Why Houses Being Unaffordable is a Myth...

[lizzie]

Australian houses are extremely expensive relative to wages, rents, historical values and other countries.

wasn't this all covered in long and detailed explainations of why housing is actually afforable? sigh, did you read any of the above?

heck, two years ago i had my 21yr old full time uni student, part time casual worker looking at buying. we worked thru the figures together - took into consideration her income, deposit, bringing in 2 friends as boarders, fhog etc. she could have easily afforded a place with a little budget control. i even talked at length to my mortgage broker who advised it was doable - but - nooooooo - she decided to buy herself a new car and take a trip to queensland instead.

that decision has since cost her around $30,000 in increased cap gain.

some you win ...

 

[Aaron Sice]

got to love those that come in halfway thru the conversation and expect to drag out ye olde argument.

 

[Graingrower]

heck, two years ago i had my 21yr old full time uni student, part time casual worker looking at buying. we worked thru the figures together - took into consideration her income, deposit, bringing in 2 friends as boarders, fhog etc. she could have easily afforded a place with a little budget control. i even talked at length to my mortgage broker who advised it was doable - but - nooooooo - she decided to buy herself a new car and take a trip to queensland instead.

that decision has since cost her around $30,000 in increased cap gain.

If life has always been easy, and you've never seen anyone else have it hard then why would you think that you have to stretch yourself now so that things are easier later on. I think that most of us property investors must have some sort of fear of poverty or something that drives us to get ahead.

 

[pats]

Although I may have come in towards the end of the discussion, I could not agree more with the OP. Lots of poeple seems to want to have a nice car, home, holidays etc and have it now, and is not willing to budge on a single 1.

I didn't read the whole topic, but the comment along the lines of "it is peoples expectations/ wants that are unaffordable, rather than houses" pretty much sums it up for me.

Catch
Patrick

 

[rugrat]

Australian houses are extremely expensive relative to wages, rents, historical values and other countries.

That is your point of view. My point of view is that it is a pointless exercise trying to measure such things and reach such a conclusion BASED ON SUCH FLAWED DATA ANALYSIS.

I haven't even got onto the issue that although the average person (whatever that is) now dedicates a higher % of their income towards their mortgage or rent (as according to this flawed data analysis), They still have a higher ACTUAL disposable income left after this major expense (as evidenced through this same flawed data analysis).

The higher your income, the less important % is, and the more important real disposable income becomes.


The higher your income, the less important % is, and the more important real disposable income becomes.

FOR EXAMPLE:
Before my family and I moved to Canberra we paid $260 f/n in rent. Our household income was about $1000 f/n. This means we were paying 26% of our household income on rent. We had $740 left to pay for everything else each fortnight.

When we moved to Canberra we were paying approx $600 f/n on rent. Our family income was $1250f/n. That means we were actually spending 48% of our income on rent. This left us with $650 f/n for everything else.

Our household income is now around $4500 f/n (It can vary). Our mortgages total repayments are about $2500 p/f. This means we are now paying 55.5% of our household income on mortgages. But that also means we have $2000 left AFTER our mortgages to pay for other things; which is more than double what we had previously. In fact it is more than double what we had in income before we moved to Canberra.

It doesn't matter that we have debt that is currently 7x our current annual income, because we can afford it.

 

[Ed Barton]

That is your point of view. My point of view is that it is a pointless exercise trying to measure such things and reach such a conclusion BASED ON SUCH FLAWED DATA ANALYSIS.

I haven't even got onto the issue that although the average person (whatever that is) now dedicates a higher % of their income towards their mortgage or rent (as according to this flawed data analysis), They still have a higher ACTUAL disposable income left after this major expense (as evidenced through this same flawed data analysis).

The higher your income, the less important % is, and the more important real disposable income becomes.


The higher your income, the less important % is, and the more important real disposable income becomes.

FOR EXAMPLE:
Before my family and I moved to Canberra we paid $260 f/n in rent. Our household income was about $1000 f/n. This means we were paying 26% of our household income on rent. We had $740 left to pay for everything else each fortnight.

When we moved to Canberra we were paying approx $600 f/n on rent. Our family income was $1250f/n. That means we were actually spending 48% of our income on rent. This left us with $650 f/n for everything else.

Our household income is now around $4500 f/n (It can vary). Our mortgages total repayments are about $2500 p/f. This means we are now paying 55.5% of our household income on mortgages. But that also means we have $2000 left AFTER our mortgages to pay for other things; which is more than double what we had previously. In fact it is more than double what we had in income before we moved to Canberra.

It doesn't matter that we have debt that is currently 7x our current annual income, because we can afford it.

we need dates to discuss this

 

[rugrat]

we need dates to discuss this

??? why???
It is just an example of how I can now afford to spend a higher % of my household income on mortgages, because even though the % spent on this is higher, the ACTUAL amount of money leftover for other expenses and luxuries is higher then I would once have had in TOTAL income.

Lets make up a senario:

Person A - earns 50k p/a (after tax for simplicity). 30% of his income is dedicated to his mortgage. he is left with 35k to 'live' off afterwards.

