putting lives on hold for the Aussie dream!?!?

Aparently a housing affordability summit was held yesterday in Canberra. According to the Courier-Mail, at least 750,000 households now spend more than 30% of their income on housing, while "local, state and federal taxes account for $90,000 of the average $437,000 price of a new house and land package".

http://www.couriermail.news.com.au/story/0,20797,19903830-953,00.html

The summit has been told the social impact of higher house prices is people delaying marriage and kids because they can't afford that and their mcmansion...

One aspect of this which interests me is whether the disconnect between house prices and average weekly ordinary time earnings (AWOTE).

Surely we get to a point when either AWOTE must rise substantially (leading to inflation, interest rate rises etc etc) or prices must fall or plateau for AWOTE to catchup...

What do ppl think?

 

One other alternative is that financing arrangements change ie allowing people to access their super to secure a ppor.

Maybe unlikely, possibly a good way to buy a few votes.

 

In the long run (don't know how long), the rules of engagement would change and people and society will adapt. To see what could happen in "the future", we can take a good look at our neighbors: Singapore, Hong Kong, Japan, etc. Generational mortgages; leasing for 90 or 30 years instead of buying; JV with Super to "lease" property, etc are common in some of these countries. The question is how long do we have to wait to get to that point and how much can we buy before we reach that milestone?.

Rgds,
artgul

 

AWOTE will probably not change and prices will not fall (it may plateau for short period of time) IHMO.
In case of a housing affordability it can be only worse not better.
In the future we may get situation in Australia similar to Europe, where average earner can not afford to rent a reasonable quality flat on his own. For majority of people in Europe buying a house or apartment is mission impossible.
Consider acquiring next IP as soon as possible !.

 

There are plenty of decent houses available in Sydney for under $437K. It appears many new/first home buyers want to start at the top instead of working their way up.

These people may be afraid of moving away from Mummy & Daddy, but if that's what it takes to get into a property, so be it. Otherwise, welcome to the world of renting and continually chasing your tail whilst trying to save that big deposit.

Sure houses are getting dearer, but there was no first homeowners grant for a lot of people that had to go out of their comfort zone years ago. You did it because it (buying out in the burbs) was all you could afford.

 

They had an interview with some bird who was complaining about not being able to afford a deposit, because rents are too high. She's 22 and she pays $230 a week in rent! What the deuce? I pay half that and live 4 k's from the city.

She was saying how she wants to buy in the area she is living cause she doesn't want to buy something cheaper 'in a dodgy area'...

Mark

 

I speculate that both things will happen:
i.e. Prices will further drop - wages, rents, inflation will rise. And soon too.
This will eventually bring RE around to being a better investment. Hence the cycle will begin again.
I also reckon that no government, labor (he he) or liberal will allow affordability to become too big an issue.

I think that the govt will allow longer mortgages, long leases, or another innovative finance arrangement to allow people to still have their mc Mansions, whether they be leased or owned thru a mortgage. See overseas.

As for whether we should all be planning to buy more RE, dunno. I think prices will become more attractive in the short term, in most of OZ anyway.

 

You raise valid points, and I'll be the first to admit that a portion of today's generation has somewhat of a "want it all now" mentality when it comes to housing and location.
However, it's not just a matter of affordability diminishing, especially in cities like Sydney and Melbourne (and to a lesser degree, Brisbane) that hurts first home buyers. It's also an attitude of "we'll never get there" due to the reality of the likely mortgage repayments that FHO's are taking on at later life stages than previous generations.
When my parents got married in the 1960's (in their twenties) the trend was to save for a deposit and buy/build your first home as soon as possible, with the expectation that 25 yrs later the loan was paid off and you could enjoy a better lifestyle. By this stage, with no PPOR debt, and still in your 40's (young young young!) with children either gone or almost off your hands, a better lifestyle could be enjoyed. I believe it was otherwise known as delayed gratification (or should we add "no choice" to the front of that term? )....

Let's not forget, however, that affordability WAS better in this era, and FHO's DO now have it tougher than our predecessors. I don't believe that the FHOG did anything for FHO's except artificially inflate the market at a time when it wasn't really necessary.

I wouldn't like to be a FHO in this market- it is difficult and, whilst it's fine to say "move out to the 'burbs" it's not always that black and white.

 

Hi Jacque.

My comments were primarily directed at the younger generation of today that say it is impossible to get into a house.

