The future of Australian property prices

[Julia]

Whilst acknowledging that home ownership is entirely possible if you wish to make the sort of choices a couple of posters have outlined - I doubt that many would want to exist that way,

Let's not assume that such rigorous saving went on for half a lifetime, as some of you seem to be doing.
Probably about ten years, amongst which time was the taking of risk and opportunity in pretty equal measure.
viz references often from Tech/A about seeing where the opportunity exists and making the most of it.

So far I've had plenty of years to enjoy the fruits of my labour and anticipate many more to come.

Not many people lie on their deathbed and wish they'd saved more money or worked longer hours, but quite a few regret the lack of time spent with loved ones, or the experiences not enjoyed and places never visited.

Or some people choose to do this sort of thing, if that's what appeals to them, at a different stage of their life.

I don't believe either Bill or I are advocating anyone else should necessarily emulate the choices we made.
My earlier comments were simply as a result of being a bit tired of constantly being told how easy we had it in every respect.

I think the number of children a family has makes a huge difference to its ability to afford housing also. It's much easier for a DINK couple to buy a home, than for one with a few children, especially if private schooling is chosen. Again, it's a choice - but many people would put having their children waaay in front of owning their home.

Perhaps consider that not everyone wants to have children. Not necessarily a choice between having a home or children, just no desire to procreate.

 

[DocK]

(snip)

Whilst acknowledging that home ownership is entirely possible if you wish to make the sort of choices a couple of posters have outlined - I doubt that many would want to exist that way, and it's certainly not a way of life I'd like to see my kids live. I've seen too many friends and relatives die before they get the chance to enjoy the fruits of their labour to advocate half living your life in the present. Not many people lie on their deathbed and wish they'd saved more money or worked longer hours, but quite a few regret the lack of time spent with loved ones, or the experiences not enjoyed and places never visited.

I think the number of children a family has makes a huge difference to its ability to afford housing also. It's much easier for a DINK couple to buy a home, than for one with a few children, especially if private schooling is chosen. Again, it's a choice - but many people would put having their children waaay in front of owning their home. I guess it's just a matter of priorities. It's not just a case of what is possible, but what is desirable. If owning means a substantial decline in lifestyle, more and more people will choose to rent instead. At the end of the day there's a limit to how much young people will be prepared to pay for a roof over their heads.

Let's not assume that such rigorous saving went on for half a lifetime, as some of you seem to be doing.
Probably about ten years, amongst which time was the taking of risk and opportunity in pretty equal measure.
viz references often from Tech/A about seeing where the opportunity exists and making the most of it.

So far I've had plenty of years to enjoy the fruits of my labour and anticipate many more to come.

Fair enough, but I doubt that the majority of the younger population want to work 2 jobs and do without for a decade in order to get into their own home, if they can rent something comparable and enjoy a nice standard of life. My comments were in relation to the affordability of housing for the next crop of first home owners - not a judgement on what you and Bill have chosen to do in the past. Clearly it has worked for you, and you're happy with the decisions you made - but that's kinda irrelevant to the young ones who are now weighing up whether such sacrifice is worth it for them. My post was directed at the general topic, and not towards you or your choices in particular, but more as an example of what may be required to get into one's own home and whether it's worth it - for others.

Or some people choose to do this sort of thing, if that's what appeals to them, at a different stage of their life.

I don't believe either Bill or I are advocating anyone else should necessarily emulate the choices we made.
My earlier comments were simply as a result of being a bit tired of constantly being told how easy we had it in every respect.

Again, fair enough. I know it's annoying to be told "you had it sooooo easy compared to my generation" - and I daresay every generation has said that to their elders at one point. I remember bitterly complaining to my parents that they had it easier than me, and now my kids complain that I had things easier than them, and so it shall no doubt repeat endlessly. I do think I had some things (like home affordability) easier than my children will have, but on the flip-side they have other aspects of life much easier than did I. One can only hope that those young upstarts that like to blame the baby boomers for everything are one day facing the same attacks from their grandchildren's generation

Perhaps consider that not everyone wants to have children. Not necessarily a choice between having a home or children, just no desire to procreate.

See the part of my post I've bolded - I certainly acknowledged that it's a choice that people make. Parenthood is not for everyone, and that's fine. No, it doesn't need to be a choice of one or the other, but having one (children) often makes the other (home ownership) less affordable. It's just another factor in the affordability debate - not every family will be able to direct 30 - 50% of their income towards a mortgage. There's a vast difference in net disposable income for a childless professional couple earning perhaps $200 - $250K combined, and a family of five with a combined income of $80 - $120K. The future of Australian property prices might be impacted by which demographic the majority of future home buyers fits into.

