4 January 2012

How's the affordability?

| johnboy
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Apparently somewhere in the ACT Treasury resides a document claiming that Canberra is ‘Australia’s most affordable capital city’.

This has prompted the Liberals’ Vicki Dunne to let rip:

“In my electorate, the median house price in Canberra’s cheapest suburb of Charnwood is more than $160,000 higher than the equivalent suburb in Sydney (Canberra Times, 15 December 2011). In Dunlop, rates have increased by 132 per cent. This is anything but affordable and it’s time ACT Labor acknowledged this fact,” Member for Ginninderra Vicki Dunne said today.

“Overall, the average cost of a first home in Canberra has risen by more than $20,000 in the last financial year to over $400,000.

“Since ACT Labor came to power, ACT property rates and charges have increased by over 75 percent and rents have increased by 68 percent.

“ACT Labor is responsible for a substantial proportion of these cost pressures and if they can’t acknowledge the problem they can’t fix it.

At the heart of all this is an assumption that all people are on average or median incomes, where in fact the average is formed by a great number of people earning well under it.

Basically if you’re a double income public service family Canberra is quite affordable. And if you’re not then you should be.

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GeneralMonash1:07 pm 16 Feb 12

Futureproof said :

Isn’t Charwoood where they filmed Mad Max? There was no need for special sets and burnt out car bodies, they were already in place.

and Gallipoli i imagine.

Isn’t Charwoood where they filmed Mad Max? There was no need for special sets and burnt out car bodies, they were already in place.

chewy14 said :

It also mentions their own index that takes into account these factors. Care to post a link to that index? I mean according to you it should show that housing affordability hasn’t decreased right?

Because it would be so difficult to look at the post directly above mine which I was replying to.

Also, maybe you should try actually reading my previous posts where several times I did mention that affordability has decreased but that doesn’t necessarily equate to being severely unaffordable, which some people have tried to claim.

poetix said :

(I can comment here again now that the Mully has been lost to this thread. I’m probably at least a three post nut-job here, but as this thread will never die, does it really matter?)

So, since you cracked the 300, your 3 posts make up 1% of the total. No need to stress about that – I think ~90% of the post were made by 2-3 people!

Holden Caulfield said :

OpenYourMind said :

Oh, and as for colourbond fences. Like em or hate em, they actually proved to be incredibly good fire breaks during the January 2003 Canberra fires.

Yeah, I can appreciate their good points. They’re just bloody ugly. A bit like vertical blinds, really.

Colourbond fences really make an emphatic statement about boundaries, whereas old grey wooden fences are far more gentle, and allow for glimpses of next door as they warp. Also possums don’t like colourbond, which I think is a bad thing, as I like them.

(I can comment here again now that the Mully has been lost to this thread. I’m probably at least a three post nut-job here, but as this thread will never die, does it really matter?)

Holden Caulfield11:39 am 02 Feb 12

OpenYourMind said :

Oh, and as for colourbond fences. Like em or hate em, they actually proved to be incredibly good fire breaks during the January 2003 Canberra fires.

Yeah, I can appreciate their good points. They’re just bloody ugly. A bit like vertical blinds, really.

devils_advocate11:14 am 02 Feb 12

Maxwell said :

Easy to say that in retrospect. What about the idiots who bought 800k inner city houses they now can’t sell for 670k ?

What about those idiots? For that matter, what about the idiots that bought worthless “dot.com” securities in companies that had no assets or sustainable business model?

Should we as a society be worrying about idiots with more money than sense (even if that money is borrowed)?

Maxwell said :

b.c the bank comes asking for the difference.

If they’re making their payments, there’s no reason for this to occur. Contrary to what some people believe, banks don’t come and ask for the difference if the price drops.

Maxwell said :

b.c they lose thier job, or suffer a pay cut.

they get sick

any number of reasons..

Irrelevant to the value of the property.

Maxwell said :

perhaps they decide they’d rather not pay most of their income in interest?

A decision that needs to be made before purchase, and again irrelevant to the value of the property.

milkman said :

Maxwell said :

Easy to say that in retrospect. What about the idiots who bought 800k inner city houses they now can’t sell for 670k ?

Why would a person who bought a home in the inner city sell? Sure, it may have gone down now, but give it time, it will grow. If it’s a home to live in it doesn’t really matter anyway.

b.c the bank comes asking for the difference.

b.c they lose thier job, or suffer a pay cut.

they get sick

any number of reasons..

perhaps they decide they’d rather not pay most of their income in interest?

Maxwell said :

Easy to say that in retrospect. What about the idiots who bought 800k inner city houses they now can’t sell for 670k ?

Why would a person who bought a home in the inner city sell? Sure, it may have gone down now, but give it time, it will grow. If it’s a home to live in it doesn’t really matter anyway.

OpenYourMind7:40 pm 01 Feb 12

Maxwell and co., when you talk about the bubble bursting, can you explain how you think this may occur in Canberra?
Take a look at the ACT Property reports for the past 15 years:
http://www.allhomes.com.au/ah/act/research/property-report/view

Something has to change to make this ‘bubble’ as you call it burst. What?

Oh, and as for colourbond fences. Like em or hate em, they actually proved to be incredibly good fire breaks during the January 2003 Canberra fires.

VYBerlinaV8_is_back said :

Watson said :

VYBerlinaV8_is_back said :

Watson said :

…But it will have my name on the papers, they can’t chuck me out, I won’t have to put up with inspections and I will throw my money at the bank instead of the landlords. And maybe one day it will really be mine and I may even make a profit out of it and be able to buy something I like slightly more.

Congratulations on your purchaseof your home, I hope you have many happy times there!

Thanks! It still scares the proverbial out of me because I had to stretch myself as far as I could financially to afford to buy the cheapest house on the market in Canberra. I am on one income though, so it’s harder for me than for the traditional couple on two incomes.

The first few years are the hardest. Over time inflation will carry your income (and indeed house value) upward, and the loan repayment will become relatively smaller. Eventually you will own it outright, and will never have to pay rent or loan repayments again.

Although it’s difficult for you (and you probably already know this), any extra that you can pay off in the early years pays big dividends down the line with lower overall interest cost and reduced loan term.

Easy to say that in retrospect. What about the idiots who bought 800k inner city houses they now can’t sell for 670k ?

Capitalism indeed… most boomers don’t have enough to even think about retiring and they’ll need to sell their homes to live because of inflation this will force prices down.

Homes are over priced at the moment and investors on this forum are just trolls sticking the boot in. They’re trying to take advantage of you and rip you off just before things drop and stagnate and drop some more.

Thats how capitalism works, be careful, and smart.

Holden Caulfield said :

Bramina said :

…Although it might be hard to imagine now, there was a time when blocks of land were readily available for the equivalent of $50,000 and less in today%u2019s dollars. That is affordable. Now in Crace, the cheapest block is $250k. That is unaffordable…

I put down a deposit for a 680m2 block in Nicholls/Harcourt Hill in early 1999 that was priced at $72K. By the time I legally owned the block some six months later (try being that lax today, haha), the developer reckoned he could flog it off for comfortably over $100K if it was handed back.

That’s not a brag story, but simply shows how quickly the “value” of land started to accelerate a bit over 10 years ago.

At the time I do think land in Canberra was undervalued, but the over correction has been spectacular and gone too far.

It cost $130K to build a modest 3br house on that block that just scraped over the minimum size for Harcourt Hill’s development conditions, which meant I walked in the door in early 2000 for a smidge over $200K, make it $220K by the time window furnishings were added and the garden was landscaped.

Now, 12 years later, you’d need to add another 200% on my original spend, at least, to get a similar size block and house in Gungahlin. I work in a field that doesn’t allow a lot of scope for promotion outside of business ownership and my wage has only increased by a bit over 50% in the decade and a bit.

I think that puts things in perspective.

Lots of people my age bought just before that boom. I wasn’t in a position to buy then having fairly recently migrated here. And I will forever be stuck with this sour feeling that I missed that boat.

I don’t know what the solution is. I am grateful for every little bit of assistance that I get, even if it is just that affordable housing scheme that forces developers to build some smaller houses in amongst the MacMansions.

Holden Caulfield5:23 pm 01 Feb 12

Bramina said :

…Although it might be hard to imagine now, there was a time when blocks of land were readily available for the equivalent of $50,000 and less in today%u2019s dollars. That is affordable. Now in Crace, the cheapest block is $250k. That is unaffordable…

I put down a deposit for a 680m2 block in Nicholls/Harcourt Hill in early 1999 that was priced at $72K. By the time I legally owned the block some six months later (try being that lax today, haha), the developer reckoned he could flog it off for comfortably over $100K if it was handed back.

That’s not a brag story, but simply shows how quickly the “value” of land started to accelerate a bit over 10 years ago.

At the time I do think land in Canberra was undervalued, but the over correction has been spectacular and gone too far.

It cost $130K to build a modest 3br house on that block that just scraped over the minimum size for Harcourt Hill’s development conditions, which meant I walked in the door in early 2000 for a smidge over $200K, make it $220K by the time window furnishings were added and the garden was landscaped.

Now, 12 years later, you’d need to add another 200% on my original spend, at least, to get a similar size block and house in Gungahlin. I work in a field that doesn’t allow a lot of scope for promotion outside of business ownership and my wage has only increased by a bit over 50% in the decade and a bit.

I think that puts things in perspective.

VYBerlinaV8_is_back5:17 pm 01 Feb 12

Watson said :

VYBerlinaV8_is_back said :

Watson said :

…But it will have my name on the papers, they can’t chuck me out, I won’t have to put up with inspections and I will throw my money at the bank instead of the landlords. And maybe one day it will really be mine and I may even make a profit out of it and be able to buy something I like slightly more.

Congratulations on your purchaseof your home, I hope you have many happy times there!

Thanks! It still scares the proverbial out of me because I had to stretch myself as far as I could financially to afford to buy the cheapest house on the market in Canberra. I am on one income though, so it’s harder for me than for the traditional couple on two incomes.

The first few years are the hardest. Over time inflation will carry your income (and indeed house value) upward, and the loan repayment will become relatively smaller. Eventually you will own it outright, and will never have to pay rent or loan repayments again.

Although it’s difficult for you (and you probably already know this), any extra that you can pay off in the early years pays big dividends down the line with lower overall interest cost and reduced loan term.

VYBerlinaV8_is_back said :

Watson said :

…But it will have my name on the papers, they can’t chuck me out, I won’t have to put up with inspections and I will throw my money at the bank instead of the landlords. And maybe one day it will really be mine and I may even make a profit out of it and be able to buy something I like slightly more.

Congratulations on your purchaseof your home, I hope you have many happy times there!

Thanks! It still scares the proverbial out of me because I had to stretch myself as far as I could financially to afford to buy the cheapest house on the market in Canberra. I am on one income though, so it’s harder for me than for the traditional couple on two incomes.

Holden Caulfield said :

Thank god you can’t afford Colorbond fencing. It’s the scourge of modern day society, haha.

They’re just so damn ugly.

But so good at keeping the dog in!

GBT said :

It also states a fact which a lot of people on this thread prefer to ignore as it doesn’t support their position that housing is now crazy unaffordable for practically everyone.

“As a measure of housing affordability, “house price to income? ratios alone are imperfect as they do not take into account interest rates. Ultimately, home purchase affordability relates to debt servicing costs of which interest rates are a key driver. This not only means that „house price to income? ratios are fundamentally defective as a measure of housing affordability but also makes intertemporal and cross border comparisons of these ratios redundant (given varying interest rates, tax regimes, population concentrations, quality of housing stock, etc).”

It also mentions their own index that takes into account these factors. Care to post a link to that index? I mean according to you it should show that housing affordability hasn’t decreased right?

GBT said :

that housing is now crazy unaffordable for practically everyone.
quote]

everyone???? 70% don’t think so, same % for 30+ years

http://www.abs.gov.au/ausstats/abs@.nsf/2f762f95845417aeca25706c00834efa/8cba7b65667c8d59ca25779e001c481d!OpenDocument

VYBerlinaV8_is_back2:32 pm 01 Feb 12

GBT said :

After all, it would only take a few years of a few percent price drops in property with normal wage inflation of 3-4% for prices to come back into line with the approximate 5x median hosuehold income.

Slow stagnation is exactly what happened during the 1990s in Canberra, and it’s exactly what I’m expecting over the next several years.

It also states a fact which a lot of people on this thread prefer to ignore as it doesn’t support their position that housing is now crazy unaffordable for practically everyone.

“As a measure of housing affordability, “house price to income? ratios alone are imperfect as they do not take into account interest rates. Ultimately, home purchase affordability relates to debt servicing costs of which interest rates are a key driver. This not only means that „house price to income? ratios are fundamentally defective as a measure of housing affordability but also makes intertemporal and cross border comparisons of these ratios redundant (given varying interest rates, tax regimes, population concentrations, quality of housing stock, etc).”

Something that may be of interest: a report by HIA Economics from December 2010 looking a housing affordability which is based on household income and includes all housing types (not just detached dwellings).

Scroll down to “Results” section to see the comparison between affordability in 1995 and 2010.

I’d much prefer the bubble deflate than burst but for some reason lots of people insist there will be a burst and house prices will drop rapidly.

After all, it would only take a few years of a few percent price drops in property with normal wage inflation of 3-4% for prices to come back into line with the approximate 5x median hosuehold income.

Though, as has already been pointed out, house prices are under 5 times the median Canberra household income already, just not the national median.

VYBerlinaV8_is_back12:06 pm 01 Feb 12

devils_advocate said :

Bramina said :

OpenYourMind said :

What is so absurd about my argument? The price of land is inflated by people speculating on property prices. High housing prices don’t add anything to society. They are not a consequence of the production of anything of value, nor do they result in the production of something.

They are just a wealth transfer from one person to another.

And it’s not like the idea of a speculative bubble is a whacky idea, there is plenty of historical precedent, both in and outside the property market.

I think what is absurd is the “either/or” approach being adopted by both sides of the argument.

Firstly, just because house prices have increased, it doesn’t mean they’re unaffordable. Some of the changes that drive the increases are because people’s capacity to pay has increased, so affordability is unchanged.

House price increases cannot be explained solely by speculation behaviour. The entire structure of the economy – openness of capital markets, labour market profiles; credit availability, increases in real incomes – have all, for better or worse, impacted on house prices. Houses seem to exhibit many characteristics of a merit good – when individuals have increases in income, they tend to want to spend more (in absolute and proportionate terms) on their houses. These factors cause structural (upward) shifts in the house prices, not temporary spikes.

Other fluctuations – including the recent reductions – can be explained by normal market cycles and changes in market sentiment. We’re not (yet) seeing the wild boom bust cycles of, say, the sharemarket (but I acknowledge prices in housing are far more sticky).

SOME of the increase may be due to bubble behaviour. That is, people investing in houses without regard to the investment return, just the prospect of ever more capital gains. However, in my experience (which in canberra is a lot – many people I know have investment properties) most people are investing with a view to long term, secure rental returns.

If there is a bubble, it will burst. When it does, not everyone will get burned. The speculators will be hurt, and a lot of overpriced houses (often at the luxury end) will come on the market for more realistic prices. But the long term investors who look at fundamentals and are in it for the long term probably won’t be much worse off. Just like when the share market tanked. Those that were leveraged up to the eyeballs had to sell at a loss to cover their loan call-ins, everyone else took the paper loss and waited for the recovery.

Well said, some common sense here.

Long term, solid rental performance is what most other investors I know are seeking. Own it long enough and the tenants will pay for the whole thing for you anyway.

devils_advocate11:48 am 01 Feb 12

Bramina said :

OpenYourMind said :

What is so absurd about my argument? The price of land is inflated by people speculating on property prices. High housing prices don’t add anything to society. They are not a consequence of the production of anything of value, nor do they result in the production of something.

They are just a wealth transfer from one person to another.

And it’s not like the idea of a speculative bubble is a whacky idea, there is plenty of historical precedent, both in and outside the property market.

I think what is absurd is the “either/or” approach being adopted by both sides of the argument.

Firstly, just because house prices have increased, it doesn’t mean they’re unaffordable. Some of the changes that drive the increases are because people’s capacity to pay has increased, so affordability is unchanged.

House price increases cannot be explained solely by speculation behaviour. The entire structure of the economy – openness of capital markets, labour market profiles; credit availability, increases in real incomes – have all, for better or worse, impacted on house prices. Houses seem to exhibit many characteristics of a merit good – when individuals have increases in income, they tend to want to spend more (in absolute and proportionate terms) on their houses. These factors cause structural (upward) shifts in the house prices, not temporary spikes.

Other fluctuations – including the recent reductions – can be explained by normal market cycles and changes in market sentiment. We’re not (yet) seeing the wild boom bust cycles of, say, the sharemarket (but I acknowledge prices in housing are far more sticky).

SOME of the increase may be due to bubble behaviour. That is, people investing in houses without regard to the investment return, just the prospect of ever more capital gains. However, in my experience (which in canberra is a lot – many people I know have investment properties) most people are investing with a view to long term, secure rental returns.

If there is a bubble, it will burst. When it does, not everyone will get burned. The speculators will be hurt, and a lot of overpriced houses (often at the luxury end) will come on the market for more realistic prices. But the long term investors who look at fundamentals and are in it for the long term probably won’t be much worse off. Just like when the share market tanked. Those that were leveraged up to the eyeballs had to sell at a loss to cover their loan call-ins, everyone else took the paper loss and waited for the recovery.

OpenYourMind said :

Bramina, you keep repeating yourself. I won’t take your argument to absurdity as I have done before, but rather take it head on. You can think that a normal price for a block of land in Holt should be $30k, you can think it all you like. You can argue that people have a right to a roof over their head, but so long as we live in a capitalist system, that’s not the ‘normal’ price for a Holt block, if it was, lots of people would be swooping in and snapping them up. It’s not necessarily fair or right, but the price is the price. As I’ve said time and again, prices won’t change unless the economy changes, public service cuts back radically or large swathes of cheap land are released. Until then the current price for Holt blocks is the current price.

What is so absurd about my argument? The price of land is inflated by people speculating on property prices. High housing prices don’t add anything to society. They are not a consequence of the production of anything of value, nor do they result in the production of something.

They are just a wealth transfer from one person to another.

And it’s not like the idea of a speculative bubble is a whacky idea, there is plenty of historical precedent, both in and outside the property market.

OpenYourMind said :

I can’t let Julia and her shoe take the Mulley, I just can’t. 🙂

Neither can I 🙁

OpenYourMind6:56 pm 31 Jan 12

Bramina, you keep repeating yourself. I won’t take your argument to absurdity as I have done before, but rather take it head on. You can think that a normal price for a block of land in Holt should be $30k, you can think it all you like. You can argue that people have a right to a roof over their head, but so long as we live in a capitalist system, that’s not the ‘normal’ price for a Holt block, if it was, lots of people would be swooping in and snapping them up. It’s not necessarily fair or right, but the price is the price. As I’ve said time and again, prices won’t change unless the economy changes, public service cuts back radically or large swathes of cheap land are released. Until then the current price for Holt blocks is the current price.

I can’t let Julia and her shoe take the Mulley, I just can’t. 🙂

VYBerlinaV8_is_back9:22 am 31 Jan 12

Bramina said :

Now in Crace, the cheapest block is $250k. That is unaffordable.

There’s a new, very large suburb less than 30 mins from the city with land sales starting in a few months where the smallest blocks go on sale at $175k. The biggest and most expensive blocks will be about $350k.

OpenYourMind said :

I’d like to buy an ‘affordable’ new car for $100, but it isn’t going to happen either. Houses for $100-150k. Let’s see, even if land prices crashed or half the brindabellas were bulldozed with a result that blocks dropped back to $50k a pop, that still means you’d need to build the house for $50k-100k. I’m not sure if you’ve checked the cost of building, but I’d like to see you find a few builders, sparkies, plumbers, tilers etc. ready to accept 1980s salaries.

Of course when all these people talk about affordable, they aren’t talking affordable and ‘starter’. These affordable houses need to be close to CBD, big block, 4bedrooms & study, WIR, ensuite, double garage, central a/c-heating and a home theatre. Just tell me why can’t we find any $150k ‘affordable’ homes like this.

I’m sorry, but HenryBG and his mates snapped up all these opportunities back in ’97.

By suggesting that we are talking about $100 cars, or affordable large houses in the inner suburbs, is misrepresentation my position and that of others. Creating an argument that is only superficially similar to someone else’s and then refuting it without ever trying to address any of their points of the actual argument doesn’t make you right.

Although it might be hard to imagine now, there was a time when blocks of land were readily available for the equivalent of $50,000 and less in today’s dollars. That is affordable. Now in Crace, the cheapest block is $250k. That is unaffordable.

That block in holt shouldn’t cost more than a few tens of thousands of dollars (which is historically reasonable). The house isn’t large, it could be built for $50,000 to $100.

