just more money i can put in my back pocket. I think they should increase the FHBG because i wouldn't mind a 5% boost to my CG. *shakes fist* damn affordability crisis, the government should do more about it!
I'm going to bite....
Being a recent FHB, i'm going to have to agree with Nth Brisbanite. Basically it has come to the point where first home buyers need 2 incomes to purchase a home. My partner and I have recently purchased a house out in the suburbs, 1 hour drive from the city and it is no way a McMansion. If one of us lost our jobs, we'd basically lose our home (for example if we had kids).
And before someone goes off and says "i bet you bought a house above your means" or "you're spending too much money going out, on cars etc..." you'll be wrong. The partner and I are both quite frugal and "smart" with our money.
The fact is, houses are damn expensive these days and while they're not unafforable, life becomes tough once you buy a house.
I'll give a simple example:
Imagine a couple in their mid 20's with with a new born, single income of $60,000. After tax that's approximately $42,000 (based on 30% tax rate). If they go off and take out a $250,000 loan to purchase a house, repayments will be in the vicinity of $22,000 per annum. That leaves $20,000 a year (or $1666 a month) for other living expesnses.
Once bills, groceries, car insurance, home insurance, petrol, rates, and items for the baby are paid for, it doesn't leave the couple with much, if anything...
Being a recent FHB, i'm going to have to agree with Nth Brisbanite. Basically it has come to the point where first home buyers need 2 incomes to purchase a home. My partner and I have recently purchased a house out in the suburbs, 1 hour drive from the city and it is no way a McMansion. If one of us lost our jobs, we'd basically lose our home (for example if we had kids).
And before someone goes off and says "i bet you bought a house above your means" or "you're spending too much money going out, on cars etc..." you'll be wrong. The partner and I are both quite frugal and "smart" with our money.
The fact is, houses are damn expensive these days and while they're not unafforable, life becomes tough once you buy a house.
I'll give a simple example:
Imagine a couple in their mid 20's with with a new born, single income of $60,000. After tax that's approximately $42,000 (based on 30% tax rate). If they go off and take out a $250,000 loan to purchase a house, repayments will be in the vicinity of $22,000 per annum. That leaves $20,000 a year (or $1666 a month) for other living expesnses.
Once bills, groceries, car insurance, home insurance, petrol, rates, and items for the baby are paid for, it doesn't leave the couple with much, if anything...
But JB, what solution have you got? Any demand-type 'solution' (lower interest rates, higher first home owners grant, etc) will just increase prices across the board. Releasing land in the fringes won't help because people, it seems, aren't willing to live out that far. Increasing redevelopment would help but if people aren't willing to switch from houses to townhouses / units, it still won't help. The only thing that would help is building lots of transport infrastructure with fast trains to open up new areas, but no government has the long term vision to do that (since by the time the trainline is finished and the benefits are obvious, it's probably another party in power).
Prices are like this because people CAN afford to buy at current prices. Some people can't, and you can lament income distribution all you want, but reality is what it is. A house is a big commitment. Maybe your lifestyle IS supposed to be impacted by buying a house.
My suggestion: learn how to invest, and build some assets. Then when you have assets and non-job income, having kids, upgrading PPOR, etc become easier.
Putting it brutally: What choice do you have? Prices aren't coming down unless we have a recession, and your job would be in even more danger then.
Alex
Prices are like this because people CAN afford to buy at current prices. Some people can't, and you can lament income distribution all you want, but reality is what it is. A house is a big commitment. Maybe your lifestyle IS supposed to be impacted by buying a house.
My suggestion: learn how to invest, and build some assets. Then when you have assets and non-job income, having kids, upgrading PPOR, etc become easier.
Putting it brutally: What choice do you have? Prices aren't coming down unless we have a recession, and your job would be in even more danger then.
Alex
We do not have a flat tax rate here. With our scaled tax system, after tax pay of 60k it's more like $47400. That's excluding tax rebate for spouse not working and family tax benefits, you are more likely to see 50k+ net after taking all that into account. If someone with that net income and say a small family with one kid can't afford a 250k mortgage then I would say they have serious problems managing their budget.
Your other choices are:
1) Move somewhere affordable - countryside or smaller regional cities. Or another country that have sensible infrustructure policies and normal house prices (if you have that option).
or
2) Rent. There is an unnecessary stigma about renting in this country. At this point it is a very attractive proposition and people should consider it. Financing through a bank is 8%. Financing through your friendly landlord is 4%.
Excellent choices. And everyone has the freedom to do so. But if people aren't even willing to move into the outer suburbs, what are the chances that significant numbers of people will move to the regional cities? Though tell me, YM, which country / city would you suggest?
As for renting, that might be a good idea. But rents are rising. Besides, if you have a family and children, you want stability, not to mention the ability to hang stuff on the walls. Can't do that in a rental. I, of all people, bought a PPOR recently, even though I knew financially it would have been much better to rent and buy IPs. Why did I do that? Because my 'nesting' instincts started to kick in. We're thinking about having kids, and I want a stable, no landlord inspections, no worries about lease renewals, life. If an investor like me is thinking like that, I'm willing to bet that most people do as well.
Ideally you should rent when yields are low, and buy when yields are high. So buying in the mid-late 90s would have been great because yields were high, and you should have moved out of your place and rented around the early 00s. If you are willing to live like that, you'll be rich.
I'm going to bet (with mine as well as the bank's money) that humans will continue to be humans, with all the usual weaknesses and illogical instincts.
Alex
And add to that, if you used interest only at 8%, then on 250k, that is $20000 pa, not $22000, every little bit counts...
People continue to throw around numbers saying it's unaffordable but just aren't looking at it precisely enough, which is important, especially at the lower end of the income scale.
And wasn't there also a 'baby bonus' available?
