Hi eveyone,
Last night I talking to my little sister (20 yo)
about her future and things.She made a comment along the lines of She will probally never be able to afford a house of her own at the present prices on her wage. I was saddened to hear that she had such little confidence in the future.(i will definately help out when the time comes)
But it did get me thinking.Have housing prices moved so far ahead of incomes that to purchase or not may become a lifestyle choice? Have a house or have a life.Have kids or have a house.250K mortages for first home buyers are normal now and would scare the hell out of me if i 20 years old and starting out.
I dont mean to be depressing on a Friday, but are we in for a major market correction in the coming couple of years,to allow every body a slice of the action, or will fewer and fewer people end owning eveything.
Bye,
JoffSometimes I wonder, ‘Is the dream of owning your own home still attainable in this day and age’ and my answer to this is ‘YES’
[
]If you really want something, you make it happen. I think its a little bit of give and take too.
No longer are the days where you worked in the same job for 40 years. People have to adapt to the change, it’s apart of life.
I am young, but I still managed to purchase my own property and one small IP investment and I am looking to purchase another one in the short term future.
Blood, Sweat and Tears. It’s about determination and in all honestly, you have to have passion, that get up and go.Gone are the good old days…..but its depends how you look at things – IS THE GLASS HALF FULL OR HALF EMPTY?
‘Luck is a by-product of your own destination; it’s the people that know the way that often get lost[:0)][:0)]’ ANON
People are working more, earning more, paying more and want more. I think that bar has definitely lifted.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auOh by the way, I am working more to earn more because I want more… so I’m probably adding to this…sorry.
Hello there,
I’d like a sports car, but I may not be able to have it just yet. I still drive a car though. My 1990 Camry takes me from A to B without to0 much of a hiccup, so I’m content with that.
Your sister, may still be able to afford a house. A 250K mortage may be out of her price range, but there are still houses that are further out of town, a little bit smaller or with less bedrooms and may need a little work done to it, and the price tag might be significantly lower.
I’d encourage your sister to purchase a good solid house, further out from town, as a stepping stone. She could always redraw equity from her house (when in goes up in value) to purchase another property which might be more towards her liking.You have to be in the game to have the chance to win!
Cheers
Sooshie []“Giving is a Blessing, receiving is the bonus”
Sooshie,
See what I mean though,she’s being driven out of town into a dump.Away from her work, family and network.She’s being made to think like a switched on property investor just to put a roof over her head.
Actually if I may digress a little, when I posted this thread, i was really exploring the ramifications for future investing given the way the market has developed in the last few years.My sisters situation is a by product of the surge in investing.I think I’ll go and have a cup of tea and a lie down now.
JoffHi Joff
I think it’s all about buying what you can afford, not necessarily what you want.
When hubby and I were starting out (over 15 years ago, gulp!) we looked around the suburbs we were used to, and decided that if we bought there we’d have a mortgage to choke on. So instead we went out of town a bit, bought land, built a house, and worked extremely hard for a couple of years to pay it off. We had friends who bought the dream home with everything in it, including the massive mortgage, and then lost it all with the 15+% interest rates.
I don’t think we lived in a dump, it was a very nice house, and in the end, we could both drive if we wanted to see family.
Looking back now, buying a house that was affordable and paying it off fast paved the way for us to move on to where we are now.
Sometimes I think that a little bit of old fashioned delayed gratification is worthwhile. It’s really not necessary to have the latest and greatest of everything to enjoy life.
Sometimes taking a step back is the best way to take two steps forward.
And also – what’s wrong with making her think like a switched on property investor? That may be the best thing that ever happens to her! []Keep smiling
FelicityFWIW Joff, I agree with you… I think it’s going to be really hard for the majority of younger people (I’m 29) to get a foothold when they’re buying their PPOR. Obviously not everyone’s into property investing, so there’s going to be a lot of people doing it tough… or are already…
I know of a lot of people my age who have loaded right up on their mortgages for their PPOR… with median price in melbourne up over 340k, it’s pretty hard not to, if interest rates go up by only 2 or 3 points there’s going to be a lot of people very stretched… I’m just considering myself lucky to have bought when I did, just before the boom.
rFW,
Hi,
“What’s wrong with thinking like a switched on prop.investor?”. Well,nothing if you want to, she just does’nt want to HAVE to.
