The future of Australian property prices

[Value Collector]

But the stats show that 90% of investors are buying pre existing dwellings. If you are buying a property from a developer I would consider that to not be a pre existing dwelling. Developers do not build properties with the goal of holding onto them. They want a sale as fast as possible. over 50% of the property sales in NSW have been to investors for a large chunk of the year. That's not a sustainable or rational market. FOMO is what's driving first home buyers to camp out for a few nights to get a $500K block of land on the city fringe. How is that affordable?

So unless investors are actually providing the capital for developers to bring new apartments and houses onto the market, all they're really doing is using NG and probably their existing primary residence as a way to out bid first home buyers and those looking to trade up / down.

yes but picture this, A developer sells a property off the plan to an investor, which allows the development to go ahead 18months later once the property is built the original "off the plan" investor flips the property to another "buy and hold" investor. If that transaction were the only transaction the figures would say 50% of investors buy existing, even though both transactions were part of bringing that 1 new rental property to market. So the figures can be off.

Also an investor may buy an existing property, and convert it to a duplex or town houses, yes he bought an existing, but he also added to supply.

But all that doesn't even matter, because your focusing on the wrong number, what counts is not what percentage of investors buy existing compared to new, what counts is what percentage of the new supply is created by investors.

Existing home sales make up a much larger portion of the total sales than do new sales, So if 90% of total sales are existing home sales, you would expect that 90% of investors are buying existing homes. If new home sales only make up 10% of total sales you can't expect all of the investor purchases to be limited to that 10% of the market.

 

[Mrmagoo]

What about the risk of being wrong. You sit out of the market and it doesn't drop. Now prices are higher and your rent bills are going up. Not having atleast one property could be considered a risk.

What about the fact that despite all your metrics on valuation its possible your timing is wrong. If there are people willing to pay higher prices they will buy it. No one knows when the tipping point will be.

There has been a lot of doubters and nay sayers about property in this thread over the past few years. They make good points. real wages, real incomes, income to price ratios etc etc, they are all true, but if the market is willing to pay more for house prices, spend more of their disposable income on a mortgage and live that dream then so be it. your analysis is wrong

A well planned, well executed property investment 2,3,4 years ago would have provided a return better than almost any other option. Add to that value add techniques or actually having the ability to subdivide etc and I'd say theres plenty out there who have proven the skeptics wrong.

How about buying a place to live in when the time is right for you and not as some get rich quick scheme which deprives others of a home.

 

[Julia]

What about the risk of being wrong. You sit out of the market and it doesn't drop. Now prices are higher and your rent bills are going up. Not having atleast one property could be considered a risk.

What about the fact that despite all your metrics on valuation its possible your timing is wrong. If there are people willing to pay higher prices they will buy it. No one knows when the tipping point will be.

There has been a lot of doubters and nay sayers about property in this thread over the past few years. They make good points. real wages, real incomes, income to price ratios etc etc, they are all true, but if the market is willing to pay more for house prices, spend more of their disposable income on a mortgage and live that dream then so be it. your analysis is wrong

A well planned, well executed property investment 2,3,4 years ago would have provided a return better than almost any other option. Add to that value add techniques or actually having the ability to subdivide etc and I'd say theres plenty out there who have proven the skeptics wrong.

Good point.

The whole question also goes to attitudes and expectations. eg Mr Magoo, you're consistently critical and negative. If you're trying to buy a place in Sydney that's pretty understandable, but what are you doing to improve your situation? eg are you sharing your rental place with at least one other person, maybe more?
Are you prepared to take a second job?

Every generation has its advantages and disadvantages. If you took a cross section of the population at any given time, placed them all in an identical environment, gave them all an equal amount of capital, I'd be very surprised if at the end of, say, a decade or two, some had not done extremely well whilst others had nothing.

Even just reading through this thread, a couple of people are always negative, can see no viable opportunities, are focused entirely on how difficult their situation is. But others can see a way round an apparent negative, find an opportunity, and have the self belief and initiative to put that opportunity to use.

