Sooky-la-la

[skater]

My point is that it hardly matters how far you go out, you can't buy a property for $80K these days. (1 x single average wage.) So houses are relatively more expensive than they were 40 or 50 years ago, and to pretend otherwise simply makes you sound like the Four Yorkshiremen.

I think it depends at what time in the property cycle you bought into, as well as the area.

When I was looking for my first home, they were almost three times the average wage, and that wasn't in a desirable area.

Mine was in the outer suburbs of Wollongong. I could have got a nicer home for the same money if I'd ventured to Campbellown, but couldn't find anything cheaper unless I went to Cringila/Port Kembla (closer to Wollongong but very dirty, overlooking the Steel Works), which was too far for me to commute to work.

In all my time looking at property, I have never seen prices equivalent to 1 x average earnings for a Capital City property.

No, sorry, I am wrong. If you look at the outer Adelaide suburbs, I believe they have been 1 x average earnings until quite recently. I also bought in Launceston and outer Hobart very cheap ages ago, but can't recall if it was 1 x average wages.

 

[BayView]

My point is that it hardly matters how far you go out, you can't buy a property for $80K these days. (1 x single average wage.)

I can only use myself as an example, and I consider myself to be pretty much Mr.Average in terms of PAYE over the years.

Yes, I had a number of years where I earned good dollars through my ProShop businesses, but none of the years were stellar by any stretch of the imagination.

So here goes; my first PPoR was bought in Boronia in 1985 for $76k from memory. I was 24 years old, and up until that time I had no hope of buying a house on what I earned previously.

At that time, I was working solo in my first ProShop business, doing a million hours a week and pulling out roughly $50k per year.

This was considered above-average wage at that time - so $76k was well above average wage, but still a cheap house in a lower-end, working class suburb.

I chose Boronia because it was half way between my G/F's work and my ProShop, and was all we could really afford - in closer would have been harder for us to qualify for loans due to purchase prices, plus a much longer commute for me..

Second PPoR was a build on a block of land I bought a few years later - 1991, in Blackburn.

Land - $60k, build was $185K (25 square, 4x3 with DLUG, double storey) - bought the land in an Urban Land Authority release (an old Primary School site - 450sq/m of land). Total cost of about $250k. More up-market Mr.Average suburb; but definitely not yer Hawthorn or Surrey Hills etc.

At that time, I was running my second ProShop business at a different Golf Club, still doing a million hours per week and pulling out close to $80k per year. Good dollars in those days, but I worked very bloody hard for it.

This was considered well above average wage for that time, but I didn't average $80k every year...some years were cr@p due to weather, etc.

So, there are two examples from the mid-80's to mid-90's where the cost of a home was a good chunk above 1 years' wages.

I did not time the market; just bought as required for PPoR no.1, and saw a cheap block for sale on the way to work (distressed sale on a tiny block) for PPoR no.2.

 

[Redom]

While i can completely understand the frustration at the 'entitlement' mentality, i think this is a growing issue worth attention.

Fact is income to price ratios have been rising over the last 2 decades. That makes it harder for people who aren't in the market to enter the market. So it IS harder today than it was before (refer to chart).

This creates obvious sustainability issues - those that benefit today are doing at the expense of those who'd like to consume tomorrow.



Just a balancing point for discussion.

 

[BayView]

While i can completely understand the frustration at the 'entitlement' mentality, i think this is a growing issue worth attention.

Fact is income to price ratios have been rising over the last 2 decades. That makes it harder for people who aren't in the market to enter the market. So it IS harder today than it was before (refer to chart).

This creates obvious sustainability issues - those that benefit today are doing at the expense of those who'd like to consume tomorrow.

View attachment 12909

Just a balancing point for discussion.

Then, the market will correct it.

If noone can afford to buy; house prices cannot rise.

Or; the Gubbmint can simply stop any overseas purchasers - assuming the "filthy-rich Chines" are the culprits who keep forcing the price up - other than us greedy BB investors, or course.

Noone in Gubb wants to address stamp duty and cost to build, of course.

 

[red liverbird]

I'm with Redom on this.

Intertemporal problems are a textbook reason why markets can fail (and not self correct). I'm all for letting the market clear themselves, but you've got to be aware of when the economics is helping achieve this and when its hindering.

 

[Redom]

Then, the market will correct it.