Watson said :

You can whinge about house prices, small blocks and shoddy builds as much as you like but in the end for lots of people it it just comes down to the fact that beggars can’t be choosers.

And that is the whole problem with housing affordability. People have no choice in having a roof over their heads and must pay the cost whether they save, rent or take out a mortgage.

When house prices go up by once percent, everybody who owns a house gets one percent increase in the price of their house. That’s all.

But everyone who buys a house from then on, for the rest of history pays that extra one percent (well at least until prices drop back to normal).

Nightshade said :

Normal-sized blocks (with free-standing 3-4 bedroom houses) in Holt are around 750 m2. They are the ones whose UVs on allhomes are in the range $320-390/m2. The one at the lower end has a UV of $269K.

You’re right that $225K would be a lot for that small house, especially compared with the equivalent price of all the larger houses. But if the UV for 1 de Mestre place is just for the 340 m2 block, then there seems to be a different pricing scale for townhouse blocks versus full size blocks – you pay almost as much for something half the size.

I guess it makes sense that the prices reflect that people are paying for some intangible ‘spirit’ of a block of land. And that is another illustration of the manifest imbalance of the housing market: that the value of land is not proportional to its area.

Surely a square metre of land in Holt should be worth as much as a square metre of land in Holt as much as a kilo of bananas should be worth as much as a kilo of bananas or a litre of petrol should be worth as much as a litre of petrol.

In our economy one can equal two. There is something fundamentally wrong with that.

VYBerlinaV8_is_back2:29 pm 30 Jan 12

Watson said :

…But it will have my name on the papers, they can’t chuck me out, I won’t have to put up with inspections and I will throw my money at the bank instead of the landlords. And maybe one day it will really be mine and I may even make a profit out of it and be able to buy something I like slightly more.

Congratulations on your purchaseof your home, I hope you have many happy times there!

RedDogInCan said :

Maxwell said :

Hey all be careful of people telling you to buy the cheap end of town under say 350k. These are likely property investors who can’t sell their 2 bedroom dog boxes for 260k.

Funny then that the house in question was listed at the start of December and just sold for $335k. Sounds like they had real trouble selling it – not.

Maxwell said :

Furthermore they’re AWFUL to live in

Why? Does the roof leak? Are the windows missing? Is the lounge room not big enough for a 250cm plasma? Don’t your friends like to visit you so far out?

Maxwell said :

you’d be better off just saving an extra 50k deposit and going to extra stretch for a town house in a few years.

Lets see – a similar property up the street rents for $450pw or $1950 per month. To save up the extra $50k within two years you would need to find an extra $2083 per month. Now even if you were to borrow 90% to purchase the De Mestre Place property the repayments would be only $1996 per month. Bit of a no brainer there.Then if you had an extra $2000 per month for repayments you could have the property paid off within 8 years.

They probably have asbestos and are otherwise worthless. YOu’re effectivel.y funding an investors 400% plus return on the dog boxes due to a rental shortage.

Buy one and watch an investor laugh all the way to the bank.

Get a proper house, with land, and you really can’t lose too badly.

Holden Caulfield2:17 pm 30 Jan 12

Thank god you can’t afford Colorbond fencing. It’s the scourge of modern day society, haha.

They’re just so damn ugly.

You can whinge about house prices, small blocks and shoddy builds as much as you like but in the end for lots of people it it just comes down to the fact that beggars can’t be choosers. I bought the only house I could afford to buy. It will be an ugly little shoebox when it’s finished, with a little backyard and at the very edge of civilisation. But it will have my name on the papers, they can’t chuck me out, I won’t have to put up with inspections and I will throw my money at the bank instead of the landlords. And maybe one day it will really be mine and I may even make a profit out of it and be able to buy something I like slightly more.

The only reason why I could afford to buy this whilst renting and on one income is because a) it was priced according to the ‘affordable housing scheme’ rules and b) I got some help with the deposit.

I considered buying a larger house on a larger block with more possibilities for the future in a Belco suburb for slightly more, but realised that I would not be able to afford the repairs an older house like that is likely to need straight away.

And what I really want is a nice modern 3 bedroom house in Upper Watson (backing the off leash dog walking spot, please), with a big backyard, a granny flat, a double garage, a covered deck, colourbond fences and an established garden. But it is more likely that I will get killed by a flying pig first.

Bramina said :

But I know in Crace they don’t have anything cheaper than $245,000, and their average block size is only 400 square metres (the Holt block was 340 square metres).

I assume you’re quoting from their website which is referencing five blocks for sale in the urban centre. Not very helpful statistically for the entire suburb.

Maxwell said :

Hey all be careful of people telling you to buy the cheap end of town under say 350k. These are likely property investors who can’t sell their 2 bedroom dog boxes for 260k.

Funny then that the house in question was listed at the start of December and just sold for $335k. Sounds like they had real trouble selling it – not.

Maxwell said :

Furthermore they’re AWFUL to live in

Why? Does the roof leak? Are the windows missing? Is the lounge room not big enough for a 250cm plasma? Don’t your friends like to visit you so far out?

Maxwell said :

you’d be better off just saving an extra 50k deposit and going to extra stretch for a town house in a few years.

Lets see – a similar property up the street rents for $450pw or $1950 per month. To save up the extra $50k within two years you would need to find an extra $2083 per month. Now even if you were to borrow 90% to purchase the De Mestre Place property the repayments would be only $1996 per month. Bit of a no brainer there.Then if you had an extra $2000 per month for repayments you could have the property paid off within 8 years.

Bramina said :

Now you have me intrigued. If the unimproved value was for both blocks, the unimproved value for the single block would only be $110,000. Thus the value of improvements to the block (the difference between that figure and the sale figure is $225,000). Looking at that 10 metre by 6 metre box, I find it hard to see how the improvements to that block are worth so much. I note that the website doesn’t have inside pictures. I presume that means the house isn’t newly renovated inside.

As for other blocks in Holt being cheaper, it’s interesting and worth looking into. An equivalent sized block at your $320 lower limit would only be worth just over $100,000. But I know in Crace they don’t have anything cheaper than $245,000, and their average block size is only 400 square metres (the Holt block was 340 square metres).

Normal-sized blocks (with free-standing 3-4 bedroom houses) in Holt are around 750 m2. They are the ones whose UVs on allhomes are in the range $320-390/m2. The one at the lower end has a UV of $269K.

You’re right that $225K would be a lot for that small house, especially compared with the equivalent price of all the larger houses. But if the UV for 1 de Mestre place is just for the 340 m2 block, then there seems to be a different pricing scale for townhouse blocks versus full size blocks – you pay almost as much for something half the size.

Hey all be careful of people telling you to buy the cheap end of town under say 350k. These are likely property investors who can’t sell their 2 bedroom dog boxes for 260k.

These kinds of properties are utter rip offs and are a good way to kill yourself financially. They won’t appreciate as much in the long run (from here) and will be the first to plument the most if a crash does occur.

Furthermore they’re AWFUL to live in and you’d be better off just saving an extra 50k deposit and going to extra stretch for a town house in a few years.

Please don’t get sucked into the “buy this piece of crap and trade up later” you won’t be able to, those things are massively overpriced for what they are.

OpenYourMind6:17 pm 29 Jan 12

Bramina said :

Nightshade said :

OpenYourMind said :

Saying such and such a place is not worth x amount is a meaningless statement. I’ve heard people say that about all manner of things. They’ll look at a $10k Italian suit and say it’s not worth that much. Well, if people are spending that much, then, guess what, that’s what it’s wortth

I’ve talked before about what could bring the prices down eg. major economic slump, massive public service cuts etc. If these events occur, house prices may drop, but there’ll be lots more unemployed and houses for some will be just as unaffordable. For now, Canberra is a city of highly paid workers and house demand has been increasing. This recipe is relatively static for now. Ironically, if house prices dropped significantly in Canberra, it’s probably investors that would swoop in and pick up the cheaply priced places and bet long.

As for the Holt place. You can speak disparagingly about it, but I’m sure it would make a very nice start for someone of relatively limited means taking their first steps into the property market.

Do you know what would be an even nicer start? Only paying $100-150,000 for the house.

There is a major and significant difference between a house and a $10,000 suit. Buying a suit is discretionary luxury spending, whereas living in a house is pretty much compulsory (the cost of financing a cost whether through rent, a mortgage or savings is roughly equivalent).

What sucks is that people are being to absurdly high prices to finance property that is overpriced. And what sucks even more is that housing prices won’t increase forever, the market will return prices to their natural balance. Markets have a very strong tendency to correct imbalances in the long term. This will leave many people significantly out of pocket.

I’d like to buy an ‘affordable’ new car for $100, but it isn’t going to happen either. Houses for $100-150k. Let’s see, even if land prices crashed or half the brindabellas were bulldozed with a result that blocks dropped back to $50k a pop, that still means you’d need to build the house for $50k-100k. I’m not sure if you’ve checked the cost of building, but I’d like to see you find a few builders, sparkies, plumbers, tilers etc. ready to accept 1980s salaries.

Of course when all these people talk about affordable, they aren’t talking affordable and ‘starter’. These affordable houses need to be close to CBD, big block, 4bedrooms & study, WIR, ensuite, double garage, central a/c-heating and a home theatre. Just tell me why can’t we find any $150k ‘affordable’ homes like this.

I’m sorry, but HenryBG and his mates snapped up all these opportunities back in ’97.

Nightshade said :

You had me intrigued with this comment .. the UV works out at $652/m2, compared with a range of $320-392/m2 for all the free-standing houses listed in the old part of Holt (i.e. not the golf course part). However, the map shows this courtyard house connected to the one on the block next door, and as the listing states the UV is for the entire block, my guess is that both these blocks are included in the UV. Otherwise that block is indeed worth nearly twice as much as the rest of the suburb.

Now you have me intrigued. If the unimproved value was for both blocks, the unimproved value for the single block would only be $110,000. Thus the value of improvements to the block (the difference between that figure and the sale figure is $225,000). Looking at that 10 metre by 6 metre box, I find it hard to see how the improvements to that block are worth so much. I note that the website doesn’t have inside pictures. I presume that means the house isn’t newly renovated inside.

As for other blocks in Holt being cheaper, it’s interesting and worth looking into. An equivalent sized block at your $320 lower limit would only be worth just over $100,000. But I know in Crace they don’t have anything cheaper than $245,000, and their average block size is only 400 square metres (the Holt block was 340 square metres).

OpenYourMind said :

Saying such and such a place is not worth x amount is a meaningless statement. I’ve heard people say that about all manner of things. They’ll look at a $10k Italian suit and say it’s not worth that much. Well, if people are spending that much, then, guess what, that’s what it’s wortth

I’ve talked before about what could bring the prices down eg. major economic slump, massive public service cuts etc. If these events occur, house prices may drop, but there’ll be lots more unemployed and houses for some will be just as unaffordable. For now, Canberra is a city of highly paid workers and house demand has been increasing. This recipe is relatively static for now. Ironically, if house prices dropped significantly in Canberra, it’s probably investors that would swoop in and pick up the cheaply priced places and bet long.

As for the Holt place. You can speak disparagingly about it, but I’m sure it would make a very nice start for someone of relatively limited means taking their first steps into the property market.

Do you know what would be an even nicer start? Only paying $100-150,000 for the house.

There is a major and significant difference between a house and a $10,000 suit. Buying a suit is discretionary luxury spending, whereas living in a house is pretty much compulsory (the cost of financing a cost whether through rent, a mortgage or savings is roughly equivalent).

What sucks is that people are being to absurdly high prices to finance property that is overpriced. And what sucks even more is that housing prices won’t increase forever, the market will return prices to their natural balance. Markets have a very strong tendency to correct imbalances in the long term. This will leave many people significantly out of pocket.

OpenYourMind said :

You can speak disparagingly about it, but I’m sure it would make a very nice start for someone of relatively limited means taking their first steps into the property market.

Precisely. The previous owners bought it for $233k in 2006. Say they borrowed 80% or $186k to purchase it, then the repayments would be $620 per fortnight over 25 years and would still owe $166k. If they were smart (and in a position to do so) and paid off $1000 fortnight, they would now owe only $91k. Selling it for $335k means they come out with $203k after agents commission and mortgage.

Before you complain that half of that is capital gains, its a mute point. All other houses have increased in value as well so the capital gains don’t provide any advancement when swapping one house for another.

Having $203k cash in the bank puts you in a nice position to move up into the $450k+ range.

Bramina said :

The prices are going to come back down regardless. Nothing can stop that from happening.

Some prices will come down in real terms, but it will be temporary.

OpenYourMind1:47 pm 28 Jan 12

Bramina said :

OpenYourMind said :

I still don’t get this whole affordability thing. Canberra is an expensive city, but take a house like this one for example:
http://www.allhomes.com.au/ah/act/sale-residential/1-de-mestre-place-holt-canberra/1316807000511
It’s not flash, but it’s a start. Annual repayments $23k per year…

Are you kidding? An old decaying 10 metre by 6 metre box on a 15 metre by 23 metre postage stamp sized block for $335,000 in Holt is a bloody rip off. And it is supposedly ‘priced to sell!’

There is something majorly wrong in the housing market, something is massively out of balance and equilibrium, when something like that costs $335 thousand dollars.

Incidentally, I compared the unimproved value per square metre to a few houses in the inner suburbs to the unimproved value per square metre for this block – and they are the same. In what universe is land in Holt worth the same as land in Braddon or Reid?

Oh come on! $330k

VYBerlinaV8_is_back said :

So, am I in favour of govt abandoning it’s influence in the housing market? No, because lots of people will be locked out forever. Also, without proper town planning we will end up with unlivable urban areas.

The prices are going to come back down regardless. Nothing can stop that from happening.

Well that particular house is ‘under offer’, so it was affordable for someone and is also worth exactly that much because that’s what someone is prepared to pay for it.

Saying such and such a place is not worth x amount is a meaningless statement. I’ve heard people say that about all manner of things. They’ll look at a $10k Italian suit and say it’s not worth that much. Well, if people are spending that much, then, guess what, that’s what it’s worth.

I’ve talked before about what could bring the prices down eg. major economic slump, massive public service cuts etc. If these events occur, house prices may drop, but there’ll be lots more unemployed and houses for some will be just as unaffordable. For now, Canberra is a city of highly paid workers and house demand has been increasing. This recipe is relatively static for now. Ironically, if house prices dropped significantly in Canberra, it’s probably investors that would swoop in and pick up the cheaply priced places and bet long.

As for the Holt place. You can speak disparagingly about it, but I’m sure it would make a very nice start for someone of relatively limited means taking their first steps into the property market.

devils_advocate12:47 pm 28 Jan 12

VYBerlinaV8_is_back said :

So, am I in favour of govt abandoning it’s influence in the housing market? No, because lots of people will be locked out forever. Also, without proper town planning we will end up with unlivable urban areas.

I don’t think people will be ‘locked out’ (what an emotive term!) of the housing market if the govt abandons its influence in the market. I think the equilibrium price would shift to a lower point. In fact, this is why I think they persist – because they don’t want to piss off existing owners.

I agree on the urban planning point though. There has to be something in place to hold the developers in check. I think they should just speed up the approval process so developers don’t incur such massive holding costs while things are being approved (costs which are then passed on to consumers).

devils_advocate12:44 pm 28 Jan 12

drfelonious said :

I suppose it stands to reason then that you are all in favour of the immediate elimination of taxpayer subsidies and government interference in the housing market?

Cause if you are I’ll join that bandwagon:
– down with negative gearing
– cut out all first home grants now
– eliminate all special treatment for housing assets for pensions etc
– get rid of government monopolies on land release

Yeah right on capitalists – count me in to the smug party!

Yes, I agree with eliminating all these things, with the exception of the last – govt monopoly on land release – because I’m not sure what the workable alternative is. Private developers tend to release stupidly small blocks AND drive the cost up so it’s just a wealth transfer from Govt to the private sector.

On a related point, I personally don’t believe in ‘negative gearing’ as a sensible path to wealth creation so removing it tomorrow would have no direct impact on me.

Overall, and as a general statement, I don’t care if the government changes the ‘rules’ so long as they are broadly equivalent in their application from time to time, and are reasonably clear. If the rule changes affect me adversely, then I’ll either suck it up or change my decisions to optimise the outcome for myself. Same with anything, really.

Bramina said :

Incidentally, I compared the unimproved value per square metre to a few houses in the inner suburbs to the unimproved value per square metre for this block – and they are the same. In what universe is land in Holt worth the same as land in Braddon or Reid?

You had me intrigued with this comment .. the UV works out at $652/m2, compared with a range of $320-392/m2 for all the free-standing houses listed in the old part of Holt (i.e. not the golf course part). However, the map shows this courtyard house connected to the one on the block next door, and as the listing states the UV is for the entire block, my guess is that both these blocks are included in the UV. Otherwise that block is indeed worth nearly twice as much as the rest of the suburb.

OpenYourMind said :

I still don’t get this whole affordability thing. Canberra is an expensive city, but take a house like this one for example:
http://www.allhomes.com.au/ah/act/sale-residential/1-de-mestre-place-holt-canberra/1316807000511
It’s not flash, but it’s a start. Annual repayments $23k per year…

Are you kidding? An old decaying 10 metre by 6 metre box on a 15 metre by 23 metre postage stamp sized block for $335,000 in Holt is a bloody rip off. And it is supposedly ‘priced to sell!’

There is something majorly wrong in the housing market, something is massively out of balance and equilibrium, when something like that costs $335 thousand dollars.

Incidentally, I compared the unimproved value per square metre to a few houses in the inner suburbs to the unimproved value per square metre for this block – and they are the same. In what universe is land in Holt worth the same as land in Braddon or Reid?

Oh come on! $330k

VYBerlinaV8_is_back said :

So, am I in favour of govt abandoning it’s influence in the housing market? No, because lots of people will be locked out forever. Also, without proper town planning we will end up with unlivable urban areas.

The prices are going to come back down regardless. Nothing can stop that from happening.

VYBerlinaV8_is_back11:22 am 27 Jan 12

drfelonious said :

So I take it then that all of you “winners” who bought (or built) your first house before the parabolic rise in house prices (I’m looking at you Nolmright, Berlina, devils advocate etc) think that those of us who did not buy in are:

– unfamiliar with markets and the concept of supply and demand,
– unable to deprive ourselves of mobile phones and TVs in order to just suck it up and buy something, anything, anywhere,
– “whingers” who want it all – mobile phones, TVs and a house as well for goodness sake, and
– soft socialists who want the government to help us out.

What a self satisfied bunch of life’s winners you are – and so proud that you did it all on the back of your own hard work without a breath of assistance from the government!

I suppose it stands to reason then that you are all in favour of the immediate elimination of taxpayer subsidies and government interference in the housing market?

Cause if you are I’ll join that bandwagon:
– down with negative gearing
– cut out all first home grants now
– eliminate all special treatment for housing assets for pensions etc
– get rid of government monopolies on land release

Yeah right on capitalists – count me in to the smug party!

I think you’ve managed to take a whole lot of varied comments and wrap them up into a conclusion which isn’t really true.

You can always look at the discussion and take a negative view, but perhaps you could also see that:
1) Supply and demand play a large part of the change of property price
2) Over the past several decades the Australian lifestyle has increased in standard, specifally in what constitutes ‘the basics’. These have to be paid for by someone.
3) There are some people who do indeed ‘want it all’, just as there have always been. Some of these people succeed, many don’t.
4) Wanting the govt to help us out seems almost to have become expected with the level of middle class welfare now prevalent.

Accusing others of being smug doesn’t add much. The reality is that prices are what they are, and some comments have offered advice as to how someone might go about purchasing a home. You are free to take it or leave it.

So, am I in favour of govt abandoning it’s influence in the housing market? No, because lots of people will be locked out forever. Also, without proper town planning we will end up with unlivable urban areas.

drfelonious said :

So I take it then that all of you “winners” who bought (or built) your first house before the parabolic rise in house prices (I’m looking at you Nolmright, Berlina, devils advocate etc) think that those of us who did not buy in are:

– unfamiliar with markets and the concept of supply and demand,
– unable to deprive ourselves of mobile phones and TVs in order to just suck it up and buy something, anything, anywhere,
– “whingers” who want it all – mobile phones, TVs and a house as well for goodness sake, and
– soft socialists who want the government to help us out.

What a self satisfied bunch of life’s winners you are – and so proud that you did it all on the back of your own hard work without a breath of assistance from the government!

I suppose it stands to reason then that you are all in favour of the immediate elimination of taxpayer subsidies and government interference in the housing market?

Cause if you are I’ll join that bandwagon:
– down with negative gearing
– cut out all first home grants now
– eliminate all special treatment for housing assets for pensions etc
– get rid of government monopolies on land release

Yeah right on capitalists – count me in to the smug party!