If you compare the generation who are the parents of the baby boomers, they'd come through the stresses and deprivations of war, many of the men fighting overseas, prisoners of the Japanese etc, and determined on their return home to create a better life for their children. The only credit most of them knew was in the form of a mortgage for that all important family home. They saved until they could afford to buy what they needed, made do with second hand furniture. There was a culture of "if you don't work hard you won't get anywhere" and most of all a culture of saving, not just to acquire appliances, a car etc., but also for a sense of security.

My early childhood was spent in a pleasant suburban house with extensive garden in a good area. Parents both worked in professional practices. When I was 8 they decided there would be more money to be made in a business so they threw in their comfortable middle class existence and bought a six day, 15 hours a day corner store, where my father was up at 3.30am to go to the markets for produce to stock the shop.

We moved into the old rundown accommodation behind the shop. The suburb was pretty awful also.
I was expected to help, including working in the shop. The only vehicle was a run down old truck for transporting produce. The entertainment the radio.

But the hard work and adjustment of attitude produced a healthy income and a build up of good will which allowed the business to be sold for an excellent profit. And so on through several more businesses, until the target was reached and we returned to suburbia and my father back to his original career.

There was nothing unusual about such a path. They did what they needed to achieve their goals.

It just seems such a huge contrast to me looking at the current gen Y, who I rarely see without a container of take away coffee in their hands: say $5 twice a day, = $50 p.w.
And no one is without the latest electronic device, most expect to travel extensively before thinking about a house deposit, take for granted going out where cocktails are $15 each, must have latest fashion etc.

That's fine. It's enjoyable to have all that. But sometimes, if you want something enough, you might have to change your priorities, be prepared to compromise on that oh so desirable area or choose a small flat as a starter rather than your four bedroom house or smart inner city apartment.

 

[FxTrader]

and land is cheap outside of the capital cities, How does the fact that Australia has abundant land help Sydney house prices when 3million + people are hell bend on squeezing into a section of land boxed in by the ocean to the east, mountains to the west, and national park north and south.

Capital cities are were the majority of wealth and opportunity are concentrated, the crowding effect will only intensify and keep upward pressure on house prices.

Land release and use policies are a significant factor for house prices but urban sprawl will turn out to be a failed development model due to the cost of fuel in the future. Unless fringe suburbs are blessed with excellent public transport the cost of commuting to them will eventually become uneconomic for many.

 

[Value Collector]

Capital cities are were the majority of wealth and opportunity are concentrated, the crowding effect will only intensify and keep upward pressure on house prices.

.

Yes, that was the point I was making. Another poster was suggesting that the fact Australia has so much land, land prices shouldn't be so high, I was making the point that the vast amounts of Australia with little development do not at all reduce the pressure on Sydney house prices.

eg. the fact that this exists.

http://www.realestate.com.au/property-house-nsw-bourke-111035035

won't reduce the price of this,

http://www.realestate.com.au/property-house-nsw-willoughby-117578747

 

[Mrmagoo]

Good point.

The whole question also goes to attitudes and expectations. eg Mr Magoo, you're consistently critical and negative. If you're trying to buy a place in Sydney that's pretty understandable, but what are you doing to improve your situation? eg are you sharing your rental place with at least one other person, maybe more?
Are you prepared to take a second job?

Every generation has its advantages and disadvantages. If you took a cross section of the population at any given time, placed them all in an identical environment, gave them all an equal amount of capital, I'd be very surprised if at the end of, say, a decade or two, some had not done extremely well whilst others had nothing.

Even just reading through this thread, a couple of people are always negative, can see no viable opportunities, are focused entirely on how difficult their situation is. But others can see a way round an apparent negative, find an opportunity, and have the self belief and initiative to put that opportunity to use.

