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  • Profile photo of spudstaspudsta
    Member
    @spudsta
    Join Date: 2007
    Post Count: 11

    Hello all,

    Im new to investing and i have been reading as much as i can about real estate but i have a problem. Because all the books i have found are even 2 years old, the information is outdated. Like Steve's book. It mentions buying property for 40,000 in 2003. 

    Now i have found the average salary in 2003 was about $40,000 for australia (varies in areas of course). Now its a few years on and salaries have not increased that much (couldnt find statistics but on what the average person earns its about the same) but property is much higher.
    I dont think you could find a property for under 100,000 yet the salaries are the same. Does anyone know where to get proper statistics on this or can they help me with figures but to me it looks as if it is very hard to get into property on the average income nowadays unless you already own a property that you can sell/use equity on.

    Am i wrong? Have salaries increased along with property or has property had a large leap recently and salaries have not?

    Thanks all

    Profile photo of WylieWylie
    Member
    @wylie
    Join Date: 2004
    Post Count: 346

    I'd like to know just what $40K would have bought in 2003. Obviously not in a capital city.

    If I was young and just starting out now, I would buy a cheapie house, rent it out while living at home. If living at home is not possible, next best strategy (my opinion only) would be to buy a cheapie (best cheapie I could afford) and rent somewhere even cheaper. At least I would have a foot on the bottom rung of the real estate ladder. Equity will increase over time.

    This is exactly how I started 26 or so years ago and I have suggested the same to my 18 year old son. He has just started uni and is only working five hours per week, so cannot do anything yet, but I am encouraging him to think about it.

    When I bought my first house, it was just as hard to find the money each month as it is for someone buying their first house now.

    Wylie

    Profile photo of nbwestnbwest
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    @nbwest
    Join Date: 2007
    Post Count: 6

    It depends on where you look.
    There are still places out there with houses going for $50k.  Queenstown Tas for one.
    It's a small mining town to be sure and probably not the nicest place to live, but if the due diligence stacks up, if there is plenty of mineral (copper in this instance) left for the digging, the company is going OK and the rental vacancy isn't to high, then it could be a chance to get the foot in the door.  I haven't done full due diligence on this place, so I'm not endorsing it, just pointing out that these cheap places are still out, just not in capital cities.
    If you do get down there to take a look, could you pass on the low down.  I haven't made it down there yet.  :-)

    Best of luck breaking in to the market.  I'm in the same position.

    Nathan

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    It is true that at the moment the affordability for houses/units is very low. But it is not going to get better anytime soon, so you need to disregard the ratios; especially if you are a long-term investor.

    The market works in cycles, and low affordability means lots of upward pressure on rents, and fewer buyers. This sounds to me like a good time to buy; especially if there are more interest rate rises predicted.

    The best strategy is to find the best deal you can, when you can, hold onto it, and as soon as you can afford it; go again.

    Timing the market is for flippers or traders, and the state of the market is critical. These people make cashflow out of doing lots of quick turn over deals, but quite often don't obtain any long-term wealth as they don't retain any of the properties.

    Long term wealth is achieved by continually acquiring income producing investments that also continue to increase in value.

    I agree with Wylie; you need to buy the best property you can afford at the time you want and/or able to buy. If it happens to be a 1 bed unit for $100k, then so be it.

    It's amazing how rich you can become by just continually buying cheaper properties that you can just afford (or just can't) and keeping them.

    Incidentally, to answer your question; there was a large leap recently in property prices, which is a large contributing factor to the low affordability right now.

    Profile photo of PRODEVPRODEV
    Member
    @prodev
    Join Date: 2003
    Post Count: 12

    The property market is forever changing, prices going high and becoming unaffordable, then rents rise to make the returns more viable again. The only option the majority of us have is to buy what we can afford, as soon as we can afford it. Don't waste time timing the markets – you'll get bogged down in numbers and miss the opportunities. If you are at the bottom end of the affordability scale then you'll have to buy the cheapest unit or apartment you can find in an outlying suburb. Rent it out and then as soon as you've got some extra equity borrow against it to renovate it. This should further increase the value of the property and hopefully increase the rent at the same time. You'll be amazed at how little it will cost you thanks to the depreciation you get on the reno costs and a little extra rent.

