The future of Australian property prices

qldfrog said:

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

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I don't see the disagreement.
The huge majority would be those who cannot achieve better than 6% nett of tax
I'm personally decreasing mortgage exposure.
Which was 7 figures now low 6 figures
My trading is only in the low 6 figures not enough return to
Negate the mortgage exposure so sell and freehold as much as possible.

No arguement from me.

I am not sure why so many people believe that home ownership is out of the question,
My generation (Y) frustrates me the most, All of my friends, cousins “Etc” all complain about how hard life is, so expensive and how I am lucky.

We all have the same opportunities in life, Some people will always make excuses and some people will make something of their life.
I started working when I was 14 at Mc donalds for some cash, I saved up 10K in two years, more money then most adults had at the time.
Any way, when I was 18 I was working two jobs and studying at the same time and bough my first IP at 21, I missed out on holidays, partying and a few other things but now at 28 I almost have my first PPOR paid off.
I sacrificed 7 years of my life to have 60 years of a good life…..

Properties might “cost more” but the issue is so many people want things now but are not willing to put any effort in.

Most people are just lazy and they think life should be easy for them, If you want your life to be easy you got to make it easy simple!!

psailagroup said:

I am not sure why so many people believe that home ownership is out of the question,
My generation (Y) frustrates me the most, All of my friends, cousins “Etc” all complain about how hard life is, so expensive and how I am lucky.

We all have the same opportunities in life, Some people will always make excuses and some people will make something of their life.
I started working when I was 14 at Mc donalds for some cash, I saved up 10K in two years, more money then most adults had at the time.
Any way, when I was 18 I was working two jobs and studying at the same time and bough my first IP at 21, I missed out on holidays, partying and a few other things but now at 28 I almost have my first PPOR paid off.
I sacrificed 7 years of my life to have 60 years of a good life…..

Properties might “cost more” but the issue is so many people want things now but are not willing to put any effort in.

Most people are just lazy and they think life should be easy for them, If you want your life to be easy you got to make it easy simple!!

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Great post. Well done on your success - keep working hard and don't listen to the nay sayers. You can see yourself what the results are!

I know what you mean though - everyone around me complains too yet they keep racking up debts on their credit cards, they don't bother learning about basic financial skills and they don't bother trying to save any money. Strangely my high-income earning friends are the worst. Despite earning well above the median family wage they don't have a single $ saved up and average debt is about 30-40k. Though they do have nice flashy cars, designer clothes, $5k watches, etc - the worst thing about it all is that they say "i wish i could buy a house" or "i wish i could save like you" then they tell me about their great trip to hawaii where they bought $4000 worth of armani, gucci, etc

group hug

All good post, my frustrations has produced one positive outcome, I am
In the process of writing and publishing a book / e book on this exact topic, I hope by mid year the book will be finished.
It's a book based on 5 simple topics
1) about how to balance your life and not over
Complicate it
2) fincial education why it's important
3) simple budgeting
4) networking with the right people

Each topic has about 5 parts to
It, can't wait to get this book launched I really want to how
Any one that a bit of hard work will go
Along a way

Pa I'm
Using. I phone lol

I've bolded the parts below which, obviously, I especially agree with.

psailagroup said:

I am not sure why so many people believe that home ownership is out of the question,
My generation (Y) frustrates me the most, All of my friends, cousins “Etc” all complain about how hard life is, so expensive and how I am lucky.

We all have the same opportunities in life, Some people will always make excuses and some people will make something of their life.
I started working when I was 14 at Mc donalds for some cash, I saved up 10K in two years, more money then most adults had at the time.
Any way, when I was 18 I was working two jobs and studying at the same time and bough my first IP at 21, I missed out on holidays, partying and a few other things but now at 28 I almost have my first PPOR paid off.
I sacrificed 7 years of my life to have 60 years of a good life…..

Properties might “cost more” but the issue is so many people want things now but are not willing to put any effort in.

Most people are just lazy and they think life should be easy for them, If you want your life to be easy you got to make it easy simple!!

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KurwaJegoMac said:

Great post. Well done on your success - keep working hard and don't listen to the nay sayers. You can see yourself what the results are!

