Solving the housing affordability crisis

As a young person I am just overwhelmed when I look at the price of properties and even the cost of rent.

I just can't understand how families with young children make it work, even on two incomes :confused:

Does anyone think that housing affordability is something the government should be addressing? And what type of policies would help?
 
No the government should not be doing anything. "expectations" around the type of property people are after is what young people like you, and families should be addressing.

Is there any reason why you, as a young person can't start off in a 1br unit, and work your way up, or share rent, or live a little further out.
Many of us on the property ladder now, started off that way. Rented shabby places, or shared rented, and then started in a 1br unit on the ladder.
Stop complaining, and lower your property expectations for a "first" home.

But by all means, let the government interfere more in property than they already have. The end result of government interference is that property prices end up going up even further.

Stop with your entitement attitude "cupcakes", and work harder to achieve your goals.
 
why do you say 2 people working can't afford rent? that sounds really strange. rent is say $400pw, $20k pa, 2 people working earn $100-300k pa.

the govt shouldn't do anything and indeed already does too much. why do taxpayers have to help you (or anybody else) afford a house? we already subsidise rents via negative gearing.
 
I've helped all sorts of people with all sorts of incomes and circumstances buy houses.

You'd be surprised how much you can borrow on an average income these days. The big problem is a lot of people have credit cards and personal loans which hold them back. This is probably the biggest thing stopping peoples affordability, not the average price of housing.

The other half of the equation is saving for a deposit. A lot of people make substantial sacrifices to get together a 5 to 10% deposit. Others have friends and family help them out. If rent is getting in your way, move back in with Mum and Dad for a while.

Housing affordability has been an issue for generations, it's nothing new. People have been complaining about the same things for longer than I can remember. In my experience, when the goverment tries to do something to make it easier, it usually ends up hurting the people it was intended to help.
 
You'd be surprised how much you can borrow on an average income these days. The big problem is a lot of people have credit cards and personal loans which hold them back. This is probably the biggest thing stopping peoples affordability, not the average price of housing.

PTB, persuasive, and I'd like to hear more from someone as close to the action as you on this.

But isn't the availability of negative gearing to existing property investors the real reason why newcomers can't get into the property market?
 
But isn't the availability of negative gearing to existing property investors the real reason why newcomers can't get into the property market?

but Cupcakes says he/she can't afford rent. Rents are currently subsidised to a large extent via neg gearing. Stop the rental subsidies and let the market sort itself out I say. It would be a shame to do that, because it is singling out property investors and denying them deductions that any other taxpayer is entitled to, but sometimes you have to slap sense into people, particularly when the ATO is payign out for the craziness
 
But isn't the availability of negative gearing to existing property investors the real reason why newcomers can't get into the property market?

Negative gearing means the landlord is actually loosing money from one week to the next. In Melbourne for example, a landlord might receive a 3-4% rental yield. If interest rates are at 7% (which they currently are), the landlord is forking out at least 3% of the property value every year, not to mention rates, mainenance and all the other holding costs.

The best case is the landlord gets 45% of the lossess back via negative gearing, but for most people it's usually about 30% of the lossess.

If a tenant can't afford rent, they definitely can't afford to buy the property. Negative gearing is what makes renting affordable for tenants. Take it away and rents will increase by about 70% within 12 months.

There's no doubt that negative gearing makes property investment slightly more affordable and thus has some upwards effect on prices, but a savvy investor understands that they make more money if they buy cheaply. The real driver of property prices is the owner occupier who falls in love with the house, or wants to live close to the right school, etc.

In terms of peoples affordability...

These days a couple earning $30k each will qualify for a loan of about $300k if they don't have significant other debts. There's not many full time jobs out there that pay less than $30k per annum. I have clients that work at Bunnings, Coles and Myer that earn more than this.

$300k doesn't get you very far in most capital cities, but I can also tell you that in satelite cities of all the capitals, purchasing a property for between $300k and $400k is easily acheived. This includes decent 3 bedroom houses. The problem is people want to live were they grew up, which is long out of their price range. They need to comprimise and live where they can afford.
 
As a young person I am just overwhelmed when I look at the price of properties and even the cost of rent.

I just can't understand how families with young children make it work, even on two incomes :confused:

Does anyone think that housing affordability is something the government should be addressing? And what type of policies would help?

What housing affordability crisis? You don't say what state, or even what town you are from, but I can assure you that there if you are working full time there is something you can afford.