 

[KurwaJegoMac]

I'm in my late 20s and can relate to a lot of what Julia and Bill have been saying. You need to make some sacrifices but the funny thing is, it's really not that hard.

On a single income (with no support from government, friends or family) I have my own PPOR and an IP. All paid for by my own savings and investments (that i made myself with my own money).

If I can do it - anyone can do it. No excuses. All it takes is some discipline and some small sacrifices.

What I have been doing:

- 2nd hand furniture for my home. Not the most 'modern' style but looks great
- No alcohol at bars and clubs except on rare occasions (buy from the bottle-o before hand instead)
- No daily coffees
- Only occassionaly dining out (once a week usually)
- Kept the same phone for 3-4 years and bought on contract to pay over time
- Drove the same, beat up old car for 8 years that cost me $3500
- No personal loans or credit card debt (except where the credit card is paid off by the end of the month)
- No designer clothing
- Travelled; been overseas every year for the last 5 years. Ski trips for a week every year for 7 years. At least 2-3 holidays a year interstate

What my friends have been doing:

- Expensive cars
- Travelling extensively
- Spending a lot at bars and clubs on the weekends
- Coffees and store bought lunches daily (you're paying $4 for some beans and hot water... )
- Lots of designer clothing ($450 jeans... really? LOL)
- Eating out a few days a week

What I have now:

- A positive cashflow IP
- A PPOR with mortgage repayments at 30% of my weekly earnings (thanks in part to the IP)
- A nice mercedes (2nd hand of course)

What my friends have now:

- Personal/credit card debt
- Downsized cars
- No assets

The best thing about all this is that I don't feel like I've missed out on a thing. I've never not been able to go out with my friends on trips. I've gone to all the events they've held - never had any issues.

I got teased often because I tracked every dollar I spent, refused to buy overpriced alcohol at bars/clubs/restaurants and had monthly budgets with $$ set aside for everything (including recreation/fun/money to blow).

Now it's all second nature and takes almost no effort to maintain. I have assets and savings that are working hard for me and I still get to have fun.

You know what's the best thing about all of this? The fact that over the past year I've helped influence 4 of my friends. They're working hard to pay down their debt and sort out their finances. Two have purchased properties of their own and are managing just fine. All four are happier with their situation then they were before and that's awesome.

So I challenge you youngens like me who say it can't be done. Track your spending for 3 months - you'll be amazed at how much money you blow on trivial things ($4.50 for a glass of coke at a restaurant?) and how much money you can save with some small tweaks (you won't even feel the changes after a couple of weeks). Then with regular savings, some investing and compounding growth just watch it take off.

You have time on your side - listen to the 50/60yr olds and learn from them, rather than whinging that life is too hard because I tell you what, life is damn easy in Australia. Travel a bit and you'll see that we have it amazing here (of course we're not perfect in all areas).

You can do it!

 

[CanOz]

Well done, great story KJM. I had to marry a thrifty woman to curb my spending...

Hows the prop gig going?

CanOz

 

[KurwaJegoMac]

Well done, great story KJM. I had to marry a thrifty woman to curb my spending...

Hows the prop gig going?

CanOz

Haha so long as you still get to have a bit of fun

I got through to the trial and passed that ok - i was asked to stay on another month but i declined. HFT isn't for me - I just couldn't get into it as much as my regular trading. Then again, i was trading for 6 hours after working an 8 hour day so that may have been a factor.

 

[CanOz]

Haha so long as you still get to have a bit of fun

I got through to the trial and passed that ok - i was asked to stay on another month but i declined. HFT isn't for me - I just couldn't get into it as much as my regular trading. Then again, i was trading for 6 hours after working an 8 hour day so that may have been a factor.

Ah well at least you got the experience and you know what its like!

 

[DB008]

To
prawn_86
CanOz
So_Cynical - well done of the property in the Philippines

I have also been looking at property in Asia. Mainly in Phuket, Thailand.

1) Ownership - my biggest concern is how you have to set up a fake board of directors (which you still control) to purchase an apartment. Houses are very difficult to purchase, and are usually done in the wives name.

2) Collecting income - don't trust them. Skimming off the top

3) Change of Government, could equal a change in property laws, not for the better.

 

[CanOz]

To
prawn_86
CanOz
So_Cynical - well done of the property in the Philippines

I have also been looking at property in Asia. Mainly in Phuket, Thailand.