I happen to love investing and have done very well out of it and secured my future,but there are people who would rather direct their energies else where and who would be happy with cheap affordable housing that’s not down a rabbit warren.
Joffi think its too simplistic to say that we were all in the same situation 20/10-5 years ago – because we were not. the ration of bebt to equity are stretched to the limit. affordablity is at an all time low. to advise people just to ‘reach for the sky’ without any forethought into the possible consequences is reckless. the property market is a ‘market’ dont forget. soemthing will happen to redress the balance. what form it takes and when it happens is your guess. having said that there are always ‘good investments in every market’. the property market is amde up of many markets. staying liquid and keeping your debt in check is the key – along with patience. its not a game. i dont like it when people say – ‘get in the game’. it may look like monopoly but the money is real.
balance
Having been through the struggle to buy my first home, I agree by saying that it is getting tougher for the average person to buy a home. The property market has simply exploded out of control and while that is good for some, it is very hard on others.
Regardless of the amount of talk on how long the boom will go for, buyers can only buy what they can afford and in my opinion, there will be an adjustment in property prices at some point in the foreseeable future.
It is simply a case of a market price being what the market can afford and that can’t go up forever.
My two cents,
Mathew.
You can still buy units from 150,000 or 1 bedroom units for 140,000 in the outer suburbs, a bit of clean up or paint work is all that’s needed. At least its a start and you are not paying rent.
Infra structure and public transport is usually well established, you don’t necessarily have to go out of town.Hi Joff,
Perhaps you could WRAP her a house, and she could have a couple of flatmates help her with the mortgage. In 2 – 3 years when she has heaps of equity, she can refinance.
If she WANTS something BAD ENOUGH there will always be a way. I remember saving for my first house & land package when I was single. When it was finished, I felt like my blood was holding the bricks together. I was so proud of that little house. If I hadn’t saved and budgeted so much, AND CANCELLED MY SOCIAL LIFE,[
] it would have meant nothing.If she wants a house bad enough, she will get 2 jobs and SAVE like lots of others have to.
AUSTRALIA IS STILL THE LUCKY COUNTRY!!![
]Del
[
]
My dad worked two jobs to be able to buy a house for his family way back in the 1950s and it was way out on the outskirts of the major city. What has changed?The number of young adults not leaving the family nest (for many years) has increased, possibly something to do with property prices! This is an excellent opportunity to start buying a property.
We also have developed a generation of “I want it therefore I need/must have it now’s!” Layby and saving for something is a thing often only found in history books or chats with grandparents.
I suppose it depends on your perception, attitude and way of thinking.
After all of that, I don’t think I would like to be entering the property market for the first time, all alone. It’s great to know that there are families who care for each other.
Good hunting
[8D]Hi all,
Joff, when we were looking to move from Donvale (we sold first) to where we currently live, looking for those elusive houses, ex-rentals that looked like glorified bomb-shelters, we were DEPRESSED and nearly backed out of our sale in Donvale. We found an “ugly duckling” (Buxton Real Estate, advertising board) and we were lucky, it really was an ‘ugly duckling’ so we negotiated on the price. It might look like a bomb-shelter now that it’s well lived in, but most would say the house is modest but comfortable. [
]
I think your sister will find something and the real estate industry WILL probably change soon, but in what way, who knows?
When your sister is ready, she will decide what she wants to do and/or what sacrifices she needs to make in order to live the life she wants to.
Perhaps as others have suggested, pool resources together or wrap her a house.Cheers
Sooshie []“Giving is a Blessing, receiving is the bonus”
your sister could always do what i do, which is buy where I can afford (small town rural new zealand) for cashflow and then rent where she wants to live but can’t afford (in my case paddington, which is inner city Sydney- OH MAN! how much money would i be LOSING each week if I had to pay a mortgage on the house we live in???!!!) it gets better, because part of your rent is tax-deductible if you work from home doing your property investing (!!!!!) as is the interest on the loan on your IP because you are not living there….and then with the cashflow from the first IP, she can save up enough to get a second and a third.
eventually she will have enough equity and cashflow to buy a (even if negatively geared) house to live in, with repayments supported by her other IPs. THEn because of capital gain in cities, she will quickly build up more equity with which she can buy more cashflow generating IPs and so on…
cheers-
MiniHi everyone,
It has been a while since I return to the forum as I have been very much occupied with my investment portfolio.