Person B - earns 100k (after tax). 50% of his income is dedicated to his mortgage. He is left with 50k to 'live' off afterwards.

Now person B doesn't 'need' 50k to live off, he is perfectly able to live off the same 35k that person A does. This means he has a 15k surplus.

So not only is Person B (the higher income earner) able to 'afford' a bigger mortgage then person A, he is also able to 'afford' an extra 15k to put towards more investment (property or otherwise). This means he can 'afford' a total of 65% of his income to be spent on property if he wishes, unlike person A who doesn't have that luxury.


This is of course assuming everything being equal (including the individuals budgeting skills) between person A and B. It is why I find the whole 'concept' of 'affordability' a crock. It is about priorities, not affordability.

I cannot afford the 4 bed house I would like to move into so my expanding family has more room to live in, at the moment. I can work towards being able to afford it at some point in the not too distant future. Everyone always has options, it is just a matter of whether of not they want to pursue those options. If they don't want to, that's fine; but don't go blaming it on 'afforrdability'.

 

[Deltaberry]

I am excluding those people below the poverty line. Those people who can not, under any circumstances possibly entertain the idea of buying a house no matter how low the prices may be - they have no possible hope of ever obtaining a loan on the oncome they are on. If the house prices were lowered to 20k, and they were able to get 7k in FHOG, they would still be unaffordable to this group of people. It is called a poverty line for a reason.

I would even go so far as to suggest that those people living below the poverty line are possibly the only ones in Australia who can honest NOT afford SOME kind of property, somewhere.

Everyone else just don't want what they can afford.

It makes no difference. If you exclude people below the poverty line here, you'd have to do the same for USA, Hong Kong, UK, Canada, NZ when comparing to them.

Your multiple will still be overpriced relative to other countries.

 

[Deltaberry]

wasn't this all covered in long and detailed explainations of why housing is actually afforable? sigh, did you read any of the above?

heck, two years ago i had my 21yr old full time uni student, part time casual worker looking at buying. we worked thru the figures together - took into consideration her income, deposit, bringing in 2 friends as boarders, fhog etc. she could have easily afforded a place with a little budget control. i even talked at length to my mortgage broker who advised it was doable - but - nooooooo - she decided to buy herself a new car and take a trip to queensland instead.

that decision has since cost her around $30,000 in increased cap gain.

some you win ...

The point is, it's more affordable in comparable countries. And it also has been more affordable here historically.

 

[Deltaberry]

This is of course assuming everything being equal (including the individuals budgeting skills) between person A and B. It is why I find the whole 'concept' of 'affordability' a crock. It is about priorities, not affordability.

When people talk about affordability, they are talking about relativities.

Relative to USA, this place is expensive and hence less affordable.

Relative to 10 yeras ago, this place now requires greater income commitment and hence less affordable.

It's not about whether you can actually 'afford' to buy something. Of course you can. I'm selling my car space for $20k. You can put a mat there and sleep if you want.

 

[The Fence]

Relative to 10 yeras ago, this place now requires greater income commitment and hence less affordable.

....and...why do you suppose that is....?

Wouldn't be anything to do with supply and demand would it...?...Oh nooooo...

 

[hobo-jo]

??? why???
It is just an example of how I can now afford to spend a higher % of my household income on mortgages, because even though the % spent on this is higher, the ACTUAL amount of money leftover for other expenses and luxuries is higher then I would once have had in TOTAL income.

Dates matter because with time comes increasing costs of other goods. If there are 10 years between each of your examples then it's not as simple as saying I had X left over then and X left over now...

 

[rugrat]

Dates matter because with time comes increasing costs of other goods. If there are 10 years between each of your examples then it's not as simple as saying I had X left over then and X left over now...

Dates don't mean crap for the purposes of which I outlined my example.

FYI - it was over a period of 4 years. The income levels increased dramatically due to climbing the corporate ladder NOT inflation. We went from being 'students' to having a higher then average income. DH has gone up 8 complete paylevels in the past four years.



Deltaberry - As for your rubbish about 'affordable' compared to other countries. Firstly, READ the thread, particularly the OP. Secondly, It doesn't matter how we compare to OTHER countries, what matters is CAN AUSTRALIANS afford property in Australia. It is like saying our milk is unaffordable here, because it is comparably cheaper in the USA.

Lastly, I am done responding to this thread.

 

[hobo-jo]

Dates don't mean crap for the purposes of which I outlined my example.

You didn't specify in the example that income increasing was from climbing the corporate ladder. For all we knew you were doing the same job for 20 years over the 3 examples which would have made a world of difference...

I suspect Ed Barton was asking for a timeframe for the same reason. There was no need to bite anyone's head off. If you'd provided a little more detail in the original post there would have been no need for follow up.

 

[jaycee]

Dates don't mean crap for the purposes of which I outlined my example.

FYI - it was over a period of 4 years. The income levels increased dramatically due to climbing the corporate ladder NOT inflation. We went from being 'students' to having a higher then average income. DH has gone up 8 complete paylevels in the past four years.



