It staggers me every time I hear someone saying that housing is not affordable these days. I am Gen X and I am sick of my generation, ie the average Joe, complaining that they can't get into the housing market. We rent. We have 3 +ve IP's, with the fourth settling in Jan. One IP is a four bedroom brick house 17 km from Melbourne. Similar on the market in the same area are listed for under $200k. Another is 1 hour from Melbourne, on a train line that is a basic 3 bedroom for $129k(purchased in August 07) The agent rang today and offered me another one that is listed for $135k. How can this be unaffordable. Are you telling me that 1st home owners cannot afford this. I think it is a case of wanting everything now and complaining when you don;t get it? I don;t expect on one income to buy a place in Toorak, or Manly etc especially with 3 kids, but I estimate that in 10 years we will be able to afford it. And we will rent until such time that we have sufficient income to pay for the lifestyle we want. Makes me angry.
I guess I just need to vent because I have been called a capitalist for purchasing more property. Thanks for listening.
Well done JL! I like your strategy. I have been telling my boys (eldest only 15) the same thing, that to get into the prop market, you buy somewhere cheap and rent it out hopefully CF+. If they want to live in the inner city, go rent there.
Two of my nieces bought houses with huge mortgages with all the bells and whistles.They expect the same standard that their parents have worked a lifetime for.
I bought my first house on the outskirts of Bris for $43k. It was a no character 2 bedder near the railway line. I took in a border.
My parents told me their first adelaide house had no carpets and no curtains.and btw 'capitalism' is not a dirty word
. But I would probably not broadcast it among friends if you don't want to be alienated. Milly,
Thanks for your support. You know when I first became a full time mum, I was criticized. I went back to work PT to help pay a few debts that the hubby and I still had from single days (mainly him with cars and me motorbikes), and was criticized again from another group of supposed friends. I am now being judged as a capitalist because I want to financially contribute and this is the way I can do it, and remain a full time mum. So to this point I am over being judged. It just really gets to me when I hear news headlines saying that housing in unaffordable. It may be in some areas, but not everywhere. My parents lived in a one bedroom rented flat for 3 years and one child after they were married to be able to build a house they remain in today. I say good on them for doing the hard yards and this generation needs to learn the same. I guess I am really preaching to the converted though.Hi, JL
I think being labelled a 'capitalist' can be a good thing; it shows that you are an enterprising person who is not afraid to seek an improvement of your own life and that of your family. Many people complain about what they do not have materially, lack the mental / emotional / psychological resolve to obtain the knowledge and skills to achieve them, are thus taken aback when certain people they know well get their act together and start moving ahead in life.
Save your advise for those who are ready to accept them. Keep forging ahead with what you are doing.
All the best.
Daniel Lee We were discussing this very subject at a Business Group function that I attended the other day and some of the reasons were certainly worth mentioning here.
When I began selling property in 1977 in an outer suburb of Brisbane (Capalaba) the average spec house was selling for around $30,000, it came as a house only, no driveway no gardens and no fences – just the house. The average size of these houses was around 10 to 12 squares.
Attending the meeting on the day we had an Architect and a Builder from one of the major franchise companies and interestingly the both agreed that if they designed or built homes under 24 to 30 squares, they would not be able to sell them.
Does this mean that the new home buyers who complain about affordability are perhaps setting their sights on too much rather than working around what they can afford? Are the local Councils and or the Developers wrong in demanding that extras like fencing and landscaping and building covenants be a necessity and not an option?
Jon
DL,
Unless your critics are using a better way to achieve financial independence, and my suspicion is that they aren't, then I would ignore their opinions on the subject.
You are clearly in the very small percentage of the population who is actually taking responsibility for their own destiny. Good on you! They probably aren't. Have confidence in yourself and don't worry about what they label you. In years to come, when the results of your years of hard work starts to become really obvious, they will no doubt label you as 'lucky'.
I don't think it's really about affordability – it's about laziness and/or poor financial education. Quite a shame really, because both these things inflate property prices and make investing harder work for us guys
Daedalus
I'd like to add that sometimes the labels might not actually be meant as a criticism. Friends/family might jibe you about being a capitalist to your face, but behind your back they might be quite proud of you…
"DL is doing really well, they've got 4 investment properties you know!…"
Don't lose sleep over it.
Daedalus
Thanks for all your support.
JLJL wrote:I guess I just need to vent because I have been called a capitalist for purchasing more property.Is it just me or is that big font ugly and horrible to read?
Why do you take offence at being called a 'capitalist'?
Forget about the phrase "affordable" for a moment. I think it's inaccurate and causes problems in a discussion such as this.
So what about if everybody hypothetically replaced the word "unnaffordable" with "overpriced"? Potential first home buyers would say "I would love to buy a place, but everything is overpriced" rather than "… but everything is unnaffordable". You're quite correct, many of these people could probably buy the in the exurban areas where you're investing, so by definition they are affordable. They are not buying there because they think the houses are overpriced relative to the benefit they would receive from moving there.
Even if renting in more desirable areas costs the same as or more than buying in the exurbs, the choice of these people to continue renting implies a value decision. The dollar value of all the benefits of moving out (net of the disadvantages of travel time and costs, remoteness, less services, possibly higher crime and social problems), and buying is less than the dollar value they place on staying put and renting (with all its benefits and disadvantages).
This is their choice. It’s not a position that can be criticised by others, but a rational, personal, decision.
