Solving the housing affordability crisis
- Thread starter Cupcakes
- Start date
Cupcakes, I suggest you give up trying to reason with the people on this forum. They simply won't accept that property is expensive. This is a forum for discussing the sentiment as to why property will always go up and up and why everyone should buy ten properties tomorrow.
There are some intelligent posters who give good advice in general but many are simply strange and often scary cult like figures who are preaching property like some kind of positivity sermon.
The long and short of it is yes property is highly expensive and most cannot afford it which is why properties are not selling as well as they have been. You can wait a few years and see what happens or try and get a very high income and a good deposit. That is about the only way you'll be able to afford it.
If you buy a little 2 beddy for 350k on an interest only loan the only person you are making better off is the investor whom you just purchased it from. (this would be an entirely speculative purchase and it's viability will depend on increasing prices)
Please do not make a property purchase in the next couple of years unless you can really afford principle plus interest and are happy with zero or negative gains for a while.
There are some intelligent posters who give good advice in general but many are simply strange and often scary cult like figures who are preaching property like some kind of positivity sermon.
The long and short of it is yes property is highly expensive and most cannot afford it which is why properties are not selling as well as they have been. You can wait a few years and see what happens or try and get a very high income and a good deposit. That is about the only way you'll be able to afford it.
If you buy a little 2 beddy for 350k on an interest only loan the only person you are making better off is the investor whom you just purchased it from. (this would be an entirely speculative purchase and it's viability will depend on increasing prices)
Please do not make a property purchase in the next couple of years unless you can really afford principle plus interest and are happy with zero or negative gains for a while.
Now who's preaching insanity?
Hi Cupcakes,
To save for our first home, my husband and I lived with his parents for just over a year.
We could not afford Sydney, and bought a house on the NSW Central Coast. There was no FHOBG twenty years ago.
We continued to live and rent in Sydney where we both worked, renting out our house on the coast. Needless to say, it eventually tripled in value.
I'm Gen X and most of our parents either lived in garages with their parents or even seperated their children to aunties for a time while they did what they had to, to save for a house.
I work with a 30yr old, who refuses to have the internet at home, has an old projection TV, makes his lunch and has just bought his first home with an LVR 70%.
Says it all, I think.
Regards,
Jo
UUUMM it says he just lost a bucket load of that 70% he saved up as he should have bought earlier ?
He could have bought back when he had 10 grand and would probably have paid most of the loan off (with that savings potential) and acheived around an additional 100% in equity from capital gains. Heck he'd probably he on his second or third property by now, with most of them almost paid off.
The only way to have won in property over the last 10 years (say you were 20 10 years ago) was to get as leveraged as possible, the oppossite of savings. It has been about borrowing and purchasing to get maximum returns, not saving.
Housing has been criminally speculative asset for those reasons, which is why prices are sky high.
Last edited:
Wait. I'm insane for saying only buy what you can afford and don't expect capital gains ?
I love this talk of buying one bedders. I seriously don't know anyone who started with owning a "one beddy" most bought 3 bedroom houses 8 or 9 years ago when they were 150-200k which are now 350-400k and the wages of people buying them hasn't increased by anywhere near that much.
So yes, it is expensive and very hard to buy.
Furthermore, when prices do fall, those pathetic little 350k units will be the first to fall in price and they'll fall the hardest because they have NO value for money. Those massively leveraged up to buy them with limited incomes on interest only loans will be hit the hardest (especially seems rates will go up in the future)
So yes, it is expensive and very hard to buy.
Furthermore, when prices do fall, those pathetic little 350k units will be the first to fall in price and they'll fall the hardest because they have NO value for money. Those massively leveraged up to buy them with limited incomes on interest only loans will be hit the hardest (especially seems rates will go up in the future)
No, Beebop, but with such absolutely certain knowedge of the future you're certainly preaching.
You'd need a direct line to the Almighty to be coming back down from your mountain advising an aspiring first-time property owner that they're unequivocally flirting with damnation.
And being able to see with such absolute clarity into the future might for some reasonably raise the question of your sanity, yes.
Last edited:
From our personal experience there is still good opportunity for those on low-middle incomes to buy property (e.g. we bought in Ballarat) but the range of buying options has shrunk in cities like Melbourne where prices shot up rapidly over a few years.
