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...
JB,
out of interest, how long did you save for a deposit, and how much deposit did you put down? What did your property cost to buy?
Assuming the above scenario you mentioned is you, and you put down 20% deposit (including FHOG) plus costs of around 6% of purchase price, then the $250k
loan means the property cost around $300k?
For a first home buyer, there is no need to spend anywhere near this much. A 2 bed unit is all a couple with a baby needs. You can buy them all over the country for around $200k in the major cities; and not out in the sticks either.
Take out FHOG - $7,000 (or is it more now?)
20% Deposit - $40,000
Purchase costs (6% approx) - $12,000
Loan of $141,000.
So, I'm guessing the FHOG would all but cut out the purchase costs?
At 8% interest only, the repayments per month on:
$141k = $940 p/month.
$250k = $1666 p/month.
Big difference from $250k, and a frugal couple would have that paid off in 10 years or less, and have a lifestyle, and the property would have doubled in value.
Then trade up to the bigger, better house; like I did, like my parents and their parents did.
The problem is now that FHB's don't need to save a bigger deposit any more; they can get 90-95% loans, LMI and all that stuff to get 'em in there faster.
So the loans are higher, the repayments higher and the cashflow is tighter, and dare I repeat the statement made so often now; have bigger expectations, but all these factors don't mix.