Sooky-la-la

[property_girl]

One of my mates bought a block of land in Calcutta st, Sorrento for $500k - ... , has no views but is walking distance to the beach.

So: the same block that was selling for $26,000 in Sorrento with water views (when my very low yearly salary was the same) would now sell for more than $500,000. How many people have an annual income of $500,000? Not many. This just proves my point.

And Skater, as to your comment:

And as for the travel to the city, well, if my Husband can do it, and my neighbour can do it, and many other people I know can do it, what on earth makes you think that you and others deserve better?

Where in my post did I say that I 'deserve better'? Nowhere. I said it was not fun spending three hours a day travelling. Luckily, I then moved to a city where I could work to work in less than five minutes. And never once did I think that I 'deserved it'.

And sorry Skater girl, it wasn't hard back then, because even though people may have had to travel 1.5 hours to work they had a property that could be paid off in a few years (I know because I did it). Nowadays on top of having to travel 1.5 hours to get to work, those people have mortgages that will take 30 years to pay off.

 

[skater]

And sorry Skater girl, it wasn't hard back then, because even though people may have had to travel 1.5 hours to work they had a property that could be paid off in a few years (I know because I did it). Nowadays on top of having to travel 1.5 hours to get to work, those people have mortgages that will take 30 years to pay off.

So.....you paid off a home while paying 17.5% interest rates, did you?

No?......Well then you've got absolutely NO IDEA of what things were like back then.

 

[sanj]

So.....you paid off a home while paying 17.5% interest rates, did you?

No?......Well then you've got absolutely NO IDEA of what things were like back then.

Fwiw picking the single highest point back then is probably not the most definitive comparison of whether prices generally are more expensive nowadays vs in the past.

Some things are more expensive nowadays, including in a lot of cases housing but some things are a lot cheaper now like Travelling, white goods etc.

The same circular arguments do my head in. It isn't about individual examples, it's about the general trend.

 

[Aaron_C]

So.....you paid off a home while paying 17.5% interest rates, did you?

No?......Well then you've got absolutely NO IDEA of what things were like back then.

Because you are obviously a greedy baby boomer who had it easy

 

[skater]

Fwiw picking the single highest point back then is probably not the most definitive comparison of whether prices generally are more expensive nowadays vs in the past.

Some things are more expensive nowadays, including in a lot of cases housing but some things are a lot cheaper now like Travelling, white goods etc.

The same circular arguments do my head in. It isn't about individual examples, it's about the general trend.

I know Sanj, and I apologise. I did say that it was hard then, same as it's hard now. It just set me off when I was told that it WASN'T hard. Unless someone has walked the walk of those that were purchasing at that point in time, they don't know what they are talking about.

Like I said previously, people pick one point in time & say "Oh, you had it easy" but what they don't see is that maybe there were other underlying factors, or perhaps on the brink of an uprise.

And then when they pick a specific area that was cheap 30-40 years ago. Well, maybe it was cheap for a reason, like nobody wanted to live there, or it was right out the back of nowhere. Then they go on to say that it's really expensive nowadays, etc. Well, it's probably really expensive NOW because people want to live there. It's no longer out in the boondocks, it has infrastructure etc.....

There is no real way to compare apples to apples when it comes to real estate.

 

[skater]

Because you are obviously a greedy baby boomer who had it easy

I know, right?

 

[property_girl]

So.....you paid off a home while paying 17.5% interest rates, did you?

No?......Well then you've got absolutely NO IDEA of what things were like back then.

I am very sorry you are doing it tough stuck out in the suburbs driving hours to get to work every day--probably accounts for your mood. Pity you can't join the rest of us living in mulit-million dollar suburbs.

 

[Scott No Mates]

And sorry Skater girl, it wasn't hard back then, because even though people may have had to travel 1.5 hours to work they had a property that could be paid off in a few years (I know because I did it). Nowadays on top of having to travel 1.5 hours to get to work, those people have mortgages that will take 30 years to pay off.