In 2006 we were renting a spacious 2 bed apartment in a nice 1940s block in beachside St Kilda for $240 pw, the property sold in mid 2006 for around $270k (prices today for comparable properties would probably be edging $400 pw rent and $500k). In 2006 for $300k you could purchase a 2 bed apartment in a range of beachside and middle rim suburbs, today you'd be looking at outer suburbs such as Melton, Werribee and Frankston.
In 2006 we were renting a spacious 2 bed apartment in a nice 1940s block in beachside St Kilda for $240 pw, the property sold in mid 2006 for around $270k (prices today for comparable properties would probably be edging $400 pw rent and $500k). In 2006 for $300k you could purchase a 2 bed apartment in a range of beachside and middle rim suburbs, today you'd be looking at outer suburbs such as Melton, Werribee and Frankston.
For the record, Cupcakes, one of the reasons it appeared that everyone was wanting to come on hard with you at first was that they mistook you to be of a similar ilk to our friend Beebop here, who is nothing more than a troll on this site.
You will find we are a patient mob with anyone who is genuinely trying to learn, but we don't suffer fools gladly, especially when they try to steal the dreams of other newbies like yourself. We have been more than patient with Beebop and he has shown his true colours, so we have now stopped trying.
You will find we are a patient mob with anyone who is genuinely trying to learn, but we don't suffer fools gladly, especially when they try to steal the dreams of other newbies like yourself. We have been more than patient with Beebop and he has shown his true colours, so we have now stopped trying.
Hi Guys,I'm new to this forum i was reading an article by Saul Eslake the other day and he writes:
"In 1998-99, when capital gains were last taxed at the same rate as other types of income (less an allowance for inflation), Australia had 1.3 million taxpaying landlords who in total made a taxable profit of almost $700 million. By 2008-09, the latest year for which statistics are available, the number of taxpaying landlords had risen to just under 1.7 million: but they collectively lost $6.5 billion, largely because the amount they paid out in interest rose almost fourfold (from just over $5 billion to almost $20 billion over this period), while the amount they collected in rent ''only'' slightly more than doubled (from $11 billion to $26 billion), as did other (non-interest) expenses.
So does this mean that if i invest in property now i will be making a loss unless the value of property goes up?as you guys are aware in the last few quarters the(Median) prices have been falling at rate that we did not expect.so unless the property value goes up there is no hope for investment i guess?
Aussie economy is in a quite bad shape at the moment and people spend much less than they used to in the last couple of years.do you think that we can expect capital gains in future? unless anybody owns at least a couple of investment property outright i think its going to be hard to recoup losses in a falling market??
Read more: http://www.theage.com.au/business/t...ive-gearing-20110424-1dsu6.html#ixzz1KavYvP8E
"In 1998-99, when capital gains were last taxed at the same rate as other types of income (less an allowance for inflation), Australia had 1.3 million taxpaying landlords who in total made a taxable profit of almost $700 million. By 2008-09, the latest year for which statistics are available, the number of taxpaying landlords had risen to just under 1.7 million: but they collectively lost $6.5 billion, largely because the amount they paid out in interest rose almost fourfold (from just over $5 billion to almost $20 billion over this period), while the amount they collected in rent ''only'' slightly more than doubled (from $11 billion to $26 billion), as did other (non-interest) expenses.
So does this mean that if i invest in property now i will be making a loss unless the value of property goes up?as you guys are aware in the last few quarters the(Median) prices have been falling at rate that we did not expect.so unless the property value goes up there is no hope for investment i guess?
Aussie economy is in a quite bad shape at the moment and people spend much less than they used to in the last couple of years.do you think that we can expect capital gains in future? unless anybody owns at least a couple of investment property outright i think its going to be hard to recoup losses in a falling market??
Read more: http://www.theage.com.au/business/t...ive-gearing-20110424-1dsu6.html#ixzz1KavYvP8E
Hi Cupcakes. I'm not sure where you live, and I'm not sure who is talking about buying a "one beddy" as Beebop is rabbiting on about.
You were not here when I posted about our son, who at 22 bought a two bedroom unit with balcony in Greenslopes, four minute drive from the city, for $292K. For the same price, he could have bought a very ordinary looking timber on brick base three bedroom house at Slacks Creek. He would have got double the space but his travel would be ten times the time spent getting to and from work, via the South East Freeway at peak hour.
