Why be an employer ?

[Ideo]

But houses in capital cities and regional areas are far more expensive against average wages now than they used to be.

It's not a whinge. It's a basic observation of the market.

The average house price has gone from 1.8 times average wage in 1960 to 2.1 in 1980 to 2.8 in 1990 to 3.4 in 2000 to 5.3 in 2012 (taken from ABS statistics via Macrobusiness.com.au).

Don't tell me that doesn't have an impact on affordability.

 

[Aaron_C]

Who cares about the average wage? The average wage earner can't afford to buy in good areas of capital cities. The 'average' suburb 20 years ago isn't the 'average' suburb today. Australians are by-and-large very wealthy - and the house prices reflect this.

 

[Ideo]

Who cares about the average wage? The average wage earner can't afford to buy in good areas of capital cities. The 'average' suburb 20 years ago isn't the 'average' suburb today. Australians are by-and-large very wealthy - and the house prices reflect this.

No arguments there - but your average person doing an average job (your policeman, teacher, whatever) has a harder time getting on the property ladder than they did 20 years ago. Even in places like Newcastle, the NSW Central Coast that are not prestigious areas. Those figures are taken on an Australian wide average. Not one specific suburb that has changed. It is taken on an Australian wage average of wages. It shoes that despite the whinges of "young people want everything on a plate" it is harder to get on the property ladder now than what it used to be. Not impossible. But harder, particularly for a single or single income family.

I don't know why this is seen as an insult or something which is clearly wrong when it is simply looking at the basic statistical information out there.

 

[Aaron_C]

No it's not an insult (numbers are numbers) but with a growing population, vast wealth and a very popular destination for living, I don't see how this result can be anything but expected. People can easily get onto the property ladder still, even young people. You can still buy houses in Newcastle or Western Sydney for circa $300k. Minimum deposit needed is only about $30k all up - which is quite easy for people to save for if they are disciplined and people's pay is $50k for even a basic graduate / starting job. It's not difficult.

 

[Peter 14.7]

But houses in capital cities and regional areas are far more expensive against average wages now than they used to be.

It's not a whinge. It's a basic observation of the market.

The average house price has gone from 1.8 times average wage in 1960 to 2.1 in 1980 to 2.8 in 1990 to 3.4 in 2000 to 5.3 in 2012 (taken from ABS statistics via Macrobusiness.com.au).

Don't tell me that doesn't have an impact on affordability.

Ideo I don't know your age so you may not know that as late as 1990 a bank considered a wife income as temporary as once married, her job was to have kids and stop work. Then in early 1990s the banks included the partners ( read wife) income. Combined with increases in female wages and bingo, incomes doubled.

As well other costs have dropped significantly i.e. consumer goods like TV, microwaves, etc...

As well our lifestyles have changed.

In 1990 we had our first mortgage and my wife and I would eat out once a week on Thursday night when shopping. I think we spent $30 on 2 meal all up.
Two nights ago we have quick meal with one child and spent $108 and was not fazed too much at the price.

I have young staff who complain to me they cannot afford a mortgage and rent for $400 a week and then spend $200 a weekend on going out. When i point out they could buy for $500 a week in one suburb away they say: but that is older!!!!!!

It is about priorities. Always has been. My first house was 2 bed townhouse with exposed brick under the flight path for $72.5k. Did I want the one on the beach for $150k. Yes but I could not afford that.

Anyone working can afford to buy a home. It might not be big or new, or luxury but they can do it.

One factor I will acknowledge is that people dont couple up as early as us oldies did and then the one income factor comes in to it. But why not have flat mate?

Peter

 

[Peter 14.7]

No arguments there - but your average person doing an average job (your policeman, teacher, whatever) has a harder time getting on the property ladder than they did 20 years ago. Even in places like Newcastle, the NSW Central Coast that are not prestigious areas. Those figures are taken on an Australian wide average. Not one specific suburb that has changed. It is taken on an Australian wage average of wages. It shoes that despite the whinges of "young people want everything on a plate" it is harder to get on the property ladder now than what it used to be. Not impossible. But harder, particularly for a single or single income family.

I don't know why this is seen as an insult or something which is clearly wrong when it is simply looking at the basic statistical information out there.

Good post and I note my last one is now a bit redundant.

But as Aaron says and I agree: you can still find bargains if you willing to look, hard and accept less.

Peter

 

[moyjos]

My issue with "but houses cost more" and back it up with ABS figures.. is that, sure the average wage has grown but the "average house" now is nothing like the "average house" then.

In 1960 the "average" was a 2 bed 1 bath no attached garage (Parents houses)

In 1980 the "average" was 3 bed 1 bath maybe a garage if lowset or a double garage under the house when highset.

By 1990 we were seeing the 4br 2 bath 2 living, DLUG

and now we have 4br + study, 2 bath plus a powder room, 2 living, media and alfresco.