So you've moved closer to work? 1.5 hrs years ago when traffic was lighter, freeways were newer etc was well out into the bush.

1.5 hours today, isn't much past Wahroonga in peak hour traffic.

A mortgage will take 30 years to pay off, if you pay the minimum. For some, they will never pay it off ie interest only.

 

[Nemo30]

I agree with Skater - It has been hard for all generations.

My parents bought a house in outer suburbs in the 70's for mid $30's. The household wage for our family of 5 was about $12k. (house cost 3 times household earnings). It is still owned by a family member and currently valued about 2 times my current household earnings.

In 2002 I bought a house outer suburbs for $180k. My household wage was $35k. It was the cheapest house I could find and i had to be very creative to be able to afford it (house cost 5 times household earnings (single wage)

2014, same house (I still own it) is now worth 2 times my household earnings (two wages).

I have a 20yo son who I hope will buy a house in the next few years. I dont think he will have it any easier or harder than other generations of his family. Its attainable if he wants it.

I'm not saying my experience is typical, its simply my experience. None of my family have ever bought a house that cost the equivalent of 1 years pay.

 

[MTR]

Cool, we'll just have to agree to disagree. Your spot on about economic cycles, i just disagree that we've seen it play out that way over the last few decades. Perhaps it is naive, i'm looking at charts and putting an economics hat on (not an investor). I've only been investing recently, so others (like you) will have much more practical experience on this than i would.

Redom, I think you need to be wearing the "investor hat".
I have been in this game for a while and there will always be boom/bust cycles, because it is very simply supply vs demand, this will never change. When there is an over supply you will see properties fall back, when there is a shortage of stock and high demand, prices will rise.

We have seen boom/bust cycles in Australia in the last decade and prior to this, some of these markets have not yet recovered.

To place all markets in one box is nonsensical and its not fact, there are so many entry levels, different product.

Here are some examples -

Gold Coast fell back GFC as much as 40% and I don't believe it still has recovered.

Perth blue chip $1M + still not recovered from boom/bust cycle 2006, fall of 20-25%, lower end sub $500K recovered 2 years ago.

Regional Perth - still not recovered similar drops 25-30%

Melb market started to rise inner city around GFC and then 2 years later fell back, some areas as much as 20%.

Major mining towns around Australia have dropped off as much as 25-30%

Brisbane has only just started to recover.

Sydney market started recovery about 2 years ago after falling back. Starting with Syd West.

I consider 20% to be significant drop, some will say that's a crash.??

Charts don't work because its humans that put them together, and they are not perfect, best to look at what is happening on the ground

 

[Blacky]

Good post MTR

You can probably add Mandurah to that list. There were significant 'falls' from '07/08. Falls of beyond 50% were seen in the 'higher' end price bracket and they still haven't 'recovered'. Nor - I dare say - will they any time soon as the prices being paid were ridiculous in the first place. But I guess thats the definition of a bubble.

Personally I think its hard to buy property now. It was hard to buy property "back then" (when ever that was). It can be done today, as it has always been able to be done - but only for those that want it enough.

Blacky

 

[Redom]

Redom, I think you need to be wearing the "investor hat".
I have been in this game for a while and there will always be boom/bust cycles, because it is very simply supply vs demand, this will never change. When there is an over supply you will see properties fall back, when there is a shortage of stock and high demand, prices will rise.

We have seen boom/bust cycles in Australia in the last decade and prior to this, some of these markets have not yet recovered.

To place all markets in one box is nonsensical and its not fact, there are so many entry levels, different product.

Here are some examples -

Gold Coast fell back GFC as much as 40% and I don't believe it still has recovered.

Perth blue chip $1M + still not recovered from boom/bust cycle 2006, fall of 20-25%, lower end sub $500K recovered 2 years ago.

Regional Perth - still not recovered similar drops 25-30%

Melb market started to rise inner city around GFC and then 2 years later fell back, some areas as much as 20%.

Major mining towns around Australia have dropped off as much as 25-30%

Brisbane has only just started to recover.

