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This is a comment and also a question built in one. On a different thread, the point was brought up that 1st home buyers are looking at homes for $350-400K in the “Middle” suburbs of Melb and Sydney, but I still don’t understand how people are meant to live?Surely the median income isn’t different from WA to VIC or NSW? I mean, hubby and I are first home buyers and we were lucky to have chosen to move away from the city and scored a house for under $100K in a major regional centre. We are living by our means and we sometimes find ourselves over our heads and we certainly don’t have all the bells and whistles many other people are getting. We have to pull the reign in so we don’t get in over our heads.
Or perhaps are the credit companies actually lying to us? Is it more likely the fact that families are way more in debt than they are letting us believe?
Is there anyone out there who is a 1st home owner in Syndey or MElb that can shed the light on how you live sustainably? Remember I am talking about the ppl(1st home buyers) buying the houses for $350-400K. I just don’t understand!!! Do these people not have lives outside work?? Do they not see their families as they are forced back to work too quickly coz of financial commitments?
Oh dear….
Steph.Success is 1% inspiration and 99% perspiration.
its an interesting one steph..
heres what i think happens
350k loan = approx 2700 per month
1 partner is on say 60k and the other works partime and earns 25k. after tax they bring in 5k per month. so they live on approx 2000 bucks.
how one afford school fees, holidays, clothes etc is a tough one..
most people think that if one partner is earning 100k then the family is rich. but you have just as much cashflow after tax from two people working earning the medium wage.
i dont know how sydney siders do it with 450k mortgages..
I reckon there are more people than we think who secured Loc Doc Lines of Credit against the equity in their PPOR and they’re gradually drawing down on this to meet living expenses. If they got the LOC last year, their property was probably worth more than it is now. Oh dear.
Tax Depreciation Schedules
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http://www.depreciator.com.auI think the basic answer, steph, is easy credit. And I reckon the out of control credit situation here in good ol’ Oz has the government rather concerned, because I think (my opinion only) that there is a heck of a lot of people, who have bought a heck of a lot of stuff, that they really didn’t need, with money they can barely afford.
People looking at 350k-400k places for their first homes should be looking a few price rungs lower… I don’t understand this mentality that many people appear to have that the first home has to have all the bells and whistles… it seems a lot of people don’t like taking stepping stones any more, they over extend themselves in one big jump, and a few will fall in the pond with a very big splash!
Case in point, my wife’s sister and her husband set up a LOC on their house out in Knoxfield, which is a bit of a battler suburb here in Melbourne. Like everywhere, it’s price has gone up a lot in the last 5 years. They used this CG to establish their LOC from which they paid for a new kitchen, new car and new television, and then wonder why they’ve all of a sudden got this big interest bill that they have to pay back. She is a school teacher getting paid stuff all, he is not working at the moment. Yes, we know it’s stupid, but I tried to explain to them why they shouldn’t do it etc etc … there are a lot of people who have not been able to restrain themselves in such situations. I mean, who really needs a big screen TV and home theatre system costing thousands?? I’d love one, but there’s other priorities.
If you do a google search, you’ll find a similar situation in the United States… too many people going to see their “equity mate” without understanding what they’re getting themselves into. It’s a house of cards that won’t take much to blow over IMHO. Mind you, I’m no economist, just an average joe.
Cheers
r[baaa]
It really concerns me that people don’t realise the implications about credit cards, buy now pay later and borrowing the equity on your house.Surely there has to be a point when these people go bust! Why are there not more people going bankrupt then?
I totally understand why people want all the bits and bobs as they are sooooo easily accessible. But one also has to question the NEED of all those things.
I find that it is really sad that these people have “Lovely” houses, but are pretty much living on the poverty line coz of their fanciful expensive lives. There’s no problem if you have the income, but the majority of us are on the $43K a year average. Needless to say, Cremin and I are working on changing that but it does take time…
Sigh, all those poor children who effectively don’t have parents…
Anyone else with anymore stories? I tell ya what, that’s a hell of an interest repayment to make richmond… $2700 just for the place you live in!!! I’m glad we are only paying what we would be if we were to rent!When will people wake up…[confused2]
hi again steph
Let’s say a house costs $350k.
Most people might be able to save $50k over time to pay for 10% and costs.
That leaves $300k to borrow. At 7.1%, that’s $410 per week in interest.
At 7.5% it’s $432 per week, at 8% it’s $461 per week.
