buyers also need to look at themselves - perhaps are just not willing to accept the type of housing such as the one i grew up in - family of 5 people in a 3 bed 1 bath house. Before tackling the affordability crisis we need to ascertain if there is a crisis. I am helping some family friends by their first homes -for around $300k you can still get a good house on a near quarter acre block close to a train station and not far from the city.
And in suburbs 15-30km from the Melbourne CBD, such houses can be bought for up to $250k, and even sometimes well under $200k.
An excellent test of whether there is a housing crisis is to look at the cheapest areas (eg Dallas, Frankston North, Doveton, etc) and compare the prices in such suburbs with the 'mortgage belt' areas typically further out.
Given that:
1. Such suburbs are $50-100k cheaper than 'mortgage belt' new homes
2. such suburbs have high proportions of renters
3. Buyer competition is relatively low (especially from owner occupiers)
4. These areas may be 'better' than they were, but there is no evidence of 'gentrification' as indicated by rising average incomes and employment profiles
The evidence is that there are tracts of cheap houses that hardly anyone is buying. Because if they were, they wouldn't be cheap anymore.
Hence first homebuyers have particular 'standards' and won't buy just anywhere. Rather they'll buy to the maximum of their affordability (largely in the hands of the banks and whether they're two income).
Peter Spann mentions that suburbs have similar people - in other words most people want to have neighbours 'just like them'. And there are probably two or three 'white-bread' first homebuyers for each cosmopolitan inner-suburbanite who claims to like living in diversity.
Hence there may be a degree of fear of the 'other', especially for families with children. 'Other' could extend to matters like origin, education, income, employment (or lack of) etc.
Parents want to do the best for their children, and avoiding a 'rough' area apparently full of drugs, knives, jobless lingerers and low socio-economic schools is as if not more important than the act of purchasing a home.
If people don't like what they see in the Dovetons, St Albans, Cranbournes, etc then it seems that they'd rather pay more and go for the new estates, where (by definition due to loan qualification requirements) almost everyone at least has a job.
Apart from the area, there is also the house itself, eg size, number of bedrooms, etc. In the cheaper areas most are 3x1, whereas 4x2 is common in new suburbs. Yet household sizes are shrinking!
There is however scope for a money-making buying scheme involving the commercialised repopulation of former poor suburbs as follows:
1. Suburb promoter sets up a sort of specialist buyers agency that only buys houses in a certain section of a poor suburb. This agency endeavours to buy all houses that come up for sale in that area, even if they pay full asking. Let's say that they pay between $160 and 180k per house (note that there is little divergence between house prices in the cheapest suburbs).
2. Promoter gets a waiting list of first-homebuyers with budgets of approx $220k to buy and move in. Note that this price might be cheaper than a home on a new estate and nearer the CBD too. Agency might also offer finance.
3. Within 5-10 years about half the houses of the poor suburb will have been changed to owner-occupation. The character of the area will change as people start making improvements, renovations, etc.
4. The suburb gentrifies and this is reflected in community facilities, schools etc due to demanding residents & parents.
5. The agency then moves to adjoining streets or parts of the suburb until the whole suburb is transformed.
Peter