Relate to the issue of housing affordability, I would say it is time to stop pumping the bubble further and allow the hope for new blood to get into the market.
I like to idea of positive gearing but never really get to the point of implmenting it within my portfolio, mainly because of logistical issues. As such, I am still keeping my eyes open for negative geared properties within Sydney. With my past year of research, I must conclude that further expansion to my portfolio would simply allow the risk to overweight the potential return. By simply looking at the price on areas such as Penrith, Quaker Hills, blacktown, Blue Mountain, Windsor and such, supposedly to be a region for first home buyers , it is already shoot past their affortable range. I already seeing owner-occupiers been forced into selling at great loss as they can’t afford the 300k+ mortgage anymore.
All these mean the market is now at the stage of killing off hope of home ownership for the common people and in turn shall kill off their motivation to achieve. The result would be more people fall back to dole or taking a ‘safer’ path in their career that would culmulatively hinder the progress of Australia economy. Look at Hong Kong and Japan, don’t let the great Australia economy fell for the same traps!
For the long term health of property investing, the market must provide hope to the new blood such that the price must be within their range and allow the hope to be maintained to motivate them to achieve. Then, there shall be organic growth to our investment and allow the market continuous expansion and eveyone to have their share.
I have shifted my attention to the share market and already made some decent return. I shall keep looking and start investing in property when the market have return to a more reasonable level.
regards,
Hiu
Hi Joff
I fully support some of the comments in this thread and in particular the comment that it is reckless to advise people to just get into the game. Also the comment about this being a game is not a good comment to use when speaking to young people. Investing is real and not a game, it involves real people and often people who are struggling (renters).Back to the subject of the original post. I would suggest that your sister looks at buying an IP in an area that will provide a +CF and will be more affordable. She should then (if possible) stay at home with the parents or share digs with friends as long as she can, whilst renting out the IP. This will give her the kind of start she needs into the property world as CG’s accrue over the years that she is young. When there sufficient equity in the IP, she can sell the IP and purchase in a slightly better area. There is no overnight magic to this!
There is no doubt that because this is a market, there will be corrections and we are due for one some time soon. This may to a limited extent address this affordability issue but not to any great extent. Even a 20-30% correction (which is predicted by many) will not make it that much easier for FTB’s to get into property because of the 100-200% increases in prices (depending on area) over the last 5 years. Salaries have not kept pace with these increases and this is where the affordability problem has its beginnings.
In conclusion, young people should use the opportunity to live at home with parents as long as they can to subsidise their IP. Most parents are willing to allow this to see their kids get a start. But be wiery of just getting straight into the market. As with any investment, do research and ask questions in forums like this.
CheersHousesOnly,
Not all renters are struggling[]. Some people choose to rent and may take offence.Hi guys I am new to this forum but to Joff. I beleive the reason young people will find it hard to buy a house is more about attitude than about finances. My brother and sister are both in thier early twenties they and most of their friends are of the opnion they should have a nice house in a trendy area, a nice car and nice clothes and that it is so unfair they can’t just have it all.
I am in my early thirties and can remember when a car and a house where a distant dream. But I combined resources with a friend and we bought a house together and put time and effort into it and five years ago sold it for a profit and then each of us bought our own property. We both now have a portfolio of properties and are looking at jointly buying commercial properties.
If you look at immigrants from Asia and Europe (greek and italian especially) one of the common threads to how they are doing so well is they banded together and pooled their resources. Their children now have nice cars, nice houses etc.
The current generation of kids in my opinion have the greatest chance of ownership ever. They just need to manage their expectations. Thinking like an investor is how most Rich people became rich.
Regards
David
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