I know what you mean though - everyone around me complains too yet they keep racking up debts on their credit cards, they don't bother learning about basic financial skills and they don't bother trying to save any money. Strangely my high-income earning friends are the worst. Despite earning well above the median family wage they don't have a single $ saved up and average debt is about 30-40k. Though they do have nice flashy cars, designer clothes, $5k watches, etc - the worst thing about it all is that they say "i wish i could buy a house" or "i wish i could save like you" then they tell me about their great trip to hawaii where they bought $4000 worth of armani, gucci, etc

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The other phrase is "oh, you're so lucky"!!! Yeah, it was all about luck: not.

CanOz said:

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CanOz

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Good on you, CanOz. It's about attitude essentially. Your wife sounds terrific.

Bill M said:

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.

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Another good point. There has been an assumption in this thread by some that, because one doesn't go out for $300 dinners and $7 coffees, there is no pleasure in life. It's entirely possible to spend time with friends over a meal etc at your own homes where often the food is better than the under-portioned, over-priced stuff on a big white plate that the restaurant serves up with a swirl of some foamy stuff to justify the price.

againsthegrain said:

group hug

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Better a metaphorical group hug than some of the disdain for effort that has been evident on this thread.

Julia said:

The price of property was then relatively proportionate to income levels.

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DocK said:

When the spouse and I, and most of our similarly-aged friends, bought our first properties back in the late '80s to early 90's - our purchase prices were approx 1.5 to twice our combined annual gross incomes. My first home cost $87,000 and we were earning about $65,000 gross combined at the time. The average wage then was $24,200 according to the ATO (google it yourself if you want). It was a modest home, small house on a small block in an average suburb of the Gold Coast. Interest rates were 17% at the time - it was during the "recession we had to have". That same house would now sell for approx $420,000, (I checked realestate.com.au) so to be comparable in terms of affordability the average wage would need to be $120,000 pa. According to ATO it's more like $70,000 - $80,000, so if you assume $150K combined that makes the same house a factor of 2.8 x comb ave gross income, rather than the 1.74 x comb gross ave income it was back then. This is relevant in my area - I assume the difference is greater in Syd & Melb etc.

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Good on ya docK, save's me the effort! She was comparing the house two doors up from Buckingham palace in the 70's to the general aussie property market or something!

It is harder for the young now than when I first bought as well. However, finally, there is a change at hand, and it may have legs yet!

MR. said:

Good on ya docK, save's (sic) me the effort! She was comparing the house two doors up from Buckingham palace in the 70's to the general aussie property market or something!

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You are assuming that DocK's comparison was equally valid to the NZ market. I have never made any claims about proportionality in the Australian real estate market, just described my own experience.
Take it or leave it. I'm pretty much over this petty stuff.

Julia said:

There has been an assumption in this thread by some that, because one doesn't go out for $300 dinners and $7 coffees, there is no pleasure in life.

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Just a little bit of exaggeration there There's a vast difference between working 70 hours per week and never going out, buying clothes, taking holidays etc and what you've described above. I daresay there are quite a lot of people who fall to the frugal side of the middle ground, but don't quite reach the extremes of doing without that you chose.

If we can all calm down and stop describing personal experiences (I'd actually fall into the thrifty camp byself, but thats besides the point imo) - the topic of this thread is "the future of Australian property prices". What is possible, or advisable, is largely immaterial. Of course it's possible to get ahead by doing without - people have always done so, and some always will. The point is what is likely to be the attitude and behaviour of the majority of future first home buyers. We all know that those on this forum are not necessarily typical of the "average Aussie". If the present younger generation sees home ownership as too onerous a burden to take on for the benefits it provides, or decides that they're better off renting and investing the saved income in other ways to provide for their retirement (whether early or not) - this will determine at least partially the "future of Australian property prices". Although owning your own home gives you choices re decorating, renovating etc - renting removes the worries of maintenance & upkeep, falling values due to new roads etc. Rents may indeed rise if more people choose that option, and house prices may indeed stagnate or fall, until home ownership becomes more attractive. I'd actually advise my children to purchase an investment property and live at home a little longer in order to build up some equity in the market before buying a PPOR themselves - but this is clearly not an option for everyone.

