Is property really unaffordable?

Yes property is affordable and our disposbale income is relatively higher thatn it ever has been.

We have never had it so good.

Well, according to Monique Wakelin (Eureka Report) & plenty of other commentators, it is well overdue to dump the totally ineffective and expensive FHBG.

It artificially boosts savings of FHB
It pushes up the price of houses by increasing the bottom end of the market
It also increases the amount which may be borrowed
So it doesn't benefit the FHB at all as they pay more and for longer

Dump the subsidy now.

This is an important point that I wished more would-be buyers would try to understand. Truth of the matter is that they have to take baby steps and get started somewhere. There is no use hoping in vain to buy that lovely $1.5 million dollar house in a well-heeled suburb when they obviously have no ability to either put down the cash for it, be able to take a loan for that amount, or be able to service that loan. What do they expect? A cash handout to fall from the sky once they have complained enough, so that they can buy the house?

When I bought my first property, I didn't have the mindset that property was too expensive. My mindset was that my salary was too low, and that I needed to find a job with a higher salary so that I can either buy more property or otherwise service a bigger loan and hence buy a more fancy house. If people thought in this manner it would propel them to do greater things and be a healthy change overall. Because let's face it: the vast majority of people could do with more money. They just need to figure out how to earn it.

Is it true that property prices have increased at an unreasonable rate and hence look expensive? Or is it because people's income has not increased in the manner that it should have? The latter is an important consideration. With increasing competition and the number of people looking for jobs, some employers have the luxury of picking their employees, and then pitting them against each other till the weaker ones drop out. The stronger ones hold on to their jobs but still don't get paid as much as they should be.

Consider that, as an example, a graduate veterinarian in the 1980s was able to draw a salary of some $20K. As such, in 2011, a new graduate vet should be able to walk into any job and draw $80K per annum. These were the words of a very old veterinarian who started work in the 1980s, not my words. However, I can tell you now that a new grad vet would be lucky to draw $40K per annum these days. And even after 3-4 years in the business, they'd be hard-pressed to see $65-70K per annum. We have more vets than before who are graduating and looking for a job. Can we truly expect their wages to go up?

Now take that example and apply it to almost every other profession and the problem becomes blindingly obvious.

So you have two big issues compounding the situation: population growth creates intense competition at the work place and reducing everyone's wages, and population also puts pressure on the housing market, with people wanting to live in a handful of desirable areas because nobody wants to live an hour away from their workplace.

The result: masses of people who cannot afford a house. This does not mean that all houses are unaffordable. It merely means that property that is located in a desirable location become too expensive for most to be able to buy.

I agree with Scott in regards to FHBG artificially pushing the house prices and don't forget foreign investments as well.

I sure hope house prices come down to a more reasonable level.

The Economist has just published an article 1st March 2011 on Australia's housing.

http://www.economist.com/blogs/freeexchange/2011/03/australias_house_prices

"This week in The Economist we will publish our quarterly index of house prices around the world. Australia's homes are the most overvalued in the index. The ratio of prices to rents in the country is fully 56% above its long-run average"

Not saying I agree with everything in this article, it is interesting what this widely read publication is saying about Australian housing.

Good luck:)

Wages can't support it – why do you think rents are so low compared to houses as it is?

The difference is there are no houses down under that have prices equating to budget cars.

say a 500k car = a 10mil house, where are the houses that equal 5k and under cars?

Oh, and BTW, the difference between a 500k and 5k is proved by the qulaity of the vehicle. How does that work with housing? You can get a 5k car within 30km of a city:) And cars depreciate with age – as houses should.

I agree that land value should apreciate, to a sustainable degree.

It's quality of house AND the land it's built on. The 'quality' of the land is pretty much determined by it's location, so a block of land in the desirable inner suburbs is worth more than the blocks of land 40km from the city.

And yes you can get a $5k car within 30km of the city. That's because they have wheels