Nice assumptions. Except that you have no idea when I bought my house and…Ive never received any assistance, such as a first home owners grant, in my purchase. Complicated reaons why but I didnt.

OpenYourMind has provided a good example of what can be done if you spend less time worrying about what others have but feel free to keep putting your efforts into why others have it easy and youre doing it so much harder though. Thats got to be the solution doesnt it 😉

OpenYourMind8:06 pm 26 Jan 12

I still don’t get this whole affordability thing. Canberra is an expensive city, but take a house like this one for example:
http://www.allhomes.com.au/ah/act/sale-residential/1-de-mestre-place-holt-canberra/1316807000511
It’s not flash, but it’s a start. Annual repayments $23k per year. Or about $490 per week. Sure you have to save a decent deposit and you may find it a bit tough to start out with, hell you may need to sublet a room, but it’s still affordable. It’s exactly the same way I and many others I know started out. I know people in their early 20s doing exactly this today – it’s affordable, not easily affordable, but it never has been.
I get that statistically property prices have risen relative to average salaries, but to suggest houses aren’t affordable is just wrong.

Affordability for a Mulley!

looks like canberra housing affordability is getting the mully cup.

So I take it then that all of you “winners” who bought (or built) your first house before the parabolic rise in house prices (I’m looking at you Nolmright, Berlina, devils advocate etc) think that those of us who did not buy in are:

– unfamiliar with markets and the concept of supply and demand,
– unable to deprive ourselves of mobile phones and TVs in order to just suck it up and buy something, anything, anywhere,
– “whingers” who want it all – mobile phones, TVs and a house as well for goodness sake, and
– soft socialists who want the government to help us out.

What a self satisfied bunch of life’s winners you are – and so proud that you did it all on the back of your own hard work without a breath of assistance from the government!

I suppose it stands to reason then that you are all in favour of the immediate elimination of taxpayer subsidies and government interference in the housing market?

Cause if you are I’ll join that bandwagon:
– down with negative gearing
– cut out all first home grants now
– eliminate all special treatment for housing assets for pensions etc
– get rid of government monopolies on land release

Yeah right on capitalists – count me in to the smug party!

devils_advocate said :

Otherwise you’d have a mexican standoff between buyers who are unwilling to pay and sellers who are unwilling to lower their price.

Interestingly, this has started to occur in the Gold Coast property market. A lack of buyers willing to pay overhyped prices has seen a significant devaluation in the past 12 months – prices for decent 3/4 bedroom are around $300k-350k with many properties on the market for 4 or more months. Prices have reached a point where many sellers can’t sell their house because they can’t drop their price any lower as they wouldn’t be able to clear their mortgage.

devils_advocate2:30 pm 25 Jan 12

Buster_Boy said :

devils_advocate said :

HenryBG said :

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

So adding to the stock of available housing drives the price up?

Pure.

Genius.

Sarcasm fail! Given that most investors purchase established properties (somewhere between 80 to 90 percent) then, clearly, they are not adding to the stock of available housing as you have inferred. And, yes, by reducing stock in a growing market will generally result in driving up the price whenever the desire and means remain.

Reading and comprehension fail! The example I provided related to ME, not “most investors”. And it was in response to (another) person attack directed at me from the poster to which I was responding.

VYBerlinaV8_is_back1:47 pm 25 Jan 12

Jim Jones said :

VYBerlinaV8_is_back said :

HenryBG said :

devils_advocate said :

Here’s what you missed – I didn’t only buy a house in 2001 (strictly speaking I built between 2000 and 2002, but anyway) but I have bought into the market on a number of occasions since then, .

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

I thought land use and pricing was responsible..?

Muslims?

Hardly – they don’t charge interest!

devils_advocate1:43 pm 25 Jan 12

Jim Jones said :

Muslims?

Illegal immigrants.

Dey tuk er jarbs!

er…

Dey tuk er houses!

devils_advocate said :

HenryBG said :

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

So adding to the stock of available housing drives the price up?

Pure.

Genius.

Sarcasm fail! Given that most investors purchase established properties (somewhere between 80 to 90 percent) then, clearly, they are not adding to the stock of available housing as you have inferred. And, yes, by reducing stock in a growing market will generally result in driving up the price whenever the desire and means remain.

VYBerlinaV8_is_back said :

HenryBG said :

devils_advocate said :

Here’s what you missed – I didn’t only buy a house in 2001 (strictly speaking I built between 2000 and 2002, but anyway) but I have bought into the market on a number of occasions since then, .

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

I thought land use and pricing was responsible..?

Muslims?

HenryBG said :

VYBerlinaV8_is_back said :

HenryBG – what is your actual argument?

OK, I had to think about that one.

A poster by the name of “NoImRight” weighed in early claiming that “The increase in average house prices is a choice” and that people who find the idea of buying a house unaffordable were just trying to “drink champagne on a beer budget”.

Others have posted plenty of factual information which clearly demonstrates that housing is far, far less affordable since it started spiking up in about 1996.

The reasons for the sharp increase in house prices is a kind of sub-discussion, but there has been a suggestion of blaming a combination of easy credit and parsimonious government land release policy.

Serious discussion has been constantly derailed by mischievous posts blaming first-home buyers themselves for the difficulties they face.

If you want to quote me then quote me. Dont misquote me and then take it out of context to somehow further your odd little bandwagon going nowhere.

Otherwise maybe I can start one that says ” well Henry BG said he knows hes a fatuous idiot who hobbies include blaming the world for generally existing but in particular for not being his version of it”.

HenryBG said :

milkman said :

HenryBG said :

It is a fact that in the 1990s you could pick up a shitbox in Narrabundah or a flat in Yarralumla for less than 2x the average wage of the day.

Of course you could. During the late 90’s Canberra property was as cheap as it had been for years.

So what could the government do to help current generations enjoy the same ability to buy themselves a cheap house as we did?

Or are the selfish interests of greedy speculators the important factor here?

So other people buying houses are greedy? But havent it already been decided houses are way overpriced and that rascally bubble will burst anytime?

Other people buying = greedy

You buying = a gosh darn right

That a fair summary?

Feel free to respond with just gobs of patronising cliches and unearnt smugness. 🙂

devils_advocate said :

Mysteryman said :

Right… because “unaffordable”, “not affordable”, and “less affordable” in this context only mean that NOBODY can by a house…

Your reasoning needs work.

Well, there were other reasons, but it’s not my intention to recapitulate the entire thread each post.

Not everyone can afford to buy a house. Clearly, there are thousands each year who can.

But there is an important third group. Those who make deliberate decisions about their consumption that exclude them from the housing market, and then complain about it on the basis that housing is unaffordable.

It is this third group that are largely responsible for the flame wars and teeth gnashing over “affordability”.

People who want to buy a house can, and is proven by the fact that they frequently do.

Last sentence in particular is a precis for this whole thread.

HenryBG said :

A poster by the name of “NoImRight” weighed in early claiming that “The increase in average house prices is a choice” and that people who find the idea of buying a house unaffordable were just trying to “drink champagne on a beer budget”.

That is a bit of a simplistic view of the point they were trying to make.

The whole crux of the issue is that while some people are genuinely unable to afford a house now that may have been able to afford it previously, there are others who just want to complain that housing is unaffordable becuase they are not willing to make any sacrifices to buy a house.

They are the ones who think that buying a house is a right and if they can’t afford it with their current lifestyle the government should do something so they can buy a house AND keep the two cars, the credit cards, the nights out etc.

devils_advocate12:18 pm 25 Jan 12

HenryBG said :

Serious discussion has been constantly derailed by mischievous posts blaming first-home buyers themselves for the difficulties they face.

For all definitions of “serious discussion” that include self-entitled whingeing.

VYBerlinaV8_is_back12:11 pm 25 Jan 12

HenryBG said :

devils_advocate said :

Here’s what you missed – I didn’t only buy a house in 2001 (strictly speaking I built between 2000 and 2002, but anyway) but I have bought into the market on a number of occasions since then, .

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

I thought land use and pricing was responsible..?

devils_advocate12:08 pm 25 Jan 12

HenryBG said :

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

So adding to the stock of available housing drives the price up?

Pure.

Genius.

devils_advocate12:02 pm 25 Jan 12

HenryBG said :

Bottom line is, the HIA report used figures on household income, so your latest non-sequitur is a waste of everybody’s time.

It was YOUR comment (comment 215) that spuriously questioned whether female workforce participation rates had increased in the period under discussion.

I gave you the reference. The subsequent posts from you were solely attributable to your inability to read and comprehend was the report was saying, and then my post attempting to educate you on what a ranking is compared to an absolute increase.

How is responding to your specific post a non-sequiter?

devils_advocate said :

Here’s what you missed – I didn’t only buy a house in 2001 (strictly speaking I built between 2000 and 2002, but anyway) but I have bought into the market on a number of occasions since then, .

I get it; greedy people buying more houses than they actually need are responsible for driving house prices up.

VYBerlinaV8_is_back12:00 pm 25 Jan 12

HenryBG said :

VYBerlinaV8_is_back said :

HenryBG – what is your actual argument?

OK, I had to think about that one.

A poster by the name of “NoImRight” weighed in early claiming that “The increase in average house prices is a choice” and that people who find the idea of buying a house unaffordable were just trying to “drink champagne on a beer budget”.

Others have posted plenty of factual information which clearly demonstrates that housing is far, far less affordable since it started spiking up in about 1996.

The reasons for the sharp increase in house prices is a kind of sub-discussion, but there has been a suggestion of blaming a combination of easy credit and parsimonious government land release policy.

Serious discussion has been constantly derailed by mischievous posts blaming first-home buyers themselves for the difficulties they face.

Thanks for that.

devils_advocate said :

HenryBG said :

“….for the past eleven years (except in 1997 and 1998 when
Australia was ranked 11th). Australia’s participation rate ranking for males and
females has also been relatively stable over this period.”

So – no change over the period this discussion concerns. As I suggested might be the case.

Try reading again. The RANKING was stable. Look at the graph. Participation levels continued to increase in absolute terms.

FFS.

Bottom line is, the HIA report used figures on household income, so your latest non-sequitur is a waste of everybody’s time.

Stamp Duty is a less than ordinary tax

VYBerlinaV8_is_back said :

HenryBG – what is your actual argument?

OK, I had to think about that one.

A poster by the name of “NoImRight” weighed in early claiming that “The increase in average house prices is a choice” and that people who find the idea of buying a house unaffordable were just trying to “drink champagne on a beer budget”.

Others have posted plenty of factual information which clearly demonstrates that housing is far, far less affordable since it started spiking up in about 1996.

The reasons for the sharp increase in house prices is a kind of sub-discussion, but there has been a suggestion of blaming a combination of easy credit and parsimonious government land release policy.

Serious discussion has been constantly derailed by mischievous posts blaming first-home buyers themselves for the difficulties they face.

devils_advocate11:41 am 25 Jan 12

HenryBG said :

devils_advocate said :

I have provided plenty of references and a useful chart to show the decrease in interest rate volatility since the oil crisis and the floating of the dollar. I also discussed the credit expansion and the reduction in lending standards. And more besides.

Let me see if I understand your logic:

Whinger with too many mobile phones: “Waaah! House prices have become totally unaffordable since the mid-1990s when it was much easier to buy a home”

Winner With Logic On His Side: “It’s all your own fault for not being a genius like me who bought a house in 2001 and houses aren’t unaffordable because the Aussie dollar was floated in 1985 and interest rates were volatile in the 1980s”.

Let me know if there’s anything I’ve missed.

Here’s what you missed – I didn’t only buy a house in 2001 (strictly speaking I built between 2000 and 2002, but anyway) but I have bought into the market on a number of occasions since then, the most recent being in 2011. And before you try, no I didn’t use paper-based equity from previous properties in lieu of deposits.

According to you, I’m (among other things) ignorant, so if someone as ignorant as me can hold down a job that enables them to do it, then clearly every other person who is better informed than me can do it so much more easily.

In fairness to me, though, I do have the basic literacy skills to understand the difference between a country’s participation rates and its rankings relative to other economies, so that sets me apart from at least one other person in the market.

devils_advocate11:31 am 25 Jan 12

Mysteryman said :

So you’re now saying that property prices are indeed unaffordable? I’m glad you agree.

No because the properties (by definition) won’t change hands when the price is more than what’s affordable. Hence the price reduces and the market clears.

Otherwise you’d have a mexican standoff between buyers who are unwilling to pay and sellers who are unwilling to lower their price. But properties still sell, the price goes up, the price goes down (as is the case now) people whinge and life goes on.

Nice try though.

devils_advocate11:29 am 25 Jan 12

HenryBG said :

“….for the past eleven years (except in 1997 and 1998 when
Australia was ranked 11th). Australia’s participation rate ranking for males and
females has also been relatively stable over this period.”

So – no change over the period this discussion concerns. As I suggested might be the case.

Try reading again. The RANKING was stable. Look at the graph. Participation levels continued to increase in absolute terms.

FFS.

Mysteryman said :

devils_advocate said :

Mysteryman said :

[citation needed]

Well some things are so basic they shouldn’t need a reference, but for the sake of indulgence:

http://en.wikipedia.org/wiki/Market_clearing

Basically, when prices get so high that they truly become unaffordable, the prices (and people’s expectations) adjust so the market clears. Which is why property prices are now falling.

So you’re now saying that property prices are indeed unaffordable? I’m glad you agree.

You’d have to be pretty stupid (and functionally illiterate) to interpret that in that way.

VYBerlinaV8_is_back11:26 am 25 Jan 12

Another elephant in the room…

http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/1370.0~2010~Chapter~National%20income%20%285.1%29

People have more money to spend, and can therefore borrow more.

devils_advocate said :

Mysteryman said :

[citation needed]

Well some things are so basic they shouldn’t need a reference, but for the sake of indulgence:

http://en.wikipedia.org/wiki/Market_clearing

Basically, when prices get so high that they truly become unaffordable, the prices (and people’s expectations) adjust so the market clears. Which is why property prices are now falling.

So you’re now saying that property prices are indeed unaffordable? I’m glad you agree.

devils_advocate said :

HenryBG said :

I would be so nice if people would base their opinions on some actual factual analysis.

For your opinion to be correct, it would be necessary for you to be able to show that female participation in the workforce had increased over the last 15 years.

It would also be nice if people could spend 5 minutes on google before ridiculing others or starting pointless arguments about things that are pretty obvious.

To save you the five minutes, please refer to page 9 of attached report.

http://www.pc.gov.au/__data/assets/pdf_file/0008/60479/workforceparticipation.pdf

Basically female participation has been increasing steadily since the 80’s. These effects would also be likely to have a lag as females permeate ever-more senior levels of the workforce with higher salaries; and have children later in life.

Interestingly, the report you link to says:

“….for the past eleven years (except in 1997 and 1998 when
Australia was ranked 11th). Australia’s participation rate ranking for males and
females has also been relatively stable over this period.”

So – no change over the period this discussion concerns. As I suggested might be the case.

devils_advocate said :

I have provided plenty of references and a useful chart to show the decrease in interest rate volatility since the oil crisis and the floating of the dollar. I also discussed the credit expansion and the reduction in lending standards. And more besides.

Let me see if I understand your logic:

Whinger with too many mobile phones: “Waaah! House prices have become totally unaffordable since the mid-1990s when it was much easier to buy a home”

Winner With Logic On His Side: “It’s all your own fault for not being a genius like me who bought a house in 2001 and houses aren’t unaffordable because the Aussie dollar was floated in 1985 and interest rates were volatile in the 1980s”.

Let me know if there’s anything I’ve missed.

devils_advocate11:13 am 25 Jan 12

dpm said :

There’s some interesting stuff in there. Of course, it is mainly Aus-wide info…..

Been said already, but… Canberra has significantly higher salaries, a low unemployment rate and a very stable APS workforce, all ingredients which tend to make people more confident about buying a house, and willing and able to pay a higher price for them.

devils_advocate11:09 am 25 Jan 12

HenryBG said :

I would be so nice if people would base their opinions on some actual factual analysis.

For your opinion to be correct, it would be necessary for you to be able to show that female participation in the workforce had increased over the last 15 years.

It would also be nice if people could spend 5 minutes on google before ridiculing others or starting pointless arguments about things that are pretty obvious.

To save you the five minutes, please refer to page 9 of attached report.

http://www.pc.gov.au/__data/assets/pdf_file/0008/60479/workforceparticipation.pdf

Basically female participation has been increasing steadily since the 80’s. These effects would also be likely to have a lag as females permeate ever-more senior levels of the workforce with higher salaries; and have children later in life.

VYBerlinaV8_is_back11:08 am 25 Jan 12

devils_advocate said :

HenryBG said :

We’ve provided links to, and quoted, facts in support of our contention that your contributions here are non-factual.

In return, you and Devil’s Advocate provide no facts and tortured reasoning. You’re fooling noone.

I have provided plenty of references and a useful chart to show the decrease in interest rate volatility since the oil crisis and the floating of the dollar. I also discussed the credit expansion and the reduction in lending standards. And more besides.

Are you now saying that neither of these things have happened? Or are you just deliberately disregarding them because they don’t fit your argument?

I’ve looked over the last few pages, and frankly I can’t really tell what HenryBG’s argument is. It seems as though several people have made the assertion that housing costs more than it used to (yes it does), and some people have responded that it’s still possible to for many people to buy (which it is), and we’ve then somehow gotten into an argument about the sources of various assertions that have arisen.

HenryBG – what is your actual argument?

devils_advocate11:01 am 25 Jan 12

HenryBG said :

We’ve provided links to, and quoted, facts in support of our contention that your contributions here are non-factual.

In return, you and Devil’s Advocate provide no facts and tortured reasoning. You’re fooling noone.

I have provided plenty of references and a useful chart to show the decrease in interest rate volatility since the oil crisis and the floating of the dollar. I also discussed the credit expansion and the reduction in lending standards. And more besides.

Are you now saying that neither of these things have happened? Or are you just deliberately disregarding them because they don’t fit your argument?

VYBerlinaV8_is_back10:59 am 25 Jan 12

HenryBG said :

VYBerlinaV8_is_back said :

HenryBG said :

VYBerlinaV8_is_back said :

My opinion (and that’s all it is) is that the social change towards having both partners working has driven the ability of of households to purchase property, which is one of the factors that has pushed up prices.

I would be so nice if people would base their opinions on some actual factual analysis.

For your opinion to be correct, it would be necessary for you to be able to show that female participation in the workforce had increased over the last 15 years.

Do you think you can show that?
I very much doubt it, as it is my understanding that this particular statistic has been fairly stable over the last couple of decades.

No problems. How you show us why property has increased in price then. Please provide your evidence.

Well let me see, I seem to have two options here:

1/ Make some shit up
or
2/ Read the Demographia report linked to above, where it says stuff like: “…land use policies in places like coastal California, Vancouver, Britain and Australia, have dramatically driven up the cost of housing,”

I think I’m going top plump for 2/, what do you think?

Regurgitate someone else’s work? Sure, be my guest.

Also, did you read the part in my post where I stated that I thought land prices contributed to overall price increases?

Price increases have come from a number of factors, and they have contributed in various ways. What about easier credit terms, do have an insight to share?

Not sure if these have been mentioned before, but they might be good background reading!

http://economics.hia.com.au/media/House%20price%20to%20income%20ratio%20-%20FINAL.pdf

http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Chapter9102008

There’s some interesting stuff in there. Of course, it is mainly Aus-wide info…..

devils_advocate10:56 am 25 Jan 12

Mysteryman said :

[citation needed]

Well some things are so basic they shouldn’t need a reference, but for the sake of indulgence:

http://en.wikipedia.org/wiki/Market_clearing

Basically, when prices get so high that they truly become unaffordable, the prices (and people’s expectations) adjust so the market clears. Which is why property prices are now falling. Takes a while because of relatively low volumes of trade (compared to, say, the share market) and possibly people’s reluctance to take a capital loss.

As for the comment about people who could afford to buy a house if they were prepared to sacrifice some elements of their “lifestyle” refer to the above claim that it wasn’t possible to afford a house on an EL1 salary (comment 121).

See also the comment at 101 that talked about not being able to save for a deposit, but then went on to list fel, car financing, credit card and mobile phone costs.

Hope that’s enough references for you.

VYBerlinaV8_is_back said :

HenryBG said :

VYBerlinaV8_is_back said :

My opinion (and that’s all it is) is that the social change towards having both partners working has driven the ability of of households to purchase property, which is one of the factors that has pushed up prices.

I would be so nice if people would base their opinions on some actual factual analysis.

For your opinion to be correct, it would be necessary for you to be able to show that female participation in the workforce had increased over the last 15 years.

Do you think you can show that?
I very much doubt it, as it is my understanding that this particular statistic has been fairly stable over the last couple of decades.

No problems. How you show us why property has increased in price then. Please provide your evidence.