Although it's ridiculous to compare the Australian property market and that of Europe, USA etc - there will be more and more of our highly paid professionals leaving this country to live overseas, and less immigrating here, if housing costs are too out of whack with those in other western nations.

Another factor is that of inheritance. Once upon a time parents or grandparents would live only 60 - 70 years or less on ave, and would be considerate enough to leave a nice inheritance to ease home ownership for their offspring/grandkids etc. As the average lifetime lengthens, the turnover rate of wealth within a family stretches, if there is anything left to bequeath at all. The knowledge that there's probably not going to be a nice lump sum inherited from the oldies to payoff any remaining debt at retirement is also a factor that might discourage some from taking on the larger mortgages required to get into the market.

Let's also not lose sight of the fact that it is possible to be a diligent saver/investor and manage to retire early on one's hard earned nest egg without necessarily owning property. There seems to be a bit of assumption that if you don't own your home at retirement age you're doomed. I know I'd certainly prefer the security of knowing my castle is my own, but some are quite happy to have amassed a nice passive income from other sources that can continue to pay their rent instead.

Just some thoughts.

There has been an assumption in this thread by some that, because one doesn't go out for $300 dinners and $7 coffees, there is no pleasure in life.

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DocK said:

Just a little bit of exaggeration there There's a vast difference between working 70 hours per week and never going out, buying clothes, taking holidays etc and what you've described above. I daresay there are quite a lot of people who fall to the frugal side of the middle ground, but don't quite reach the extremes of doing without that you chose.

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Again, assumptions. I went out for plenty of just such dinners. On a company credit card which I can remember handing over on many occasions in payment of a bill well in excess of $1000 for four people.

If one is out frequently on a business basis, then the idea of having friends at home was financially to my advantage and absolutely my preference.

No need to infer that anyone who made some sacrifices to achieve a goal necessarily endured a life of misery.

We will all have different aspirations and different ways of achieving these. I have not criticised anyone else's lifestyle, spending habits or aspirations, and am frankly puzzled at the need of some people to do this. It's certainly a discouragement toward attempting to contribute to a thread.

Julia said:

Again, assumptions. I went out for plenty of just such dinners. On a company credit card which I can remember handing over on many occasions in payment of a bill well in excess of $1000 for four people.

If one is out frequently on a business basis, then the idea of having friends at home was financially to my advantage and absolutely my preference.

No need to infer that anyone who made some sacrifices to achieve a goal necessarily endured a life of misery.

We will all have different aspirations and different ways of achieving these. I have not criticised anyone else's lifestyle, spending habits or aspirations, and am frankly puzzled at the need of some people to do this. It's certainly a discouragement toward attempting to contribute to a thread.

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Julia, I think you're taking things just a little too personally. I, personally, have not implied that you endured a life of misery, nor have I criticised your choices. I'm saying I doubt that the majority of young people would choose to make them, as a good deal of sacrifice was involved. I, personally, would not have made the choices you did to the same extreme - but that's my opinion, not a criticism. I don't really care one way or the other what you chose to do in your youth - it's not my concern. I was very careful to state that your decisions were your choice and if you didn't regret them, fine - it's entirely your business and irrelevant to the thread. In short - some posters, including you, have given examples of how young people certainly could afford a home if they're prepared to do without certain things - and I've expressed the view that I don't think it's likely that many would want to do so to some of the levels portrayed. That is not a judgement, it's an opinion.

What I am trying to discuss is the general rather than the personal. I'm attempting to discuss the type of sacrifices necessary in order to afford a home at today's prices, and whether the average person is likely to want to make them. Yes, I've used the examples given by you and Bill on how you set about attaining home ownership and said that I don't think they would appeal to most - but that is not a criticism of you or your choice, just an observation of the way I see today's population. I'm actually trying to stick to the topic of the thread, rather than get drawn into an argument on whether what you, Bill, Kurwa.., psailagroup, Canoz, MrMagoo or any other individual poster has chosen to do is right, wrong, desirable or not - that has no bearing on the subject.

If we can stick to the topic:

I think housing is less affordable in Australia now, than it was 30 or 40 years ago - in terms of ave income vs ave house prices. If average income levels start to rapidly increase for some reason then obviously that would not remain the case.