Sydney market started recovery about 2 years ago after falling back. Starting with Syd West.

I consider 20% to be significant drop, some will say that's a crash.??

Charts don't work because its humans that put them together, and they are not perfect, best to look at what is happening on the ground

I agree with you MTR - when looking at individual sub markets I definitely see corrections. You've mentioned a couple above. Gold Coast is a great example of what I imagine a 'correction' to be.

I'm not sure that anything similar has happened in Sydney/Melbourne as broader regions though...(perhaps in isolated pockets). But I am very much looking at it with an 'economics hat', staring at charts and generally debating this point with my geeky economist mates.

I'd have to defer to you and other investors who've got years of experience in the market to get an understanding of how its played out as an investor. I'd love to be on the forums and passing on my experience of markets to others, but I've only really been in the game for a few years and have charts to go by as stories of past market movements.

Perhaps it could just be an expectation thing, investors may see no price growth over a 4-5 year period as a 'market correction', while geeky chart readers will just see a period of stagnation in growth.

 

[Redom]

I agree with Skater - It has been hard for all generations.

My parents bought a house in outer suburbs in the 70's for mid $30's. The household wage for our family of 5 was about $12k. (house cost 3 times household earnings). It is still owned by a family member and currently valued about 2 times my current household earnings.

In 2002 I bought a house outer suburbs for $180k. My household wage was $35k. It was the cheapest house I could find and i had to be very creative to be able to afford it (house cost 5 times household earnings (single wage)

2014, same house (I still own it) is now worth 2 times my household earnings (two wages).

I have a 20yo son who I hope will buy a house in the next few years. I dont think he will have it any easier or harder than other generations of his family. Its attainable if he wants it.

I'm not saying my experience is typical, its simply my experience. None of my family have ever bought a house that cost the equivalent of 1 years pay.

I think there may be a point of difference here.

Skater, I agree with you that it was difficult back then to repay your mortgage. I even agree that it may have been MORE difficult back in the late 80s given higher interest rates than today.

Housing affordability indicators aren't actually that bad around now (http://www.smh.com.au/business/property/housing-affordability-at-decade-high-20131127-2y99g.html)

But repaying your mortgage is only one of the barriers to entry first home owners face.

In todays low rate environment, its not really the servicing aspect that's the issue. As a broker, most of my less experienced clients are constantly surprised how much money they can borrow.

Its the money required to 'get in' (without excessive risk) that's the big difference. If first home owners want to get in with a healthy 20% deposit, then there literally talking about forking up $100k +in savings. In the fast moving market today where homeowners are experiencing value growth of 20%+ over the last 18 months, on what was previously a 500k property, the amount of savings required for the deposit has just increased another 20k!

That is a BIG constraint today. For people that own property already - its a piece of cake. Just withdraw the equity you've just made, and boom, you have another property. You'll keep climbing the ladder and accumulate more and more.

I sympathise with those that don't own and are trying to get into the market. Not because I don't own property myself and i'm suffering from 'entitlement mentality', but because I don't think it should be that hard and require as much of a sacrifice than what the market is requiring.

One can easily poke holes in what i'm saying by pointing to the ability to access 95%+ loans today compared to back in the 80s, but this type of purchasing profile really isn't everyone's cup of tea - and from a financial stability point of view - nor should it be.

 

[skater]

It is easier to 'get into the market' these days due to the abundance of 95% loans available and a FHOG.

Back then you had to have 20% deposit, even if you could prove that you had the ability to make the payments on a higher lend, and you had to show it had come from savings, not as a 'gift'. There was no FHOG either.

I think it is easier for people to overextend themselves now, than it was back then. Many seem to buy at the top of their affordability, which can make finances tight, especially in the environment we have now, with low interest rates. It will be a world of hurt for some when the rates eventually rise, as we all know they must do at some time.

 

[joeExpat]

I have been in this game for a while and there will always be boom/bust cycles, because it is very simply supply vs demand, this will never change.