Well let me see, I seem to have two options here:

1/ Make some shit up
or
2/ Read the Demographia report linked to above, where it says stuff like: “…land use policies in places like coastal California, Vancouver, Britain and Australia, have dramatically driven up the cost of housing,”

I think I’m going top plump for 2/, what do you think?

VYBerlinaV8_is_back10:23 am 25 Jan 12

HenryBG said :

VYBerlinaV8_is_back said :

My opinion (and that’s all it is) is that the social change towards having both partners working has driven the ability of of households to purchase property, which is one of the factors that has pushed up prices.

I would be so nice if people would base their opinions on some actual factual analysis.

For your opinion to be correct, it would be necessary for you to be able to show that female participation in the workforce had increased over the last 15 years.

Do you think you can show that?
I very much doubt it, as it is my understanding that this particular statistic has been fairly stable over the last couple of decades.

No problems. How you show us why property has increased in price then. Please provide your evidence.

VYBerlinaV8_is_back said :

My opinion (and that’s all it is) is that the social change towards having both partners working has driven the ability of of households to purchase property, which is one of the factors that has pushed up prices.

I would be so nice if people would base their opinions on some actual factual analysis.

For your opinion to be correct, it would be necessary for you to be able to show that female participation in the workforce had increased over the last 15 years.

Do you think you can show that?
I very much doubt it, as it is my understanding that this particular statistic has been fairly stable over the last couple of decades.

VYBerlinaV8_is_back9:59 am 25 Jan 12

milkman said :

At several times during the 80’s property was relatively more expensive than during the 90’s. Also, the cost of living is higher now because the standard is much higher. But I think we’ve probably discussed that already.

The thing we need to remember is that while prices stagnate (or even fall), affordability improves due to inflation and increases in income. We shouldn’t underestimate the difference that 5 years of stagnant prices would make, which would be a drop in real terms of 15 percent or more.

My opinion (and that’s all it is) is that the social change towards having both partners working has driven the ability of of households to purchase property, which is one of the factors that has pushed up prices. With more money chasing limited stock, the price has risen. Add then the factor of easier credit, and purchasing power increases further. Consider also that the cost of building new has risen heaps (land prices, building materials, labour cost all contribute here) and you have more money chasing existing stock.

The question for the property owners, especially investors, is this: What further societal changes can drive the price of housing upwards?

It’s an interesting discussion, but for some people an unfortunate situation.

devils_advocate said :

Mysteryman said :

Right… because “unaffordable”, “not affordable”, and “less affordable” in this context only mean that NOBODY can by a house…

Your reasoning needs work.

Well, there were other reasons, but it’s not my intention to recapitulate the entire thread each post.

Not everyone can afford to buy a house. Clearly, there are thousands each year who can.

But there is an important third group. Those who make deliberate decisions about their consumption that exclude them from the housing market, and then complain about it on the basis that housing is unaffordable.

It is this third group that are largely responsible for the flame wars and teeth gnashing over “affordability”.

People who want to buy a house can, and is proven by the fact that they frequently do.

[citation needed]

[citation needed]

[citation needed]

Seriously, what a crock of garbage. If you want to be taken seriously, you should probably have changed your closing statement to “Some people who want to buy a house can, and do, while others who want to can’t, because it’s simply not as affordable as it used to be.

HenryBG said :

milkman said :

HenryBG said :

It is a fact that in the 1990s you could pick up a shitbox in Narrabundah or a flat in Yarralumla for less than 2x the average wage of the day.

Of course you could. During the late 90’s Canberra property was as cheap as it had been for years.

So what could the government do to help current generations enjoy the same ability to buy themselves a cheap house as we did?

Or are the selfish interests of greedy speculators the important factor here?

At several times during the 80’s property was relatively more expensive than during the 90’s. Also, the cost of living is higher now because the standard is much higher. But I think we’ve probably discussed that already.

What can be done to help people purchase? That’s a tough one. The only serious idea I have is to freeze the release price of land over the next 10 years, and to increase supply. That way existing owners/buyers don’t get burnt, but affordability of new stock steadily increases, which also relieves pressure on the price of existing stock.

Anything the govt does to increase ‘buying power’ (e.g. grants, etc) just pushes the market higher. Remember the old $7k first home buyer grant? That actually increases buying power by $35k, as buyers can use the $7k as the 20% component of a $35k loan increase.

Personally I think financial education would also be good, to teach people about the concept of living below their means and gaining real benefit from funds that are saved or invested.

devils_advocate said :

hax said :

I wonder how long until 3 incomes is the norm to afford an average house..

A more likely explanation is that at a certain point (at, or to be precise slightly before, houses become truly unaffordable) buyers see the housing stock as a whole as being too expensive, and they choose not to buy. Sellers can’t sell, and they have to adjust their price expectations downwards in order for the market to clear. This will result in market prices as a whole declining.

Oh wait, this has already happened.

Nevermind.

What will be interesting is: whether this decline in house prices (increase in affordability, if you’re a glass half full person – yay!) is just part of the normal cyclical nature of prices in general, or if (as some are hoping) the downward price movements influence future price expectations, trigger a deflation and therefore the current decline proves to be the “tipping point” of a major correction in a bubble.

I think it has to collapse because there is a feedback effect between declining confidence that housing is a sure bet, declining willingness to buy and increasing willingness to sell.

At some point the confidence pretty much has to fail.

milkman said :

HenryBG said :

It is a fact that in the 1990s you could pick up a shitbox in Narrabundah or a flat in Yarralumla for less than 2x the average wage of the day.

Of course you could. During the late 90’s Canberra property was as cheap as it had been for years.

So what could the government do to help current generations enjoy the same ability to buy themselves a cheap house as we did?

Or are the selfish interests of greedy speculators the important factor here?

HenryBG said :

It is a fact that in the 1990s you could pick up a shitbox in Narrabundah or a flat in Yarralumla for less than 2x the average wage of the day.

Of course you could. During the late 90’s Canberra property was as cheap as it had been for years.

OpenYourMind said :

If you cared to read HenryBG’s fireside tales of yesteryear, back in ’97 he and his mates were picking up cheap houses in Yarralumla and O’Connor like a lady’s man picked up loose women at the Private Bin. Fast forward to today and a self respecting university educated EL1 can’t even afford a goddamn Doodah!

We’ve provided links to, and quoted, facts in support of our contention that your contributions here are non-factual.

In return, you and Devil’s Advocate provide no facts and tortured reasoning. You’re fooling noone.

I especially like the idea that an isolated, out-of-context figure about the number of first-home-buyers’-grants in one particular year proves…….something……

Time to give up.

It is a fact that in the 1990s you could pick up a shitbox in Narrabundah or a flat in Yarralumla for less than 2x the average wage of the day.
It is a fact that a first home buyer today has to front up around 5x today’s average wage to get something, somewhere.

Do the maths….if you can….

OpenYourMind6:22 pm 24 Jan 12

If you cared to read HenryBG’s fireside tales of yesteryear, back in ’97 he and his mates were picking up cheap houses in Yarralumla and O’Connor like a lady’s man picked up loose women at the Private Bin. Fast forward to today and a self respecting university educated EL1 can’t even afford a goddamn Doodah!

devils_advocate said :

Mysteryman said :

Right… because “unaffordable”, “not affordable”, and “less affordable” in this context only mean that NOBODY can by a house…

Your reasoning needs work.

Well, there were other reasons, but it’s not my intention to recapitulate the entire thread each post.

Not everyone can afford to buy a house. Clearly, there are thousands each year who can.

But there is an important third group. Those who make deliberate decisions about their consumption that exclude them from the housing market, and then complain about it on the basis that housing is unaffordable.

It is this third group that are largely responsible for the flame wars and teeth gnashing over “affordability”.

People who want to buy a house can, and is proven by the fact that they frequently do.

ORLY,
Got any evidence of this third group being the main ones complaining about housing affordability?
Any at all will do.

devils_advocate6:05 pm 24 Jan 12

Mysteryman said :

Right… because “unaffordable”, “not affordable”, and “less affordable” in this context only mean that NOBODY can by a house…

Your reasoning needs work.

Well, there were other reasons, but it’s not my intention to recapitulate the entire thread each post.

Not everyone can afford to buy a house. Clearly, there are thousands each year who can.

But there is an important third group. Those who make deliberate decisions about their consumption that exclude them from the housing market, and then complain about it on the basis that housing is unaffordable.

It is this third group that are largely responsible for the flame wars and teeth gnashing over “affordability”.

People who want to buy a house can, and is proven by the fact that they frequently do.

devils_advocate said :

HenryBG said :

Idle speculation about how many incomes exist per household is so much fun than actually providing facts and figures about the same, eh?

I’m sure they have a bright future ahead of them in the sheltered workshop we call the Australian Public Service.

The only thing worse would be, someone who selectively views statistics that support their argument at the expense of all the evidence to the contrary.

In 2009-10, (ie before the price decline) there were 3568 first home owner grants paid out.

http://www.treasury.act.gov.au/documents/TSY2009-10AnnReportVol1.pdf

If housing isn’t affordable, then who the f–k are these three and a half thousand people fronting up to the ACT revenue office each year? Clearly they exist and they are coming up with the finance from somewhere.

Right… because “unaffordable”, “not affordable”, and “less affordable” in this context only mean that NOBODY can by a house…

Your reasoning needs work.

devils_advocate4:56 pm 24 Jan 12

HenryBG said :

Idle speculation about how many incomes exist per household is so much fun than actually providing facts and figures about the same, eh?

I’m sure they have a bright future ahead of them in the sheltered workshop we call the Australian Public Service.

The only thing worse would be, someone who selectively views statistics that support their argument at the expense of all the evidence to the contrary.

In 2009-10, (ie before the price decline) there were 3568 first home owner grants paid out.

http://www.treasury.act.gov.au/documents/TSY2009-10AnnReportVol1.pdf

If housing isn’t affordable, then who the f–k are these three and a half thousand people fronting up to the ACT revenue office each year? Clearly they exist and they are coming up with the finance from somewhere.

I’d have thought that this would be a pretty easy question to answer, but I find it’s not quite.

I went looking for some figures about something like median house price as a proportion of median income over, say, a twenty year period. So far, no luck. There are plenty of sites with barrows to push (mostly real estate industry-related) and plenty showing that Australian cities are amongst the most expensive in the world for housing, but nothing that answers the specific question “has housing become more or less affordable?” I assume the figures are there, but I haven’t found them yet.

My sense is that housing is less affordable now than it was when I bought my first house many years ago, but that’s just a gut feeling. I remember hearing a radio interview with someone who seemed to know what he was talking about, saying that, on average, globally and over time, house prices tend to be around 300% of average (or median – can’t remember) income, whereas in Australia, now, it’s between 700% and 1100%. This, he said, means that it’s a huge bubble. But I haven’t found any figures supporting that.

devils_advocate4:39 pm 24 Jan 12

HenryBG said :

I’d say you understand very little of the afore-mentioned topics if you’re going to commit such a glaring fallacy in statistical analysis as to ignore a significant long-term cumulative growth in favour of pinning your argument on recent minor short-term variability.

Taking a short-term trend and extrapolating is roughly on par with: selecting two factors – namely individual wages and the price of specific, detached, inner-city dwellings – to the exclusion of all other relevant economic factors, and using those two selected factors in isolation to support an argument.

There’s a saying about this – something about idiots dragging you down to there level and beating you with experience.

devils_advocate said :

HenryBG said :

Now for you to understand that less affordable means a much higher bar over which the less well off are now completely unable to jump whereas in the past they could have.

Well, in order to “understand” this I would have to disregard everything I know about economics, financial markets, consumer behaviour and history, which (unfortunately for your “argument”) is a fair bit.

In any case, to use your awesome methodology: adult weekly earnings, +4.9 per cent ytd.

Canberra house prices, -2.2 per cent ytd.

More affordable!

I’d say you understand very little of the afore-mentioned topics if you’re going to commit such a glaring fallacy in statistical analysis as to ignore a significant long-term cumulative growth in favour of pinning your argument on recent minor short-term variability.

chewy14 said :

devils_advocate said :

ainira said :

Could it be that more households are dual income now (more women in workforce etc), whereas in the past, single income households were more the norm?

I would have thought so but according to HenryBG, no.

You’re only allowed to look at the average wage of a single person and compare it to the average price of a given house in an inner suburb. Taking account of other factors – eg the increase in dual income households, changes in credit markets, etc etc, is not allowed.

Did you even take a cursory glance at the demographia report linked earlier?
Here it is again for the challenged:
http://www.demographia.com/dhi.pdf

No they didn’t. Checking facts is anathema to people who base their lives around anecdote, guesswork, gross generalisation and a studfious avoidance of reality.

Idle speculation about how many incomes exist per household is so much fun than actually providing facts and figures about the same, eh?

I’m sure they have a bright future ahead of them in the sheltered workshop we call the Australian Public Service.

Holden Caulfield4:16 pm 24 Jan 12

@chewy14 it’s actually a bit simpler than that:

1. Do you agree with me?
2. If ‘No’ you are wrong. If ‘Yes’ you are still wrong.

devils_advocate said :

ainira said :

Could it be that more households are dual income now (more women in workforce etc), whereas in the past, single income households were more the norm?

I would have thought so but according to HenryBG, no.

You’re only allowed to look at the average wage of a single person and compare it to the average price of a given house in an inner suburb. Taking account of other factors – eg the increase in dual income households, changes in credit markets, etc etc, is not allowed.

Did you even take a cursory glance at the demographia report linked earlier?
Here it is again for the challenged:
http://www.demographia.com/dhi.pdf

The average went from under 3x average household income in the early 90’s to over 5. It’s now sitting at 4.9 as it’s dropped slightly from the peak.
Anything over 3 is defined as unaffordable. For Canberra this equates to anything over $315K.

Considering that a 3bedroom house on a stamp sized block in West Macgregor costs $350K+ I would think that we can agree that housing is less affordable than it used to be, but perhaps not.

I think some people get angry when others suggest that either:
a) affordability hasn’t decreased (proven wrong)
b) people only want McMansions (the price of above mentioned tiny houses on small blocks should cure you of that thought)
c) Young people are lazy and/or don’t want to work hard like the people who bought 15years ago did (Seeing as housing affordability has gone down by a significant amount, what they’re actually saying is people don’t want to work harder than those who bought 15 years ago did).

If a, b, or c doesn’t apply to you then disregard.

devils_advocate3:57 pm 24 Jan 12

NoImRight said :

devils_advocate said :

ainira said :

I don’t think it will go up to 3 incomes as the norm, unless there is a huge cultural shift towards couples buying with their parents (or with another couple, which I think is even less likely). Well, I hope not! :S

What about a cultural shift towards polygamy? I could wear higher mortgage repayments in favour of greater social acceptance of me doing what thousands of years of evolution tells me to do.

You’re an ideas man.

The only real downfall is based on the moral approbrium based on the “greedy landlords” slur against property investors (largely, IMO, down to jealousy).

You’ve seen the hatred directed towards owning more than one house.

Imagine the hatred directed towards boning more than one spouse.

devils_advocate said :

ainira said :

I don’t think it will go up to 3 incomes as the norm, unless there is a huge cultural shift towards couples buying with their parents (or with another couple, which I think is even less likely). Well, I hope not! :S

What about a cultural shift towards polygamy? I could wear higher mortgage repayments in favour of greater social acceptance of me doing what thousands of years of evolution tells me to do.

You’re an ideas man.

devils_advocate3:21 pm 24 Jan 12

ainira said :

I don’t think it will go up to 3 incomes as the norm, unless there is a huge cultural shift towards couples buying with their parents (or with another couple, which I think is even less likely). Well, I hope not! :S

What about a cultural shift towards polygamy? I could wear higher mortgage repayments in favour of greater social acceptance of me doing what thousands of years of evolution tells me to do.

devils_advocate3:16 pm 24 Jan 12

hax said :

I wonder how long until 3 incomes is the norm to afford an average house..

A more likely explanation is that at a certain point (at, or to be precise slightly before, houses become truly unaffordable) buyers see the housing stock as a whole as being too expensive, and they choose not to buy. Sellers can’t sell, and they have to adjust their price expectations downwards in order for the market to clear. This will result in market prices as a whole declining.

Oh wait, this has already happened.

Nevermind.

What will be interesting is: whether this decline in house prices (increase in affordability, if you’re a glass half full person – yay!) is just part of the normal cyclical nature of prices in general, or if (as some are hoping) the downward price movements influence future price expectations, trigger a deflation and therefore the current decline proves to be the “tipping point” of a major correction in a bubble.

hax said :

ainira said :

Could it be that more households are dual income now (more women in workforce etc), whereas in the past, single income households were more the norm? So if in the past, houses were 3 or 4x median income, then you would it expect it now to be 8 or 9x median income as this is what dual income households are able to afford.

I wonder how long until 3 incomes is the norm to afford an average house..

I’ve read news article of a couple buying a house with another couple so that they can get a really nice house, and then they sort of split the house up between them *shudder*

I don’t think it will go up to 3 incomes as the norm, unless there is a huge cultural shift towards couples buying with their parents (or with another couple, which I think is even less likely). Well, I hope not! :S

HenryBG said :

OpenYourMind said :

I am still seeing young people who are determined to own their own property in Canberra managing to do so. It’s not easy, but it wasn’t 15 years ago either.

Geez you’re thick.
It was *easier* 15 years ago. Now, it’s *harder*.

How about a simple analogy:

In 1995, you go to the doodah shop with $100 in your pocket. Doodahs are $50 each, so you come home with two of them.

In 2012, you Gen-Y nephew goes to the shop. He has $180 in his pocket thanks to the increase in average wage. However, doodahs are now $160 each due to the government and banks doing stuff which has reduced supply. Your Gen-Y nephew can only afford 1.

Back in 1995, you got twice what people can get now with their money. We can say: “Doodahs are less affordable”.

I *do* hope you can grasp this simple concept.

The point being made though is that maybe first buyers shouldnt demand such a fancy doodah and accept a doodah they can afford.

Bleating about how cheap first homes were 20 years ago should also perhaps include a comparison of what people were buying as first homes then and now. There seems to be a lot of carry on about nice suburbs and house that suit lifestyle images. My first home obviously wouldnt meet those exacting standards.

ainira said :

Could it be that more households are dual income now (more women in workforce etc), whereas in the past, single income households were more the norm? So if in the past, houses were 3 or 4x median income, then you would it expect it now to be 8 or 9x median income as this is what dual income households are able to afford.

I wonder how long until 3 incomes is the norm to afford an average house..

devils_advocate3:03 pm 24 Jan 12

ainira said :

Could it be that more households are dual income now (more women in workforce etc), whereas in the past, single income households were more the norm?

I would have thought so but according to HenryBG, no.

You’re only allowed to look at the average wage of a single person and compare it to the average price of a given house in an inner suburb. Taking account of other factors – eg the increase in dual income households, changes in credit markets, etc etc, is not allowed.

HenryBG said :

Gosh, it’s amazing that this needs to be spelled out – “Less affordable in general for everybody” means “unaffordable for more people”.

If you look at me exceedingly simple but surely unnecessary analogy above, anybody with at least $50 in 1995 could buy 1 doodah.
In 2012, you need a minimum of $160 to buy one doodah.

Could it be that more households are dual income now (more women in workforce etc), whereas in the past, single income households were more the norm? So if in the past, houses were 3 or 4x median income, then you would it expect it now to be 8 or 9x median income as this is what dual income households are able to afford.

devils_advocate2:44 pm 24 Jan 12

HenryBG said :

Now for you to understand that less affordable means a much higher bar over which the less well off are now completely unable to jump whereas in the past they could have.

Well, in order to “understand” this I would have to disregard everything I know about economics, financial markets, consumer behaviour and history, which (unfortunately for your “argument”) is a fair bit.

In any case, to use your awesome methodology: adult weekly earnings, +4.9 per cent ytd.

Canberra house prices, -2.2 per cent ytd.

More affordable!

devils_advocate said :

Both of these arguments tended towards “unaffordable” rather than “less affordable than at certain times in the past”.

Gosh, it’s amazing that this needs to be spelled out – “Less affordable in general for everybody” means “unaffordable for more people”.

If you look at me exceedingly simple but surely unnecessary analogy above, anybody with at least $50 in 1995 could buy 1 doodah.
In 2012, you need a minimum of $160 to buy one doodah.

Less affordable!
I’m glad we’re agreed on that, at least, although there did appear to be some numeracy-challengees here who couldn’t quite grasp the concept of an increasing house price:income ratio.

Now for you to understand that less affordable means a much higher bar over which the less well off are now completely unable to jump whereas in the past they could have.

devils_advocate2:08 pm 24 Jan 12

HenryBG said :

I *do* hope you can grasp this simple concept.

