Australian Housing Affordability Discussion

[cove]

Re: The totally off-topic thread

In 1978 I was in the US and I learned that profit is good. Now I thought I should tell you that as it helped me invest better.

 

[JessicaTam]

Re: The totally off-topic thread

You might be aiming very high for a first home.

I don't know Melbourne real estate that well but I am sure there are units/apartments you can buy for ~$400,000 or maybe less? That's where you start.

Also, and I know you are not going to listen, but you have got to stop spending. Full stop. Buying points, expensive hotels, staying in hotels in your home town, drinking expensive alcohol daily, eating out, going to New Zealand for lunch etc. That has to go. Save money and buy your first property. Negative gear the property if possible.

And seriously create yourself a basic spreadsheet to track your loan through to paying off. When you see that the $60 you just spent on a bottle of champagne will pay your property a month quicker you won't buy that bottle of champagne.

It really isn't that difficult. You need to prioritise your goals if you want own a home. When you have paid it off then you can start enjoying travel.

[rant]
JohnK, I was with my father when he died. He had suffered for ten years with Parkinsons. He died in the same year as he was planning to retire. As a surgeon he was forced to stop work sooner than he had wanted. He had also worked his butt off for his entire life to provide for a family and to allow a retirement filled with travel and playing golf every day. Working a six and a half day week he gave up many things and in the end, his enjoyment of retirement was one of them.

As a result I am planning for my future as well as enjoying today - in case there is no future.

Please don't preach to blackcat20 about how she should live her life. I reckon she does pretty well.
[/rant]

 

[penegal]

Re: The totally off-topic thread

TomCat - you think you have it hard - at least you have two incomes! Some of us simpletons are single and not having much luck changing that...

Never under estimate the power of the DINK in home ownership. (for the uninitiated that's Double/Dual Income, No Kids)

 

[Hvr]

Re: The totally off-topic thread

Some interesting thoughts posted here.

On tertiary education I believe that with few exceptions, people should have at least a year off between their formal schooling. A little life education is essential and will help to reinforce book learning. Maybe a 5% discount for every year between conclusion of secondary school and commencement of university.

Trade apprenticeships are essential to the future of this country. We desperately need skilled tradespeople to build the infrastructure of the future and if we don't start training people now we'll be seriously short of them.

Housing, too many people want to buy their Mc Mansion now with way too much space for their biggest possible family circumstance rather than even what they've planned.

They'll be living in the boondocks and spending a huge percentage of their income whilst commuting way too many hours to keep their relationship intact. Still divorce is a good driver of housing sales so the cycle continues.

 

[TomVexille]

Re: The totally off-topic thread

We bought our first home in 1976; banks then were very strict on how much they would lend, was based on a percentage of your salary - something like say 1/4 of your salary went on repayment which was tied to a scale of loan. My husband and I both had second jobs while we saved. He in a pub, me cleaning offices. 10 years later hen we bought house #2 - will I mention an interest rate of 17%? Budget and thrifty were not names of car hire companies. We put three kids through private school too (substantial fees - well that's after tax dollars)We didn't have credit card debt either. We didn't travel overseas till we were in our 40s.

Yep we are the mean nasty baby boomers hogging all the money. Oh did I say we also saved our own money and are in the very fortunate position that we will be self supporting into our old age. I appreciate that we had many advantages but we paid plenty of tax and have tried to be prudent.

I guess we still saw the effects of a war and a depression on our own parents as far as money went. My own were ten pound Poms who came with a few boxes, hardly any savings but a dream of the future in which they could work hard and create a better life for their family. We baby boomers I think had pretty much idyllic childhoods. The next generations seem to be unfazed by debt & are often very highly leveraged, were able to borrow 100% of the cost of a house (though that perhaps is no longer the case)and don't have any notion of waiting till they can afford to buy stuff. Like Pushka - we did things as we could afford, including drinking cask wine. When I suggested that my daughter who was bemoaning always being broke, try it instead of $20 "quaffing" wine she was horrified. She said well you drink it - which is true but she forgot the 30 years of working in between!
I do however disagree with the cost of tertiary education - if we educate our children then everyone benefits, it's the way out and up and many more should have that opportunity.
Now preparing for a barrage of 'selfish old fart' replies!

