I just read an interesting article and wanted to get the forums view on if they agree or disagree with it.
http://propertytoolbox.com.au/property-update/
I live in brisbane and i know there are still plenty of properties below 350k within 10km of the CBD, most of them are units and need a touch up.
I have friends who say what the media tells them, that property is unafordable and out of reach. I believe what the article says that they can afford property they just cant afford the property they want.
For the 50 odd years prior to the last decade or so, Australians could buy an average house on a quarter acre block in an area the local government had plans to fully develop for 3-5x average income.
What is unaffordable? Heroin junkies can pay for their habits but not much else.
Perhaps the question should be are current prices reasonable when compared to long term trends? And are current prices sustainable with a view to the wider economy?
Yes property is affordable and our disposbale income is relatively higher thatn it ever has been.
We have never had it so good.
I have a quick question that I am hoping people can answer. Is a quarter acre rectangular block, in Hampton Park, reasonably priced if the buyers are looking for offers over 425K?
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 longerDump the subsidy now.
JamesSampson wrote:I have friends who say what the media tells them, that property is unafordable and out of reach. I believe what the article says that they can afford property they just cant afford the property they want.
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.
Even low earners like me can still afford to buy a place in some areas, its true. And I can get a loan to do it. Say I go for a place worth $200K in regional VIC. Once I move there, I'll have to learn a new trade because the sort of job I work only exists in the city, and I will pay my maximum inner-city rental capacity equivalent for 30 years. By that time, I will have payed nearly $400k including interest, and its not even a flashy house or a nice piece of land. And all of my friends and family are no where to be seen.
As a quick comparison, you can buy three flats in a hip part of Berlin for $250K. You could live in one. The rental income from the other two would be enough to live off. Now, that's a loan worth taking out. Not so sure what the incentive is to buy in Australia right now. To become a wage slave? To pay the bank interest? To buy a block of land so caught up in planning laws that I'll need to seek permission to renovate it?
Don't get me wrong, I really do want to. I just doesn't feel right. But I'll keep saving towards it and I'll hopefully get there. For one reason only, to provide for my family.
Read this, or at least the executive summary, and you will see how housing experts measure affordability, and how over priced most Australian markets are ranked: http://www.demographia.com/dhi.pdf – we can always afford something, but at what cost? We get ripped off, and then we're supposed to sell to the next guy for more. What an honourable system, what a 'fair go' for all.
Sorry it's late. House hunting in the morning.
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.
I still stand by my previous post on this and if anything it is actually becoming more affordable according to the Rismark boys.
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.
nicolas_b wrote:….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.
Hmmm…..simple, let’s increase rents by 56% to bring the ratio back into balance.
Scott No Mates wrote:Hmmm…..simple, let's increase rents by 56% to bring the ratio back into balance.Good luck:)
Wages can't support it – why do you think rents are so low compared to houses as it is?
fWord wrote: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.But isn't this the same for any consumer item? I'd like to buy a Ferrari 458, but I can't afford one. So I buy a car that I can afford.
We couldn't afford to pay $1m for a house in a blue ribbon suburb, so we bought, 2 and a half years ago, in a suburb where we could afford a decent house.
What's the difference?
Dan42 wrote:fWord wrote: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.But isn't this the same for any consumer item? I'd like to buy a Ferrari 458, but I can't afford one. So I buy a car that I can afford.
We couldn't afford to pay $1m for a house in a blue ribbon suburb, so we bought, 2 and a half years ago, in a suburb where we could afford a decent house.
What's the difference?
The difference is there are no houses down under that have prices equating to budget cars.
ummester wrote:The difference is there are no houses down under that have prices equating to budget cars.Really?? None at all? I'd beg to differ.
Dan42 wrote:ummester wrote:The difference is there are no houses down under that have prices equating to budget cars.Really?? None at all? I'd beg to differ.
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.
Houses do depreciate with age. But land appreciates IAW demand, and so does the sqm available in housing.
If I were to buy a brand spankin new house in Milton, QLD. I will pay mostly for the land, partly for the sqm of useable space, and partly for the level of finish.
10 years from now if I sell that house without doing any maintenance on it I can expect to receive a much higher price than I paid for it because:
1. Demand has gone up in the area; and
2. The size of similar accomodation in the market has reduced due to increasing density.What I cannot expect to receive is a premium for the high level of finish I would achieve if I built a brand new house on the vacant (identical) lot next door.
ummester wrote: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
I should add, I believe property is definately affordable.
I'm 27 years old, and I bought my first house at 21. Then I had a ex-g/f that wanted to sell it, and I couldn't afford it on my own. We walked away with a few grand in hand… then I bought a car… and then I found myself at 25 with no money to my name, a car loan, and an average income for my age.
My partner and I decided we wanted to buy a house so we scraped together a quick deposit in a couple of months, borrowed 95% and bought a house a good 40 mins drive from family, friends, and work (all in brisbane).
We now have 20% equity in our home because of 2 reasons:
1. We bought well;
2. We have made improvements.We are looking at holding on to this one as a renter while we take on our next project. Buy, reno, and move on.
None of our friends have done the same thing, because none of them want to start at the bottom. They just bitch about how they will never be able to buy property, or they will just wait to inherit it.
They just don't realise that once you have your foot in the door, everything is possible.
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