1) Ownership - my biggest concern is how you have to set up a fake board of directors (which you still control) to purchase an apartment. Houses are very difficult to purchase, and are usually done in the wives name.

2) Collecting income - don't trust them. Skimming off the top

3) Change of Government, could equal a change in property laws, not for the better.

There are many places that are run by expats that have partnerships with the Thais, so try to find one of them. Siam Real Estate was one of the better R.E. Agencies around a couple of years ago...that could have changed. As far as expat ownership is concerned, you are allowed to own up to three condos in a complex as a foreigner in Thailand. There is some geopolitical risk, but the Thais are quite settled into their version of democracy...the King is the caveat though.

CanOz

 

[sydboy007]

I do wonder how my kids are going to fare with the home ownership dilemma - although several years off.

Whilst acknowledging that home ownership is entirely possible if you wish to make the sort of choices a couple of posters have outlined - I doubt that many would want to exist that way, and it's certainly not a way of life I'd like to see my kids live. I've seen too many friends and relatives die before they get the chance to enjoy the fruits of their labour to advocate half living your life in the present. Not many people lie on their deathbed and wish they'd saved more money or worked longer hours, but quite a few regret the lack of time spent with loved ones, or the experiences not enjoyed and places never visited. .

+1

I remember being questioned about my holiday spending years ago. I'd say I spend 7-10% of my after tax income on travel each year. A lot of my Asian friends thought I was being silly and should be solely focused on paying down debt.

For me the holidays were the sanity release of stressful work and escaping the rigours of shift work. I also believed that I didn't want to be hit by a bus and not have walked around Angkor Watt or stood atop the Empire State building, just to name a few bucket list items.

The old saying - dying rich raises the loudest laughter in hell.

1 guy I worked with about 8 years ago used to live in St Leonards Sydney. Would literally take him 20 mins to drive to work at Burwood. His GF (now wife) had been hassling him they should buy a house. They had to move to the central costs to afford it. His train trip took an hour, then he had to tack on a 15 minute walk at the work side and a 30 min at the house side, or drive to the station. The major issue was the train was an hourly service and he had to hope it was quiet at the end of his shift so he could leave work 20 mins early or he had to wait till 8 to get his train home. I'd warned him about how big an effect that would have on someone doing 12 hour shifts, but he didn't believe me. After 12 months he was well and truly over it. They sold up and moved to QLD to be able to buy cheaper property and have a much shorter commute time.

 

[sydboy007]

There are many places that are run by expats that have partnerships with the Thais, so try to find one of them. Siam Real Estate was one of the better R.E. Agencies around a couple of years ago...that could have changed. As far as expat ownership is concerned, you are allowed to own up to three condos in a complex as a foreigner in Thailand. There is some geopolitical risk, but the Thais are quite settled into their version of democracy...the King is the caveat though.

CanOz

Location will be a factor, but some Thai friends of mine were complaining that the Condos they owned in BKK were struggling to give them a return. I'd say Pattaya is as bad.

The prob is the influx of large amounts of new Condos, so people can always get the latest and greatest which depresses the price of the older ones, and lowers the rent you can expect to receive.

I'm hoping to team up with a friend in Thailand to build some student accommodation near the new University being built in his home town. His dad has quite a few contacts in the area and local Govt, so that makes a lot of the issues of investing in Asia easier. always helps to know who's into Chivas or Remey Martin

If / When I make the move to Asia I think I'll just rent. Looking at the rental market in most cities, it seems the yields there are as bad as a lot of Australia, so I'd prefer to have my money in assets producing 7% returns and paying rent at 4% and avoiding the holding costs of property. I also like the idea of being able to move around as time goes by and sorta be a nomadic back packer with a base of operations. Is easier to do this when you're single.

 

[CanOz]

Location will be a factor, but some Thai friends of mine were complaining that the Condos they owned in BKK were struggling to give them a return. I'd say Pattaya is as bad.

The prob is the influx of large amounts of new Condos, so people can always get the latest and greatest which depresses the price of the older ones, and lowers the rent you can expect to receive.

I'm hoping to team up with a friend in Thailand to build some student accommodation near the new University being built in his home town. His dad has quite a few contacts in the area and local Govt, so that makes a lot of the issues of investing in Asia easier. always helps to know who's into Chivas or Remey Martin

If / When I make the move to Asia I think I'll just rent. Looking at the rental market in most cities, it seems the yields there are as bad as a lot of Australia, so I'd prefer to have my money in assets producing 7% returns and paying rent at 4% and avoiding the holding costs of property. I also like the idea of being able to move around as time goes by and sorta be a nomadic back packer with a base of operations. Is easier to do this when you're single.