If you compare the generation who are the parents of the baby boomers, they'd come through the stresses and deprivations of war, many of the men fighting overseas, prisoners of the Japanese etc, and determined on their return home to create a better life for their children. The only credit most of them knew was in the form of a mortgage for that all important family home. They saved until they could afford to buy what they needed, made do with second hand furniture. There was a culture of "if you don't work hard you won't get anywhere" and most of all a culture of saving, not just to acquire appliances, a car etc., but also for a sense of security.

My early childhood was spent in a pleasant suburban house with extensive garden in a good area. Parents both worked in professional practices. When I was 8 they decided there would be more money to be made in a business so they threw in their comfortable middle class existence and bought a six day, 15 hours a day corner store, where my father was up at 3.30am to go to the markets for produce to stock the shop.

We moved into the old rundown accommodation behind the shop. The suburb was pretty awful also.
I was expected to help, including working in the shop. The only vehicle was a run down old truck for transporting produce. The entertainment the radio.

But the hard work and adjustment of attitude produced a healthy income and a build up of good will which allowed the business to be sold for an excellent profit. And so on through several more businesses, until the target was reached and we returned to suburbia and my father back to his original career.

There was nothing unusual about such a path. They did what they needed to achieve their goals.

It just seems such a huge contrast to me looking at the current gen Y, who I rarely see without a container of take away coffee in their hands: say $5 twice a day, = $50 p.w.
And no one is without the latest electronic device, most expect to travel extensively before thinking about a house deposit, take for granted going out where cocktails are $15 each, must have latest fashion etc.

That's fine. It's enjoyable to have all that. But sometimes, if you want something enough, you might have to change your priorities, be prepared to compromise on that oh so desirable area or choose a small flat as a starter rather than your four bedroom house or smart inner city apartment.

Those are the gen y you chose to notice as you are rich were born well off and so are they. Your story really just tells me you dont know how the other half (particulary gen y) live and there is nothing wrong with that anyway, who wants to be poor ? Poor is a bad.

You also dont get what improving your lot means either. You dont just go buy a house these days because someone on the i ternet said to buy one. You think the only way to work hard is to borrow a fortune ? Ps boomers were in their 20s in the 80s and 70s not the post war era...

 

[banco]

It just seems such a huge contrast to me looking at the current gen Y, who I rarely see without a container of take away coffee in their hands: say $5 twice a day, = $50 p.w.
And no one is without the latest electronic device, most expect to travel extensively before thinking about a house deposit, take for granted going out where cocktails are $15 each, must have latest fashion etc.

.

You forgot the big screen TV in your list of cliches.

 

[sydboy007]

yes but picture this, A developer sells a property off the plan to an investor, which allows the development to go ahead 18months later once the property is built the original "off the plan" investor flips the property to another "buy and hold" investor. If that transaction were the only transaction the figures would say 50% of investors buy existing, even though both transactions were part of bringing that 1 new rental property to market. So the figures can be off.

Also an investor may buy an existing property, and convert it to a duplex or town houses, yes he bought an existing, but he also added to supply.

But all that doesn't even matter, because your focusing on the wrong number, what counts is not what percentage of investors buy existing compared to new, what counts is what percentage of the new supply is created by investors.

Existing home sales make up a much larger portion of the total sales than do new sales, So if 90% of total sales are existing home sales, you would expect that 90% of investors are buying existing homes. If new home sales only make up 10% of total sales you can't expect all of the investor purchases to be limited to that 10% of the market.

The points I'm trying to make are:

* restrictive land use / zoning in capital cities makes land scarce and therefore more expensive

* NG / FHB grants / demand side policies meet restricted supply side policies.

* Demand is outstripping supply. prices go up.

Investors are not really benefiting the rental market. If most of them are buying relatively old housing stock and they're representing something like 50% of the market, then that extra demand is really only bidding up prices.

As for your duplex scenario, you've obviously not tried to do it. I know some people in Sydney who bought tear down properties to build town houses on the large block and it was a 3 year process by the time they were able to start building. NSW can take up to 119 months to rezone land! I doubt investors looking to do this are a significant % of property investors.