You selfish old fart!

Nice story. Let me just put a few things into perspective. I wish we could get a mortgage that is only 1/4 of our salary. It's more likely to be 40%, and that's if we manage to find something cheap. I often work 48-60 hour weeks now, just so I can try and squirrel away a little. I moved to New Zealand at the age of 19 with one bag and $1000, and later to Australia with not much more. So don't tell me I've had everything handed to me. I've worked for pretty much everything I have. I have zero debt.

But then again I'm just an irresponsible, debt laden punk who wants everything "now" right?

 

[mushez]

Re: The totally off-topic thread

Housing, too many people want to buy their Mc Mansion now with way too much space for their biggest possible family circumstance rather than even what they've planned.

I agree with such a statement ....... but only to a small degree. The issue is Real Estate agents wanting 5% cut on any sale, stamp duties and tax implications each time you buy and sell, and the general rule that any house appreciates in value in the past 10-15 years of equal value to annual interest to service a property even if you are at 100% mortgage - in the long term, most are actually better off financially getting the biggest and best place now to suit all and every need for the future.

 

[Pushka]

The totally off-topic thread

Some interesting thoughts posted here.

On tertiary education I believe that with few exceptions, people should have at least a year off between their formal schooling. A little life education is essential and will help to reinforce book learning. Maybe a 5% discount for every year between conclusion of secondary school and commencement of university.

Trade apprenticeships are essential to the future of this country. We desperately need skilled tradespeople to build the infrastructure of the future and if we don't start training people now we'll be seriously short of them.

Totally agree here. Its really tough getting an apprenticeship in companies in order to get started. And then keep the fingers crossed the company stays solvent until the apprenticeship is finished.

Took MasterP almost a year to get a position which he loves in a company with a great culture. And he came top in his pre-apprenticeship course. I suspect the rest are still not working. His area is in industrial refrigeration.

 

[OATEK]

Re: The totally off-topic thread

We bought our first home in 1976; banks then were very strict on how much they would lend, was based on a percentage of your salary - something like say 1/4 of your salary went on repayment which was tied to a scale of loan. My husband and I both had second jobs while we saved. He in a pub, me cleaning offices. 10 years later hen we bought house #2 - will I mention an interest rate of 17%? Budget and thrifty were not names of car hire companies. We put three kids through private school too (substantial fees - well that's after tax dollars)We didn't have credit card debt either. We didn't travel overseas till we were in our 40s.

Yep we are the mean nasty baby boomers hogging all the money. Oh did I say we also saved our own money and are in the very fortunate position that we will be self supporting into our old age. I appreciate that we had many advantages but we paid plenty of tax and have tried to be prudent.

I guess we still saw the effects of a war and a depression on our own parents as far as money went. My own were ten pound Poms who came with a few boxes, hardly any savings but a dream of the future in which they could work hard and create a better life for their family. We baby boomers I think had pretty much idyllic childhoods. The next generations seem to be unfazed by debt & are often very highly leveraged, were able to borrow 100% of the cost of a house (though that perhaps is no longer the case)and don't have any notion of waiting till they can afford to buy stuff. Like Pushka - we did things as we could afford, including drinking cask wine. When I suggested that my daughter who was bemoaning always being broke, try it instead of $20 "quaffing" wine she was horrified. She said well you drink it - which is true but she forgot the 30 years of working in between!
I do however disagree with the cost of tertiary education - if we educate our children then everyone benefits, it's the way out and up and many more should have that opportunity.
Now preparing for a barrage of 'selfish old fart' replies!

You selfish old fart!

Nice story. Let me just put a few things into perspective. I wish we could get a mortgage that is only 1/4 of our salary. It's more likely to be 40%, and that's if we manage to find something cheap. I often work 48-60 hour weeks now, just so I can try and squirrel away a little. I moved to New Zealand at the age of 19 with one bag and $1000, and later to Australia with not much more. So don't tell me I've had everything handed to me. I've worked for pretty much everything I have. I have zero debt.

But then again I'm just an irresponsible, debt laden punk who wants everything "now" right?

Old farts and punks - neither helps the debate.