That’s a lot of money to be paying out per week in non-deductible debt. No wonder most couples have to work these days to keep the cashflow going… what happens if one loses their job, what about those buying on 5% deposit? yuck
Cheers
rI seem to recall some time ago (I turn 40 next year) a period when property prices were falling and interest rates were rising.
Many people who got in over their heads lost money etc. It was also around a time when there was a property boom. I cant recall the time but it may have been around late 80’s.
I reckon the same will happen here wihin a year, two or three.
I don’t exactly fit your spend profile of first home buyer because I have actually prucahsed my first home below the 350k you mentioned.
I went to Steve’s book launch in Melbourne and one of the comments he made that has stuck in my head is about instant gratification. These words explain our society to a tee. That is why this is happening – but your question is about how.
Yes there are people not thinking, they are getting credit too easily and I can see that this is going to become a huge problem in the future.
But I will tell you how I did it and still live a comfortable life. we purchased our first property for jsut over $250k last january in the eastern suburbs. instead of spending 300k straight up we bought something to fix up and have since spent about $25k renovating. we spent 12 months saving the renovation funds after we purchased and have nearly finished a lot of the changes. doing this has enabled us to build a nice amount of equity in our home now as we contrinuted our own cash for the renovation as well as seeing growth in the area in values and via the improvements. we have all the bobs and whistles. over 20 squares of living, new everything, billiard table, swimming pool, stainless steel fridge, dishwasher etc, basically we have everything we want – that’s the instant gratification part of me. i want it all now, i don’t want to struggle to create wealth like my parents had to when they were young.
we still lead a very social and relaxed lifestyle, go out a lot, holiday a lot, drive cars that we are happy with and we still save a reasonable amount each week. how do we do this – we budget big time. if the entertainment and food budget runs out, then there’s no going out for the rest of the week we just find something else to do. but how do we have the money at the age of 23 to live the life we want? we went to university and are willing to work hard. we are not planning to have children in the near future and the mortgage should be gone not long after we turn 30.
i think the answer to living the life you are talking about is budgeting and prioritising to know exactly what you want out of life.
I agree with you that there are a lot of people i see that are going in way over their heads. but you only hear about those ones, you don’t hear about the people doing it, living a great life in melbourne and being able to pay for it all. i get fed up every time a first home buyer says to me that it’s so expensive. if they chose to prioritise and buy into property instead of buying the new car, going on a european holiday or whatever they are doing with their money they would be able to do it – it’s just that their priorities are elsewhere.
So in answer to your queries – i don’t know how first home buyers are spending $400k without at least a 100k deposit or more but i do know you can still have a great place for less than that as a first home buyer.
Screamin,
Apparently the average wage just crept over $50K. I know this because when I walked into the office this morning, Anna (who handles all our accountant affiliates) said: ‘Do you think I’m below average?’ I said: ‘No, of course not’. So she asked me whether she could have at least the average wage and shoved the Herald article in my face.Tax Depreciation Schedules
Australia wide service
1300 660033
[email protected]
http://www.depreciator.com.auYou should have told her maybe if she didn’t waste her time reading such a newspaper you would have grounds to pay her more
[biggrin]
Its a great question Steph,
And one that has baffled me too.
Nats gave a good explanation of how a young couple can achieve the dream, and still have a life as well…
But that was at $250k and not $400k….its mind boggling.And the young professional couple who earn $110k and $50k together…are inherently not savers…they’re party going spenders. So the deposit question is another mystery?
They think that high income equals wealth…but all they are doing is trading time for money…so its a trap in itself.
And the job usually burns them out within 10 years….then what ? wake up call time ?…..time to reassess the finances ?Its truly scary from where I sit…..
KP
great stuff nat. well done.
you must have reasonable jobs/salaries to have achieved all that at the age of 23 considering you squeezed in uni too.
cheers
rYes, good ‘uns to all who have managed to learn how to save and pull their heads in when needed.
I dunno, I’m a school teacher and I hear a lot from the children “Oh we got this, and that and next week we get that!” and it gets you wondering. Sometimes it’s pretend keeping up with the Jones’ but most of the time it is true. What values does that send to your children?
Ok, my next question… To parents out there…
How have you helped your child/children develop an appreciation of earning money and saving for things they would like? Do you sometimes cave in and give it to them or do you stick by your guns and make them work for it? I personally was taught to save for what you wanted and I didn’t really bug my parents too much about other things coz there was four of us and money was Reeeeeeaaaaaaallllllyy tight…
Please, someone! Restore my faith that there are parents out there who indulge in their children but without going down the materialistic route!!!