He earns $38.5K but that salary will rise and his interest only mortgage is fixed for three years. He is not paying anything off the principal, but even if he had a principal and interest loan he would hardly be paying off any principal in those first years either. Many people are scared by interest only loans thinking they are going nowhere, but such a loan means our son can borrow. If he borrowed principal and interest, he would probably not have been able to borrow enough.
My son didn't want to pay rent, so his option was to stay at home or buy. He was convinced he could NOT buy, until he told me this and I called our loan broker. Because the unit was rented, he was able to borrow using the rental amount, as if he was continuing to rent it, although the bank would have known he was going to live in it. Perhaps they turned a blind eye, perhaps they didn't connect the dots.
Doesn't matter, because his repayments on a loan of $292K are about $395 per week. He has a friend from school contributing towards his expenses and our son has taken the smallest bedroom initially, but it fits a queen size bed, a three door wardrobe plus a small desk. Not huge, but certainly big enough for the time he is in there.
His repayments will stay at $395 for at least three years. His school friend contributes $160 per week towards his expenses. He is not "renting" to his friend, there is no lease and he is not claiming any costs.
He must live there for six months to satisfy the First Home Owners Grant and he must live there for twelve months to satisfy the Office of State Revenue who have not charged him transfer (stamp) duty on the purchase.
After twelve months, he could move out, rent with friends or move back home, rent his unit for probably $340 per week and claim his interest, and depreciation.
He gutted the bathroom, spent about $5K installing a new one that looks fantastic, painted his kitchen cupboards deep grey, which I thought was a waste of time and paint, but which made a 1000% difference to the kitchen. It looks like a new kitchen with a few new wall cabinets. HUGE difference!!
What I am saying is that if he rented the same unit, it would cost him $170 if he shared with one other. He is paying $225 plus body corporate, rates, insurance. In three years it will still be costing him $225 plus those fees, and to rent the same place might cost him $200 as rents rise.
If he was supporting a non-working partner, he could obviously not do this without getting a second job, or having paid down the mortgage before the partner became non-working, but that is what planning is all about.
Beebop has (and will) come back with all the negatives. My son was the same until the lightbulb moment he had that instead of whining about what he could NOT afford, I was able to show him what he COULD afford.
It isn't grand, it certainly isn't his "dream home", but it is a very nice unit in a highly sought after ares, and it is all his (apart from what the bank owns
) and he is loving it.
I hope you took the time to explain to him that not wanting to pay rent is a stupid reason for buying
Rent money is no more dead money than interest on the mortgage for a PPOR...Based on the figures you've provided and prices in the area I would assume he had around a $50k deposit.
Let's take a quick look at the figures:
Mortgage: $235pw (after friends assistance)
Corporate Rates: $25pw ($350pq)
Council Rates: $20pw ($250pq)
Other Maintenance: $20pw (Based on .3%pa of purchase at $340k)
Insurance: $5pw (building only)
Water Rates: $11 ($150pq)
Total = $316pw
If he rented the same apartment you claim he could split it, $170pw. No worries, but you're forgetting the missed benefit of his deposit/cash. $50,000 x 6.5% = $3250 - 30% tax = $2275 or $43 per week, so we take that off his rental cost to get a weekly expense for renting of $127.
$127pw to rent or $316pw to buy (or in his case using interest only, rent from the bank)... hmmm let me think which I'd prefer.
He could be saving almost $10k per year simply by renting! Sure that figure might slowly reduce over the years, but over how many??
Happy for you to correct any of my figures wylie, I had to do some guesstimates, but I would say that I was fair.
To be honest it sounds like a money pit. Even if he decided to rent it out he is going to be running at a loss and being in such a low tax bracket any breaks he can get are going to make minimal difference.
Did you do these sorts of calcs with your Son when he said he was going to buy? When did he buy? Possibly also need to take into account the weak QLD market at the moment... throw falling prices into the equation and things could look even worse!
I can't believe you are using these sorts of examples to encourage people that buying property is the way to go
I enquired about some floor plan or other a few months ago with a large project builder and the guy I spoke to was older and seemed to really have a clue. I asked how they are dealing with the new 6 star rules, and are they planning to change any of their floor plans to make them more energy efficient.
The answer says it all. They worked out that ALL their designs make the 6 star rules if they just put R5 insulation in the ceilings, so that's the only thing they changed.