Deltaberry - As for your rubbish about 'affordable' compared to other countries. Firstly, READ the thread, particularly the OP. Secondly, It doesn't matter how we compare to OTHER countries, what matters is CAN AUSTRALIANS afford property in Australia. It is like saying our milk is unaffordable here, because it is comparably cheaper in the USA.

Lastly, I am done responding to this thread.

Why are you so angry ?

 

[lizzie]

Why are you so angry ?

because some people ask such silly questions when the answer was obvious in the example (not the real life example, but the one that followed) in an attempt to justify their point that has just been disproved.

bit like a few others on this forum - i've had enough of the negativity and spatting and opinion posturing. i'd rather get on with real life as i know it.

 

[Blair]

I was speaking to my grandmother the other day and I asked her how much she paid for her home. She said $50. I didn't even believe her so I forced her to get out the documents showing how much her and my grandfather paid.

They paid a $50 deposit and a mortgage of $2 per week for 3 years!

Now..I know inflation causes prices to rise but seriously...a 3 year mortgage is absolutely unheard of these days.

I can't help but feel a little ripped off now lol

When I look at property I definitely feel like you don't get what you pay for. Yes I can afford an apartment. But it will be an old studio apartment with no kitchen and I'll be living off baked beans to pay for it. It really isn't any way to live. I think the price of property is a joke right now.

Unfortunately that means I'll be living at home with my parents and buying a property to rent out rather than buying a place to live in.

 

[devo76]

I was speaking to my grandmother the other day and I asked her how much she paid for her home. She said $50. I didn't even believe her so I forced her to get out the documents showing how much her and my grandfather paid.

They paid a $50 deposit and a mortgage of $2 per week for 3 years!

Now..I know inflation causes prices to rise but seriously...a 3 year mortgage is absolutely unheard of these days.

I can't help but feel a little ripped off now lol

When I look at property I definitely feel like you don't get what you pay for. Yes I can afford an apartment. But it will be an old studio apartment with no kitchen and I'll be living off baked beans to pay for it. It really isn't any way to live. I think the price of property is a joke right now.

Unfortunately that means I'll be living at home with my parents and buying a property to rent out rather than buying a place to live in.

Just imagine what your grandkids are going to say in the future.

" My grandparents bought there first house for $350,000. They had it so easy back then. Now i have to pay $ 1 million just for a dump.Im never going to own a house. At least i have my 150 inch 4D TV and my super cool hover board to play with. Now off to pack for my holiday to the moon.

 

[zed_kid]

I was speaking to my grandmother the other day and I asked her how much she paid for her home. She said $50. I didn't even believe her so I forced her to get out the documents showing how much her and my grandfather paid.

They paid a $50 deposit and a mortgage of $2 per week for 3 years!

Now..I know inflation causes prices to rise but seriously...a 3 year mortgage is absolutely unheard of these days.

I can't help but feel a little ripped off now lol

When I look at property I definitely feel like you don't get what you pay for. Yes I can afford an apartment. But it will be an old studio apartment with no kitchen and I'll be living off baked beans to pay for it. It really isn't any way to live. I think the price of property is a joke right now.

Unfortunately that means I'll be living at home with my parents and buying a property to rent out rather than buying a place to live in.

Go overseas for work and invest in Australia? I don’t know... but just being an Australian citizen you are already ahead of the pack. Use it to your advantage.

Just imagine what your grandkids are going to say in the future.

" My grandparents bought there first house for $350,000. They had it so easy back then. Now i have to pay $ 1 million just for a dump.Im never going to own a house. At least i have my 150 inch 4D TV and my super cool hover board to play with. Now off to pack for my holiday to the moon.

hahaha thanks for the lolz

 

[The Fence]

When I look at property I definitely feel like you don't get what you pay for. Yes I can afford an apartment. But it will be an old studio apartment with no kitchen and I'll be living off baked beans to pay for it. It really isn't any way to live. I think the price of property is a joke right now.

Unfortunately that means I'll be living at home with my parents and buying a property to rent out rather than buying a place to live in.

I lived on baked beans in my twenties...baked beans for breakfast, baked bean sandwiches for lunch and a treat for dinner...sausages and mash potato.

Lived in an old fibro house in the middle of a paddock of wheat about 20klms outta town on corrugated gravel road and the rent was $20/wk and I was sharing...!!
I was making $200/wk as a farmhand when TC was just a kid in school....just down the road.
At that time I thought a mortgage was completely out of my scope, I was resigned to renting forever.....that stuff was for switched on rich folks.....

Here we are 25yrs later, still doing manual labour for $$$ and holding 4IP's on the coast and PPOR on 6.5acres nice brick home, boat, good transport, couple of share holdings on the ASX...nothing too flash....

All because I read up about investing my hard earned $$$ and got the bull by the horns so to speak and had a go.... At first I thought it was a croc (Jans books) but it works still to this day....

Why don't you and all the other whingers on here have a go too...????

This myth is BUSTED...!!!


Oh....and we eat steak and prawns these days too...