Now your position is different. You see the exurban house prices as either correctly priced or under-priced. I presume this based on the fact you’re buying them. So you wouldn’t claim these houses are “affordable”, you’d say they were “cheap” or “reasonably priced” to you as an investor. This again is a position that is not open for criticism, it’s a personal judgement based on the value of these properties to yourself.
See how the heat is taken out of the situation by a simple rewording? Now we have the renters saying “house prices are too high, so I’m not buying” while you’re saying “house prices are cheap, so I’m buying”. Who is right? Both of you.
It’s interesting to consider why renters might think house prices are too high. Here’s a chart of the distribution of house prices in Melbourne* just ten years ago:
*Note: Metropolitan Melbourne, not Exurban MelbourneNotice that the bulk of houses were in the range of $75k to $175k? This was around 2x to 4x the average annual full time earnings per person. I don’t have a current distribution of prices, but I figure a similar proportion of properties would now fall in the $300k to $500k range. Around 5.5x to 9x average full time earnings. Houses are now a bit over twice as expensive in real terms as they were a decade ago. Meanwhile, despite all the hype over the rental crisis, rents are slightly below their 1997 levels in real terms, having fallen from an average of 34% average earnings to just 28% average earnings. Owning has become far more expensive, renting has become a bit less expensive.
Sure, you get people who are natural whingers and will complain about both rents and house prices. That’s not smart. They’re blinded by the dollar effect and can’t see beyond the nominal prices. I guess in fairness I should point out that people who claim house prices are cheap and that other people (renters particularly) should stop complaining about them are probably suffering some degree of the same blindness. They most likely don’t realise that house prices are currently historically high relative to earnings or rents.
I take it the houses you mention are out west or north-west right? Melton perhaps? Just out of curiosity, do you rent in this area or closer to the city? When you buy, will it be in this area or closer to the city?
Remember, it’s “price” not “affordability”.
Cheers, F. [cowboy2]
A very long and interesting thread elsewhere on housing affordability: http://forums.ski.com.au/forums/ubbthreads.php?ubb=showflat&Number=255705&page=1&fpart=1
Arguments from many different viewpoints (this is not a link to a property investment website just to a lifestyle)
Foundation,
You make some good points in your discussion about percieved value. I tell you, that I do not see the houses we have purchased as cheap. The only reason I have chosen these particular houses in these areas, is they can offer myself and my family a return immediately. The last place I bought, last week, is actually very rural – 1650 people in the town. I am betting on the fact that a mining company has just announced a new mine there. I got the house for $44k and I could sell it on for $60k. This is maybe cheap, but I was in the right place at the right time and had done some homework and lots of driving with 2 young kids. I reasoned that if we lost out on this one – as I see it as high risk, then our loss would be minimal. This is expected to return $120 p/w once I have put A/C's in. The other houses, well ones in Werribee and I note that since purchasing in Werribee the house prices have gone down 4%. Another is just off the Hume a hour from Melbourne. This is where we rent. We have another in country NSW next to a Uni. When we buy for us to reside, we will have to first decide on what city to adopt .
So back to my original point. I am sick of being called a capitalist by those who complain that housing is unaffordable. I say, Stop complaining and start doing (and really I was just having a winge, so thanks for listening).JL, an old acquaintance of mine bought up quite a few houses in a reasonable mining area years ago. The theory is that miners/mining companies will pay rent but they will not buy in an area. Thus there is always good demand for rental properties & good cashflow.
Scott no mates,
Yep, Thats why I am willing to spend $44k on a property. This town also has a good size hospital and school, that has transiant staff that want to rent. Looking forward to settlement on this one.JL, you are a capitalist!
Your best retort might be "That's right. What are you, a Marxist?"
Thanks foundation. You are right, I am a capitalist. I guess I feel like I want positive people around myself and my children. Negative people have lead me to whinging in the first place.
JLwell affordability would be nearer if these people stopped wasting money on brand new cars, plasmas, and all the like. I still have my TV which is close to 18yrs old a card which is 9 years old. i go without because my investments are more like my health insurance when i get old! alot of people forget we only need food, shelter and clothes everything else is a luxury!
Capitalist is the word used by people who are not wealthy, and never will be, and know they won't be, and want you to feel as bad as they do.
PosEnterprises wrote:well affordability would be nearer if these people stopped wasting money on brand new cars, plasmas, and all the like. I still have my TV which is close to 18yrs old a card which is 9 years old. i go without because my investments are more like my health insurance when i get old! alot of people forget we only need food, shelter and clothes everything else is a luxury!
Love your thinking. Our TV is a big one we bought about 8 years ago second hand. It is so heavy that it takes three people to lift it. It is distorted around the edges, so we cannot see the cricket scores orthe weather etc.I recently had a look in the local rag for the area where I am working. I found 2 units (1bdr & 2 bdr) + a third on the net – all located in the same complex and ALL returning around 6% gross.
They are easy enough to find once you know where to look. I will add that there are even cheaper areas nearby but this area is close to rail & regional shopping centre, schools, govt offices etc.
It would be easy to buy up all 3 for less than $500k.
my grandparents were both working most of their life.
they could not apparently afford to buy their first house untill they were in their 50's.
this was about 70/80 years ago in oakleigh, (melbourne).my parents had rented 14 different houses before they were able to purchase their own house.
this was about 45 years ago in blackburn (melbourne)i am in my 40's and i fully own 2 and a bit properties and i don't think i work any harder than my parents or grandparents would have.
we just live in different times. (quite possibly easier times).it also depends on what we individually do with our earned money over time, of course.
frosty1
. But I would probably not broadcast it among friends if you don't want to be alienated. 
*Note: Metropolitan Melbourne, not Exurban Melbourne
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