Steph.Success is 1% inspiration and 99% perspiration.
Hi
I have to agree with Richmond – it really boils down to not what you earn but what you spend’.
Your first step is to get your consumer debt under control.
Regards
‘ You will never go broke taking a profit ‘
Pickworth,
I can’t agree with you or Richmond. If you earn nothing,then that’s what you have.NOTHING.
You must generate a decent wage to afford to live.
No decent wage,no good things in life.
The best investment you have is your JOB.If you can’t live on your wage,then you’re history!
Trying NOT to Waste your wage is the trick!
This is why you must have a comprehensive budget.
Stick to your budget and you should then know where you’re going,up,down or out the door backwards.
Just a thought!bruham. [withstupid]
We built our first home back in the “bad” old late 80s, and paid it off in 2 years despite horrendous interest rates. How? Both of us worked, we bought in a small town on the outskirts of Melbourne and therefore bought what we could AFFORD! We then spent a year travelling the world. It’s all about staying within sensible financial parameters, ie delayed gratification. We’ve since sold that house (boohoo!) and used the money to build our dream house, where we’ve now lived for over 5 years. If we’d tried to jump straight to the dream house, we’d hve been stuffed.
I remember in the Age recently there was an article bemoaning the plight of first home buyers, and it totally cheesed me off. All these poor dears whining about how they couldn’t afford to buy a house – where? – in the middle ring suburbs for $350k-400k. My only thought was – go and buy further out you idiots, then in a few years time you’ll be able to buy where you want.Keep smiling
Felicity
I know a young couple who bought a house that was very affordable and eventually used the equity that developed to buy somthing better. More equity came out of the new house so they thought an IP would be the answer. It was “all happening” and there was a lot of encouragement to move ahead.
They had a tenant who paid on time and things looked rosey. Eventually the tenant had to move on and to their surprise, they could not find a replacement. The budget couldn’t cope with the short fall so they decided to sell. Guess what? They could not find a buyer. Even at a very reduced rent they could not place a tenant. The property was eventually sold at a massive loss to them. They had to sell their PPOR to cover the loss only to discover they did not have the equity they imagined. They are renting again and saving for a deposit.
It’s a bit of a horror story but very true. The moral I guess hints at the first question of”how do they live”. As long as the market is growing you have opportunities but you have to be pretty shrewd to be able to know the future.Regards Marsden
Yay! I agree with you Felicity! Buy within your means.
Marsden, what a sad story. Oh well, they won’t that mistake again…
I think one of the traps with withdrawing the “equity” in your own home is that you can think, “Oh just a little more so we can get that as well…” We are looking for our first IP and will use a little bit of equity from the house as a deposit. BUT I am extremely aware that the interest we pay will go up accordingly too. Knowing that, I certainly don’t want to overextend ourselves, considering we are hoping to try for a bub in the very near future…
How bout my second question form my second post? Do you feel you indulge in your children a little or do you teach them to value money and how to earn it?
Steph.Success is 1% inspiration and 99% perspiration.
Scremin,
People use credit cards because they’re broke.
They know as well as you, and everyone else, the implications of credit cards. They are not stupid.
If you’re dead broke and something goes wrong or breaks down that has too be remedied immediately the only alternative is the credit card.
This has happen to me on occasions.But you pay them off at the first opportunity.
Now Scremin, you can get off your high horse.bruham.[withstupid]
originally posted by Scremin:
How bout my second question form my second post? Do you feel you indulge in your children a little or do you teach them to value money and how to earn it?
Steph.Well yes, Steph, I believe in dissapointment therapy!after reading George Classons “Richest Man in Babylon” I have been adamant that I will teach my children properly! I wnat them to be able to know what little I know now so that when they are my age they know (hopefully) trwice as much as I do. Our children are only two and three, but at this time I am ‘training’ the baby sitter who just loves to spend all her money on other people. AArrrgghhh! She is the daughter of friends of ours and they don’t mind me helping her manage her money better (they have tried and failed).
So far we are at 70/30 split level! Save 30% and blow the 70% on anything you want! I intend to do the same for my children! I want them to get the different mind set from the start, not have to go thru life like I did and now I have to work doubly as hard!As for the housing statement, my wife and I picked up very early on that we need to look at houses in our price range or below. Then add value (gardens, retic, etc) and use the equity for the next house and work forwards. Using leverage will increase our money velocity! Boom-boom. Friends of ours that have gone the oposite way, are indeed struggeling and must retain their current jobs or loose everything!
Cheers
C@34
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