We are in a relatively low inflation environment when compared to the pre mid 90s Australia, the level of borrowing to buy a basic dwelling is 2 to 3 times what it was 25+ years ago, and a lot of workers are receiving below CPI wage increases. Over time inflation is not stealing away the borrowings like a lot of the home owners on this forum experienced - smurf summed it up quite nicely. Workers aren't receiving 10 or 12 % pay rises each year so say after 5 years the level of income required for their mortgage isn't half to a third of what most home buyers are faced with today.

The politicians can't afford to fix the issue - as has been shown at the federal level a lot of them are heavily geared into property. The boomers can't afford the issue to be fixed because they've used property as their main savings vehicle. The banks can't afford the issue to be fixed because a large drop in property values would see their bad debts jump and the 2 LMI issuers would face a wipe-out.

 

[Value Collector]

The points I'm trying to make are:

* restrictive land use / zoning in capital cities makes land scarce and therefore more expensive

* NG / FHB grants / demand side policies meet restricted supply side policies.

* Demand is outstripping supply. prices go up.

Investors are not really benefiting the rental market. If most of them are buying relatively old housing stock and they're representing something like 50% of the market, then that extra demand is really only bidding up prices.

As for your duplex scenario, you've obviously not tried to do it. I know some people in Sydney who bought tear down properties to build town houses on the large block and it was a 3 year process by the time they were able to start building. NSW can take up to 119 months to rezone land! I doubt investors looking to do this are a significant % of property investors.

We are in a relatively low inflation environment when compared to the pre mid 90s Australia, the level of borrowing to buy a basic dwelling is 2 to 3 times what it was 25+ years ago, and a lot of workers are receiving below CPI wage increases. Over time inflation is not stealing away the borrowings like a lot of the home owners on this forum experienced - smurf summed it up quite nicely. Workers aren't receiving 10 or 12 % pay rises each year so say after 5 years the level of income required for their mortgage isn't half to a third of what most home buyers are faced with today.

The politicians can't afford to fix the issue - as has been shown at the federal level a lot of them are heavily geared into property. The boomers can't afford the issue to be fixed because they've used property as their main savings vehicle. The banks can't afford the issue to be fixed because a large drop in property values would see their bad debts jump and the 2 LMI issuers would face a wipe-out.

Yes, I have actually converted a house into a duplex, albeit in Brisbane not Nsw

 

[Value Collector]

Those are the gen y you chose to notice as you are rich were born well off and so are they. Your story really just tells me you dont know how the other half (particulary gen y) live and there is nothing wrong with that anyway, who wants to be poor ? Poor is a bad.

You also dont get what improving your lot means either. You dont just go buy a house these days because someone on the i ternet said to buy one. You think the only way to work hard is to borrow a fortune ? Ps boomers were in their 20s in the 80s and 70s not the post war era...

You might beable to charge julia with not understanding gen y, but I am gen y myself, and have personally found the last 10 years to be full of opportunity, and still can see opportunity everywhere.

Also I think julia was talking about the parents of the boomers

 

[Mrmagoo]

You might beable to charge julia with not understanding gen y, but I am gen y myself, and have personally found the last 10 years to be full of opportunity, and still can see opportunity everywhere.

(You know I graduated right before the GFC hit right ? Lots of people either lost their jobs or had offers reneged).

There were people of each generation saying the same thing who did really well for themselves. If you have, good on you ! I don't envy success. But that is not a general statement about the economy or housing affordability in general and it doesn't mean the system should punish others for daring not to be successful as one individual declares they should be.

Most Gen Y I know have modest incomes of between 55-75k a year are tertiary qualified and VERY modest spenders compared to our parents. Of about 40 people I know me and two others are the only ones to break 100k. A lot of my friends just bounce from low paid contract to low paid contract. It must be depressing. You can't buy a house on a 55k-65k 12 month state of employment. It is not possible.

They may buy a coffee in the morning, but most workplaces where you get paid a decent amount will provide coffee.

