Why Houses Being Unaffordable is a Myth...

[sash]

I might cop a caning for this...but here goes.....

I was reading this article and had a good chuckle...particularly in regards to some of the following commentary....

http://www.smh.com.au/business/melb...ins-20110131-1aa8l.html?comments=144#comments

The article indicates that houses in Australia are now 7.2 times the median wage of 66k...or aobut 475k.

I feel the story is biased and does not consider that due to the level of participation of women most people use two incomes to purchase a house. So it might be more like the median household income of 110k.

In Sydney you have plenty of choices of properties under 400k..which a 110k income will service comfortably.though mostly units. Some of these areas are well within 15-25 klms. The REAL issue is that people these days want everything now. You could comfortably buy a 2 brm unit in Meadowbank, Belmore, Lidcombe, Homebush, or Ryde for that kind of money.

In other cities like Melbourne, Adelaide, and Brisbane you will find houses under 350k mark confortably within 15-25klms.

So perhaps an article need to be written not about housing affordablity....but the lack of will and snob factor by FHB.

I should know because I talk to people who are 25-25 yrs of age....and they will want to buy a 850k inner city terrace or californian bungalow as their first home.

Sydney like all global cities now has a group of people who will always rent. They can afford to buy in the outer surburbs but they want to live in the inner city. Perhaps the better compromise is to buy an IP in the outer surburbs but continue to rent in the inner suburbs ...this will allow them to move with the Sydney market.

 

[meconium]

Value oriented people can easily find bargains by looking at the lowest quartile of sales in their area, rather than focusing on the actual median

I'm amazed at the number of bargains around cities like Perth and Melbourne that can be had for around $350,000. Perfectly nice brick houses on potential dual occ sites......its hard to go wrong with these.

 

[Ausprop]

I feel the story is biased and does not consider that due to the level of participation of women most people use two incomes to purchase a house. So it might be more like the median household income of 110k.

why have we enslavened half the population unnecessarily I would ask?

 

[Dazz]

The article indicates that houses in Australia are now 7.2 times the median wage of 66k...or aobut 475k.

I feel the story is biased and does not consider that due to the level of participation of women most people use two incomes to purchase a house. So it might be more like the median household income of 110k.

Fantastic if income has gone up from 66K to 110K pa.

What about the expenses though ?? If they have plenty of kids, or a bunch under 5, I suppose the expenses have also gone through the roof with typically Mum not looking after the brood for free.

With ABC Learning going to the wall, I imagine costs will keep getting steeper until a successful business model can be found. Of course, most reckon the $ factor shouldn't come into it and child care should be about the child's welfare. Sounds great, I'm all for that, as long as the people who say that pay.

 

[Ed Barton]

I might cop a caning for this...but here goes.....

i didn't read past this but i can guess you posted some bearish analysis and are a bit embarrassed by that.

don't be embarrassed alternative views should be valued.

off to read the story...

 

[jezza]

Couldn't agree more DAZZ, single income family with 3 kids and wifee hasn't worked since the first one is born. People think I live in the 60's. Wife stays home, cooks, looks after kids. I get home have 1 beer and as there is no house work to do I get to spend 2 hours with the kids. While I appreciate some can not afford to live wihtout 2 wages, I am astonished with the volume of familes in my area who have send 2 kids to full time child care and never see there kids throughout the week.
All of the following Baby Bonus, meterinty pay for 26 weeks, child care subsidies should be all scrapped, if you can't afford to have a child then don't.

Back to Sash OP, I find it difficult to understand why people don'tview what is in there means and want to struggle, I think it has a lot to do with image and you don't want to be seen to not have what everyone else does. However in saying that the 2 pieces of data don't directly talk to each other. This as always is due to that wonderful word " Medium". Lets see figures, a few basic things are missing but will just work with the main numbers

Pay: $66000
Tax: $13650
Remaining:$52350
House bought at: $475k, lets assume they had enough money to pay stamp duty legal etc
repayment at 7.1% P & I, $3391 per month or $40692
Living capability now per week: $224

Jezza

 

[Ed Barton]

Pay: $66000
Tax: $13650
Remaining:$52350
House bought at: $475k, lets assume they had enough money to pay stamp duty legal etc
repayment at 7.1% P & I, $3391 per month or $40692
Living capability now per week: $224
Jezza

224 to support you, wife +3. good luck with that. you could easily spend that per day

 

[charlieandkath]

Or you could move bush where you can pick houses up for $50,000 to $200,000 and be on an income of $100,000 and pay off in afew years.

 

[sash]

...OR.......continue to have your wife stay at home ...rent in the area where you want....but buy a house in a area like Melton or Werribee for 250k and rent it out for 280pw.

How much will this cost????

Interest on 240k @ 7% - $16800
Other costs (rates, mgmt fees, water, etc) - $3000

The total rent per annum is $14560 so the differnce after interest and other cost is $5240

Allowing for a depreciation of say $2000 per annum.