If the "average" worker wanted to replicate the house from the past they could buy multiple properties.


As for the suburb debate..... suburbs have always been suburbs
I grew up in Hendra (Bris) which shortly after Dad bought got rezoned into the Clayfield postcode. (Nice one dad ) Hendra was NOT a desireable suburb by any means back in the 70's now.... Super trendy

the inlaws bought an expensive house in an AV Jennings estate in Fairfield (Sydney) their friends and parents thought they were CRAZY..It was soooooo far out etc etc.

Even my early houses were waaaay out in Brighton, Bracken Ridge and Narangba.

the "average" debate just compare apples with apples.

 

[BayView]

My issue with "but houses cost more" and back it up with ABS figures.. is that, sure the average wage has grown but the "average house" now is nothing like the "average house" then.

+1.

I've been sayin this for ages.

My Parents in Law bought their one and only home (still live in it) when they were new to Aus...about 1965 or thereabouts.

A double fronted brick veneer 3 x 1 with separate single car garage....average house back then.

Who willingly buys these sorts of houses these days?

 

[cimbom]

the "average" debate just compare apples with apples.

That doesn't make sense. The average price (i.e. median) is meant to be the point at which there are an equal number of properties above that price as there are below. Why does this change just because the features may have now improved? We are still referring to the same thing - a house that is at the mid-point of the price continuum.

Also, the majority of the houses with home theatre rooms, parents retreat, etc are in new housing estates in the outer suburbs. They are largely not in the "trendy" expensive areas that have mostly tiny blocks so that argument also doesn't work. In my experience, people go for these big McMansion type houses to compensate for the location of their property because their budget did not stretch to allow them to live in their ideally preferred suburb. They think that if they are going to have a long commute, they might as well as have something they perceive as "worth it".

 

[Peter 14.7]

My issue with "but houses cost more" and back it up with ABS figures.. is that, sure the average wage has grown but the "average house" now is nothing like the "average house" then.

In 1960 the "average" was a 2 bed 1 bath no attached garage (Parents houses)

In 1980 the "average" was 3 bed 1 bath maybe a garage if lowset or a double garage under the house when highset.

By 1990 we were seeing the 4br 2 bath 2 living, DLUG

and now we have 4br + study, 2 bath plus a powder room, 2 living, media and alfresco.

If the "average" worker wanted to replicate the house from the past they could buy multiple properties.


As for the suburb debate..... suburbs have always been suburbs
I grew up in Hendra (Bris) which shortly after Dad bought got rezoned into the Clayfield postcode. (Nice one dad ) Hendra was NOT a desireable suburb by any means back in the 70's now.... Super trendy

the inlaws bought an expensive house in an AV Jennings estate in Fairfield (Sydney) their friends and parents thought they were CRAZY..It was soooooo far out etc etc.

Even my early houses were waaaay out in Brighton, Bracken Ridge and Narangba.

the "average" debate just compare apples with apples.

+1 on this.

My mum and dad had 3 bed housing commission built fibre cement, fenced, with two concrete strips as driveway for $10k in 1969. Dad worked two jobs and grew veggies and mum worked one job and they eventually got the luxury of metal clad garage, internal fences, and a rattler AC unit.

My first house was in the dodgy, working class ghetto called Surry Hills Sydney. What a dump place to live they all said.

Peter

 

[cimbom]

+1.

Who willingly buys these sorts of houses these days?

I just did except it has the luxury of a carport and not an enclosed garage. And it just scraped into our budget by $500

 

[Peter 14.7]

That doesn't make sense. The average price (i.e. median) is meant to be the point at which there are an equal number of properties above that price as there are below. Why does this change just because the features may have now improved? We are still referring to the same thing - a house that is at the mid-point of the price continuum.

Also, the majority of the houses with home theatre rooms, parents retreat, etc are in new housing estates in the outer suburbs. They are largely not in the "trendy" expensive areas that have mostly tiny blocks so that argument also doesn't work. In my experience, people go for these big McMansion type houses to compensate for the location of their property because their budget did not stretch to allow them to live in their ideally preferred suburb. They think that if they are going to have a long commute, they might as well as have something they perceive as "worth it".

I think the point tis if you buy the most affordable doer upper in the western suburbs instead of the new MC Mansion they are much more affordable.

Thats apples with apples.

Peter

 

[cimbom]

No, it's not. You need to compare the mid-point then with the mid-point now. Features are irrelevant.

 

[VYBerlinaV8]

No, it's not. You need to compare the mid-point then with the mid-point now. Features are irrelevant.

Features, especially size, directly impacts the cost of the property. There's no point comparing, for example, a property with 2000 bricks with one with 10000 bricks, because the the cost to build is enormously different.

Part of the reason houses cost more is because new houses are much larger and better featured than they were in the past. This impacts existing houses because there are now more people who can't afford new, who compete for existing stock. Demand increases, those with the deepest pockets win.