Being born in 1950, I didn't know the war, but growing up I heard a good deal about how both world wars and the depression had affected earlier generations of our family. And try as I might to put myself in their shoes, you can't quite imagine what you have not experienced.

But one thing I am certain of, is that the generations before the baby boomers were involved in far more calamitous events than have been experienced during the boomers cycle. You just have to visit a memorial to the WW1 fallen in France, that was shot up during WW2 to know that. So I think it is a bit grim when people say that the boomers are the cause of all our problems, when they have also been the cause of many of the good things.

Yes buying a home in 2016 is tough for young people, but to say it was tougher than for a boomer on one income when they needed 15-20% deposit is one of the more difficult arguments to prove, just as it was when we boomers complained and were told we should have experienced how hard it was to keep a roof over one's head during the depression when the sole breadwinner worked only 16-20hrs per week (the fortunate ones) and had to feed his wife and 3 children while paying the mortgage.

 

[JohnK]

Re: The totally off-topic thread

I agree with such a statement ....... but only to a small degree. The issue is Real Estate agents wanting 5% cut on any sale, stamp duties and tax implications each time you buy and sell, and the general rule that any house appreciates in value in the past 10-15 years of equal value to annual interest to service a property even if you are at 100% mortgage - in the long term, most are actually better off financially getting the biggest and best place now to suit all and every need for the future.

I don't disagree with what you are saying but slightly confused on the real estate commission. Which real estate charges 5% commission on sales. I won't bother calling them.

I negotiated ~1.5% commission including GST up to a certain amount. If sold for less they would still get the commission on agreed amount. And then 1.5% commission on anything above agreed amount.

I have also negotiated 3.85% management fee a long time ago where I believe many agents are now chargjng >6%.

 

[blackcat20]

Re: The totally off-topic thread

TomCat - you think you have it hard - at least you have two incomes! Some of us simpletons are single and not having much luck changing that...

Never under estimate the power of the DINK in home ownership. (for the uninitiated that's Double/Dual Income, No Kids)

While there are two of us, our income is close to or below the "average" DINK due to studies etc. Dont forget I also didnt enjoy proper employment until 25 when I had finished my PhD. That kind of delay in earning a proper income really pushes back your ability to purchase property.

 

[TomVexille]

Re: The totally off-topic thread

Old farts and punks - neither helps the debate.

Being born in 1950, I didn't know the war, but growing up I heard a good deal about how both world wars and the depression had affected earlier generations of our family. And try as I might to put myself in their shoes, you can't quite imagine what you have not experienced.

But one thing I am certain of, is that the generations before the baby boomers were involved in far more calamitous events than have been experienced during the boomers cycle. You just have to visit a memorial to the WW1 fallen in France, that was shot up during WW2 to know that. So I think it is a bit grim when people say that the boomers are the cause of all our problems, when they have also been the cause of many of the good things.

Yes buying a home in 2016 is tough for young people, but to say it was tougher than for a boomer on one income when they needed 15-20% deposit is one of the more difficult arguments to prove, just as it was when we boomers complained and were told we should have experienced how hard it was to keep a roof over one's head during the depression when the sole breadwinner worked only 16-20hrs per week (the fortunate ones) and had to feed his wife and 3 children while paying the mortgage.

Yes. I think at the end of the day I'm asking that we be taken seriously when we speak. After all, we are the most educated generation ever (mostly thanks to our parents).

I won't deny that we live in a pretty good age because of the work done by those ahead of us.

But to the housing argument, in 1977 the median price in the most expensive market in the country was $39,200, and the average wage per male was $11,055. That equates to 3.55 times the breadwinners wage. Now if we compare Melbourne's median housing price of $707,415 and the Australian average wage of $74,724, it's 9.467 times more. Even if you have two incomes AND they both make the average wage, housing is 32% more expensive to buy then when the boomers were buying. But realistically it's 2.66 times more expensive. And sure, predatory lenders are willing to lend 95% of the house value, but is that really a good idea? Also anything under a 20% deposit leads to a very high mortgage insurance payment.