This property is going to cost you about $45pw.....less if you had a 10$ deposit.

Its really about choices....

Couldn't agree more DAZZ, single income family with 3 kids and wifee hasn't worked since the first one is born. People think I live in the 60's. Wife stays home, cooks, looks after kids. I get home have 1 beer and as there is no house work to do I get to spend 2 hours with the kids. While I appreciate some can not afford to live wihtout 2 wages, I am astonished with the volume of familes in my area who have send 2 kids to full time child care and never see there kids throughout the week.
All of the following Baby Bonus, meterinty pay for 26 weeks, child care subsidies should be all scrapped, if you can't afford to have a child then don't.

Back to Sash OP, I find it difficult to understand why people don'tview what is in there means and want to struggle, I think it has a lot to do with image and you don't want to be seen to not have what everyone else does. However in saying that the 2 pieces of data don't directly talk to each other. This as always is due to that wonderful word " Medium". Lets see figures, a few basic things are missing but will just work with the main numbers

Pay: $66000
Tax: $13650
Remaining:$52350
House bought at: $475k, lets assume they had enough money to pay stamp duty legal etc
repayment at 7.1% P & I, $3391 per month or $40692
Living capability now per week: $224

Jezza

 

[evand]

I think the situation is that people (or families) sacrifice lifestyle to buy into a better area or a better house.

They are willing to pay more as a percentage of their income into their mortgage than previous generations.

Which is all good and fine but the problem lies in that when this happens in large numbers it leaves the population very sensitive to upward interest rate changes.

All unaffordibilty does in reduce the amount of people that can afford higher priced housing. As that number reduces, like a pyramid at the top, the demand lessens at that particular higher price point. And maybe moves the demand down to lower priced properties/areas. I'm getting out of my depth here so maybe someone else can pick this up.

 

[chilliblue]

Couldn't agree more DAZZ, single income family with 3 kids and wifee hasn't worked since the first one is born. People think I live in the 60's. Wife stays home, cooks, looks after kids. I get home have 1 beer and as there is no house work to do I get to spend 2 hours with the kids. While I appreciate some can not afford to live wihtout 2 wages, I am astonished with the volume of familes in my area who have send 2 kids to full time child care and never see there kids throughout the week.
All of the following Baby Bonus, meterinty pay for 26 weeks, child care subsidies should be all scrapped, if you can't afford to have a child then don't.

Back to Sash OP, I find it difficult to understand why people don'tview what is in there means and want to struggle, I think it has a lot to do with image and you don't want to be seen to not have what everyone else does. However in saying that the 2 pieces of data don't directly talk to each other. This as always is due to that wonderful word " Medium". Lets see figures, a few basic things are missing but will just work with the main numbers

Pay: $66000
Tax: $13650
Remaining:$52350
House bought at: $475k, lets assume they had enough money to pay stamp duty legal etc
repayment at 7.1% P & I, $3391 per month or $40692
Living capability now per week: $224

Jezza

Correct me if I am wrong, but on that income, do you not get the Family Allowance part a and b?

 

[Graingrower]

I agree that housing unaffordability is a myth. Some people say that "the great Australian dream" is dying and all youg people will end up renting. Who is going to own all the houses when the baby boomers pass on? If it is giant investment companies, they are only going to own propertys that have a decent rental return or capital gain. Property values will only keep going up if rent goes up and rent will only go up if wages go up.
I'm in my early thirties, married, with two children and live in a two bedroom home that is 60 years old, most people my age would demand a four bedroom home under 20 years old. I think that is the problem with housing affordability.

 

[krgambling]

Sash,

You're point is valid if yes there are two working parents in the family to support the mortgage. But housing affordability also concerns people trying to sustain a mortgage on one income, either where one parent stays home with the kids, or alternately a single person. Suddenly $66,000 doesn't go so far in the property market.

It's true you could buy a $350,000 house on that wage. But it'd only leave you with (roughly) $600 a fortnight to cover all other living costs. If you can live frugally that's manageable, but what happens when interest rates rise by a percent? Or an unexpected expense comes up (think uninsured tragedy)? Not so manageable all of a sudden....and remember, those are you living conditions for the next 30 years.

Cheers,
Keith

 

[sash]

Yes....I see your point...which is why it is important to getting into a house early preferably before one has kids.

With two incomes it is not that hard.....but on one income with kids it does become more of a challenge but still doable.

The real issue as Evand and Graingrower point out is peoples expectations. 60-70% of people buy a house which stretches their bdugets.

But as time goes along and their salary increases, equity increases; the pressure slowly dissapates.

Sash,

You're point is valid if yes there are two working parents in the family to support the mortgage. But housing affordability also concerns people trying to sustain a mortgage on one income, either where one parent stays home with the kids, or alternately a single person. Suddenly $66,000 doesn't go so far in the property market.