As valiant is for you to attempt to use condescension to make a point, (and this might come as a blow to your ego) people are responding to the thread in general, not just to you.

Some on here (including myself) seemed, variously, bemused/incensed by the comment that an EL1 can’t afford a first home. There was another argument put forth at some point bemoaning the fact that housing had become a luxury when it should be viewed as a neccessity. Both of these arguments tended towards “unaffordable” rather than “less affordable than at certain times in the past”.

In any case, house prices are on the way down, so by your simple metrics housing is now more affordable than it has been in the past.

So what is your problem.

Very few, if any, posters in this thread are making the claim that housing is no less affordable than it used to be. Saying that would just be ludicrous.

What is frustrating many of us is these people who are complaining that it’s just impossible to buy your own first home these days when there’s evidence to the contrary and wanting someone else to do something about it for them.

OpenYourMind said :

I am still seeing young people who are determined to own their own property in Canberra managing to do so. It’s not easy, but it wasn’t 15 years ago either.

Geez you’re thick.
It was *easier* 15 years ago. Now, it’s *harder*.

How about a simple analogy:

In 1995, you go to the doodah shop with $100 in your pocket. Doodahs are $50 each, so you come home with two of them.

In 2012, you Gen-Y nephew goes to the shop. He has $180 in his pocket thanks to the increase in average wage. However, doodahs are now $160 each due to the government and banks doing stuff which has reduced supply. Your Gen-Y nephew can only afford 1.

Back in 1995, you got twice what people can get now with their money. We can say: “Doodahs are less affordable”.

I *do* hope you can grasp this simple concept.

devils_advocate1:42 pm 24 Jan 12

GBT said :

Pestiness, I suggest you look up the definition of a troll.

It doesn’t mean: “Someone who doesn’t agree with me and uses defensible arguments to make their point.”

FWIW, I think it’s more that *some people* have an axe to grind/specific personal greivance rather than being a troll per se.

Much of the reason for the acrimony in this thread is the binary view of the world i.e. housing is either affordable or it’s not. I would be willing to concede that housing is LESS affordable than it has been at certain times in the past, including in recent history.

However I still think it’s affordable – by definition it has to be because first home buyers are entering the market all the time. I also happen to think that the people are claiming unaffordability are simply unwilling to sacrifice the lifestyle that others in a similar position forgo in exchange for leaving the rental market.

Pestiness, I suggest you look up the definition of a troll.

It doesn’t mean: “Someone who doesn’t agree with me and uses defensible arguments to make their point.”

Pestiness said :

I don’t think you get it, NoImRight. Having a roof over your head is indeed a need, but it is becoming a luxury for many people below the average income. Many of these people are financially better off not working, and seeking government support as they can’t afford to pay the rent otherwise. You need to take a trip outside of your own McMansion some time. I’m assuming the handle is short for “No (I refuse to listen as) I’m (a) right (-wing out-of-touch troll… that other rioters probably shouldn’t feed)”.

Not agreeing with the wahmbulance brigade doesnt mean I dont “get it” and thanks for the confidence in me but I neither have nor want a McMansion.

Your assumptions about me otherwise are just that. Its almost like youve described a Bizarro version of me which only demonstrates your eagerness to write and your unwillingness to read. Slightly, but only slightly, amusing that you throw around the troll epithet and yet your post is a classic troll itself.

Respond on this if you want or dont. Im happy to discuss the topic but not interested in your fantasy world.

VYBerlinaV8_is_back8:59 am 24 Jan 12

It’s worth being careful with the demographia stuff, as it uses different methods for different countries. I’ve been told they don’t include units, for example, in Australia.

HenryBG said :

dpm said :

According to this ‘Demographia International Housing Affordability Survey’ report, Canberra is the 7th most affordable Aus city for housing.
http://www.demographia.com/dhi.pdf
That’s because the survey employs the “Median Multiple” (median house price divided by gross [before tax] annual median household income) to rate housing affordability.
In this case, the median Canberra household income is $105k…. (the median house is apparently $513k).

By that argument, the ACT government could start feeding caviar the inmates at Hume – “But it’s only the 7th most expensive caviar!” they could tell us.

The HIA report mentioned earlier in this thread quantifies precisely how the ratio of house prices to income has almost doubled since the 1990s.

It really shouldn’t take a genius to understand that when a price to income ratio has almost doubled, this means that affordability for that commodity has significantly dropped.

It’s astounding that there are so many participating in this thread who are so enjoying their gleeful smugness they refuse to admit this undeniable reality.

Chillax. I wasn’t ‘arguing’ with anyone. I was simply mentioning this new report in this thread, as it seemed quite relevant. Isn’t it? I hadn’t even made a personal opinion on the matter (the closest to that would be the word ‘apparently’ that I used).

So I hope your thinly-veiled insults ‘genius’ and ‘gleeful smugness’ aren’t aimed at me.

FWIW, if you skim the report I linked, you’ll notice the Canberra multiple is still considered ‘seriously unaffordable’ ….
Enjoy your day.

OpenYourMind6:18 am 24 Jan 12

HenryBG, how the hell am I being smug when I am suggesting people live within their means, save a deposit and buy where they can afford (which, over time and as the population grows, will be further out from the CBD). I am reacting to comments from people suggesting that they are too ‘good’ for certain suburbs.
I am still seeing young people who are determined to own their own property in Canberra managing to do so. It’s not easy, but it wasn’t 15 years ago either.

OpenYourMind said :

Simple supply and demand means that even those with Pestiness thoroughbred education can’t afford to start out in Yarralumla or O’Connor.

That’s exactly where me and my peers all bought our first houses just 15 years ago: O’Connor, Narrabundah, Garran, Curtin. A couple bought newish houses out in woop-woop somewhere.

Now, due to the increasing unaffordability of housing, first home buyers are facing a much more difficult task and far fewer choices than we did.

Your analysis of all this continues to be completely wrong, offensively generalised, and insufferably smug.

OpenYourMind6:05 pm 23 Jan 12

Pestiness said :

Ok… So if you’re living beyond your means it will be difficult to buy in. That’s a given. No arguments here. I am unusual for someone my age. Uni educated with a good income, have only ever been in debt for my education and property, have lived in my share of group houses and with family (lucky for me), slept on futons with milk crates for furniture (shhhh!), have never owned a new car (a supreme waste of money imo) and yet cos i don’t want to live in a suburb that depresses me cos there is no space between the buildings and i can hear my neighbour’s daily bowel movements (really, they should just build one big roof over the whole of gunghalin and cut the building costs) i am being greedy and unrealistic to want a humble place in the town where my parents and their parents grew up?
I don’t want a mcmansion! I have always been happy to be frugal and save for things i want. Even an average place ln the fringes is close to the price of a shitbox in a crap suburb further in. I like my elderly parents and don’t want them driving to goulburn (the thought of dad doing that is scary) to visit me. I’d like a modest place that’s sep title so i can make it my home without having to ask approval for doing minor improvements! (in fact, i find it disgusting that you can pay a few grand for body corp and get basically nothing in return in many canberra developments). Our rental prices are astronomical and most can’t afford to save and pay rent and other living expenses (for NECESSITIES – NOT LUXURIES!) on an average wage. I don’t like the thought of renting and helping to pay off someone elses mortgage in any case (the only option for many people) I’m in a good financial position with no debt, no kids and while i like clothes and shoes, i shop sensibly… and I’m having a hard time finding the right place at the right price, so how is an aussie battler (or even a couple on average income) gonna do it?
I’m thinking about setting up a hippy squatter camp under commonwealth (ahem) bridge for young professionals who would like to continue working and living in canberra. Who wants to join me?

And there it all is in one nicely wrapped package. ‘Pestiness’ is not talking about affordability, what he/she is really saying is that they are too good to start out in an outer suburb or apartment/flat. Pestiness, you’ll find that lots of those in older generations with nice houses probably started out buying in less desirable outer suburbs or started with apartments. When I was training as a Cabbie, I remember the manual had some Canberra historical notes, one of which was that Torrens was considered too far out and the Govt effectively gave away the land.

Simple supply and demand means that even those with Pestiness thoroughbred education can’t afford to start out in Yarralumla or O’Connor.

dpm said :

According to this ‘Demographia International Housing Affordability Survey’ report, Canberra is the 7th most affordable Aus city for housing.
http://www.demographia.com/dhi.pdf
That’s because the survey employs the “Median Multiple” (median house price divided by gross [before tax] annual median household income) to rate housing affordability.
In this case, the median Canberra household income is $105k…. (the median house is apparently $513k).

By that argument, the ACT government could start feeding caviar the inmates at Hume – “But it’s only the 7th most expensive caviar!” they could tell us.

The HIA report mentioned earlier in this thread quantifies precisely how the ratio of house prices to income has almost doubled since the 1990s.

It really shouldn’t take a genius to understand that when a price to income ratio has almost doubled, this means that affordability for that commodity has significantly dropped.

It’s astounding that there are so many participating in this thread who are so enjoying their gleeful smugness they refuse to admit this undeniable reality.

I don’t think you get it, NoImRight. Having a roof over your head is indeed a need, but it is becoming a luxury for many people below the average income. Many of these people are financially better off not working, and seeking government support as they can’t afford to pay the rent otherwise. You need to take a trip outside of your own McMansion some time. I’m assuming the handle is short for “No (I refuse to listen as) I’m (a) right (-wing out-of-touch troll… that other rioters probably shouldn’t feed)”.

According to this ‘Demographia International Housing Affordability Survey’ report, Canberra is the 7th most affordable Aus city for housing.
http://www.demographia.com/dhi.pdf
That’s because the survey employs the “Median Multiple” (median house price divided by gross [before tax] annual median household income) to rate housing affordability.
In this case, the median Canberra household income is $105k…. (the median house is apparently $513k).

HenryBG said :

NoImRight said :

A roof over your head is a basic need. Owning that roof isnt. People need to start realising that. Then they can make the decision about whether they want to rent the “nice” house straight away, and maybe forever, or whether they are prepared to give up some luxuries for a long term goal.

Right, and to make things much more difficult, affordability is down to almost half what it was 15 years ago.
So you get far less bang for your buck today than you did then.
This is what people are talking about.
Good to see you’re on-board!

So you think being deliberately obtuse is somehow making a contribution? Does your carer know you have access to the internet?

NoImRight said :

A roof over your head is a basic need. Owning that roof isnt. People need to start realising that. Then they can make the decision about whether they want to rent the “nice” house straight away, and maybe forever, or whether they are prepared to give up some luxuries for a long term goal.

Right, and to make things much more difficult, affordability is down to almost half what it was 15 years ago.
So you get far less bang for your buck today than you did then.
This is what people are talking about.
Good to see you’re on-board!

A roof over your head is a basic need. Owning that roof isnt. People need to start realising that. Then they can make the decision about whether they want to rent the “nice” house straight away, and maybe forever, or whether they are prepared to give up some luxuries for a long term goal.

Ok… So if you’re living beyond your means it will be difficult to buy in. That’s a given. No arguments here. I am unusual for someone my age. Uni educated with a good income, have only ever been in debt for my education and property, have lived in my share of group houses and with family (lucky for me), slept on futons with milk crates for furniture (shhhh!), have never owned a new car (a supreme waste of money imo) and yet cos i don’t want to live in a suburb that depresses me cos there is no space between the buildings and i can hear my neighbour’s daily bowel movements (really, they should just build one big roof over the whole of gunghalin and cut the building costs) i am being greedy and unrealistic to want a humble place in the town where my parents and their parents grew up?
I don’t want a mcmansion! I have always been happy to be frugal and save for things i want. Even an average place ln the fringes is close to the price of a shitbox in a crap suburb further in. I like my elderly parents and don’t want them driving to goulburn (the thought of dad doing that is scary) to visit me. I’d like a modest place that’s sep title so i can make it my home without having to ask approval for doing minor improvements! (in fact, i find it disgusting that you can pay a few grand for body corp and get basically nothing in return in many canberra developments). Our rental prices are astronomical and most can’t afford to save and pay rent and other living expenses (for NECESSITIES – NOT LUXURIES!) on an average wage. I don’t like the thought of renting and helping to pay off someone elses mortgage in any case (the only option for many people) I’m in a good financial position with no debt, no kids and while i like clothes and shoes, i shop sensibly… and I’m having a hard time finding the right place at the right price, so how is an aussie battler (or even a couple on average income) gonna do it?
I’m thinking about setting up a hippy squatter camp under commonwealth (ahem) bridge for young professionals who would like to continue working and living in canberra. Who wants to join me?

Grail said :

Cars are not assets, and barely class as liabilities: they are money sinks. I saved most of my deposit for my first house while living at home and riding the bike or catching the bus to work. That’s how much money a car costs you: first there’s the cost of insurance and registration, then there’s the cost of petrol and maintenance, but then there are the hidden costs such as going to the movies with friends because you can just drive there, it’s so convenient! Without a car, you end up inviting your friends to watch DVDs and have pizza at your place instead.

Seriously, in Canberra? Public transport is so crap if your friends don’t all have cars then your gathering won’t be able to go past 10-11pm or 7pm on Sundays! Ironically if you don’t have cars it’s probably best to meet in public or not at all – going to friends’ houses of an evening (or having them come to mine) was a luxury we needed cars for! I know that’s probably not the point you were trying to make but bad example of a cheap activity lol.

Having said that I do think it’s stupid for a young person to buy a brand new car, or to spend significant money on a car before having a house deposit (if they wish to buy a house). I very carefully researched mine and delayed so long it barely made a dent in my savings and I got an excellent deal. Also, my car is very efficient and petrol + insurance cost less than the bus per month. (Obviously it’s depreciating too, but it was getting to the point where I really needed a car.)

Grail said :

HenryBG said :

Normal people in their 20’s actually have a life, though. Having a life costs money. Being a scrounger on your parents isn’t everybody’s cup of tea, and not that many 20-year-olds are going to be happy being the pathetic losers who catch buses everywhere.

Well, you go “have a life” then, and stop whining about housing affordability. Just because you can’t envisage a “life” that doesn’t include driving a car everywhere and dining out with your friends every night doesn’t mean that being frugal can’t be fun.

People who whinge that they can’t have a life without spending are a bit like people who whinge that there’s nothing to do in Canberra. It’s more a reflection on the person than on reality.

HenryBG said :

Normal people in their 20’s actually have a life, though. Having a life costs money. Being a scrounger on your parents isn’t everybody’s cup of tea, and not that many 20-year-olds are going to be happy being the pathetic losers who catch buses everywhere.

Well, you go “have a life” then, and stop whining about housing affordability. Just because you can’t envisage a “life” that doesn’t include driving a car everywhere and dining out with your friends every night doesn’t mean that being frugal can’t be fun.

devils_advocate2:04 pm 19 Jan 12

chewy14 said :

It’s not until late 20’s or early 30’s that people are settled and earning enough to be able to save the large amounts of money needed to purchase a house.

Depends if they managed to develop saving habits. Speaking for my own generation, there are a number of us that became accustomed to living at home and consuming their entire paycheck week to week – car payments, video game consoles, eating out for lunch at work and dinner most nights, beers at the pub after work, etc etc. When you have no financial committments, this is easy to do and worse still this level of consumption is habit forming. Makes it very difficult to save when you decide that you want something.

I went straight from being on austudy to being mortgage poor when I was 20. Got used to spending only what was left over after mortgage and utilities bills. It’s only relatively recently in my life that I’ve got accustomed to the idea of having truly “disposable” income.

HenryBG said :

Grail said :

I saved most of my deposit for my first house while living at home and riding the bike or catching the bus to work. That’s how much money a car costs you: first there’s the cost of insurance and registration, then there’s the cost of petrol and maintenance, but then there are the hidden costs such as going to the movies with friends because you can just drive there, it’s so convenient! Without a car, you end up inviting your friends to watch DVDs and have pizza at your place instead.
.

Normal people in their 20’s actually have a life, though. Having a life costs money. Being a scrounger on your parents isn’t everybody’s cup of tea, and not that many 20-year-olds are going to be happy being the pathetic losers who catch buses everywhere.

I don’t even think having a life in your 20’s comes into it much.
Most people in their early 20’s will be studying or doing apprenticeships.
A fair proportion of people in their 20’s won’t be able to live at home.
And more importantly, most people in their 20’s won’t have the income to be able to save for a house deposit anyway.

It’s not until late 20’s or early 30’s that people are settled and earning enough to be able to save the large amounts of money needed to purchase a house.

devils_advocate10:45 am 19 Jan 12

HenryBG said :

Normal people in their 20’s actually have a life, though. Having a life costs money. Being a scrounger on your parents isn’t everybody’s cup of tea, and not that many 20-year-olds are going to be happy being the pathetic losers who catch buses everywhere.

I agree having a life costs money, but in the absence of unlimited money we have to make choices. You can have a brand new car and get it serviced under warranty by a commercial workshop; or you can drive a shitbox for a few years and fix it yourself. You can drink cocktails in manuka or get two-for-one jugs of beer for $8 at zorros (for mine, the latter was always way more fun). You can buy cases of commercial beer or brew your own. You can pay full price for italian wool suits, or wait until boxing day and stock up on them. You can drive down the coast with your mates to camp on the beach for the weekend or you can grab a flight to bali and stay in a 4 star hotel.

Ultimately, how much people spend on having a life is their choice. But where you have a limit on how much money you make, these choices impact on other choices, such as the choice between buying and renting.

Grail said :

I saved most of my deposit for my first house while living at home and riding the bike or catching the bus to work. That’s how much money a car costs you: first there’s the cost of insurance and registration, then there’s the cost of petrol and maintenance, but then there are the hidden costs such as going to the movies with friends because you can just drive there, it’s so convenient! Without a car, you end up inviting your friends to watch DVDs and have pizza at your place instead.
.

Normal people in their 20’s actually have a life, though. Having a life costs money. Being a scrounger on your parents isn’t everybody’s cup of tea, and not that many 20-year-olds are going to be happy being the pathetic losers who catch buses everywhere.

Bramina said :

The problem is the price of land.

The “problem” is many faceted, the price of land is but one facet of the problem. Note that we can’t keep expanding Canberra forever. There are limits due to water supply: sure, we could suck the molongolo dry, but that leaves everyone downstream a little worse off, doesn’t it?

devils_advocate said :

If you have limited income and want a house, buying a brand new car is an extravagance full stop.

I was on my second house before I considered throwing down $14k+ on a car (which, BTW, is a depreciating asset, so barely even qualifies as an asset, IMO).

Hear, hear!

Cars are not assets, and barely class as liabilities: they are money sinks. I saved most of my deposit for my first house while living at home and riding the bike or catching the bus to work. That’s how much money a car costs you: first there’s the cost of insurance and registration, then there’s the cost of petrol and maintenance, but then there are the hidden costs such as going to the movies with friends because you can just drive there, it’s so convenient! Without a car, you end up inviting your friends to watch DVDs and have pizza at your place instead.

And bonus points for the ultimate “afford a house quickly” scheme, having your friends live with you chipping in their share of the “rent” 🙂

That’s the way capitalism works: if you want something, get other people to pay you for it.

joeyjojojuniorshabadoo said :

EvanJames said :

$600k, it might as well be on the moon for someone on $65k. This is the issue, there’s a significant number of people on “normal” incomes who work full time and save, but a house just moves further and further out of reach, and this is not a desirable state of affairs. Housing is a basic need, not a want or a luxury, but something has happened to move housing into that category.

lol yeah right, pay back 400k on 65k a year ? lmfao
Easy solution – don’t buy a $600k house on an income of $65k. Plenty of decent houses around for $350-$400k.

F***ing hell, people living beyond their means etc etc.

Traditionally, new suburbs on the fringes was where the battlers went, because houses were genuinely affordable – this is still the case in Sydney and Melbourne to an extent, but in Canberra something has gone awry because new suburbs are not the most affordable ones. That honour goes to suburbs built in the 80s and 90s.

I guess one reason is that new canberra suburbs are not as remote as, say, those in Sydney and Melbourne, so the negative stigma associated with living there is not so great, and people seem more willing to pay a premium for a new home here. Another reason is, of course, that in other cities prices of subdivided land are determined by the market, but in the ACT it’s the government, who has a vested interest in getting a good price.

The govt’s policy of releasing land in comparatively central locations like Molonglo or Kenny in Gungahlin will only make the affordablity problem worse – i never understood how the govt releasing 400-600sq m plots for $380,000 – 500,000 (the case in Molonglo) was going to increase affordability. The dilemma is that the govt can’t sell land at below market rates because this would rip the taxpayer off. If the govt was really concerned with affordability, it would focus on releasing more inexpensive land on the fringes for proper suburbs on ok sized blocks, while also building more high density closer to the city (ie urban infill). In other words, more Bonner, more Kingston Foreshore, less McMansion ghettos like O’Malley and, soon, North Weston.

devils_advocate said :

Have a look at what an apartment/body corporate style house was in the 70’s, and have a look at it now. Apartments are now seen as permanent living options, not simply a first home stopgap on the way to a quarter acre block and freestanding house. Apartment/townhouse living has improved to the point where some would prefer it over houses, esp. as they generally require little to no garden maintenance.

