Affordability

Bought my 1st home in 1985 $63000 it was a small rentstopper 10sq ,no paths no grass,no floor coverings,no curtains,not even a letterbox but we were as proud as punch.With time we got all of the above. I feel people just dont want to do the hard yards . I was 22 .My next door neighbour is in his 80’s they had tea chests for furniture till they could afford to replace with the real thing.I spoke to my kids &they would not go without like we did . Postie

“Good, then do what we did and what a lot of our parents did, go buy something you can afford further out, and then further down the track you can trade up to the $400k home in suburb x.”

The problem I have with this quote, is that even out Lynbrook/Cranbourne way in Melb, houses are around the 330k mark. How far out do you expect people to go?

I think if people are responding to this thread they should let us know how old they are… because a lot of older people often think the young ‘uns have got it easier, when I reckon it’s a load of garbage. Quoting an age might give a better perspective where people are “coming from.”

“Self sacrifice isn’t always fun, but it’s often an effective tool to get what you want in life.” – I do agree with this statement wholeheartedly. My point is that right now, self sacrifice can be just as whole hearted and dedicated as 5 years ago, but housing affordability is undoubtedly more difficult RIGHT NOW, and that is the original question.

Assuming a 300k house in Melbourne, which will buy you bugger all… if a young person is able to save $300 per week out of $600 net pay cheque, it’ll take them at least 3 years to save enough to get a 10% deposit and another 5% for costs… yes, the FHOG helps a little bit, but by the time the person is able to buy, the price of where they are looking at would have gone up by a whole lot more than 7k.

In a lot of ways, today’s younger people have never had it easier… but housing affordability is definitely not one of the areas where they’re “cruising”.

Cheers
r

Richmond, you’re looking in the wrong parts of Cranbourne!
It’s possible to buy very well for under $200k there.
Lynbrook is an incredibly overpriced new suburb, with lots of 2 storey 25 square mansions – and they are definitely over $300k.

Keep smiling
Felicity

The World Today – Thursday, 27 November , 2003 12:10:00
Reporter: Stephen Long
HAMISH ROBERTSON: A new study has raised concern about an issue that’s certain to feature prominently in the next Federal election, the very high cost of buying a home.

New figures out today put housing affordability at a new record low and prospects for first home buyers are worse than ever, according to the report by the Housing Industry Association and the Commonwealth Bank.

Well, our Finance Correspondent Stephen Long joins us in the studio with more on the story.

Stephen, how grim is it really looking now for first homebuyers?

STEPHEN LONG: Well grim indeed according to these numbers Hamish.

The Housing Industry Association says its affordability index has fallen by 9.4 per cent in the September quarter and is 22.5 per cent lower than it was a year ago. They say affordability has fallen because of a 10.1 per cent rise in house prices, but you’re looking at 30 per cent over the year in Sydney and that’s brought the total loan repayment needed to service a typical first home mortgage to $1740 which is 28.4 per cent of average household income, but in Sydney you’re looking at 45 per cent of average income going to service a typical first mortgage.

HAMISH ROBERTSON: And this could be political dynamite in the run up to a Federal election.

STEPHEN LONG: Oh indeed, but it must be remembered that the decline in affordability for first home buyers is the flipside of rising asset prices for those already in the market, so it’s mixed in terms of the political effect.

Also, there’s a question of whether there’s some lies, damn lies and statistics in these figures.

The Housing Industry Association and the Commonwealth Bank are saying that a first home has risen by about 10 per cent in the September quarter, but the Housing Industry Association’s figures put, sorry, the Real Estate Institute’s figures say that the median price of a house in Sydney rose by just 1.1 per cent in the quarter and unit prices actually fell and so you’ve got to wonder whether certain statistics can suit a certain case.

HAMISH ROBERTSON: It does seem that the relatively low interest rates by historical standards are more than balanced by the very high level of property prices.

STEPHEN LONG: Well indeed, and so people who are in the market are sitting pretty, but there is a serious concern about first homebuyers. I think this is the third time in a row we’ve seen a record low figure for the affordability for people who are out of the market and trying to get in.

HAMISH ROBERTSON: Stephen Long, many thanks.

Interesting topic

I am 38 and I definitely agree with Postie about the apparent need in the younger people to have everything now. Delayed gratification is a rare commodity it would seem. Many of the young first home buyers we know are getting a nice new 200 sqm plus 4bed 2bath brick tile home with all the trimmings from day one. No small houses with bare floors, bare windows and a motley collection of second hand furniture thankyou.
Of course this is understandable, credit is so easy to get. You can have just about anything now and pay later. Everywhere you turn there is advertising telling you that you must have this, or that and why wait until you can afford it.
My parents had over 30% deposit for our first house when we first came to WA but the banks still wouldn’t give them a loan. They both had jobs as well. Nowadays the banks would be offering them all sorts of money and credit cards etc.
As for home affordability well I guess we, as property investors can’t have it both ways. We invest mainly in the cities because this is where the best CG is. We aim to outpace the rate of inflation so it stands to reason that the cost of housing in and around the cities will generally become less affordable.
I purchased my first block in Mandurah in 1983 at 17, it cost 17K and I built a 4 bed 2bath brick and tile house on it for 65K. I was in the second year of my apprenticeship at BP refinery and earning around 12K a year. I paid cash for the block but borrowed for the house. I still have the house today and it is worth approx 265K. If I were a second year apprentice today could I afford this house? I think so. If it had been in a good suburb of Perth however, the story may be somewhat different.
I sometimes wonder how long our tradition of owning our own homes can continue. My wife is from Croatia and there, and elsewhere in Europe, people on average do not own the place they live in, they rent and spend their money on lifestyle. People tend to live with their parents longer as well. Will the 70/30 ratio of owner occupiers to renters continue?
Gee I have waffled on, time to stop!

Regards
SMTM