Australian Housing Affordability Discussion

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If housing is cheap and supportable via a single income is child care such an issue?

I had to work in the '80's with a child to supplement income for the mortgage. We started with a second hand bed, newspapers for curtains and only floor coverings in our bedroom and the lounge. One TV. Second hand. Second hand +++ cars.
 
In the 2008 to 2010 period in Los Angeles we saw many properties forced onto the market and prices for forced sales got well and truly crunched.
Perth prices haven't crashed but they are falling on a monthly basis as there is now a surplus of homes that are available for rent.Rents have fallen due to so many project workers being let go as projects cut staff and contractors. Many have gone back east as there are very few new jobs now in Perth after the mining and gas boom.
Melbourne is now racing to release building blocks and blocks have been selling very quickly even in outer suburbs.
I am expecting a saturation to occur in Melbourne once developers catch up to market demand but no one knows how soon that will be.

I expect saturation in Melbourne (of housing stock) in about 2055 ;).

The problem is that people usually try to look at property in too broad a stroke when sometimes they have to be looked at suburb by suburb, sometimes even street by street! As generally as possible though, in Melbourne there is a severe undersupply of free standing housing (desirable) in established (desirable) suburbs. Add to that the highest net immigration of any Australian city (and no plans to stop this), a low interest rate environment and an economy that is still ticking along without any major bumps yet to the people buying in this bracket.

If you want to get very specific some more working class suburbs / locales near the car manufacturing belt may be impacted a little by the exit of the manufacturers (a la Perth effect) but I suspect there will still be too much demand over and above these factors to let much slip. I feel desperately sorry for those impacted and who have lost their jobs but I suspect prices even there will continue to increase to meet demand.

All this said there is still hope for people still searching to buy in the established suburbs Melbourne, there are still suburbs within 5-7 km of the cbd which are undervalued, like the inner northern suburbs of Brunswick West and Brunswick. You can pick up a free standing house on decent land in these suburbs for easily about 40-50% less than the equivalent distanced suburbs in the south/south east. All the shopping strips are gentrifying as more and more young professionals buy out that way. So there are definitely still options if people can bear to live away from Chapel street and in an area that will probably become the new Chapel street in 5-10 years!

Perth I agree you can paint with a wider brush because the whole city has been affected pretty much by the same issues though I would suggest some suburbs more than others.
 
About one million for a home on a decent block in Brunswick and that's if you can buy it without pressure from some dodgy developer bidding against you.
 
No stamp duty for first home buyers in Victoria for homes under 600k with a sliding scale between 600k-750k.

Tens of thousands of first home buyers will no longer have to pay stamp duty on properties worth up to $600,000 under an Andrews government plan to make housing more affordable.
Long-awaited reforms to be unveiled on Sunday will give new home owners savings of up to $15,000 by exempting them from stamp duty on new and existing properties, in a bid to help more Victorians to break into the expensive housing market.

First home buyers: Stamp duty cuts for houses worth up to $600,000
 
About one million for a home on a decent block in Brunswick and that's if you can buy it without pressure from some dodgy developer bidding against you.

Yep! Brunswick has well and truly flown the coop. Footscray is really taking off now. There is so much land between Footscray and Docklands that could be smartly developed, but it won't be due to the government wanting to feed more roads through it. E gate was and should have been a prime land renewal area.
 
Yep! Brunswick has well and truly flown the coop. Footscray is really taking off now. There is so much land between Footscray and Docklands that could be smartly developed, but it won't be due to the government wanting to feed more roads through it. E gate was and should have been a prime land renewal area.

Do note, that land was originally wetlands.
 
Good news for us.

Even though our preference was for south east, we'd been looking North and those house prices were also quickly spiralling out of reach.

We just helped friends buy in Brunswick West and another couple we know have just bought in Brunswick. Both were renting in Windsor/South Yarra (Inner south east) but as per most are completely priced out of those suburbs now (to buy). We haven't come across many developers actually in the inner north, except on the main roads of Sydney, Lygon and Nicholson of course but main roads developing - that happens everywhere.