    Another option is to get some like minded friends together and invest your dollars into a property syndicate. They do come with some risks but the returns can be outstanding – risk vs reward.

    If you invest your money into managed funds and fixed term bank accounts like the average person does then you can only ever be average!

    Profile photo of hbhb
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    @hb
    Join Date: 2005
    Post Count: 179

    Hi spudsta

    your post is a few months old, but probably still of interest.

    "Does anyone know where to get proper statistics?"

    Try the RBA.gov.au site for salary statistic

    "Am i wrong?"

    NO

    "Have salaries increased along with property or has property had a large leap recently and salaries have not?"

    The second one, and not just "recently".

    Let me show you

    In 1996, when the present government was elected, the median price house in Melbourne was $135K
    and the average wages (gross) was 664.40  take away tax 161.78 and you had 505.62 Nett.

    So if you had 10% deposit, your loan repayments on $121.5K at 10.5% was 263.59 weekly  or 52.9% of your Nett wage.

    Today June 2007, the median house price is $420k,
    and the average wages is $1091.20 take away tax of 255.20 and you have 836.00 Nett.

    10% deposit, and your loan repayments on $378K at 8.05% is 673.27 weekly or 80.5% of your Nett wage.

    Nett wages since from 1996 to 2007 have gone up 66%
    Houses prices in the same period have gone up $211%

    So one of 2 things can happen to bring back the balance

    Wages increase by the same amount as property (211%)  making the current wage $1,563.15 nett or $2,274 gross per week
    or houses reduce to 66%, so the median house price in melbourne today should be $224K.

    So which of the 2 is most likely?

    Neither

    Oh well,  we'll just have to grim and bear the housing affordability problem

    cheers

    Profile photo of bardonbardon
    Participant
    @bardon
    Join Date: 2004
    Post Count: 557

    Spudsta, I work in engineering and construction and have had a 100% pay rise  since 2003 as has most of my peers, I just gave a guy a 50% pay rise that had been with us 4 months.  I am about to move up to senior executive level and expect another significant pay rise to come with the role.  So dont forget that some segments are having large pay rises that are actually higher than house price inflation.

    Profile photo of hbhb
    Member
    @hb
    Join Date: 2005
    Post Count: 179

    There are also some CEOs making millions of dollars a year just in bonuses,

    but the true figures of the average wages salary is available from the RBA.gov.au website and for june 2007 is $1091.20 GROSS

    Profile photo of foundationfoundation
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    @foundation
    Join Date: 2005
    Post Count: 1,153
    spudsta wrote:
    Does anyone know where to get proper statistics on this or can they help me with figures

    Try here: Global House Prices > Australian Property Discussion Forum

    Quote:
    but to me it looks as if it is very hard to get into property on the average income nowadays unless you already own a property that you can sell/use equity on.

    Am i wrong?

    Nope.

    F. [cowboy2]

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    bardon wrote:
    Spudsta, I work in engineering and construction and have had a 100% pay rise  since 2003 as has most of my peers, I just gave a guy a 50% pay rise that had been with us 4 months.  I am about to move up to senior executive level and expect another significant pay rise to come with the role.  So dont forget that some segments are having large pay rises that are actually higher than house price inflation.

    When can I start?

    Profile photo of bardonbardon
    Participant
    @bardon
    Join Date: 2004
    Post Count: 557

    LA you can start any time, you will mix well on the golf course and could teach me how to, just send me a CV we are growing rapidly and are constantly seeking to bring on talent not as fast as we would like to, we aint in the US yet but watch this space, Abu Dahbi is our next new venture.  I do work effectively and deal with everyone elses problems got to say that ozzies dont handle problems well and like to blame others this puts me at an advantage to clean up as I am here on a "working holiday" and dont have a problem with taking ownership.  No BS I just got a large bonus today and I know it doesn't make sense but the first thought  I got after seeing only half of it going in the bank is that I need to get more negatively geared properties its a false economy I know but thats what I am doing.

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,847
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