It may be impossible to buy inner city for some young people, but guess what, there would be many older type people that still can't get into inner city to this day, and thats after working for 20 years plus.

I can recall years ago, people I knew/know that bought their first houses in places like Campbelltown, St Marys, Blacktown, Liverpool etc. Did thet grow up there? No. Was it their first preferance to live there? No. Did they have to move away from family? Yes.
But they did it and progressed from there.

As far as affordability being better then, I'm not too sure. It's always hard when you get your first mortgage and regardless of what the FHOG has or hasn't done, it wasn't an option years ago, nor were there the loan products etc that are available today.

Having talked to some of my sons friends that live inner city (still at home), most have indicated that they wouldn't move out west.

I think peoples ideals have changed over the years and todays generation is spoiled for products and doo-dads and flashy cars that make buying your first house not such the priority it was years ago. A lot of younger people have resigned themselves to the fact that they will rent forever because of their lifestyle preferences and don't seem to be bothered by it.

 

Perhaps then society's perception on what the "right order" in which to do things has changed?
Renting, particularly in recent years, has allowed people to live in areas of their choice as well. The resignation that you refer to is indicative of this attitude as the urge to buy one's own home is no longer the strong priority of modern day couples. There's also been larger opportunities to rent and invest in IP's for those who've taken the steps to invest their spare cash.

 

SP, I agree, and "resigned" may not be the right word because some (of the many) not only aren't bothered, but seem to see a commitment like buying a house as restrictive. Some prefer a more mobile lifestyle, going where the work that interests them lies, which might involve frequent changes in location ... but always involves being close to entertainment, cafes, etc.

Regards, Dave (X-gen already feeling out-of-date by this change in lifestyle view )

 

Any concept that the young are being forced out of the housing market is ridiculous.

I'm 28 and I don't know if that still qualifies me in the young group or not, probably not these days... but my wife and I went from a deposit on a one bedroom flat in Glebe in about 2002 (we had about $50k) to now being about 6 months away from being able to buy a 2 bedroom Newtown terrace in cash (we have about $425k).

It comes back to whether you choose to work towards getting an above average salary, then choosing to not spend all of it, then choosing to learn up on what to do best with your savings etc. It's not rocket science.

 

Yep I spent my childhood in Campbelltown, it was all my parents could afford. They bought closer to the city 12 years later. At that stage dad was working 3 jobs sucking down 17% interest rates on his mortgage!

 

Another theory came to mind today, as I was taking a look at some very nice apartments that seemed to have mainly singleton owners.

The importance of one's own space has become so paramount now, whereas years ago, families shared houses and (shock, horror!) siblings even co-habited the same bedroom until they left home (and often only then to get hitched).

The need for more space and privacy, even amongst families, has led to wanting the bigger and better property from the very start. Areas within modern homes include parent retreats, theatre rooms and dressing rooms (I've seen one and I want one!!! ) so a 3 bed house with one L-shaped combined lounge/dining room is no longer suitable or, indeed, seen to be enough for families. Not everyone is willing to work their way up from the mere one bedroom unit, like you Glebe After all, it requires sacrifice, time and, above all, patience Nice job on your part!

 

Isn't it weird?

My wife and I were talking the other day about the tiny little 1 bedroom unit we started off in.........and we loved it!

We bought a 'nicer' 2-bedroom IP unit not far away while we were still living in the 1-bedroom and laughed how our tenants probably thought they had it better than us.

The 1-bedroom was low maintenance, close to everything, meant we couldn't 'accumulate' a lot of stuff we really didn't need and was fine.

I went to the funeral of a young friend this week and it really reminded me again of what the important things are and what is the 'fluff'.

Gigantic LCD screens, home theatre rooms, twin studies, parents retreats with combined teenage retreats and 5000 bottle wine-cellars are lovely.......but not essential. The day people say we can't afford to have children because we're having trouble paying for the mortgage on the above is the day we really need to start looking at our priorities. My opinion only.

 

Yep started in one room , with share bathroom (at one time 12 others in the house shared that bathroom-landlord let out all the rooms in an inner West Sydney house)- had our first bub there- 14 months after our marriage --Ended up in mansion at Vaucluse-- had another 3 beautiful babies along the way-- having bubs did not curb our success-- Go for it!!

 

Wow! That's quite an advancement there, Balboa
Did you achieve this through any investing at all, or was it generated purely from income?