 

[medhead]

Re: The totally off-topic thread

I don't know, I'm gen X. We did it pretty hard as a child. No Vic20 for me, no VCR until well into the 1990s. Of course we could borrow a VCR from Dad's work for weekends. We got a colour TV for Charlie's first wedding, and only because of that wedding. Friends came around to watch on our TV because we had colour! our car was an old 1960s falcon, it broke down pretty often. My parents paid $1000 for their first block of land. The bank refused to loan enough to buy 2 blocks of land.

They had to get Dad's mum to get her bank to loan them money to build the house. She had some decent financial backing and a good relationship with her bank manager. But then as a child her father owned one side of Sandgate Road at Albion in Brisbane. My grandmother was friends with the police commissioners daughter at primary school. But they lost most of that in the depression.

My childhood was made more financially difficult for a few reasons: the political shenanigans of the Moonlight state, Mum had to resign from work when both children were born - no maternity leave, mum was "sacked" over Christmas every year - why should the education department waste money paying female teachers during school holidays. I knew my parents struggled to find money for each meal, but they always managed to serve up something. And we got through, more or less. I spent a lot of time at the beach, swimming in creeks or on the reef. A bit embarrassing taking girls to the reef on the slow boat while mates are on the fast, expensive "CATS". Even more embarrassing when one of the girls' family owns one of those other reef boats - umm lets take the competition. But I still had great fun.

I'm not going to deny my children anything. I don't want them to miss out, or feel they can't ask like I did. Well horse riding was something we didn't support greatly. Those sacrifices back then to give me an education have put me in a position now to afford that lifestyle. Money is still a worry. I'm sure I could go back to my childhood austerity, but fortunately that's not needed.

I can see that life is still difficult today, just in different ways. That doesn't mean that any one generation struggled more than another. The current state of the housing market is a joke.

 

[cove]

Re: The totally off-topic thread

When we married in 1973 we found we couldn't spend our combined incomes. It is still the same in 2016. Most DINKs would have this financial position. We have always had a great holiday each year. Saving up 20% for a house deposit is not that hard for DINKs unless they are unable to get a reliable job in their chosen industry or they blast away the money earned on the latest toys or worse on alcohol and or cigarettes.

 

[medhead]

Re: The totally off-topic thread

We're not DINKS. At best 1.5 incomes. Or 1.125 of my income. And have just about always had kids while with my wife.

 

[TomVexille]

Re: The totally off-topic thread

That's the other thing. A safe "reliable" job has gone the way of the Tassie Tiger. Corporations don't want a career employee anymore.

 

[GarrettM]

Re: The totally off-topic thread

We were DINKs. It helped us buy our house, with a little extra help from elsewhere.

Now were SIOK-s

The "-" represents the portion of our SI currently being invested in the wife's small business venture. We don't know that it will ever come back to us in any great ROI, but if you're going to try you may as well do it the right way.

But we have tightened our belts a little, metaphorically. In my case I expect the tightening to be literal to a small degree, which is not a bad thing.

 

[RAM]

Re: The totally off-topic thread

Yes. I think at the end of the day I'm asking that we be taken seriously when we speak. After all, we are the most educated generation ever (mostly thanks to our parents).

I won't deny that we live in a pretty good age because of the work done by those ahead of us.

But to the housing argument, in 1977 the median price in the most expensive market in the country was $39,200, and the average wage per male was $11,055. That equates to 3.55 times the breadwinners wage. Now if we compare Melbourne's median housing price of $707,415 and the Australian average wage of $74,724, it's 9.467 times more. Even if you have two incomes AND they both make the average wage, housing is 32% more expensive to buy then when the boomers were buying. But realistically it's 2.66 times more expensive. And sure, predatory lenders are willing to lend 95% of the house value, but is that really a good idea? Also anything under a 20% deposit leads to a very high mortgage insurance payment.

Ah, I can see you are WELL-educated in the way you have pulled the old two card trick...

In one price comparison you use median wage and in the more recent one (quoting you) it is average wage. That's an apples and oranges comparison unfortunately <PEDANT hat appearing as if by magic...>

Using the same stat would be a better start. Then you need to compare the servicing cost of the assumed 90% loan at both times, and say for arguments sake add in 1989 when mortgages were taken by some at 17%. Today I can lock in a 5 year fixed rate mortgage for under 4% with redraw/offset available to a limited extent).

