Housing affordibility crisis hits Canberra hard

Bear in mind also that it’s very easy to make comparisons about how much more expensive houses are when you compare to a point where they were comparatively VERY cheap (ie late 90’s), because the local market had gone nowhere for almost a decade.

Gen Y are very interested in home ownership – the problem is that the homes they are interested in are the ones in really nice suburbs, or the city, or with nice views. Typically luxury townhouses or units. Of course, there are a few Gen Y people who are more realistic, and many of these people have been able to buy a property (typically a fairly modest one), happy in the knowledge that as their income and equity increase they can ‘trade up’ to something more desirable later. Sorta the same approach every other generation up until now has taken.

The ‘powers that be’ keep saying Gen Y are not as interested in home ownership . . . bollocks. It’s just that they have pretty much given up on aspiring due to unaffordability.
Apparently (according to SBS’s Dateline this week), houses have gone from double the annaual average income, to 7 – 10 times the annual income.
A lot of the stability of Australian society in the last 40 years has been because of relatively high home ownership rates.
Time to factor in social stability when they look at housing policy, instead of solely focusing on economics. It is very bad for households to be forced to live with the uncertainty of having to move all the time.

Is that a piece of the sky falling on my head?

🙂

VYBerlina be careful around here with your statistics, research and considered reasoning.

What we want is gut reactions and idle speculation. It’s much easier than thinking.

It is an interesting term “affordability crisis” Most houses that go on the market eventually sell. Therefore they are affordable, by someone.
Just not me.

I’d be careful comparing us to the US mortgage crisis, because in the US, about 17% of the mortgages relate to the sub-prime market (ie lo-doc, no-doc), a large amount of which is people who can’t really afford the loan. In Australia, the sub-prime mortgage component of the market is only about 4.5%, which reduces our exposure. Also, many of these loans in the US are ‘adjustable rate’, which means for the first X years they are very low interest rate, but then the rate increases dramatically (by several percent) when the honeymoon period expires. This is very different to the Australian market, and like the sub-prime products, has allowed many people who really can’t afford to get into the market buy a house, which they subsequently lose a few years in.

In the US and UK, about a third of the population owns all the property. Everyone else rents, and the rental cost is pure supply/demand. This is the direction Australia is likely to go, I think.

Bottom line – don’t wait for prices to drop (because there’s a good chance they won’t – especially in somewhere like Canberra), get in as soon as you can and start reducing the size of your loan.

You know the mortgage crisis that’s hitting the US at the moment? The one that put the UK Northern Rock bank into such a crisis?

This is what it looks like, just before the fit hits the shan.

It’s the “unemployed teenager” story I have trouble believing. I ws astounded by the number of hoops I had to jump through to get $100,000 (secured against my almost-owned-outright principal residence) to bet on ASX.

Next time I try to leverage equity I’ll declare myself a dropkick layabout.

GnT’s right about the equity advantages. Since 2000 I’ve gone from 15% to 80% owning my house, despite only halving the original loan amount.

I only recently made the decision to access the equity and that’s because interest rates are still low. If they go past 10% I’ll be selling shares faster than you can say “Christopher Skase”.

Buy a farm.