If noone can afford to buy; house prices cannot rise.

Or; the Gubbmint can simply stop any overseas purchasers - assuming the "filthy-rich Chines" are the culprits who keep forcing the price up - other than us greedy BB investors, or course.

Noone in Gubb wants to address stamp duty and cost to build, of course.

People can afford to buy - just not those that havent benefited from capital gains over the last 20 years. That is, first home buyers.

The market wont correct for that, it'd just lead to a separation in the market.

I'm not sure its a good societal outcome if the barriers to entering the housing market require extraordinary sacrifice.

 

[Tyla]

People can afford to buy - just not those that havent benefited from capital gains over the last 20 years. That is, first home buyers.
.

We bought ours in 2010 in Sydney with less than 20% deposit and paid off in less than 4 years. We earn slightly above average but my wife was on maternity leave for over a year so it balances out too. We financially supported our families in oversea at the same time too.

Note: our house is below median price. We pack lunch to work most day of the week. I still drive my 2005 Toyota (bought second hand in 2008). We both don't smoke. I catch public transport to work as I get free pass. Is that big sacrifice? We still enjoy most stuffs like everyone else.

The point is anyone can do it if they put their mind to it.

 

[skater]

Actually, there are a lot of very young investors on here at the moment, and they're not the sooky whinging kind. There's a whole heap of them that are buying multiple properties and doing very well for themselves. At the recent Sydney meetup I was very surprised. I felt like I was old enough to be the mother of most of them. Very inspiring!


No EN710, you & your mates are probably of the same calibre as the group I mentioned above, but make no mistake, there's a heap of youngsters with a huge entitlement mentality who will never be able to afford their own place because they refuse to 'settle' and/or can't (read won't) save.

People can afford to buy - just not those that havent benefited from capital gains over the last 20 years. That is, first home buyers.

The market wont correct for that, it'd just lead to a separation in the market.

I'm not sure its a good societal outcome if the barriers to entering the housing market require extraordinary sacrifice.

Sadly Redom, you appear to be the second type, as noted in my post above.

We bought ours in 2010 in Sydney with less than 20% deposit and paid off in less than 4 years.
The point is anyone can do it if they put their mind to it.

Congratulations Tyla, you are obviously the same calibre of the investors I met at the meetup. You will do very well for yourself.

 

[boeman]

Meh, as a 20-something I had no misconceptions about the reality of a first home.

Suburb closest to the city on the largest block I could find. That was my criteria and it was pretty easy. Cost me just under 4 years wage and I am happy.

Far easier than b!tching and moaning about how houses in dream locations cost far too much.

 

[Redom]

We bought ours in 2010 in Sydney with less than 20% deposit and paid off in less than 4 years. We earn slightly above average but my wife was on maternity leave for over a year so it balances out too. We financially supported our families in oversea at the same time too.

Note: our house is below median price. We pack lunch to work most day of the week. I still drive my 2005 Toyota (bought second hand in 2008). We both don't smoke. I catch public transport to work as I get free pass. Is that big sacrifice? We still enjoy most stuffs like everyone else.

The point is anyone can do it if they put their mind to it.

I dont disagree that it cant be done Tyla - perhaps not at your speed - thats something worth celebrating. Being mortgage free is a great achievement in that timespan.

 

[BayView]

People can afford to buy - just not those that havent benefited from capital gains over the last 20 years. That is, first home buyers.

The market wont correct for that, it'd just lead to a separation in the market.

I'm not sure its a good societal outcome if the barriers to entering the housing market require extraordinary sacrifice.

But you are missing the point that old b@stards like me and others are making Redom;

It was just as hard waaay back when I was a young bloke of 24 - as a FHB.

It required extraordinary sacrifice - I worked daylight until dark 7 days a week in my first business, made a decent living from that, and bought a house after 2 years. Not a trumpet blow; just the facts.

I didn't want to do it per se; it was my first Pro Shop and it was what I had to do to make the business work. I was single, no kids, no staff, and had the energy to carry it through....and it was a 20%/80% P&I loan for the house.

Any young kid can do the same today - if they want to.

Any young plumber or sparky etc could do it on their ear - if they committed to the hours and saved the dough they earned.

Ask any 80 year old how hard it was for them to buy their first home.