That is the older half, the younger half are just ruined. There are not jobs and everything is expensive. I really feel sorry for them even if they do get a job there is usually no money in the budget for their pay rises.

 

[sptrawler]

(You know I graduated right before the GFC hit right ? Lots of people either lost their jobs or had offers reneged).

There were people of each generation saying the same thing who did really well for themselves. If you have, good on you ! I don't envy success. But that is not a general statement about the economy or housing affordability in general and it doesn't mean the system should punish others for daring not to be successful as one individual declares they should be.

Most Gen Y I know have modest incomes of between 55-75k a year are tertiary qualified and VERY modest spenders compared to our parents. Of about 40 people I know me and two others are the only ones to break 100k. A lot of my friends just bounce from low paid contract to low paid contract. It must be depressing. You can't buy a house on a 55k-65k 12 month state of employment. It is not possible.

They may buy a coffee in the morning, but most workplaces where you get paid a decent amount will provide coffee.

That is the older half, the younger half are just ruined. There are not jobs and everything is expensive. I really feel sorry for them even if they do get a job there is usually no money in the budget for their pay rises.

Well it all sounds doom and gloom, I can't talk for the Eastern Seaboard, but Perth is supposed to be right up there in the unaffordable stakes.
However, you can buy a house on a triplex block less than 500m from the waterfront, the suburb is serviced by the main metro electrified rail system, for less than $400k.
Yet because of the percieved 'bad area' tag, no one is buying.
I would bet, in 10 years, gen y will be saying remember when.
One has to look past what everyone else is chasing, and find the gems everyone is overlooking, nothing has changed.
If it has amenity, ambiance, services, proximity to water eventually the money will want it.

 

[ROE]

The best time to buy a house to live in is when you can afford one, ignore
the bull and bear predictor.

Dont wait for a crash or correction it may comes but you maybe too old
good if you can buy during down turn or correction or crash but dont wait

investing is different you need the number to stack up ... but it is always
a good time to buy when you can afford a place and call your own home.

you may have to alter your life style and sacrificed a bit in order to afford it but
in the long 9/10 it will be worth it.

and it is not my advice it advice from the richest man in Babylon book
and I heed his advice and it works out super

 

[sydboy007]

Well it all sounds doom and gloom, I can't talk for the Eastern Seaboard, but Perth is supposed to be right up there in the unaffordable stakes.
However, you can buy a house on a triplex block less than 500m from the waterfront, the suburb is serviced by the main metro electrified rail system, for less than $400k.
Yet because of the percieved 'bad area' tag, no one is buying.
I would bet, in 10 years, gen y will be saying remember when.
One has to look past what everyone else is chasing, and find the gems everyone is overlooking, nothing has changed.
If it has amenity, ambiance, services, proximity to water eventually the money will want it.

The Median Multiple indicator, recommended by the World Bank and the United Nations, rates affordability of housing by dividing the median house price by gross [before tax] annual median household income). This indicator rates housing affordability on a scale of 0 to 5 with categories 3 and under being affordable. From 3 to 5 the categories are rated as moderate (3.1 to 4.0), serious (4.1 to 5.0) and severe unaffordability (5.1 and over).

So lets look at how that "less than $400K" property and just how affordable it is.

Lets make it $370K

So how many households would find that to be above the 3 times median household income level? You'd need a household income of ~ 123K to make it into the affordability stakes. You'd be somewhere in the mid 7th decile of household incomes ie 75% of households would find that property unaffordable.

So lets take a couple with a household income of $94K which is equivalent to them both earning the ~47K median income. We're now getting close to 4 times income or nigh on the boundary of serious unaffordability.

How about a median household income of $1330 a week. That $370K property is up at 5.3 times income or severe unaffordability.

So what would be affordable for that median income family? Something under $210K. A household at the boundary to the 5th decile would once again find that 210K at 3.9 times income.

How much housing is available at < $210k that has reasonable employment opportunities?