There is a much more powerful force affecting property prices than supply and demand, and that is the availability of credit.

Easy credit, and its sudden removal, is what caused the booms and busts in all countries that had property crashes in the GFC. Similarly the current boom in Australia is caused by the cheapest credit seen in many peoples lifetimes.

 

[Tyla]

That is a BIG constraint today. For people that own property already - its a piece of cake. Just withdraw the equity you've just made, and boom, you have another property. You'll keep climbing the ladder and accumulate more and more.

What makes it easier is not the equity in their property. It is taking baby steps. These property owners have sacrificed in the same way if not more to get to where they are. I do believe in "No pain, no gain". As a FH buyer myself just a few years ago, I believe I do fit in "entitlement generation". But luckily my wife and I didn't follow the crowd.

Here are a few examples of some mates and colleagues.

- One guy recently bought a land in North West suburbs for around 500k and building massive house. Single income, wife and 2 kids. I told him only the land costs nearly as much as our established house.

- Another guy has wife and a kid, still lives with his mum. He has a small boat, 2 cars, a quad bike, a Harley, etc - almost everything except a house of his own.

- A guy in 40s won lotto for 200k more than 5 years ago, and his house is not paid off yet.

- Another guy - we told him to buy a house when we bought ours because we were paying 8k more in interest per year compared to renting similar house in the same suburb, and the CG would beat it easily. He didn't. We told him again before the stamp duty exemption was removed. He didn't. Now he still thinks the price may come down soon. Needless to say I've kept my mouth shut.

Are you seeing the pattern with what's really going on? Most young people are not suffering as you think. And housing affordability is not as harder for them as you think.

PS: Having a roof over one's head, owning your home, having financial freedom - none of that is a right.

 

[BayView]

That is a BIG constraint today. For people that own property already - its a piece of cake. Just withdraw the equity you've just made, and boom, you have another property. You'll keep climbing the ladder and accumulate more and more.

Yep; isn't it fantastic!!

This has always been the case - even when I was saving for my first PPoR...of course; I wasn't aware of it all at that stage.

Back when I was a teenager/early 20's, there was a series of ads for one of the Banks with the theme; "Equity-mate" where folks could use their home equity to fund purchases - but they were for boats and holidays etc on the ads.

The fact that folks can withdraw their equity to fund an investment is terrific for them (me) - we have earned it by being brave enough to get on the ladder, and work hard to decrease debt and build up equity through that and CG.

Don't "tall-poppy" those/we folk for that.

Anyone can do it...if they want to make the sacrifices to start.

 

[BayView]

Quote:
for the most, things are more expensive they were 30 years ago,

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

I saw a HD 50" tv in the Aldi catalogue yesterday for $199.

I will agree that the cost of things like Utilities has become expensive, but I cannot remember how much they used to cost as a percentage of my wage 30 years ago.

I only know that my memory of all Utility bills is BAD.

That means either I have always had too much week at the end of the money, or they have always been expensive.

 

[TMNT]

I am very sorry you are doing it tough stuck out in the suburbs driving hours to get to work every day--probably accounts for your mood. Pity you can't join the rest of us living in mulit-million dollar suburbs.

is there any thread that you dont get emotional and try and put people down?

 

[TMNT]

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

I saw a HD 50" tv in the Aldi catalogue yesterday for $199.

I will agree that the cost of things like Utilities has become expensive, but I cannot remember how much they used to cost as a percentage of my wage 30 years ago.

I only know that my memory of all Utility bills is BAD.

That means either I have always had too much week at the end of the money, or they have always been expensive.

since I assume you are having a cheeky go at me,

yes tvs, computers, etc are cheaper then 30 years, ago, but how often do you buy these? the last tv I bought was 5 years ago,

in the meantime, rates, water, gas ,electrcity, eating out, rent, petrol have all gone up,

phone plans have come down a little, but now I have to pay for home internet, mobile phone, and ipad data (I dont but its becoming the norm)

I would easily bet my left foot that the amount of $ needed to live a normal life is much higher