So the cost of servicing is less than one fourth what it was at the worst (mid of baby boomers house buying peak period). So (mischievously different) ratio of price to med/avg income x cost of servicing makes house in 1977 more costly than today and perhaps less than half of what it was in 1989/90.

(Cue violin music)- gee you guys are SOOO lucky back in my day ...and that was followed by the recession we had to have where for the first time since the 1920s accountants, financiers and marketers got retrenched as well as other workers. <screen fades to black>

What has always hit me - is the pure 'sticker shock' of looking at say a $500,000 or $1,000,000 mortgage and remembering 17% interest rates. Even on the low $500,000 mortgage amount (choking as I typed low) that is $85,000 AFTER TAX dollars in 1989 cost days which meant around $170,000 pre-tax.

Today it is as little as $18,000 After tax dollars or $37,000 pre-tax. BTW these examples assume interest only.

Not much comfort though if you cannot afford it but it does illustrate what may be at the back of some BBs commenting.

BIG difference would be to look at what the median person spent money on in 1989 vs now. For example the typical replacement cycle for TVs is as low as 1/4 the time it was in the 1980/90s for example although the TVs are still working. Similar with PCs unfortunately. A house nearby put out three desktops and Samsung LCD screens - I picked up one of each out of interest and yes they both still worked perfectly. The desk top (4 years ago now) even had a working bluray writer in it - happy local day care shortly thereafter.

One aspect that is not often discussed is the change in the social mindset. The advent of high cc use has seen a fall in the 'commitment' aspect in the typical psyche. How many people reading this thread use lay-by for example vs instant purchase on cc? In the 1970s, 80s and 90s - layby was many fold higher a % of consumer spending than it is today. Coincidentally (not at all actually) outstanding credit card debt is an even higher multiple per capita.

The shock of a mortgage - a legal contract locking you in for up to 30 years - seems far more confronting when the typical person's horizon often does not extend beyond next weekend these days. AFFers scheming on maxing points earn being somewhat of an exception - the rise in mobile phones has seen a concomitant fall in planning for the future.

How many people do you know who will be planning on where to meet up even as they are walking in the general direction of the person they are going to meet and talking on the phone to decide the location/cafe/restaurant?

 

[medhead]

Re: The totally off-topic thread

Another set of Waahaas about 17% interest rates with the same failure to mention that inflation was vastly higher as well meaning that the value of the property was increasing very quickly, much quicker than today. And wages were also increasing at a much higher rate, meaning ability to service the loan even at high interest rates was the same or better.

 

[OATEK]

Re: The totally off-topic thread

That's the other thing. A safe "reliable" job has gone the way of the Tassie Tiger. Corporations don't want a career employee anymore.

Not just corporations, my Dad's best mate sold me a job in the public service in 1969 as a job for life! That ended in the 1980s, and my job was abolished, and I had to compete for new/changed positions, about 7 times before I left for the private sector in 1999. Since joining the private sector I have been "upgraded" without ever applying/re-applying for a position.

So yes, job security is not what it was. And of course this aligns somewhat with those various futurists who say most people will have 5 or 6 careers in the course of their working life.

Personally I think career and job gets confused here. I had something like 12 jobs in my Public Service career, across 6 agencies, but really only 4 careers (clerical, property management, ICT and Consultant). A number of commentators have said that young people move around a lot in the early years as they and their employers look for the best fit, but that this settles down once a person has settled into a chosen career. I wouldn't be surprised if corporations, SMEs and the public service will often provide a career for life for some, and not others depending on a range of variables, such as demand, technology etc.

 

[OATEK]

Re: The totally off-topic thread

Another set of Waahaas about 17% interest rates with the same failure to mention that inflation was vastly higher as well meaning that the value of the property was increasing very quickly, much quicker than today. And wages were also increasing at a much higher rate, meaning ability to service the loan even at high interest rates was the same or better.

Well when I went close to defaulting when interest reached 17% and we were on one wage, it didn't feel quite as sunny as you suggest. Family helped us out of a difficult position, and the only way we could draw on the extra value back then was to sell the house from over our heads. The banks wouldn't lend more when we were struggling to pay what we already owed.