Yes, the zeros on the end were different, but it applied to the wages as well - it applied to everything.

When I commenced my PGA apprenticeship in 1979, I was earning $45 per week as a first year.

 

[Redom]

Sadly Redom, you appear to be the second type, as noted in my post above.


Congratulations Tyla, you are obviously the same calibre of the investors I met at the meetup. You will do very well for yourself.

Haha thats definitely the first time anyone's thought i've fit into the 'entitlement' bracket. I think i'd be considered a young investor (<25), and have benefitted largely from highly leveraged exposure to the most recent cycle.

While i've done well myself, i dont think its good for society to have prices disconnect from incomes. I'm also conscious of having a balanced discussion on this thread, and trying to consider another point of view...rather than basketing anything other than my position as inferior and 'entitled'.

A large number of my friends are simply more risk averse than i am. Despite reasonable savings patterns, they've struggled to enter to market within their comfort barriers. They will at some point, but an ideal society wont require as great of a sacrifice.

 

[Redom]

But you are missing the point that old b@stards like me and others are making Redom;

It was just as hard waaay back when I was a young bloke of 24 - as a FHB.

It required extraordinary sacrifice - I worked daylight until dark 7 days a week in my first business, made a decent living from that, and bought a house after 2 years. Not a trumpet blow; just the facts.

I didn't want to do it per se; it was my first Pro Shop and it was what I had to do to make the business work. I was single, no kids, no staff, and had the energy to carry it through....and it was a 20%/80% P&I loan for the house.

Any young kid can do the same today - if they want to.

Any young plumber or sparky etc could do it on their ear - if they committed to the hours and saved the dough they earned.

Ask any 80 year old how hard it was for them to buy their first home.

Yes, the zeros on the end were different, but it applied to the wages as well - it applied to everything.

When I commenced my PGA apprenticeship in 1979, I was earning $45 per week as a first year.

That is fair BayView. I dont disagree that it was always required some level of sacrifice. I also dont disagree that i cant be done, it is definitely possible. I also often get annoyed at that mentality where people wonder why they cant get in instead of rolling up the sleeves.

My point is more of an economic one. Taking away cyclical interest rate factors, incomes and prices are quite disconnected at the moment. Prices are rising. Fast. Incomes arent moving...this just means first home buyers are having to make more and more sacrifices.

From a policy standpoint, its not ideal.

 

[Redom]

Ask any 80 year old how hard it was for them to buy their first home.

Yes, the zeros on the end were different, but it applied to the wages as well - it applied to everything.

When I commenced my PGA apprenticeship in 1979, I was earning $45 per week as a first year.

Without the numbers on hand Bayview, income to price ratios were <3 then. Now they're ~ 5-6, and around 40% higher than 1990.

Its easier to get in with 95% lending nowadays, but thats no everyones cup of tea. Others like to come in with 20-30% deposits.

 

[EN710]

A large number of my friends are simply more risk averse than i am. Despite reasonable savings patterns, they've struggled to enter to market within their comfort barriers. They will at some point, but an ideal society wont require as great of a sacrifice.

I can understand... I prefer money plus sign visible in my bank account... not big minus sign from loans.

Ideal society... maybe, but 'ideal' society never happened. So there's no point on spending energy arguing why the society is not ideal instead of going and taking action.

That is fair BayView. I dont disagree that it was always required some level of sacrifice. I also dont disagree that i cant be done, it is definitely possible. I also often get annoyed at that mentality where people wonder why they cant get in instead of rolling up the sleeves.

My point is more of an economic one. Taking away cyclical interest rate factors, incomes and prices are quite disconnected at the moment. Prices are rising. Fast. Incomes arent moving...this just means first home buyers are having to make more and more sacrifices.

From a policy standpoint, its not ideal.

I don't get "income doesn't increase". Well, unless they're working in corporate company with policy to increase salary every year to catch up with inflation, generally salary won't increase if you are just keep doing what you're doing. Not fair, but it happens all the time.

In my relatively short working career (6 years ish), all of the salary increases came from changing companies, moving to better roles, asking for promotion. I started with a 30K a year as a contractor, before doubling it by moving. Unfortunately for most, income just won't move if you're keep doing the same thing. Statistic said the average income doesn't move, but hey, people moves around all the time, some takes better salary, some decided to cut working hours some decide to stay stagnant. These are too complex to be "average".