So anyway, flip the map and same distance on other side of town in the inner north they picked up a house for 1.1m in Brunswick West, that would easily be worth 1.8-1.9 in the south east. It's a pocket that is only just starting to pick up now and has strong medium long term prospects.

So I guess my point is that there are still good buys in inner city Melbourne if people think more medium/long term with suburbs like Brunswick West and Brunswick which are rapidly gentrifying as opposed to 'move ready' suburbs like Windsor, Prahran, South Yarra on the other side of town. As per others in this thread you sometimes just have to make a compromise and think a bit longer term!
 
Is $1.1 million a compromise (compared to $1.8 million)?

i shudder to think what a loan repayment looks like on even that price....so I looked it. Up. around $6,000 per month for 300 months..... (stamp duty, LMI)
bad luck for you if one of your income earners bust a gasket. Esp with flatline wage growth
(this would involve a family income topping over $250,000 (taking into account rates & taxes, super, children, partner, living expenses, two cars, holidays, oops forgot the private school fees) 30% of income marker is $216,000
seems to me we have quite a few average earners getting into this racket - mind you no mortgage, no kids two $80,000 salaries you could save $500k for that yacht in the marina within 7-8 years so I suppose it is doable

still I suppose housing has just become another commodified stock market product.
 
I had to work in the '80's with a child to supplement income for the mortgage. We started with a second hand bed, newspapers for curtains and only floor coverings in our bedroom and the lounge. One TV. Second hand. Second hand +++ cars.

Your point? Is this a mashed avocado story?
 
Your point? Is this a mashed avocado story?


And I have no idea what you are talking about.

My point is that each generation faces challenges and it is like comparing apples with oranges. And avocadoes weren't all that much around in the eighties.

Your original post inferred that it is only the current generation who required 2 incomes to manage mortgage payments and thus balance child care costs. Bad assumption.
 
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And I have no idea what you are talking about.

My point is that each generation faces challenges and it is like comparing apples with oranges. And avocadoes weren't all that much around in the eighties.

Your original post inferred that it is only the current generation who required 2 incomes to manage mortgage payments and thus balance child care costs. Bad assumption.

The current generation just has to face mas immigration driving down wages at the mid to lower levels.

mass student immigration which further drives down wages at the lower end

457 Visas for fast food workers driving wages down at the lower end.

2 incomes today isn't about child care fees. It's about the fact that you'ed need to be in the top 5% of income earners to be able to buy a median property in Syd or Melbourne on a single income. This was far more achievable in the 80s.

The ABS classifies 1990 as 100 on their median house price index. In 1985 the index was just 66.7 for Sydney, 84.1 for Melb, 79.8 for Bris. Move forward to 2003 and the index was 170 / 153.2 / 160.2 for Syd / Melb / Bris. Far in excess of wages growth.

Back in the mid 80s you needed about 75% of household income for a deposit for house, or 60% for a unit. By late 2016 you needed about 170% for a house or 135% for a unit.

The Bank of International Settlements has developed internationally standardised debt service ratios (DSR) to derive estimates of aggregate principal and interest repayments to income. Household debt and prices escalated, interest rates declined and principal payments rose over the years. The gap has widened between interest payments to income and the DSR from around 1% between the late 1970s and early 1990s to a record 6% today.

From the BIS "the DSR is a reliable early warning indicator for systemic banking crises. Furthermore, a high DSR has a strong negative impact on consumption and investment.” The DSR is currently 15% nationwide, far higher than the US, UK and Spain at the peaks of their housing bubbles. Estimates of the DSR for New South Wales and Victoria are 18%, which demonstrates extreme indebtedness.

Buyers from, say, 2010 face onerous payments over the life of their mortgage compared to those who purchased in 1980 and 1990 when interest rates were much higher. The average ratio across the lifetime of the mortgage for all purchases dates are 1960 (10%), 1970 (10%), 1980 (18%), 1990 (27%), 2000 (23%) and 2010 (37%). Affordability is even worse in 2016 due to rising prices, with an estimated average payment ratio of 42%. The payment burden for 2010 and 2016 is still extreme and higher than 1990.