For instance, if in the ACT, try Queenbeyan, if from Melbourne, then you've places around Geelong, if from Sydney, then Western Sydney. Getting the picture? Sure these places might not be your ideal suburb of choice, you might have to commute, you might have to live in something older and small, but it's a start.

So, get off your high horse, save a deposit (yes, save, old fashioned, but it works) and stop expecting everyone else to help you out. We all did it and survived. I'm sure you can too!

Oh, & before you come back and say that it's still too expensive, consider this. I have a 21yr old earning a whopping $30kpa who has saved a deposit and is approved to purchase a 3 bed home ON A SINGLE INCOME. Proof positive that there are places available to suit all incomes.
 
As a young person I am just overwhelmed when I look at the price of properties and even the cost of rent.

I just can't understand how families with young children make it work, even on two incomes :confused:

Does anyone think that housing affordability is something the government should be addressing? And what type of policies would help?

300k house, minus 30k deposit, 7k first home owners grant, no stamp duty, plus 2500 legal fees.

265.5k debt

outgoings (fixed)

- Mortgage Interest Only $19,912.50 Per year (7.5% Interest rate)
- Council rates - $1,200
- Water rates - $660
- Insurance - $700
- Repairs - $500

$442 per week, split two ways - $221 per week.

Im not going to sugar coat it, the government doesn't have to do anything about affordability because their isn't a problem. Some people just have to lower their expectations and be prepared to sacrifice abit (yeah instead of spending that $400 bucks aunty sally gave you, maybe stick it in the bank or use it to pay down some exsisting debt). If you are really serious about the issue and this isn't a troll job, do your self a favor and get some books on how to manage money

Regards,

RH
 
As a young person I am just overwhelmed when I look at the price of properties and even the cost of rent.

I just can't understand how families with young children make it work, even on two incomes :confused:

Does anyone think that housing affordability is something the government should be addressing? And what type of policies would help?

We're at a high point in the cycle, and over the next few years prices will stagnate (coming down a bit in real terms). What's really needed is to practice living simply and saving, and to seek out a property that fits your price point. Look not so much at overall price, and more at what it costs to hold and pay off a mortgage per week/fortnight/month. Ridin-high's post explains this further.

Consider that at 30 you probably won't be living in your dream home, but will be getting ready to upgrade at some point. Whatever you do, DON'T use property being expensive as an excuse to not live simply and save for most of the time. What separates the wealthy from the poor as you get older is the will to delay gratification.
 
Back in 2006 my partner and I bought a house in an Adelaide suburb, around 8km out from the city for $290k. Today the same property would sell for around $420k. Up 44% in a short 5 years, where wages would have been lucky to grow 15% over the same time frame. If we were in the same jobs now that we had then (with only the same level of savings) we wouldn't be able to afford it.

Those on median incomes have been pushed further and further out from the city centres to fringe suburbs.

Those that could still afford the inner ring thought this was great... but it's the upper price percentile (inner-ring) that is now falling the worst. With fewer being able to afford the inner areas there are less people to bid up and keep the prices stable. Uh-oh.

Affordability will be back, just how quickly depends on how the government interferes.

Policy suggestions from Steve Keen:
1. Abolition of the First Home Owners Grant (FHOG) for the purchase of existing properties;
2. Abolition of Negative Gearing (NG) on existing properties and shares (coupled with grandfathering of existing Negative Gearing);
3. Restoring capital gains tax to the same rate as income tax;
4. Ban “covered bonds”–which rank bond purchasers ahead of depositors;
5. 25% of the funds saved from these two programs over the next 3 years to go to the purchase of new properties to expand the supply of low-income public housing;
6. 5% to expand the funding of public housing;
7. 25% to construct and administer new homeless shelters; and
8. 5% to Swags for Homeless so that people who are still sleeping rough can do so in better comfort.
http://www.debtdeflation.com/blogs/2011/03/29/getup-proposed-campaign-against-negative-gearing/

From Prosper:
# Negative gearing limited to new home construction, then phased out completely
# Stamp Duty eliminated
# Abolishing First Home Owner Grants (never again!)
# Replace stamp duty and negative gearing with a higher and flatter Land Value Tax
# Reducing the threshold on Land Tax to zero
http://www.prosper.org.au/2011/03/31/what-we-want-buyers-strike/
 
Negative gearing means the landlord is actually losing money from one week to the next. . . .

The best case is the landlord gets 45% of the losses back via negative gearing, but for most people it's usually about 30% of the losses. . . .