 

[Redom]

I can understand... I prefer money plus sign visible in my bank account... not big minus sign from loans.

Ideal society... maybe, but 'ideal' society never happened. So there's no point on spending energy arguing why the society is not ideal instead of going and taking action.

I don't get "my income doesn't increase". Well, unless they're working in corporate company with policy to increase salary every year to catch up with inflation, generally salary won't increase if you are just keep doing what you're doing. Not fair, but it happens all the time.

In my relatively short working career (6 years ish), all of the salary increases came from changing companies, moving to better roles, asking for promotion. I started with a 30K a year as a contractor, before doubling it by moving. Unfortunately for most, income just won't move if you're keep doing the same thing. Statistic said the average income doesn't move, but hey, people moves around all the time, some takes better salary, some decided to cut working hours some decide to stay stagnant. These are too complex to be "average".

Totally agree with your personal experience. Being proactive with income correlates with better income prospects.

I wasnt talking about myself in any of this. I was working my observations with macro data figures. Wage growth is incredibly subdued at the moment...the 2.30pm statement makes reference to it.

 

[skater]

My point is more of an economic one. Taking away cyclical interest rate factors, incomes and prices are quite disconnected at the moment. Prices are rising. Fast. Incomes arent moving...this just means first home buyers are having to make more and more sacrifices.

.

And for around the last........fill in the blanks, because it's different in different markets, housing prices were stagnant.

You need to understand the cycles.

Home prices do not work on CPI, and they do not move upwards in a straight line. Often, people start buying into a market when they feel it is good value. Momentum builds as more people also enter the market, which pushes prices up. This continues for some time, then there is usually a correction. Then prices will stagnate for a while until the next rise.

Wages, on the other hand, do move in a straight line. If you stay in the same position, they will move at a steady rate, often with CPI. If you are upwardly mobile, good at your job, chasing the dollar, and are willing to change Companies to get what you want, you can do a lot better than that.

.

 

[Tyla]

Congratulations Tyla, you are obviously the same calibre of the investors I met at the meetup. You will do very well for yourself.

Thanks, Skater! It means a lot to me coming from experienced people like you.

My point is more of an economic one. Taking away cyclical interest rate factors, incomes and prices are quite disconnected at the moment. Prices are rising. Fast. Incomes arent moving...this just means first home buyers are having to make more and more sacrifices.

From a policy standpoint, its not ideal.

For young people and generations to come, it's not going to get any easier. You can see the trend if you look at two generations before. The resources are getting scarce, population is growing, jobs are getting outsourced or automated. Not just properties, everything is working against. They can either whinge and choose to become victims, or they can be in charge of their lives and bring positive outcome to their lives. My advice for newbies is the time to do is NOW and it is absolutely possible to afford a house and pay off as long as one is reasonable.

 

[Redom]

This continues for some time, then there is usually a correction. Then prices will stagnate for a while until the next rise.

.

The evidence does not support you on this skater. Over the last 2-3 decades, there's been an unusual stickiness to house prices in Australia (generally speaking). 'Corrections' haven't been seen.

A lack of a correction indeed has pushed first home buyers out of the market and pushed up the wealth values of capital owners.

Take a look at the chart I showed more closely. A correction is shown in the US, Ireland (a very big one!), and even NZ. I'm not sure there's much of a correction shown at all in Australia. A slowdown, a stagnation of growth - sure.

But no 'correction'.

Adding Australia's projected income story to the mix (low/very low income growth over the next decade), it can lead to a further dislocation in the market between buyer segments.

Their incomes aren't growing at the speeds they used too and prices are rising at quite some speed. This makes it harder and harder to get in.

 

[Redom]

Thanks, Skater! It means a lot to me coming from experienced people like you.


For young people and generations to come, it's not going to get any easier. You can see the trend if you look at two generations before. The resources are getting scarce, population is growing, jobs are getting outsourced or automated. Not just properties, everything is working against. They can either whinge and choose to become victims, or they can be in charge of their lives and bring positive outcome to their lives. My advice for newbies is the time to do is NOW and it is absolutely possible to afford a house and pay off as long as one is reasonable.

That is great advice and something i'd definitely second.

You can only play in the environment you operate in, sure its harder (not sure everyone agrees on this point), but there are ample examples of it being done.