The problem isn’t the size or condition of the house. If it were, people would demolish the shitty old houses and build new ones.

And new homes aren’t over priced. They can’t be. The market for building houses and fro the inputs are both very competitive.

The problem is the price of land.

devils_advocate4:39 pm 18 Jan 12

Thoroughly Smashed said :

WTF is a $40k Corolla anyway?

I dunno – where are you getting it from? All references above were to $20k corollas, as far as I can see.

Thoroughly Smashed4:19 pm 18 Jan 12

WTF is a $40k Corolla anyway?

devils_advocate said :

Grail said :

As for car prices: why pay $20k for a second hand corolla when you can pay $14k for a brand new Barina?

If you have limited income and want a house, buying a brand new car is an extravagance full stop.

My first car was manufactured well before I was born….

In summary, buy a 180B. Even if everything goes terribly wrong, you can buy an engine and gearbox for around the cost of a tank of petrol.

I haven’t gotten in this thread yet, until you mentioned the 180B, also my first car. The damn thing ran forever, and I ended up giving it away after 4 years at uni! I still drive a car turning 15 this year, cost of $4000.

I bought my house in Kambah knowing it was not a great house, in not a great neighbourhood. It still isn’t, but I own the house outright. I was lucky to buy in 1999, a slow year just before the surge in prices in Canberra. A difference was that I bought an investment property for each of the following 4 years, while having a series of obnoxious flatmates helping to pay my own mortgage. Those properties now mean that when I find a higher quality residence, I can afford to do it on a 34 year old teacher’s salary with wife and kids in tow.

In short, luck, coupled with hard work, a realisation of delayed gratification, and a long term view means I am not having to eat noodles each night at all… It was possible, but I fear that it is now getting too difficult for new players.

joeyjojojuniorshabadoo2:42 pm 18 Jan 12

devils_advocate said :

Grail said :

As for car prices: why pay $20k for a second hand corolla when you can pay $14k for a brand new Barina?

If you have limited income and want a house, buying a brand new car is an extravagance full stop.

My first car was manufactured well before I was born. I couldn’t “afford” to take it to a mechanic (read: prioritised mortgage payments, and going out drinking etc) so if it broke I fixed it myself. If I didn’t know how I read a book and/or got help from my mates.

I was on my second house before I considered throwing down $14k+ on a car (which, BTW, is a depreciating asset, so barely even qualifies as an asset, IMO).

In summary, buy a 180B. Even if everything goes terribly wrong, you can buy an engine and gearbox for around the cost of a tank of petrol.

This is sound advice (well, maybe not so much the part about buying a 180B!).

joeyjojojuniorshabadoo2:38 pm 18 Jan 12

EvanJames said :

$600k, it might as well be on the moon for someone on $65k. This is the issue, there’s a significant number of people on “normal” incomes who work full time and save, but a house just moves further and further out of reach, and this is not a desirable state of affairs. Housing is a basic need, not a want or a luxury, but something has happened to move housing into that category.

Easy solution – don’t buy a $600k house on an income of $65k. Plenty of decent houses around for $350-$400k.

Fucking hell, people living beyond their means etc etc.

devils_advocate2:21 pm 18 Jan 12

Grail said :

As for car prices: why pay $20k for a second hand corolla when you can pay $14k for a brand new Barina?

If you have limited income and want a house, buying a brand new car is an extravagance full stop.

My first car was manufactured well before I was born. I couldn’t “afford” to take it to a mechanic (read: prioritised mortgage payments, and going out drinking etc) so if it broke I fixed it myself. If I didn’t know how I read a book and/or got help from my mates. I was on my second house before I considered throwing down $14k+ on a car (which, BTW, is a depreciating asset, so barely even qualifies as an asset, IMO).

In summary, buy a 180B. Even if everything goes terribly wrong, you can buy an engine and gearbox for around the cost of a tank of petrol.

EvanJames said :

Housing is a basic need, not a want or a luxury, but something has happened to move housing into that category. And it’s happened quite quickly so there’s a large group of people who acquired housing when it was within reach, who are looking at people now and not grasping the change that’s happened.

Housing or shelter is a basic need. But owning one is not. You can rent a house/apartment instead.

I’m not familiar with how policies regarding investment properties have affected the market, but this is the way I see it:

* Dual income households are common today = more disposable income
* Dual income households buy in “inner” suburbs = price goes up because supply is limited and people who buy in those suburbs are willing to pay more because of fomo
* People who can’t afford the desirable suburbs buy in the adjacent slightly cheaper suburbs = ripple effect
* Households with less disposable income priced out of the general market (but perhaps not out of the currently non-desirable “outer suburbs”)

Houses are only worth as much as what people are willing to pay for them. If people with high disposable income are willing to pay a lot, then unfortunately, people who don’t have high disposable income are at a disadvantage.

Jpo said :

Actually, you can still buy a house in Narrabundah for well under $600K. Also in 1998 (and even still much later than that) Narrabundah was considered a ‘dodgy suburb’ by many.

$600k, it might as well be on the moon for someone on $65k. This is the issue, there’s a significant number of people on “normal” incomes who work full time and save, but a house just moves further and further out of reach, and this is not a desirable state of affairs. Housing is a basic need, not a want or a luxury, but something has happened to move housing into that category. And it’s happened quite quickly so there’s a large group of people who acquired housing when it was within reach, who are looking at people now and not grasping the change that’s happened.

It’s also quiet dangerous to be in such massive debt that a change in interest rates can have you facing bankruptcy. This is in part what led to the American GFC, too many people who couldn’t afford it having home loans they couldn’t service if anything changed, and it did.

devils_advocate9:56 am 18 Jan 12

PantsMan said :

WTF? I can spend over one whole pay check a month on a mortgage to have a loan on a sh*tbox for thirty years, while eating noodles. What a socialist workers’ paradise this s$#thole is.

Paying 50 pc of your salary on housing isn’t that much of an issue if you’re on an EL1 salary.

Maxwell said :

devils_advocate said :

Thoroughly Smashed said :

Maxwell said :

Even on a single EL1 income you can’t really afford to buy.

WT and additionally F?

LOL yeah I was wondering if I was the only one that thought that was a bit much. I mean an EL1 salary should support a mortgage, even if it’s a line agency.

750 a week mortage repayments… el1 is what 1300 a week ?

EL1 is $88-106k pa. If you can’t manage to buy a house and maintain a family with two children and stay-at-home-other-half, you really need to stop spending like you’re a millionaire. Stick to one car (for the stay-at-home & kids), public transport to get to work, wear shorts and short-sleeve shirt instead of turning the air-conditioning on at 27C, play Scrabble and Five Hundred instead of insisting on new release titles for your three video game consoles attached to one of the various televisions around the house, etc.

I managed to live quite happily on half that, paying a mortgage for a 2br apartment, eating home cooked meals and avoiding TV like the plague.

$450 a week for a room in a share house indicates that you’re trying to taste champagne while stranded on a beer budget. I could rent you an entire 2br apartment (with aircon and two under cover parking places) for $380/wk. So perhaps people complaining about the cost of living just need to reign in their lifestyle.

As for car prices: why pay $20k for a second hand corolla when you can pay $14k for a brand new Barina?

Lifestyles of the rich and famous are extravagant because they’re rich, duh.

Try selling a 2 bedroom house with no garage and no air-conditioning to a young couple who just left their parents homes these days. They’ll tell you you’re dreaming!

HenryBG said :

devils_advocate said :

If house prices double, but the amount the banks are prepared to lend borrowers doubles, and the ability to repay the interest doubles due to more stable and lower interest rates, more stable and lower unemployment rates, higher real wages, reduced consumer prices, and potential borrowers are actually able to qualify for the loans due to laxer lending criteria, then affordability hasn’t necessarily reduced.

Gibberish.
Interest rates are barely lower and no more stable now that than they were in 1998, house prices have grown 300%, but wages have grown by less than 50%.

I don’t understand why you are trying to argue that affordability hasn’t reduced when it so very clearly has. I could buy a decent house in O’Connor for $200,000 in 1998, or $160,000 in Narrabundah but you’re looking at $600,000 for either of these suburbs these days. Even dodgy suburbs are costing well over $400,000.
Clearly this is far less affordable for people just entering the housing market.
As they are telling you.
But you aren’t listening.
Because of your smug “I’m alright Jack” attitude.

Actually, you can still buy a house in Narrabundah for well under $600K. Also in 1998 (and even still much later than that) Narrabundah was considered a ‘dodgy suburb’ by many.

Even if the generalised asertions on house prices and wages you quote in your post are accuarte, they are not necessarily reflective of the strengh or weakness of the housing market in any particular suburb or city.

breda said :

“Breda,

Most people get paid fortnightly. I think he was saying 50% of his salary.'”

————————————————————————

He was the one who mentioned monthly costs, not me.

When I first got my home loan, it was more than 50% of my after tax income. After a few years, it was cheaper than renting. It’s called ‘deferred gratification’.

Boo hoo, OP, and bad luck that all the lessons about self esteem being the main determinant of success didn’t pan out in the real world.,

I grew up in a house where my single mother on the supporting parents pension paid a $500 deposit on a $58,000 house that had a leaking roof and mold growing on the walls. Interest rates were 17 per cent. I’ve since graduated from two Group of Eight universities. Through shear miserable bad luck I’ve ended up stuck in Canberra working in the public service (career over) with sociopathic, lazy, whinging, dumb, brats. I’m pretty sure I know what getting off one’s arse looks and feels like thanks Brenda!

As for subsidizing baby boomers, who pays for their pensions and tax breaks, superannuation tax concessions, health care, aged care? Will that be provided free for me?

breda said :

“Breda,

Most people get paid fortnightly. I think he was saying 50% of his salary.'”

————————————————————————

He was the one who mentioned monthly costs, not me.

When I first got my home loan, it was more than 50% of my after tax income. After a few years, it was cheaper than renting. It’s called ‘deferred gratification’.

Boo hoo, OP, and bad luck that all the lessons about self esteem being the main determinant of success didn’t pan out in the real world.,

Whats that even mean ?

You bought something for 120k 10 years ago and then now someone else has to pay 400k for it ?

What the fuck has that got to do with self esteem ?

devils_advocate said :

Thoroughly Smashed said :

Maxwell said :

Even on a single EL1 income you can’t really afford to buy.

WT and additionally F?

LOL yeah I was wondering if I was the only one that thought that was a bit much. I mean an EL1 salary should support a mortgage, even if it’s a line agency.

750 a week mortage repayments… el1 is what 1300 a week ?

johnboy said :

PantsMan said :

WTF? I can spend over one whole pay check a month on a mortgage to have a loan on a sh*tbox for thirty years, while eating noodles. What a socialist workers’ paradise this s$#thole is.

AND you’re funding a boomer’s 40 year retirement. Which is the really important thing here.

I’m not sure I should ask, and I’m not sure if I’m in this boomer category, but how on earth would you be funding my ‘retirement’ when eventually that happens? (Not that I’m earning anything vaguely resembling a wage now, by the way.) Surely that’s funded by the superannuation that I (or to be totally honest, my husband) will have paid? Plus any real estate we own? I just don’t understand, and I expect criticism for my obvious ignorance, but can you please explain what you mean. You were being serious were you?

Prepared for buckets of ridicule…now.

breda said :

“Breda,

Most people get paid fortnightly. I think he was saying 50% of his salary.'”

————————————————————————

He was the one who mentioned monthly costs, not me.

When I first got my home loan, it was more than 50% of my after tax income. After a few years, it was cheaper than renting. It’s called ‘deferred gratification’.

Boo hoo, OP, and bad luck that all the lessons about self esteem being the main determinant of success didn’t pan out in the real world.,

Yes one pay a month, ie nearly half of his monthly wage, which is what he wrote.

As for the rest of your post, don’t worry about all the evidence provided to the contrary, the real reason people are unhappy is because they’re lazy. Damn gen y and their expectation to be able to find a place to live whilst not having to fund the entire retirement cost of the baby boomers. They should just suck it up and work harder like we didn’t have to.

“Breda,

Most people get paid fortnightly. I think he was saying 50% of his salary.'”

————————————————————————

He was the one who mentioned monthly costs, not me.

When I first got my home loan, it was more than 50% of my after tax income. After a few years, it was cheaper than renting. It’s called ‘deferred gratification’.

Boo hoo, OP, and bad luck that all the lessons about self esteem being the main determinant of success didn’t pan out in the real world.,

breda said :

“WTF? I can spend over one whole pay check a month on a mortgage to have a loan on a sh*tbox for thirty years, while eating noodles. What a socialist workers’ paradise this s$#thole is.”

———————————————————————————————-

So, you are spending 25% of your income on your mortgage and living on noodles?

Time to get your habit under control.

Breda,

Most people get paid fortnightly. I think he was saying 50% of his salary.

“WTF? I can spend over one whole pay check a month on a mortgage to have a loan on a sh*tbox for thirty years, while eating noodles. What a socialist workers’ paradise this s$#thole is.”

———————————————————————————————-

So, you are spending 25% of your income on your mortgage and living on noodles?

Time to get your habit under control.

Holden Caulfield6:15 pm 17 Jan 12

ainira said :

Anyway, the point I would like to make is that if you are healthy, have no dependents, and on a graduate salary, there’s no reason why you can’t save a reasonable amount of money that you could put towards buying an entry-level property.

You win.

Most kids these days want it all and they want it now. Little willingness to sacrifice to achieve a longer term goal.

PantsMan said :

WTF? I can spend over one whole pay check a month on a mortgage to have a loan on a sh*tbox for thirty years, while eating noodles. What a socialist workers’ paradise this s$#thole is.

AND you’re funding a boomer’s 40 year retirement. Which is the really important thing here.

devils_advocate said :

Thoroughly Smashed said :

Maxwell said :

Even on a single EL1 income you can’t really afford to buy.

WT and additionally F?

LOL yeah I was wondering if I was the only one that thought that was a bit much. I mean an EL1 salary should support a mortgage, even if it’s a line agency.

WTF? I can spend over one whole pay check a month on a mortgage to have a loan on a sh*tbox for thirty years, while eating noodles. What a socialist workers’ paradise this s$#thole is.

devils_advocate4:51 pm 17 Jan 12

Thoroughly Smashed said :

Maxwell said :

Even on a single EL1 income you can’t really afford to buy.

WT and additionally F?

LOL yeah I was wondering if I was the only one that thought that was a bit much. I mean an EL1 salary should support a mortgage, even if it’s a line agency.

Pestiness said :

“In the 1980s, houses used to cost an affordable three times the median household income. In recent years, they have climbed to nine times the household income in Sydney, according to the 2011 Demographia International Housing Affordability Survey. And this is despite more households now having more than one breadwinner.”

There’s also a good graph on p11 comparing Canberra to other capital cities. Flawed metrics, but the bottom line is housing is less affordable, regardless of how you crunch the figures. Stamp duty comparison on p16 is also interesting.

Source: http://www.cis.org.au/images/stories/policy-monographs/pm-125.pdf

Oh, and with regard to choosing body corp properties, I understand that this kind of living arrangement suits many people. Great if it does, not so great if you don’t really have a choice.

Check page 11 of the report, Although it does show housing is less affordable ……
It has Canberra as the most affordable city in Australia. 🙂 yay

Thoroughly Smashed3:55 pm 17 Jan 12

Maxwell said :

Even on a single EL1 income you can’t really afford to buy.

WT and additionally F?

“In the 1980s, houses used to cost an affordable three times the median household income. In recent years, they have climbed to nine times the household income in Sydney, according to the 2011 Demographia International Housing Affordability Survey. And this is despite more households now having more than one breadwinner.”

There’s also a good graph on p11 comparing Canberra to other capital cities. Flawed metrics, but the bottom line is housing is less affordable, regardless of how you crunch the figures. Stamp duty comparison on p16 is also interesting.

Source: http://www.cis.org.au/images/stories/policy-monographs/pm-125.pdf

Oh, and with regard to choosing body corp properties, I understand that this kind of living arrangement suits many people. Great if it does, not so great if you don’t really have a choice.

devils_advocate10:52 am 13 Jan 12

Maxwell said :

I’ll also throw it in that money for housing used to be given away to anyone who wanted a loan.

These days lending criteria are actually (or can be) rather tough.

A lot of people have a guarantor they don’t tell you about.

Depends on “used to be”. In 2000, in addition to handing over my pay slips and them calling my employer to check I was permanent, I was required to fill out a detailed form setting out all my monthly expenses. I also had to cancel a $5000 credit card, based on their assumption that I would max it out and then have to pay that back.

I bought another house in 2005. Things were a bit more relaxed at that point, but they still had a really close check of loan serviceability.

I went in to discuss a loan just before the GFC. IMO, this was the “low point” in lending standards, in terms of the banks handing out cash to anyone with a pulse. I looked at the amount they were willing to loan me (based on paper-based increases in value of the other houses, which to me are valueless as they are unrealised capital gains). I was absoluted horrified by the amount of money they were willing to throw at me, even back of the envelope calculations showed I could never service those amounts, I dunno what they were thinking.

I didn’t actually take out a third loan until post-GFC. By this time the lending standards had become more risk averse (In my view, reverted back to some semblance of being sensible) but of course the interest rates themselves were doing a lot of the work in terms of deterring speculative purchases by investors or owner-occupiers who really couldn’t service a loan.

As at around January this year, the interest rates are relatively low, and competition by the banks seems to be prompting a bit more aggressive lending strategies. Things have loosened up a bit but they appear to be considering servicability again. I think it has a long way to go before it gets as bad as immediately pre-GFC though.

Finally, with the guarantor thing, I asked about it in 2000 (but haven’t needed one since). I was told by the bank that gratuitous guarantees by third parties were unenforceable at law since various court decisions and so the bank didn’t accept them. This was consistent with my undergrad studies on unconscionable conduct (cases like amadio etc). Have banks been accepting or have started accepting guarantees again?

For all the comments on affordability:

I purchased a brand new, seperate title, 3 bedroom, single bathroom, single garage house last year for a lot less than $400k. In fact $66k less than $400. I bought this on a single salary (I also don’t rent any of the spare rooms out to cover part of the mortgage) and the government incentives for first home buyer and stamp duty concession were great initiatives which helped me to buy this place.

They also ‘marketed’ these incentives to the large developers, Village Building built mine and have built a lot of houses in Canberra marketed at first home buyers (most of the Village estates). I also still have a ‘life’ and eat out etc. Just remember, “West Belconnen” is not the sticks. Its closer than Yass for sure! I also have a great view of the surrounding country without loads of houses in the way.

If you are serious I would suggest finding a really good mortgage broker who will explain all your options, let you know how much you need to save etc and find you a good deal on a mortgage. Tiffen and Co helped me out immensely after meeting with two terrible brokers who basically told me I had no chance of buying as a “single” mortgagee. They were fantastic and still call me to check on how I am going. I also got a congratulatory bottle of champagne from them when I moved in (who said you can’t have champagne on a beer budget!).

devils_advocate9:47 am 13 Jan 12

Pestiness said :

Clearly RedDog is riding the wave of the baby boomers. He doesn’t realise that the X in Gen X is analogous to car crash. All I read in his posts is: ‘When IIIIIII was a boy….’ . Things have changed. Dramatically. You can’t even enter the non-bodycorp housing market with much less than half a million in Canberra anymore. I’m not saying ‘poor me’, I’m just saying that it aint like it used to be (and I’m a third generation Canberran).

Have a look at what an apartment/body corporate style house was in the 70’s, and have a look at it now. Apartments are now seen as permanent living options, not simply a first home stopgap on the way to a quarter acre block and freestanding house. Apartment/townhouse living has improved to the point where some would prefer it over houses, esp. as they generally require little to no garden maintenance.

Maxwell said :

Great post. You need to be on a dual income and have a good saving mentality.

Also just wondering what the “husband earns” and what contribution that might be making to the $430,000 house ?

If I took home $3500 a fortnight I could easily pay for two people to live and still save. Living for one person is not that much cheaper than living for two.

Hubby earns much more than me now, though we both initially started on the same graduate salary, and has substantially more savings as a result. However, we calculated that we can make minimum repayments on the house and live on *my* income alone if one of us got injured etc.

I think our savings mentality came from living on a combined income of $520/week (before rent and other expenses) six years ago, and still being able to save 😛 It wasn’t much left over, but enough to go on a ten-day holiday in New Zealand 🙂

Anyway, the point I would like to make is that if you are healthy, have no dependents, and on a graduate salary, there’s no reason why you can’t save a reasonable amount of money that you could put towards buying an entry-level property.

poetix said :

I too could bore on about how we bought our first house for a ridiculously low amount simply because we were entering the market at the right time, and pass that off as cleverness. However the more worrying aspect of the smugness on one side and near despair on the other that can be detected in this thread is that we are going to have people coming into Canberra to work every day who have no real commitment to the city and who live in dormitory cities (or towns) such as Goulburn or Yass.