 

[Julia]

Those are the gen y you chose to notice as you are rich were born well off and so re
they. Your story really just tells me you dont know how the other half (particulary gen y) live

The above comment says a lot about how you completely distort the circumstances of people you don't know.
As Value Collector has pointed out, I was describing the circumstances of my parents, not myself. After the war, when they married, they had literally nothing. Both worked hack jobs while they acquired tertiary education, entirely via night study. Not for a moment did they sit around and say, hell life's tough, but no way out of it. The same parents ensured I worked through all school holidays. One entire summer of six weeks spent in the local post office, before mechanisation, hand stamping every envelope that came in. Complaints of wrist pain were dismissed with the injunction: put up with it, you're working towards a goal.

You actually p*** me off so much that I can hardly be bothered to respond to the rest of your post.
But however, you allege I was born well off. I'd say I was born of parents who knew what it was like to struggle, to have to work hard to make their way out of mediocrity.

Why do you assume that I am 'rich'? Even if that were true, which I don't believe it is at all, what do you know of what sacrifices I might have made to not be dependent on the Australian taxpayer in retirement? I've been in my mid 30s without any money at all, no home, no job, so you will not tell me that I don't know what it's like to be poor.
I've just rejected the notion that that was my destiny, something you seem to embrace, and sought opportunities to get out of that situation.

You also dont get what improving your lot means either. You dont just go buy a house these days because someone on the i ternet said to buy one.

For god's sake, do you really think someone a few generations ago just said to themselves, "let's go and buy a house," and voila, it happened. What ridiculous, stupid rubbish. On the contrary, people worked two and three jobs to accumulate the deposit for a house.

You think the only way to work hard is to borrow a fortune ?

Where did I say that? I talked about the time when people saved until they could afford what they needed.
At the same time, if there's a good opportunity to make money, it makes sense to borrow to increase into that position to maximise the profit.

But you're so mired in your own misery that you can't see anything else but what you perceive as your own uniquely disadvantaged circumstances.

Meantime, others will continue to seek and use opportunities and you'll be left ever further behind with even more to whine about.
Good luck.

Ps boomers were in their 20s in the 80s and 70s not the post war era...

Quite so. If you read my post you would see I was referring to the parents of the boomers.

You forgot the big screen TV in your list of cliches.

Thank you so much banco. I can always depend on you to find something to quibble about.
Much as above with Magoo, it's no wonder people don't bother joining in a discussion, when they know any genuinely related circumstance will elicit petty objections just for the sake of it.

You might beable to charge julia with not understanding gen y, but I am gen y myself, and have personally found the last 10 years to be full of opportunity, and still can see opportunity everywhere.

Also I think julia was talking about the parents of the boomers

Yes, I was. And your first paragraph above endorses what I said earlier about those who see opportunity where others see nothing but gloom.

Syd, you can quote figures to your heart's content, and if stats say the cost of property v average wage is more difficult than it was some while ago, I wouldn't dispute that.
All I'd say, however, is "why would you then be content to accept the average wage? Why not think of some way to increase your income, even if it encompasses some hardship for a few years".

I note that Magoo has not responded to my query about whether he is prepared to share his accommodation in order to increase availability of saving for deposit on property, or for that matter, get a second job.
Obviously no obligation to make any such response, but the omission says plenty.

 

[sptrawler]

The Median Multiple indicator, recommended by the World Bank and the United Nations, rates affordability of housing by dividing the median house price by gross [before tax] annual median household income). This indicator rates housing affordability on a scale of 0 to 5 with categories 3 and under being affordable. From 3 to 5 the categories are rated as moderate (3.1 to 4.0), serious (4.1 to 5.0) and severe unaffordability (5.1 and over).

So lets look at how that "less than $400K" property and just how affordable it is.

Lets make it $370K

So how many households would find that to be above the 3 times median household income level? You'd need a household income of ~ 123K to make it into the affordability stakes. You'd be somewhere in the mid 7th decile of household incomes ie 75% of households would find that property unaffordable.