The above demonstrate severe unaffordability, confirmed by the highest deposit-to-income ratios, the highest debt repayments relative to income over the lifetime of the mortgage and very high DSRs. Over 50% of first home buyers today are reliant on parental assistance, and it's rather sad many FHBs buy an apartment, live in it for 6 months to get any grants then rent it out to get NG and often move back to live with their parents. This is going to have long term negative consequences for Australia. The loss of productivity and competitiveness due to high land costs is a major factor in the hollowing out of the economy, along with artificially rising energy costs, and the idiocy of letting the AUD go above parity with the USD for an extended period.

Yes each generation faces their own difficulties, but to say the current FHB situation is comparable to any previous time in Australia is just wrong. I feel sorry for anyone buying in the last few years. They will at best live with a debt millstone for 25 years, at worst end up bankrupt or nearly so.
 
Re: The totally off-topic thread

Why do you persist with the Lies, Damn Lies, Statistics and RAM "facts"?

The 17% interest rate didn't even last a year. By the end of 1990 it was 15%, then 12% by the end of 1991 and 10% by the end of 1992. By contrast the only way is up for interest rates right now, and every 25 basis points that the RBA puts on now will see many investors going into mortgage stress (along with those already there).


Must not be a good time for you Moody?

That is an excerpt from the newspaper article.

It is all correct and factual, that is what the monthly repayments were at 17%, that is the salary etc etc.

1 + 1 does make two. Have a read of the complete article to get the full story perhaps?
 
Hey - cherry pick data points to misrepresent reality and I will respectfully (kinda) correct you. Do it again and all bets are off. I also had a mortgage in the late '80s and can assure you that not only would the same property be at the limit of my borrowing today, it would likely send me bankrupt if interest rates returned to anything like normality.

Seriously?I just couldn't fit the whole graph in the screen using the app. Sheesh.
 
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$1.1 is the compromise? :shock:

We couldnt afford anywhere near that, hence being priced out of many suburbs, including the one we currently live in. We currently live in an old house on a 450sqm block that sold for over $1m. We're buying a 423sqm block for under 300k. As much as Id like to live closer to the city, I know which mortgage I'd rather be paying.
 
$1.1 is the compromise? :shock:

We couldnt afford anywhere near that, hence being priced out of many suburbs, including the one we currently live in. We currently live in an old house on a 450sqm block that sold for over $1m. We're buying a 423sqm block for under 300k. As much as Id like to live closer to the city, I know which mortgage I'd rather be paying.
I was a little surprised at the price, especially as the post seemed to indicate that it was quite cheap. I would think that's not in the ball park for a first home buyer. It is a bit dear for me as well, though as retirees we are now cash buyers.
 
Re: The totally off-topic thread

Must not be a good time for you Moody?

That is an excerpt from the newspaper article.

It is all correct and factual, that is what the monthly repayments were at 17%, that is the salary etc etc.

1 + 1 does make two. Have a read of the complete article to get the full story perhaps?

It took me all of 300 nano-seconds to spot the cherry-picked data in your post. For your homework you should study and memorise the post directly above your last - it contains a reasoned argument.
 
Seriously?I just couldn't fit the whole graph in the screen using the app. Sheesh.


Calm down - I was referring to RAM's cherry picking of data, not your cut & paste issue. Glad you cleared it up though, as I was slightly suspicious of the missing years ....... it looked like a climate-change deniers view of the world - that nothing bad has happened in the last 10 years so we can just ignore it and burn more coal.
 
Yeah we had it easy. 25 years debt was expected when we started our mortgage.

Calm down - I was referring to RAM's cherry picking of data, not your cut & paste issue. Glad you cleared it up though, as I was slightly suspicious of the missing years ....... it looked like a climate-change deniers view of the world - that nothing bad has happened in the last 10 years so we can just ignore it and burn more coal.

But you quoted me and the graph.

Stamp duty is what our state Government based their budget on and subsequently spent heavily. When housing prices fell in SA then their budget got screwed.

Stamp duty is one thing that has to be abolished.
 
Remember the 17% rates very well - fulltime job, good wage and banks wouldn't touch me for an 80k loan for a unit on the fringes of ADL. Same place today - 350k. SMH. :(
 
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