People often reflect on the transience they detect in Canberra (people moving in and out with the public service) but the ridiculous rise in house prices will mean more and more people who live here long-term, are disconnected from the place they should see as home, as well as where they make their money. However long they work in Canberra, they may never be able to buy a house here. They would be unable to have much involvement in the wider community. They may even be spending too much time commuting to have much connection with the place their home is in the dormitory cities, and feel some resentment to those in Canberra. It doesn’t seem like a good vision for the future, actually a more divided society than we have now. It would not be the same as commuting within a city, such as Sydney, but being unable to live in the city at all.

This may all seem a bit extreme, but it’s already happening to some extent.

The apartments being built, while allowing more people to buy, are still much more expensive than houses were 20 years ago.

Sorry, there’s a mistake in para 2, should read ‘more and more people who work here long-term, are disconnected…’ not ‘live here…’.

I too could bore on about how we bought our first house for a ridiculously low amount simply because we were entering the market at the right time, and pass that off as cleverness. However the more worrying aspect of the smugness on one side and near despair on the other that can be detected in this thread is that we are going to have people coming into Canberra to work every day who have no real commitment to the city and who live in dormitory cities (or towns) such as Goulburn or Yass.

People often reflect on the transience they detect in Canberra (people moving in and out with the public service) but the ridiculous rise in house prices will mean more and more people who live here long-term, are disconnected from the place they should see as home, as well as where they make their money. However long they work in Canberra, they may never be able to buy a house here. They would be unable to have much involvement in the wider community. They may even be spending too much time commuting to have much connection with the place their home is in the dormitory cities, and feel some resentment to those in Canberra. It doesn’t seem like a good vision for the future, actually a more divided society than we have now. It would not be the same as commuting within a city, such as Sydney, but being unable to live in the city at all.

This may all seem a bit extreme, but it’s already happening to some extent.

The apartments being built, while allowing more people to buy, are still much more expensive than houses were 20 years ago.

screaming banshee7:45 pm 12 Jan 12

GBT said :

As was mentioned before, choosing to own a second car is also a luxury not a necessity, as is choosing to own the type of car that costs $450 a month over 5 years in car payments.

Actually the maths was $450/fortnight, so $900 a month…EACH, and wah wah wah we can’t save any money.

ainira said :

Lurch said :

This is what we call the rent trap and why it is so damn hard to get out of.
The only reason *I* am able to look at buying is through inheritance. So I guess the nay-sayers who say housing is affordable just need our parents to kick the bucket.
Let alone someone in their 20s wanting to actually, you know… have a life.

I disagree that it takes that long to save for a deposit on those salaries you indicated. I work in the university sector. My after tax income at the start of 2007 was just under $1400/fortnight and is now currently about $1770/fortnight (3 or 4% salary increase per year plus incremental salary progression).

I have $54,000+ saved at the moment (my savings were $0 at the start of 2007). This is after three overseas trips to Europe and Asia (2 five-week, 1 three-week), getting married, and paying half of the 10% holding deposit for a $430K house. My husband and I share our expenses equally.

In the expenses you listed, I think the credit card, expensive mobile/phone costs, and second car might be what’s eating into your savings.

Great post. You need to be on a dual income and have a good saving mentality.

Also just wondering what the “husband earns” and what contribution that might be making to the $430,000 house ?

If I took home $3500 a fortnight I could easily pay for two people to live and still save. Living for one person is not that much cheaper than living for two.

I’ll also throw it in that money for housing used to be given away to anyone who wanted a loan.

These days lending criteria are actually (or can be) rather tough.

A lot of people have a guarantor they don’t tell you about.

devils_advocate said :

Genie said :

I currently owe less than $2k on a car loan, have no other debt and have an excellent savings history. My problem is that I’m under 30 and trying to buy a place on my own. Even my bank told me to give up trying until I had a 20%+ deposit down.

I was 20 and bought (financed) a 4brm house and land package on an APS 4 salary. There were actual lending criteria back in those days – banks actually assessed people’s ability to pay back the loan. I didn’t have a 20 per cent deposit. Either you’re not trying hard enough or there’s something else you’re not telling us.

Wow ? Really, an APS4 ? You guys sure had it easy back then !

I think that the concept of home ownership is something people should put out of their minds. Even on a single EL1 income you can’t really afford to buy. I mean sure you’ll have the cashflow for the mortgage and all that but who thinks paying $450 a week for a room in a share house is a good idea ? Beacause that is the equation if you buy a house. (or spend 80% of your income on repayments)

The alternative is to buy a one or two bedroom dump and get utterly ripped off by some property investor.

I’ve had a look at a fair few places and my god the quality is just awful. If you buy a cheap place in the ACT it is not a cheap place at all, it is expensive, even more expensive it just happens to be of such an awful quality that a higher price cannot be charged.

$20k for a 1990 corolla is not cheap just because a 2011 corolla is 40k.

Understand ?

Clearly RedDog is riding the wave of the baby boomers. He doesn’t realise that the X in Gen X is analogous to car crash. All I read in his posts is: ‘When IIIIIII was a boy….’ . Things have changed. Dramatically. You can’t even enter the non-bodycorp housing market with much less than half a million in Canberra anymore. I’m not saying ‘poor me’, I’m just saying that it aint like it used to be (and I’m a third generation Canberran).

Lurch, I think you made the point there that obviously if people want to save a deposit they need to maybe take a cut in lifestyle.

I mean $400 a fortnight in fuel and $600 a fortnight in food sounds a little excessive. Not to mention a credit card doesn’t need to cost you anything if you pay it off during the interest free period.

As was mentioned before, choosing to own a second car is also a luxury not a necessity, as is choosing to own the type of car that costs $450 a month over 5 years in car payments.

As has already been mentioned in this thread, people want a nice 4 bedroom house for their first house and don’t want to reduce their lifestyle in order to get it.

chewy14 said :

NoImRight,
I’m not saying Keen hasn’t been wrong in the past but did you even take a casual glance at the graphs and information in the article? Predictions of massive falls may be incorrect but the information does present an unpleasant picture for people heavily geared in property investment.

No but you are probably right, housing will continue to double every 5-7 years forever, I mean that kind of growth is completely sustainable right? Right?

Yes I did look at the article. I wont say in depth because I didnt have time but I have read his stuff before. You’ll find though there are a few people that question his stats or at least his intepretation. Its a bit like climate change for every “proof” you have of a bubble I can probably find a “proof” that its wrong. Neither of us will be any closer to being right. My concern was more if you havent bought a house solely because of doomsayers they have robbed you to some small extent. Rightly or wrongly if you can buy a house, and could have some years ago, you wouldnt be worse off right now. I hope you at least made other investments instead? If teh bubble is real hopefully investments that will be protected from it. What they would be Im not sure?

Whether will prices keep doubling very 5 years I dont know. I havent seen much of that in some years personally. Then again Im not relying on those sorts of figures though either.

Here are some numbers to back up my argument:

Borrow $450K over 25 years at 7.3%
Repayments are $1501 per fortnight
After 5 years you still owe $411k

Borrow $300k over 25 years at 7.3%
Same level of repayments at $1501 per fortnight
After 5 years you owe $195k
After 10 years you only owe $46k

chewy14 said :

With regards to your example, well done. You took advantage of extremely favourable (bubble) conditions which most likely won’t continue.

The housing market will always have boom and bust cycles. Its time in the market that produces the returns, not your timing. If I knew in 1999 there was a boom coming, I would have bought everything in sight and let it sit vacant for 10 years.

chewy14 said :

Let me guess, you think your $750K property will be worth $1.5M in 5years?

No, it should be worth $1.5m in about 10 years. Historically real estate doubles in value about every 10 years give or take, irrespective of boom or bust cycles. This equates to a 7.2%pa return (ignoring the costs of ownership) which isn’t exactly spectacular but compounded of a long time really adds up. The trick is to minimise the amount of that gain that you hand over to the bank in the form of interest.

chewy14 said :

What happens when the s***box houses that people buy now for $350K are only worth $350K in five years time? It’s a bit hard to upgrade without those capital gains isn’t it?

[\quote]

Well, my shitbox was only worth $90k five years after I purchased it. Five years is much too short a timeframe to invest in the market. You upgrade by building the equity in your property, which is much easier to do if you only owe $300k instead of $500k. Besides, if your shitbox is still only worth $350k in five years time then the rest of the market will be at the same level as well. Relying on booms is not a good strategy as you have to buy as well as sell.

chewy14 said :

the issue isn’t that people want what others have, it’s that they want the same conditions that you had when you bought.

People have exactly the same conditions today as have existed for as long as man has wanted to call a piece of ground his own.

NoImRight,
I’m not saying Keen hasn’t been wrong in the past but did you even take a casual glance at the graphs and information in the article? Predictions of massive falls may be incorrect but the information does present an unpleasant picture for people heavily geared in property investment.

No but you are probably right, housing will continue to double every 5-7 years forever, I mean that kind of growth is completely sustainable right? Right?

chewy14 said :

RedDogInCan said :

That’s what the smart people do. My own case as an example:

Bought a s***box in poor suburb at the very edge of Canberra in the early 90’s for $90k. Paid it off then sold it in 2001 for $150k when it was still a s***box in a poor suburb but now considered an inner suburb. Used the proceeds to buy a nice $250k house in a good suburb. Paid it off and am currently in the process of selling it for $570k to buy an amazing $750k house in a top notch area. This was done mostly on one income and having two kids in the process.

At each step of the way I have only ever been paying off a couple of hundred thousand dollars over ten years.

Having compound interest working against you is the real killer.

Let me guess, you’re only contributed the minimum amount to superannuation as well?

Well you guess wrong.
I currently don’t own property simply because I think prices are far too high and that’s backed up by nearly every metric you can think of.

With regards to your example, well done. You took advantage of extremely favourable (bubble) conditions which most likely won’t continue.

Let me guess, you think your $750K property will be worth $1.5M in 5years?

What happens when the s***box houses that people buy now for $350K are only worth $350K in five years time? It’s a bit hard to upgrade without those capital gains isn’t it?

And NoImRight,

the issue isn’t that people want what others have, it’s that they want the same conditions that you had when you bought.
ie the government to stop artificially propping up housing prices to protect a small amount of the population who are property investors (speculators).

http://www.crikey.com.au/2012/01/11/is-australias-housing-bubble-finally-close-to-bursting/

Keen is the Lord Monckton of economists. Hes made a career out of this prediction.

Your a little late anyway according to this article the bubble already burst
http://www.prosper.org.au/2011/04/12/pop-the-real-estate-bubble-has-burst/

Maybe this guy is right instead though. It was about to “burst” in 2010. http://www.news.com.au/money/property/housing-market-will-implode-warns-edward-chancellor/story-e6frfmd0-1225861377051

Or maybe this guy. hes an expert too. It was going to “burst” anytime soon in February 2009

http://www.fatcat.com.au/news/home/Investment/233_0.html

You are probably right. Best not buy anything for another 10 or 20 years just in case.

devils_advocate2:49 pm 12 Jan 12

devils_advocate said :

There seems to be a bit of a misconception about what average wages are in the ACT. The relevant ABS cat is 6302.

In August last year, average weekly wage for full time adult in public sector was $1416. For private it was $1296. Public and private was $1322.

Multiply those out and have a think about whether you are actually on the average wage before you start complaining.

If all you can manage is an APS4 job then you’re doing it wrong.

Finally, the point about “average home” not being equal to “first home” is well made.

Further to the above, note the ACT is well above the national average, at around $1500. See:

http://www.treasury.act.gov.au/snapshot/AWOTE.pdf

devils_advocate2:42 pm 12 Jan 12

There seems to be a bit of a misconception about what average wages are in the ACT. The relevant ABS cat is 6302.

In August last year, average weekly wage for full time adult in public sector was $1416. For private it was $1296. Public and private was $1322.

Multiply those out and have a think about whether you are actually on the average wage before you start complaining.

If all you can manage is an APS4 job then you’re doing it wrong.

Finally, the point about “average home” not being equal to “first home” is well made.

johnboy said :

affordable housing is a bit more than a “want” if you “want” to have a society worth living in.

So are we talking about first homes still? Or average homes” Even home ownership? Affordable housing is a decent roof over your head not a golden ticket that says you have to own the roof.Given how many houses are selling though someone seems to be able to afford them. There arent that many DINK EL2 couples around to buy them all.

Lots of energy getting spent explaining why someone else should “do something” without too many people saying what they are doing for themselves.Dont wish to sound repetitive but, again, home ownership is not a right.

RedDogInCan said :

That’s what the smart people do. My own case as an example:

Bought a s***box in poor suburb at the very edge of Canberra in the early 90’s for $90k. Paid it off then sold it in 2001 for $150k when it was still a s***box in a poor suburb but now considered an inner suburb. Used the proceeds to buy a nice $250k house in a good suburb. Paid it off and am currently in the process of selling it for $570k to buy an amazing $750k house in a top notch area. This was done mostly on one income and having two kids in the process.

At each step of the way I have only ever been paying off a couple of hundred thousand dollars over ten years.

Having compound interest working against you is the real killer.

Let me guess, you’re only contributed the minimum amount to superannuation as well?

Well you guess wrong.
I currently don’t own property simply because I think prices are far too high and that’s backed up by nearly every metric you can think of.

With regards to your example, well done. You took advantage of extremely favourable (bubble) conditions which most likely won’t continue.

Let me guess, you think your $750K property will be worth $1.5M in 5years?

What happens when the s***box houses that people buy now for $350K are only worth $350K in five years time? It’s a bit hard to upgrade without those capital gains isn’t it?

And NoImRight,

the issue isn’t that people want what others have, it’s that they want the same conditions that you had when you bought.
ie the government to stop artificially propping up housing prices to protect a small amount of the population who are property investors (speculators).

http://www.crikey.com.au/2012/01/11/is-australias-housing-bubble-finally-close-to-bursting/

affordable housing is a bit more than a “want” if you “want” to have a society worth living in.

johnboy said :

RedDogInCan said :

That’s what the smart people do. My own case as an example:

Bought a s***box in poor suburb at the very edge of Canberra in the early 90’s for $90k. Paid it off then sold it in 2001 for $150k when it was still a s***box in a poor suburb but now considered an inner suburb. Used the proceeds to buy a nice $250k house in a good suburb. Paid it off and am currently in the process of selling it for $570k to buy an amazing $750k house in a top notch area. This was done mostly on one income and having two kids in the process.

At each step of the way I have only ever been paying off a couple of hundred thousand dollars over ten years.

Having compound interest working against you is the real killer.

Let me guess, you’re only contributed the minimum amount to superannuation as well?

How lovely for you. unfortunately neither triple digit capital gains nor $90k houses are out there for anyone else.

So the real issue someon else has what you want but cant have?

RedDogInCan said :

That’s what the smart people do. My own case as an example:

Bought a s***box in poor suburb at the very edge of Canberra in the early 90’s for $90k. Paid it off then sold it in 2001 for $150k when it was still a s***box in a poor suburb but now considered an inner suburb. Used the proceeds to buy a nice $250k house in a good suburb. Paid it off and am currently in the process of selling it for $570k to buy an amazing $750k house in a top notch area. This was done mostly on one income and having two kids in the process.

At each step of the way I have only ever been paying off a couple of hundred thousand dollars over ten years.

Having compound interest working against you is the real killer.

Let me guess, you’re only contributed the minimum amount to superannuation as well?

How lovely for you. unfortunately neither triple digit capital gains nor $90k houses are out there for anyone else.

chewy14 said :

NoImRight,
so what you’re saying is that people earning average or in some cases above average wages should buy s***boxes in the middle of nowhere. Houses that are far below average.

Can you see the disconnect here?

That’s what the smart people do. My own case as an example:

Bought a s***box in poor suburb at the very edge of Canberra in the early 90’s for $90k. Paid it off then sold it in 2001 for $150k when it was still a s***box in a poor suburb but now considered an inner suburb. Used the proceeds to buy a nice $250k house in a good suburb. Paid it off and am currently in the process of selling it for $570k to buy an amazing $750k house in a top notch area. This was done mostly on one income and having two kids in the process.

At each step of the way I have only ever been paying off a couple of hundred thousand dollars over ten years. Having compound interest working against you is the real killer.

Let me guess, you’re only contributed the minimum amount to superannuation as well?

chewy14 said :

NoImRight,
so what you’re saying is that people earning average or in some cases above average wages should buy s***boxes in the middle of nowhere. Houses that are far below average.

Can you see the disconnect here?

What Im saying is buy what you can afford. Some people of “average wages” (and I know this is a generalisation) bought these “s**boxes” of which you speak when young and now have accumulated assets to afford their better property. Some didnt. Some bought flashy cars, some went on overseas holidays. Again I know its a generalaisation but not a broad one.

I do understand your point that but if they cant afford them then I guess they arent average houses by definition are they? Finacial ambitions overreach financial abilities. Again we need to get away from this concept that we have some entitlement to certain lifestyle options.

Lurch said :

This is what we call the rent trap and why it is so damn hard to get out of.
The only reason *I* am able to look at buying is through inheritance. So I guess the nay-sayers who say housing is affordable just need our parents to kick the bucket.
Let alone someone in their 20s wanting to actually, you know… have a life.

I disagree that it takes that long to save for a deposit on those salaries you indicated. I work in the university sector. My after tax income at the start of 2007 was just under $1400/fortnight and is now currently about $1770/fortnight (3 or 4% salary increase per year plus incremental salary progression).

I have $54,000+ saved at the moment (my savings were $0 at the start of 2007). This is after three overseas trips to Europe and Asia (2 five-week, 1 three-week), getting married, and paying half of the 10% holding deposit for a $430K house. My husband and I share our expenses equally.

In the expenses you listed, I think the credit card, expensive mobile/phone costs, and second car might be what’s eating into your savings.

NoImRight,
so what you’re saying is that people earning average or in some cases above average wages should buy s***boxes in the middle of nowhere. Houses that are far below average.

Can you see the disconnect here?

It is very hard to save the deposit but again the fixation with a $400000 house when there are lots of properties lower priced. We seem to be fixated on a first house being an ideal house when that cant always be the case. Buy what you can afford and move up when you can.

We seem to believe home ownership is a right or an entitlement when it isnt.There is no obligation on anyone to make our life perfect. Buy what you can afford or else rent. Its harsh and Im glad I have the worst behind me becauseI do agree it seems harder now than it was even a few years ago.

Yes the idea of scrimp and save to get a deposit is a noble one.
But adding it up (and I’m going through this right now) $400K purchase price is $40k deposit. Add $15k for stamp duty, and say another $3k for legals and incidentals.
$58K.
Minus the $7k first home owners grant – $51K
Assume for a sec your lucky… 2 PS jobs, no kids. We’ll take an overage of say 1x APS4 and 1x APS6.
What are they these days? $55k + $75K? So thats $130K pa.
Roughly working out, thats about $1700 and $2200 per fortnight income. $3900 total.
The median 2 bedroom unit/townhouse rent in Canberra is $450 a week. $900 per fortnight.
Expenses?
I can only take an idea of what *I* spend per fortnight. Fuel? $200 Food? $300 Car Repayment? $450 Credit Card? $100 Mobile Phone? $40 Elec/Phone etc? $80. Total: $1170. Times two: $2340.
Leaving $660 per fortnight at a very maximum before anything else raises its head (rego, car repairs, clothes, wanting to go for a beer with your mates, and kind of hobby)
Add all those kinds of things up, and I reckon the left over is closer to $300 per fortnight, or $600 per month.
By my (probably poor) math, it would take a smidge over 7 years to save the $58K. And thats with *2* APS jobs and no kids.
God forbid you dont work in the public sector.
Reduce that income down to 2x $55k…. with none of the incidentals I included.. it leaves $160 per fortnight. But lets reduce that rent a bit to $300 per week with no incidentals. Thats $460 left in the pocket, or 9.2 years of saving.

This is what we call the rent trap and why it is so damn hard to get out of.
The only reason *I* am able to look at buying is through inheritance. So I guess the nay-sayers who say housing is affordable just need our parents to kick the bucket.
Let alone someone in their 20s wanting to actually, you know… have a life.

devils_advocate10:15 am 09 Jan 12

Tetranitrate said :

Oh I posted that graph in another thread on here some time ago. And it supports my position just as well now as it did then.
Nominal interest rates are not actually all that low now, nor did they become ‘low’ since the recession we had to have.
They were simply high in the 70s and 80s. The aberration in terms of nominal interest rates isn’t the present day, rather it’s the time during and immediately after the 70s oil crisis.
This ‘durrr house prices are high cause our interest rates are lower’ rubbish is obviously, demonstrably wrong and the graph you yourself posted proves it: despite nominal interest rates just as low as now, in the 50s/60s houses were as affordable as ever.