So lets take a couple with a household income of $94K which is equivalent to them both earning the ~47K median income. We're now getting close to 4 times income or nigh on the boundary of serious unaffordability.

How about a median household income of $1330 a week. That $370K property is up at 5.3 times income or severe unaffordability.

So what would be affordable for that median income family? Something under $210K. A household at the boundary to the 5th decile would once again find that 210K at 3.9 times income.

How much housing is available at < $210k that has reasonable employment opportunities?

As I said, that is a reasonable house on a triplex block, i.e investment potential.

You can buy a two bedroom unit same location for $200k, or a 3 bedroom house on a split block for $270k.

Just depends where your level of risk return, money/time available, sits.

I'm just fed up with the constant whinging, I agree and have done always that housing has become stupidly priced.
But you can't sit there forever, you have to think outside the box, otherwise inflation, wages, prices swallow up the outrageous gap.
So if you can't afford the big stakes table, look for the next oportunity.

 

[Mrmagoo]

Problem with property investors is they're so wound up about property they don't see any way to live life or be motivated. Everything is about the house.

 

[sptrawler]

Problem with property investors is they're so wound up about property they don't see any way to live life or be motivated. Everything is about the house.

Tell that to someone who is 59 years old and can't find a job, with a missus at home saying how do we pay the rent?

He has to tell her, "well if you think that's bad, I can't get a pension till 66 years old, so we are on job search till then.

It is about time people realised owning shelter is important, much more important than the capital appreciation.

It is first and foremost shelter, everyone needs it, if you make money on it really is secondry if you don't have it.

As I said in the previous post, if the big game table is too expensive, look for opportunities on a lower stakes table.

Peoples expectations are clouding the the fundamental issues.IMO

 

[sydboy007]

Syd, you can quote figures to your heart's content, and if stats say the cost of property v average wage is more difficult than it was some while ago, I wouldn't dispute that.
All I'd say, however, is "why would you then be content to accept the average wage? Why not think of some way to increase your income, even if it encompasses some hardship for a few years".

At least the figures give some benchmark to what people are saying is possible, or to be honest, just how difficult it really is.

As for increasing income, not that easy the last few years. Since the GFC I've had 2 pay rises of roughly 2% each. People in the retail sector would likely find getting extra income even more daunting. There isn't the work like there was pre GFC when people were equity mating their life styles. In the IT industry, contract work is being increasingly the way employers want to higher staff. That lack of job security makes it difficult for someone to commit to a house as well. Retail and Service sector staff have also faced below CPI wage increases, so their costs of living are taking an increasing share of their income which leaves less to save.

With the outrageous prices of property now I don't know why anyone would want to put themselves through the stress of a 4 or 5 times household income mortgage, especially when unemployment is on the rise. Borrowing a house is relatively cheap, all ya got to have is the instinct to force yourself to save without the need of a mortgage to enforce that on you.

 

[sydboy007]

Tell that to someone who is 59 years old and can't find a job, with a missus at home saying how do we pay the rent?

He has to tell her, "well if you think that's bad, I can't get a pension till 66 years old, so we are on job search till then.

It is about time people realised owning shelter is important, much more important than the capital appreciation.

It is first and foremost shelter, everyone needs it, if you make money on it really is secondry if you don't have it.

As I said in the previous post, if the big game table is too expensive, look for opportunities on a lower stakes table.

Peoples expectations are clouding the the fundamental issues.IMO

At some point in the last 20 years, and I think it was in 2000, property went from being for shelter to being an asset. It's now siphoning just about all credit growth in the economy, with business credit actually falling. This attitude has caused a massive cost inflation for everything. All rents are higher than they should be, causing the cost of most goods and services to be higher. Wages have to be higher to support al the increased costs. It's a pernicious cycle in the economy.

The number of property investors who have no idea of the yield that their property is making pretty much shows just how screwed up the housing market has become.