 

[TMNT]

ok playing complete devils advocate, (im good at this , yes seriously)
and putting aside the feelings of melancholy you get when you see your parents buy a run down 2bdr house in what at the time was an average or below average area that is now a blue chip suburb, while working 2-3 jobs to afford it (im guilty of this too),

its evident that:
- compared to average wage, the income to house price ratio is far higher now
but back then it was single income, now double income
- your average mum and dad didnt go out twice a week and spend $200 equivalent on a drinking night out
- young peoples expectations are different, 30 yr old FHO buyers want a backyard, media room, 30km within the CBD, backyard, DLUG, and if its more then 10 years old........watch out!!
- when my parents were in their 30s, they didnt need to pay for internet, a mobile phone per person, ipad repayments, which is now seen as a necesssity, (call me a tight a$$ but I absolutely cringe at the thoguht of people paying $100+ pm for mobile + $30 for ipad+$10 for data)
- as someone stated, the average person isnt going to buy in the high end properties so comparing average wage is pointless, that being said, the less demand there is, esepcially from Owner Occupiers, teh demand wont be as high, and growth will be limited from this perspective, sure the $20m houses wont be affected, but if there is going to be lesss demand for $800k properties, then the $500ks in the area will grow to a point where it would make sense to pay the extra for the $800k property thus moving the market
- on the other hand, we could just turn out to be like countries like Finland or Norway(if I recall which one) that simply people rent and tahts the norm.


DYOR

 

[cimbom]

Features, especially size, directly impacts the cost of the property. There's no point comparing, for example, a property with 2000 bricks with one with 10000 bricks, because the the cost to build is enormously different.

Part of the reason houses cost more is because new houses are much larger and better featured than they were in the past. This impacts existing houses because there are now more people who can't afford new, who compete for existing stock. Demand increases, those with the deepest pockets win.

If this is how you are going to compare things then it is almost impossible to compare the change in price of any item over time because most items would have changed in quality significantly over several decades. That's why using the "median" is better for this purpose.

Also, the median "new" house is generally going to be cheaper than the median "existing" house because most existing houses are in suburbs that are established and have limited vacant blocks available thus driving up the value of the land component.

The location of the land is more closely related to the overall price than the number of bricks used. This is why my parents can build a brand new 500sqm double storey house in the outer suburbs of Melbourne for the same price as a 1 or 2 bedroom apartment in the trendy inner suburbs. Which of these properties is "better"? It's quite a subjective assessment.

 

[Aaron_C]

Which of these properties is "better"? It's quite a subjective assessment.

Indeed it is subjective but the only objective measure is price.

 

[cimbom]

Yes, specifically the median price

 

[VYBerlinaV8]

If this is how you are going to compare things then it is almost impossible to compare the change in price of any item over time because most items would have changed in quality significantly over several decades. That's why using the "median" is better for this purpose.

Also, the median "new" house is generally going to be cheaper than the median "existing" house because most existing houses are in suburbs that are established and have limited vacant blocks available thus driving up the value of the land component.

The location of the land is more closely related to the overall price than the number of bricks used. This is why my parents can build a brand new 500sqm double storey house in the outer suburbs of Melbourne for the same price as a 1 or 2 bedroom apartment in the trendy inner suburbs. Which of these properties is "better"? It's quite a subjective assessment.

Fair points, but we need somehow to address the issue that although property is more expensive, you are getting more.

Medians is one way, but can also be misleading. Land value is another.

 

[greedy2000]

My issue with "but houses cost more" and back it up with ABS figures.. is that, sure the average wage has grown but the "average house" now is nothing like the "average house" then.

In 1960 the "average" was a 2 bed 1 bath no attached garage (Parents houses)

In 1980 the "average" was 3 bed 1 bath maybe a garage if lowset or a double garage under the house when highset.

By 1990 we were seeing the 4br 2 bath 2 living, DLUG

and now we have 4br + study, 2 bath plus a powder room, 2 living, media and alfresco.

If the "average" worker wanted to replicate the house from the past they could buy multiple properties.


As for the suburb debate..... suburbs have always been suburbs
I grew up in Hendra (Bris) which shortly after Dad bought got rezoned into the Clayfield postcode. (Nice one dad ) Hendra was NOT a desireable suburb by any means back in the 70's now.... Super trendy

the inlaws bought an expensive house in an AV Jennings estate in Fairfield (Sydney) their friends and parents thought they were CRAZY..It was soooooo far out etc etc.

Even my early houses were waaaay out in Brighton, Bracken Ridge and Narangba.

the "average" debate just compare apples with apples.

I wish they still built homes in Adelaide like they did 90-120 years ago.

Lovely stone fronted cottages etc. double brick houses, high ceilings, built solid to last and much cooler in the summer.

I wonder what it would cost to build that same house in todays dollars?

I'd take a lovely 2 bdr stone cottage over a 4 bdr McMansion any day.