I think the younger generation, apart from above-average income earners, will increasingly find they're either priced out of the market, or unwilling to make the type of sacrifices necessary to service the large debt they'd need to take on. In short, I think the % of home ownership will reduce and renting will increase.

I think that the current price of housing in Australia, combined with our cost-of-living, will result in less high-income professionals wanting to make Australia their home, and may indeed see some of our home grown talent move offshore.

I think all of these factors combined give weight to the likelihood of house prices remaining flat. I don't see how we could expect to see the rapid rises in capital values that were seen over the recent past.

I think it is possible to provide for a comfortable retirement without necessarily owning your own home. I am not making a statement on whether I think it is advisable, desirable or not, just saying I think it is possible.

I think I'll now leave this thread - it's a little too contentious for me.

Everything reverts to mean, eventually...so be it with property! That's my opinion of the future of property prices in Australia.

CanOz

CanOz said:

Everything reverts to mean, eventually...so be it with property! That's my opinion of the future of property prices in Australia.

CanOz

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Where is the mean on a long term trend line i wonder?

DocK said:

If we can all calm down and stop describing personal experiences

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What? this isn't the personal experience thread?

(only got 9.76 seconds)

Has always been, people telling others how they did it. How there's no excuse why you can't just go out and buy that home or IP right now. (AND WORK IT OFF) The problem has been for some time "the timing". I have no doubt many are wishing they never ventured when they did.

prawn_86 said:

Where is the mean on a long term trend line i wonder?

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No idea, just trying to get back on topic...

Things are always getting harder. Simple math. inflation is quoted at 2-3%. Inflation actually runs probably at 5-6%+ easily. Unless wages increase by more than say 6%, then every generation is going to find it harder than the last. Unless there is a point in time where prices fall instead of rise (deflation, recession i guess?) Then it only gets harder for the financially retarded.

I'm not complaining. Ill get to where I want to be regardless of what house prices were, are, or will be, 300k, 500k, or 1.5 mill I'm not concerned. But to argue that it was just as difficult back in the good ol' day doesn't make sense to me. I;m not interested in the 18% rates story either. Rates are only higher if there is too much money flying around in everyones pocket.

House prices down, or across. Certainly not up. Unless they boost first home owners to 50k. Then up, shortly followed by down.

PS Im enjoying watching this thread.

KurwaJegoMac said:

Great post. Well done on your success - keep working hard and don't listen to the nay sayers. You can see yourself what the results are!

I know what you mean though - everyone around me complains too yet they keep racking up debts on their credit cards, they don't bother learning about basic financial skills and they don't bother trying to save any money. Strangely my high-income earning friends are the worst. Despite earning well above the median family wage they don't have a single $ saved up and average debt is about 30-40k. Though they do have nice flashy cars, designer clothes, $5k watches, etc - the worst thing about it all is that they say "i wish i could buy a house" or "i wish i could save like you" then they tell me about their great trip to hawaii where they bought $4000 worth of armani, gucci, etc

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Is your issue with travelling? or over indulgent and unnecessary spending?

A trip to hawaii is actually quite affordable, and I'm assuming quite nice. Gotta see the world while your young, can't do it(properly) with kids, and a PPOR makes it more difficult. Also twice as expensive with kids.

CanOz said:

No idea, just trying to get back on topic...

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young-gun said:

House prices down, or across. Certainly not up.

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My opinion is that in 5 years you will be paying 20% more for a home/unit in busy, popular, trendy, handy and want to live suburbs. And by that I mean not in an over supplied area like the Gold Coast where there are thousands of high rise units on the market. Pick your areas/towns and you will do ok, pick a bad suburb and you could well lose. I wouldn't be investing where I am if I thought I would be losing, that's for sure, cheers.

Some of the back slappers on this thread who have done well for themselves should thank all the "free spirits" who have pissed all their money up against the wall (creating income) and end up perpetual "renters" who provide the market for the achievers to rent their investment properties to.

No need to demonize the underachievers because without them there would be no over-achievers.

psailagroup said:

We all have the same opportunities in life

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No we don't, a very common misconception...we are not all born equal into an equal society.