I don't think anyone was talking about 1 bedders but you hit the nail on the head why I want one (in inner Adelaide, yes, boring I know). The really ugly cream or concrete brick ones with no yards were never expensive to start with, they haven't gone up as much as the 'character' house next door but still enough to really bring their yield down, and they'll be the first to come back down in line with rents, as they have a limited market (students and singles) and are quite cheap to rent. There's absolutely heaps of them in the suburb I'm interested in too. Bonus!
hobo-jo i totally agree, i am from south east Melbourne and all i can say is YUCK too. the quality of the rental properties in my area are so bad trust me no one would enjoy renting here.compared to other states Melbourne is a hole. i pay $240 a week and i do not even get heating or cooling.
A decent townhouse here would cost you close to 400 a week to rent.and i think its just ridiculous.but if you were to own a mortgage for a similar townhouse without a substantial deposit you would be looking at paying over 2000k per month easily.
I think things are going to explode pretty soon.whats happening to this country?
In Wylie's example there is the factor of added value, which seems significant just based on the buy price and location and Wylie's description of the renovation work. I'm seeing impressive work and numbers done by renovators in the present market, mainly because they can buy well and a lot of areas are relatively stable with prices between their buy and sell dates.
Buy v Rent calculations might reasonably include capital value changes otherwise there wouldn't even be a debate (renting is cheaper), also there is the consideration of owning, which might mean not wanting to pay rent is a valid reason to buy.
As always capital growth is a key assumption, whatever you use in your calculations is going to have a decisive effect on the result.
Buy v Rent calculations might reasonably include capital value changes otherwise there wouldn't even be a debate (renting is cheaper), also there is the consideration of owning, which might mean not wanting to pay rent is a valid reason to buy.
As always capital growth is a key assumption, whatever you use in your calculations is going to have a decisive effect on the result.
I appreciate the advice. But, I really did start this topic for a discussion on improving housing affordability in general - not housing affordability for myself. Even if you don't agree that there is a "crisis" for all Australians, there is research showing that there are Australians experiencing housing affordability stress and that as the cost of housing continues to outpace incomes that number is growing.
I also don't agree that the basics have become cheaper. The basics are getting much more expensive. The price of food, water, gas, electricity, fuel, clothing and housing are all going up. But I agree that non-necessities such as electronics seem to be falling in price.
When people discuss the issue it's almost always an attack on property investors or they're cheering on a collapse in the market. I don't have anything against property investors (In fact, I think investors and developers are probably the key to improving housing affordability) and I think a collapse in the market would be an absolute disaster as many Australians have their entire net worth tied up in their PPOR.
I thought you guys might have some alternative solutions other than the usual "scrap negative gearing" or "don't worry, the market is just going to crash anyway" type of comments I always hear.
I also don't agree that the basics have become cheaper. The basics are getting much more expensive. The price of food, water, gas, electricity, fuel, clothing and housing are all going up. But I agree that non-necessities such as electronics seem to be falling in price.
When people discuss the issue it's almost always an attack on property investors or they're cheering on a collapse in the market. I don't have anything against property investors (In fact, I think investors and developers are probably the key to improving housing affordability) and I think a collapse in the market would be an absolute disaster as many Australians have their entire net worth tied up in their PPOR.
I thought you guys might have some alternative solutions other than the usual "scrap negative gearing" or "don't worry, the market is just going to crash anyway" type of comments I always hear.
It's one of the reason's we are dabbling with growing our own food and minimising the use of utilities, etc etc.
We are currently trying to prove that a "standard block" in outer melbourne can produce enough food for 2 people to "survive" (ok, we're not talking anything fancy here, and eating jerusalem artichokes for 6 months straight is not something anyone would look forward to, nor would the lack of variety be healthy).
I am also investigating solar cookers (not much of a carbon footprint unlike solar panels) and a charcoal kiln (ok, this one's going to be difficult without being able to monitor it pretty much 24/7 for 3 months!
)The Y-man
Dandy had an av income of $315~$340 per week back in 2008 and avergae rent back then was $160 pw. I have to say, the income side probably hasn't gone up much, so I agree, for a single person, it would almost be undoable without pairing up.
Interestingly in Werribee, the average income in the same time period was $450 pw.
The Y-man
I think Ocean Architect and Belbo covered it quite well..
Similar threads