Yeah we're not really looking at this strictly from an investment POV. We really want a place to stay when we are there, but a little income to pay the fees while we are away. If we get some capital growth in the meantime then that would be great too.

CanOz

 

[Mr J]

I'm in my late 20s and can relate to a lot of what Julia and Bill have been saying. You need to make some sacrifices but the funny thing is, it's really not that hard.

On a single income (with no support from government, friends or family) I have my own PPOR and an IP. All paid for by my own savings and investments (that i made myself with my own money).

If I can do it - anyone can do it. No excuses. All it takes is some discipline and some small sacrifices.

A person on an average income paying off a below average mortgage by the time they are 30 has done damn well. A $200k mortgage on a $50k salary is pretty tight.

I got through to the trial and passed that ok - i was asked to stay on another month but i declined

Stay for another month of trial or for in-house? Just curious as I start soon.

 

[KurwaJegoMac]

A person on an average income paying off a below average mortgage by the time they are 30 has done damn well. A $200k mortgage on a $50k salary is pretty tight.



Stay for another month of trial or for in-house? Just curious as I start soon.

Agree - thats very tight, probably not worth risking. I would just save for a deposit and rent with friends; houses prices are gonna be flat/decreasing for a while so no need to rush. I've only got a PPOR coz I get older places, renovate and flip it for another reno job. I wouldnt buy otherwise - better to rent in a suburb you want to live in and buy IPs. Besides at such a young age you still wont be settled yet and career/family/etc can drastically change where you want to live so think hard before commiting to a purchase.

Regarding propex - i got asked to stay on line for another month. I had a few good days and lots of flat days so they wanted to see my performance over a longer timeframe. I definitely recommend giving it a go - it was a great experience and as Canoz said it'll help you decide if it's right for you. Good luck!

 

[Julia]

Fair enough, but I doubt that the majority of the younger population want to work 2 jobs and do without for a decade in order to get into their own home, if they can rent something comparable and enjoy a nice standard of life.

Fine. I have already made clear that I wasn't suggesting anyone should regard what Bill or I did as any sort of recommendation. Some people feel very strongly about home ownership, not just from a financial point of view but more for the knowledge that it's yours to do with it what you wish.
If some people want to rent, I respect that choice. They will of course be subject always to the dictates of a landlord, dictates as to whether or not they may have a pet, whether they can change the paint colour etc etc.
I've rented while getting a deposit together and didn't enjoy the restrictions.
In the whole scheme of one's entire life, I don't regard about ten years of stringent saving too much, when the ultimate result has been financial independence at well before retirement age.

Again, fair enough. I know it's annoying to be told "you had it sooooo easy compared to my generation" - and I daresay every generation has said that to their elders at one point. I remember bitterly complaining to my parents that they had it easier than me, and now my kids complain that I had things easier than them, and so it shall no doubt repeat endlessly.

I understand what you're saying, but I recall clearly my father's accounts of living through the Great Depression and how incredibly difficult it was. No social welfare support in those days. What a far cry from the middle class welfare so generously doled out as vote buying these days.

Then that generation were extremely grateful for the opportunities that came post-war, when most western societies enjoyed a level of affluence for those prepared to work hard such as they had never believed possible.
My parents - both previously professionally qualified and employed - gave up their careers to work very long hours in a convenience store, as a stepping stone to making more money. They did very well, and I think were surprised at how much they actually enjoyed it, despite the awful hours. It was a time when hard work and initiative was well rewarded.

I guess we are all much influenced by what our parents and even grandparents have modelled to us as we grew up. I absorbed the philosophy that if you wanted to do well, it was absolutely up to you, don't expect anything from anyone. You're responsible for your own decisions and their outcomes. It's a philosophy that I will always respect.

I do think I had some things (like home affordability) easier than my children will have, but on the flip-side they have other aspects of life much easier than did I. One can only hope that those young upstarts that like to blame the baby boomers for everything are one day facing the same attacks from their grandchildren's generation

Almost certainly they will. It seems to be the pattern now.

On a single income (with no support from government, friends or family) I have my own PPOR and an IP. All paid for by my own savings and investments (that i made myself with my own money).

Congratulations, KJM. Really well done. Good for you. What a great example to set.