It's true you could buy a $350,000 house on that wage. But it'd only leave you with (roughly) $600 a fortnight to cover all other living costs. If you can live frugally that's manageable, but what happens when interest rates rise by a percent? Or an unexpected expense comes up (think uninsured tragedy)? Not so manageable all of a sudden....and remember, those are you living conditions for the next 30 years.

Cheers,
Keith

 

[zed_kid]

What happened to planning and forward thinking? Maybe do the sums first and see if you can afford a house and a kid on one income… I understand that sometimes things happen and conceiving a baby is not a strict procedure but a little bit of responsibility goes a long way, I think.

 

[Deltaberry]

I might cop a caning for this...but here goes.....

I was reading this article and had a good chuckle...particularly in regards to some of the following commentary....

http://www.smh.com.au/business/melb...ins-20110131-1aa8l.html?comments=144#comments

The article indicates that houses in Australia are now 7.2 times the median wage of 66k...or aobut 475k.

I feel the story is biased and does not consider that due to the level of participation of women most people use two incomes to purchase a house. So it might be more like the median household income of 110k.

In Sydney you have plenty of choices of properties under 400k..which a 110k income will service comfortably.though mostly units. Some of these areas are well within 15-25 klms. The REAL issue is that people these days want everything now. You could comfortably buy a 2 brm unit in Meadowbank, Belmore, Lidcombe, Homebush, or Ryde for that kind of money.

In other cities like Melbourne, Adelaide, and Brisbane you will find houses under 350k mark confortably within 15-25klms.

So perhaps an article need to be written not about housing affordablity....but the lack of will and snob factor by FHB.

I should know because I talk to people who are 25-25 yrs of age....and they will want to buy a 850k inner city terrace or californian bungalow as their first home.

Sydney like all global cities now has a group of people who will always rent. They can afford to buy in the outer surburbs but they want to live in the inner city. Perhaps the better compromise is to buy an IP in the outer surburbs but continue to rent in the inner suburbs ...this will allow them to move with the Sydney market.

As I've discussed in other threads, I find views like the one you posted to be pretty self-deceiving. Let me briefly touch on the points you mention.

Argument: You say that the 7.2x only seems high because we're using median house prices. However people can easily look for cheaper houses, perhaps at 4.0x income.
Comment: What your argument fails to recognise is that the 7.2x is used to compare countries, and even cities, with other places such as the US, Canada etc. While it's true you can buy houses for 4.0x median income in Sydney (in fact I'm sure you can do it for 3.0x if you tried hard enough), the point is Sydney and Australia are severely overpriced relative to offshore properties in comparable economies.

Argument: You say that the study fails to recognise dual-income.
Comment: The studies I've seen all use median household income, rather than median the income of an individual. If the median household income is $66k (as mentioned in a number of other threads), then it's fair to say that the median household doesn't have dual incomes! Therefore the real myth are the dual income families I hear property investors keep spruiking about... Next thing I know some not-so-economically-minded-fellow-forumites are probably going to tell me families should work harder. Let me preempt that and respond: the point is not about what they should do. What's important is what they ARE doing and whether what they ARE doing supports current prices...

Argument: Young people want to buy $850k terraces
Comment: I'm sure there's idiots everywhere. But the reality is all the numbers indicate unaffordability. You need to remember, these ratios (such as prices/income) are all relative and simply used to compare countries, and compare between 'now' and the 'past'. I know you can find cheaper places but that's not the point...

Only time will tell on this one, but I have a feeling it'll be the same as our east vs west debate in 2009 (ie I'll probably emerge right again)...

 

[Deltaberry]

Or you could move bush where you can pick houses up for $50,000 to $200,000 and be on an income of $100,000 and pay off in afew years.

Or you could live in a gutter. That's free! And eat at those caravans where social service people go to hand out yucky soup. Or cheat Centrelink and apply for commission housing (I know lots of Australians who do).

But still, that's not the point. You guys are talking about what people SHOULD do. What's more important is whether the status quo living practises supports status quo prices.

 

[atsim]

What happened to planning and forward thinking? Maybe do the sums first and see if you can afford a house and a kid on one income… I understand that sometimes things happen and conceiving a baby is not a strict procedure but a little bit of responsibility goes a long way, I think.

birds dont have babys untill they establish a nest. Smarter than most humans id say

 

[Aaron Sice]

why have we enslavened half the population unnecessarily I would ask?

wasn't it the rockefellers who were aiding the "right to work" for women, in the knowledge it would boost the tax base they were able to get funding from?

i thought i heard that in an interview with Aaron Russo.

 

[Ausprop]

wasn't it the rockefellers who were aiding the "right to work" for women, in the knowledge it would boost the tax base they were able to get funding from?

i thought i heard that in an interview with Aaron Russo.

it just doesn't sit well with me. for the extra person working we may have an extra bedroom and bathroom, but otherwise we have traded that for our social and family structure. When I grew up, Dad could afford the mortgage, now it takes a Mum and a Dad and the kids get farmed out and at the end of the day we all still live in... just a house. to make it worse, the debt is largely held by foreigners, so all the fruits of labour are transferred overseas