Negative gearing is what makes renting affordable for tenants. Take it away and rents will increase by about 70% within 12 months. . . .

The problem is people want to live were they grew up, which is long out of their price range. They need to comprimise and live where they can afford.

Thanks for the reply, PT! (Please forgive the editing, but I wanted to follow up with you on just this point for now.)

Now, in today's SMH, Saul Eslake argues -

Supporters of negative gearing argue that its abolition would lead to a ''landlords' strike'', driving up rents and exacerbating the existing shortage of affordable rental housing. . . .

uppose that a large number of landlords were to respond to the abolition of negative gearing by selling their properties. That would push down the prices of investment properties, making them more affordable to would-be home buyers, allowing more of them to become home owners, and thereby reducing demand for rental properties in almost exactly the same proportion as the reduction in the supply of them.

It's actually quite difficult to think of anything that would do more to improve affordability conditions for would-be home buyers than the abolition of negative gearing.


http://www.smh.com.au/business/time...ules-for-negative-gearing-20110424-1dsu6.html

Isn't he right?
 
The highly negative geared areas are also likely to be those that will not be affordable for FHBs anyway, even if prices did drop.

Sure there will be a smaller flow on affect to the sub 500k market, but I would expect the biggest drops to be in blue chip suburbs.
 
As a young person I am just overwhelmed when I look at the price of properties and even the cost of rent.

I just can't understand how families with young children make it work, even on two incomes :confused:

Does anyone think that housing affordability is something the government should be addressing? And what type of policies would help?

I am a Young (both gen Y) family (3 kids plus one on the way) on a single income (albeit a reasonably good single income).

It can be hard. It takes perserverance, dedication, savings, budgeting and clearly defined set of goals to work towards, as well as maybe adjusting your own expectations of what you are aiming towards and where.

None of this is new. People have always had to sacrifice a little to get ahead in the property market. The difference nowdays is people don't 'want' to sacrifice anything else. They want to keep up with the jones, with their lifestyle (ie, credit cards debt, eating out, clothing, holidays, cars, etc) and they still expect to have a house on TOP of that. :rolleyes:

Housing isn't unaffordable. People are just too demanding, too far in 'other' debt and less willing to work towards what they want. They want someone else to just hand it too them on a silver platter. There is a sense of entitlement. And people just look at the BIG goal (the reallly nice big house in the goods suburb) without wanting to work their way up to that. The fact is they they CANN"T afford that. Not straight up. They need to work towards what they can afford, or figure out a way to be able to afford the bigger goal.

It isn't about income. It is rarely about income. It is about how smart you are with the money you have.

I have seen people (am related to some of them) on crappy incomes, increase those incomes significantly (as much as three and four times their original incomes). They still couldn't 'afford' a house. Not because of their income. But because they were stupid (for lack of a better word). Their debt increased with their incomes, their spending increased with their incomes, their extra-ciricular activity increased with their incomes - and they result was they were still broke. They are still living paycheck to paycheck. They are still complaining how 'unaffordable' housing is.

I have no sympathy for people who suffer because of their own stupidity. Those who genuinely want to get ahead, who genuinely want solutions, will find them. Those who want things handed to them on a silver platter....
Tough luck. The world doesn't work like that.

You reap what you sow.
 
Or rent in the suburb of your choice and buy IPs in other areas which have higher rental yields.

This is what I am doing.

Ditto. Same as what we are doing. Renting around the Harbour where a landlord gets 3% yield (and where it would cost $800-850K to buy the same 2bedder), and investing elsewhere where we get 5-7%.

Some people just get so emotionally attached to the idea of a "dream" home. that they end up paying large amounts of money for property further out, and then slave away 30yr to pay it off. Some people are just plain dumb.
 
The government can certainly do something about housing prices - they can stop paying ridiculous things like first home owners grants, that do nothing but inflate prices and benefit sellers.

They can also stop charging stupid fees like stamp duty and GST on houses, which in themselves pump up house prices because the poor bugger who bought the place is forced to sell at a high price just to break even.
 
Add to that OA all the huge assortment of charges, levies and taxes that get lumped in along the way by each level of government in taking a greenfields site up to the stage of a completed new house for sale.

My memory on this is a bit rusty, but I recall reading some months ago that such total government revenues contributed something like $160K out of the cost of a $360K house and land package.

Actually, if anyone out there can help me with more accurate figures / sources in this area I'd be hugely indebted (or should that be, massively negatively geared in the obligation department?).
 
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