 

[Tink]

Agree with your posts Julia, about home ownership and the importance of.
I was raised the same with making sacrifices if you want something in life, and I am extending the same to the children. Son is looking into property in the next few years.

 

[So_Cynical]

Now how hard would it really be to save 29K for a deposit and borrow $260,000 and pay that off? According to UBanks calculator it would cost $1,455 P/M to pay off this loan at their current rate of 5.37%. $1,455 works out at $363 P/W. I can tell you now I would definitely be able to pay that off on my own even with a Coles salary.

Lets see

• $17460 PA mortgage
• $2500 PA rates and unit fees
• $1000 PA insurance
• $3500 PA for a car that you don't drive much (just to coles )

$24500 gone just there, more than half your Gross wage of $42,000 P/A for a full time employee...and you haven't paid tax, private health or contributed to super, paid the gas/power, food, clothes the net and phone.

Even with a 10% deposit i doubt the bank would lend you the money.

 

[Bill M]

If I can do it - anyone can do it. No excuses. All it takes is some discipline and some small sacrifices.

What I have been doing:

- 2nd hand furniture for my home. Not the most 'modern' style but looks great
- No alcohol at bars and clubs except on rare occasions (buy from the bottle-o before hand instead)
- No daily coffees
- Only occassionaly dining out (once a week usually)
- Kept the same phone for 3-4 years and bought on contract to pay over time
- Drove the same, beat up old car for 8 years that cost me $3500
- No personal loans or credit card debt (except where the credit card is paid off by the end of the month)
- No designer clothing
- Travelled; been overseas every year for the last 5 years. Ski trips for a week every year for 7 years. At least 2-3 holidays a year interstate

What my friends have been doing:

- Expensive cars
- Travelling extensively
- Spending a lot at bars and clubs on the weekends
- Coffees and store bought lunches daily (you're paying $4 for some beans and hot water... )
- Lots of designer clothing ($450 jeans... really? LOL)
- Eating out a few days a week

What I have now:

- A positive cashflow IP
- A PPOR with mortgage repayments at 30% of my weekly earnings (thanks in part to the IP)
- A nice mercedes (2nd hand of course)

What my friends have now:

- Personal/credit card debt
- Downsized cars
- No assets

The best thing about all this is that I don't feel like I've missed out on a thing. I've never not been able to go out with my friends on trips. I've gone to all the events they've held - never had any issues.


You can do it!

Excellent post KurwaJegoMac and one that all people who want to save a bit of money and buy property should read. I really liked the part about the designer jeans for $450, I bought a pair of jeans at Lowes for $20 on special 5 years ago and they look good and I'm still wearing them now.

The best part about getting the property and mortgage knocked on the head early in life was that eventually I could retire early (not old). Retiring early means that I am young enough to travel and do all the things I want to do in my life while I still can. Short term pain has given me long term happiness, it was the most important thing in my life to get done. I can go away as I do on 4 or 5 Month expeditions and return home to a nice home and there is no better feeling than that. Congrats on everything that you have achieved.

PS: I make the best coffee at home from some of the best beans in Australia. Love doing it and tastes really good and better than any cafe, all for around 40c a cup.

 

[tech/a]

5 Years

Bill you really should take them off and give them a wash.

K
What a tremendous and inspirational
Post.

 

[Bill M]

Lets see

• $17460 PA mortgage
• $2500 PA rates and unit fees
• $1000 PA insurance
• $3500 PA for a car that you don't drive much (just to coles )

$24500 gone just there, more than half your Gross wage of $42,000 P/A for a full time employee...and you haven't paid tax, private health or contributed to super, paid the gas/power, food, clothes the net and phone.

Even with a 10% deposit i doubt the bank would lend you the money.

It's not fair to include your car running costs as you could well do without one or that you would need to pay for that anyway whether you rent or buy.

I posted that because magoo said it couldn't be done, it can be, the figures are there and as I said, if I had to do it all over again I would do it exactly the same way as I have done before. Paying 50% of your "Coles" salary for accommodation to live somewhere and eventually own it outright is worth it to me. Maybe to others it is not but to me it is. It is the end result of living rent and mortgage free that people should be concentrating on.

 

[qldfrog]

Anyone who cant get more than 6% on their money would be best advised to do that.
Those who can would be Crazy!!

I very rarely disagree with you tech/a, but 6% tax free and risk free is what a repayment on a home Loan (PPOR) gives you.
This is the most sensible choice for the huge majority of people. Pay your mortgage first