– and in actual fact once you correct for inflation you find we have relatively high real rates now, and much of the ‘high’ (nominal) period actually isn’t so – real rates were negative for much of the mid-late 70s because of oil-crisis caused inflation, until the early-mid 80s/early 90s when they were (courageously) raised and kept high to wrench that self perpetuating inflation out of the system.

Well there were two elements to that argument, being low AND stable. If interest rates are volatile (which in the past they were, more so than now) then risk-averse borrowers (in the economic sense, not in the colloquial sense) will borrow less because they can’t otherwise hedge themselves against swings in the interest rates.

I agree the nominal level of the interest rate doesn’t matter in theory, but in practice it impacts on people’s decision-making because we have a *relatively* rigid wage/price structure.

So my argument is not so much ‘durrr house prices are high cause our interest rates are lower’ but, to paraphrase, ‘durr, house prices are high cause interest rates are low AND more stable, we are less prone to importing inflation from overseas due to the dollar being floated and having an adjustment mechanism, real wages are higher (esp in Canberra) and credit has expanded, and higher nominal house prices (even relative to wages) does not neccessarily mean that affordability has declined”.

Hi Nolm,

I meant to say house prices have tripled in just over a decade, not a year. I noticed that after I posted but didnt bother to correct it given the focus in the thread on prices tripling since 1998 – I didnt think it was really necessary.

Tetranitrate4:54 pm 06 Jan 12

devils_advocate said :

HenryBG said :

devils_advocate said :

If house prices double, but the amount the banks are prepared to lend borrowers doubles, and the ability to repay the interest doubles due to more stable and lower interest rates, more stable and lower unemployment rates, higher real wages, reduced consumer prices, and potential borrowers are actually able to qualify for the loans due to laxer lending criteria, then affordability hasn’t necessarily reduced.

Gibberish.
Interest rates are barely lower and no more stable now that than they were in 1998, house prices have grown 300%, but wages have grown by less than 50%.

I don’t understand why you are trying to argue that affordability hasn’t reduced when it so very clearly has. I could buy a decent house in O’Connor for $200,000 in 1998, or $160,000 in Narrabundah but you’re looking at $600,000 for either of these suburbs these days. Even dodgy suburbs are costing well over $400,000.
Clearly this is far less affordable for people just entering the housing market.
As they are telling you.
But you aren’t listening.
Because of your smug “I’m alright Jack” attitude.

1) Interest rates – NB in particular the change since interest rate policy was set independently by RBA:

http://www.loansense.com.au/historicalrates2.gif

Oh I posted that graph in another thread on here some time ago. And it supports my position just as well now as it did then.
Nominal interest rates are not actually all that low now, nor did they become ‘low’ since the recession we had to have.
They were simply high in the 70s and 80s. The aberration in terms of nominal interest rates isn’t the present day, rather it’s the time during and immediately after the 70s oil crisis.
This ‘durrr house prices are high cause our interest rates are lower’ rubbish is obviously, demonstrably wrong and the graph you yourself posted proves it: despite nominal interest rates just as low as now, in the 50s/60s houses were as affordable as ever.

– and in actual fact once you correct for inflation you find we have relatively high real rates now, and much of the ‘high’ (nominal) period actually isn’t so – real rates were negative for much of the mid-late 70s because of oil-crisis caused inflation, until the early-mid 80s/early 90s when they were (courageously) raised and kept high to wrench that self perpetuating inflation out of the system.

Also they won’t be on a quarter acre block of land. In the same way as I was unable to buy a house in yarralumla on a shearer’s wage. None of this means housing is unaffordable.

Not at all the same thing: when the average house is unaffordable on the average wage, there’s obviously a problem.

HenryBG said :

Clearly this is far less affordable for people just entering the housing market.

I think you said it there. I think most people can agree that housing is less affordable than it used to be but that doesn’t make it unaffordable.

To be saying you are just unable to afford a house on an average wage just means you are unable to afford the house you want on an average wage.

devils_advocate said :

If house prices double, but the amount the banks are prepared to lend borrowers doubles, and the ability to repay the interest doubles due to more stable and lower interest rates, more stable and lower unemployment rates, higher real wages, reduced consumer prices, and potential borrowers are actually able to qualify for the loans due to laxer lending criteria, then affordability hasn’t necessarily reduced.

What is it with you people? Forget this trival quibbling over affordability.

Can’t you realise that as a whole society gets no benefit if housing is expensive.

When it is expensive it is a massive overhead on the rest of the economy. If housing is more expensive wages have to increase to provide the same shelter. That wage increase is completely unproductive, and it represents wealth sent overseas as interest on the banks short term funding.

High house prices represent nothing but a massive inefficiency, regardless of how affordable they are.

NoImRight said :

Im wondering a bit what motivates some people to almost salivate at the idea of the housing market collapsing?

The chance to demonstrate in no uncertain terms what unrealised capital gains are to the vocal pseudo riche.

But more seriously, because we probably need some catastrophic event in the housing sector to get some decent tax reform re. negative gearing, capital gains tax, FHOG etc.

Henry,

Are you saying 1st home buyers should be looking at homes in O’Connor and Narrbundah?

No wonder you don’t think that is affordable.

drfelonious said :

.

…. when houses cost three times what they did just over a year ago

Heres a bold statistic that should put to flight any arguments.

devils_advocate11:33 am 06 Jan 12

HenryBG said :

devils_advocate said :

If house prices double, but the amount the banks are prepared to lend borrowers doubles, and the ability to repay the interest doubles due to more stable and lower interest rates, more stable and lower unemployment rates, higher real wages, reduced consumer prices, and potential borrowers are actually able to qualify for the loans due to laxer lending criteria, then affordability hasn’t necessarily reduced.

Gibberish.
Interest rates are barely lower and no more stable now that than they were in 1998, house prices have grown 300%, but wages have grown by less than 50%.

I don’t understand why you are trying to argue that affordability hasn’t reduced when it so very clearly has. I could buy a decent house in O’Connor for $200,000 in 1998, or $160,000 in Narrabundah but you’re looking at $600,000 for either of these suburbs these days. Even dodgy suburbs are costing well over $400,000.
Clearly this is far less affordable for people just entering the housing market.
As they are telling you.
But you aren’t listening.
Because of your smug “I’m alright Jack” attitude.

1) Interest rates – NB in particular the change since interest rate policy was set independently by RBA:

http://www.loansense.com.au/historicalrates2.gif

2) First home buyers will have to get houses that are further away from the CBD than those purchased by their parents. That’s where the new houses are being built (leaving aside infill). It is true someone buying today is unlikely to get a place in turner or o’conner. Also they won’t be on a quarter acre block of land. In the same way as I was unable to buy a house in yarralumla on a shearer’s wage. None of this means housing is unaffordable.

devils_advocate said :

If house prices double, but the amount the banks are prepared to lend borrowers doubles, and the ability to repay the interest doubles due to more stable and lower interest rates, more stable and lower unemployment rates, higher real wages, reduced consumer prices, and potential borrowers are actually able to qualify for the loans due to laxer lending criteria, then affordability hasn’t necessarily reduced.

Gibberish.
Interest rates are barely lower and no more stable now that than they were in 1998, house prices have grown 300%, but wages have grown by less than 50%.

I don’t understand why you are trying to argue that affordability hasn’t reduced when it so very clearly has. I could buy a decent house in O’Connor for $200,000 in 1998, or $160,000 in Narrabundah but you’re looking at $600,000 for either of these suburbs these days. Even dodgy suburbs are costing well over $400,000.
Clearly this is far less affordable for people just entering the housing market.
As they are telling you.
But you aren’t listening.
Because of your smug “I’m alright Jack” attitude.

Just a wee bit behind here. But wanted to point out that a recent report from the National Housing Supply Council puts ACT one of the best in the country for housing supply, with a modest surplus. I therefore don’t think that the ACT govt is releasing too little land in order to drive up prices. If they were doing that (a la NSW which is, naturally, the worst) the demand would be outstripping supply. That position is not supported by the figures.

johnboy said :

NoImRight said :

Im wondering a bit what motivates some people to almost salivate at the idea of the housing market collapsing? Ive been hearing experts for at least 20 years making dire warnings about our housing bubble and that its about to plunge us all into a new Dark Ages. These are the same experts who sprayed “facts” across magazines and newspapers “proving” that anyone who invests in property is an idiot and the smart money is in shares. Yet the share market is almost constantly in a state of boom or bust. For every profit you make someone makes a loss.

Could these expert opinions just be sour grapes from at seeing others achieve so justifying to themselves at least how the world is against them?

Because asset bubbles are terrible things that do immense damage to a society and the sooner they are burst the less damage is done.

Asset bubble itself is an oversued term though and maybe an exaggeration here. Just saying a commodity is an asset bubble may justify to you your exclusion from it but it doesnt make it true. Fair bit of schadenfreude at work here.

devils_advocate10:55 am 06 Jan 12

HenryBG said :

You manage to get that right and wrong at the same time. “credit availability/lending criteria” has had a massive impact on house affordibility due to banks allowing people to borrow vastly larger sums than previously – with more credit available and people borrowing more, this has been the main factor to push house prices up.

If house prices double, but the amount the banks are prepared to lend borrowers doubles, and the ability to repay the interest doubles due to more stable and lower interest rates, more stable and lower unemployment rates, higher real wages, reduced consumer prices, and potential borrowers are actually able to qualify for the loans due to laxer lending criteria, then affordability hasn’t necessarily reduced.

devils_advocate10:49 am 06 Jan 12

johnboy said :

Because asset bubbles are terrible things that do immense damage to a society and the sooner they are burst the less damage is done.

Bubbles of themselves don’t *neccessarily* do massive damage to society. The speculators who bought in at the peak having no regards for fundamentals (ie in the hypothecated example of a housing bubble, not caring about rental returns or holding costs, just looking for capital gains) get burned.

In the case of housing, it only causes problems to the rest of society when either a) the government has structured the entire economy around unsustainable debt-financed consumption and/or b) the equally culpable financial institutions who fed the bubble need to be bailed out at the public expense.

Oh, wait.

Nevermind.

NoImRight said :

Im wondering a bit what motivates some people to almost salivate at the idea of the housing market collapsing? Ive been hearing experts for at least 20 years making dire warnings about our housing bubble and that its about to plunge us all into a new Dark Ages. These are the same experts who sprayed “facts” across magazines and newspapers “proving” that anyone who invests in property is an idiot and the smart money is in shares. Yet the share market is almost constantly in a state of boom or bust. For every profit you make someone makes a loss.

Could these expert opinions just be sour grapes from at seeing others achieve so justifying to themselves at least how the world is against them?

Because asset bubbles are terrible things that do immense damage to a society and the sooner they are burst the less damage is done.

devils_advocate said :

Bramina said :

I think governments and people in general became obsessed with increasing housing prices over the past two decades. It was seen as a fantastic thing that people’s house values were increasing by 15 or 20 percent year after year.

I think at least part of the problem was driven by the relatively new financial products that allowed people to “access the equity (mate)” in their home. In the corporate world, releasing dividends to owners based on unrealised paper profits is a no-no, but for some reason its ok for the general public to do it.

People treating their home as an ATM – especially to finance consumption goods – creates other problems as well. But I think that once people viewed their house price increases as a speedboat, LCD big screen or luxury car, it fanned the obsession with increases in nominal prices.

Excellent point. Its a pity tehre isnt some basic training on budgeting in school. So people would see the difference between borrowing for assets and borrowing for gratification

Im wondering a bit what motivates some people to almost salivate at the idea of the housing market collapsing? Ive been hearing experts for at least 20 years making dire warnings about our housing bubble and that its about to plunge us all into a new Dark Ages. These are the same experts who sprayed “facts” across magazines and newspapers “proving” that anyone who invests in property is an idiot and the smart money is in shares. Yet the share market is almost constantly in a state of boom or bust. For every profit you make someone makes a loss.

Could these expert opinions just be sour grapes from at seeing others achieve so justifying to themselves at least how the world is against them?

devils_advocate said :

1) The ABS data goes back to 2002. I’d rather use ABS data that looks at the housing stock price movements as a whole than attempting to draw conclusions from AUV (which the ACT govt, rightly or wrongly, inflates to target ratepayers) from one particular area.

Either way, the fact that house prices have more than doubled since 2002 in no way contradicts my statement that they have tripled since 1998.

http://www.news.com.au/money/property/price-slide-fears-send-shiver-through-market/story-e6frfmd0-1226221461085#ixzz1gSCbK7sn

“Capital city house prices have more than quadrupled and household debt has tripled since 1990. Simple metrics indicate that the current price levels are not sustainable,” Moody’s lead analyst Ilya Serov said.

devils_advocate said :

2) Housing affordability is more than a function of wages and house prices. Things like credit availability/lending criteria, level and stability of interest rates, (un)employment rates, all impact. But feel free to select only the components that support your world view.

You manage to get that right and wrong at the same time. “credit availability/lending criteria” has had a massive impact on house affordibility due to banks allowing people to borrow vastly larger sums than previously – with more credit available and people borrowing more, this has been the main factor to push house prices up.
Of course this is not an ACT government responsibility – they are merely benefiting from the increased availability of easy credit just like any other property speculator by irresponsibly creating the recent land releases of over-priced and under-sized blocks.
What more do you expect from the ACT government, anyway? They are a bunch of useless monkeys.

Under the Howard government, personal debt in Australia more than doubled, and this was mostly down to mortgages. Creating some sort of rules preventing banks from creating the sort of housing bubble we are seeing now would be a Federal responsibility.

devils_advocate10:28 am 06 Jan 12

Bramina said :

I think governments and people in general became obsessed with increasing housing prices over the past two decades. It was seen as a fantastic thing that people’s house values were increasing by 15 or 20 percent year after year.

I think at least part of the problem was driven by the relatively new financial products that allowed people to “access the equity (mate)” in their home. In the corporate world, releasing dividends to owners based on unrealised paper profits is a no-no, but for some reason its ok for the general public to do it.

People treating their home as an ATM – especially to finance consumption goods – creates other problems as well. But I think that once people viewed their house price increases as a speedboat, LCD big screen or luxury car, it fanned the obsession with increases in nominal prices.

2604 said :

I fully sympathise with everyone who is trying to break into the market. The memories of all the years of hard saving and fruitless looking at houses are still pretty fresh for Mrs 2604 and me. Just earn as much as you can and save as much as you can and you’ll get there.

Maybe consider looking at houses in some of the suburbs on the periphery of Canberra – Theodore, Calwell, Flynn, Spence? Same for so-called bogan suburbs (Kambah, Wannaissa). These suburbs are pretty unfashionable, but you can get a 3 bedroom place in one of them for low-$400s. And, because they were developed back in the day when suburbs were suburbs (if you know what I mean), the blocks are actually a decent size.

Also, for what it’s worth, we noticed when saving for our house that the quality of houses increases quickly as the price goes up. Houses around the entry level – say $400,000 in today’s money – were pretty awful. But those around $450,000 were already quite a bit better, and those around $500,000 were about twice as good – lots of choice, big blocks, ensuites, nice renovations, etc. I guess my suggestion is that if you have the patience to save for another 6-12 months then it might be worth doing so, as the quality of place you’ll be able to afford in 12 months time will be much higher than if you settle for an entry level place.

Finally, as a short term measure, you might consider taking steps to earn extra income in your spare time. My wife and I both did this in the final year we were saving the deposit for our house and it really helped in getting us over the line.

Good luck with it.

+1

We did this (witho deposit), both got 2nd jobs and worked our butts off for all of 2008.
No point whinging about it ….. or you will be whinging in 10 years and still have nothing.

Personally I am a fan of the outer “bigger block” suburbs and now that the tin lids are coming along they like having a back yard that can fit a few toys on it.

devils_advocate10:08 am 06 Jan 12

Tetranitrate said :

Yeah, but if the entry level cost of housing was the price of agricultural land + building costs, the bottom would drop out of the market. You’d be looking at small houses at the bottom end of the market costing less than $200,000… and imagine the implications for the existing value of housing stock… thus why land ‘must’ be drip fed to the market.

I agree that one of the factors with land release is that the Gubment doesn’t want to crash the market and put all existing owners offside – however I don’t think this fear is well founded.

For some reason people in canberra are willing to pay ridiculous premiums to live just a few minutes/kilometres closer to the city. I don’t know why. People in Sydney think a 45 minute commute is par for the course but here people would think you’re a mental patient.

Because people value proximity so highly, I don’t think developments on the fringe end up seriously impacting house prices closer in. Also the cost of providing all the infrastructure creates some fixed costs that put a lower limit on prices.

devils_advocate9:56 am 06 Jan 12

HenryBG said :

So 220% since 2002 ..ah..”proves”… it hasn’t been 300% since 1998? Are you a confused person?

In any case, have ASO4 wages increased by 220% since 2002, same as house prices, or have they increased by around 30%?

And would the discrepancy between 220% and 30% indicate there just might be some affordability issues for people who would like to byu a house in 2012?

1) The ABS data goes back to 2002. I’d rather use ABS data that looks at the housing stock price movements as a whole than attempting to draw conclusions from AUV (which the ACT govt, rightly or wrongly, inflates to target ratepayers) from one particular area.
2) Housing affordability is more than a function of wages and house prices. Things like credit availability/lending criteria, level and stability of interest rates, (un)employment rates, all impact. But feel free to select only the components that support your world view.

That is all.

NoImRight said :

Back OT what, in reality, can Govt do to help first homeowners and also what should Government do? A mention was made earlier of waiving stamp duty which was done as part of the GFC package. At the time is was both cheered and booed.

Any interference by Government in housing creates artificial changes. Or does it? Is Government charges or the lack of them just an inherent part of housing?Does the Government even have an obligation to first homeowners in particular? How much should market forces drive housing? If this was any other product would we expect the Government to step in and manipulate prices?

If it were market forces driving housing then housing would be affordable and we wouldn’t be having this discussion. The problem is that the housing market in this country is so manipulated by government and the supply of land so artificially restricted that it bears almost no resemblance to a functioning market.

Also +1 to the long comment made by drfelonious.

wildturkeycanoe10:17 pm 05 Jan 12

To simplify how to afford a house in Canberra, it is like this.
Live in poverty for 5 years to get a deposit.
Buy cheap and nasty, cramped shoebox.
Live in poverty for next 30 years paying off cheap and nasty shoebox, still having no life because of mortgage.

I fully sympathise with everyone who is trying to break into the market. The memories of all the years of hard saving and fruitless looking at houses are still pretty fresh for Mrs 2604 and me. Just earn as much as you can and save as much as you can and you’ll get there.

Maybe consider looking at houses in some of the suburbs on the periphery of Canberra – Theodore, Calwell, Flynn, Spence? Same for so-called bogan suburbs (Kambah, Wannaissa). These suburbs are pretty unfashionable, but you can get a 3 bedroom place in one of them for low-$400s. And, because they were developed back in the day when suburbs were suburbs (if you know what I mean), the blocks are actually a decent size.

Also, for what it’s worth, we noticed when saving for our house that the quality of houses increases quickly as the price goes up. Houses around the entry level – say $400,000 in today’s money – were pretty awful. But those around $450,000 were already quite a bit better, and those around $500,000 were about twice as good – lots of choice, big blocks, ensuites, nice renovations, etc. I guess my suggestion is that if you have the patience to save for another 6-12 months then it might be worth doing so, as the quality of place you’ll be able to afford in 12 months time will be much higher than if you settle for an entry level place.

Finally, as a short term measure, you might consider taking steps to earn extra income in your spare time. My wife and I both did this in the final year we were saving the deposit for our house and it really helped in getting us over the line.

Good luck with it.

JC said :

Government does have an effect, thought not necessarily local government, but federal. In this case house prices started to rise after the GST was introduced and Howard started lowering income tax rates, meaning people had more disposable income and could afford to spend more which in turn leads to price rises. Coupled to this his fiscal policies also led to lower interest rates which also has the same effect in a rising market. So yep all ACT Labors fault.

I think governments and people in general became obsessed with increasing housing prices over the past two decades. It was seen as a fantastic thing that people’s house values were increasing by 15 or 20 percent year after year.

In that time, governments have instituted policies that drive up house prices, such as restricting land releases and creating barriers to developing land. But people didn’t mind. Their house prices were going up.

But many people missed the obvious downside that higher house prices meant lower affordability. Many people still don’t get it.

What is really bad, is that when house prices increase, all people who own houses have a once off increase in the price of their house. But when house prices increase, everyone who buys a house for the rest of time has a bigger mortgage and pays more interest. Everyone who rents for the rest of time pays more rent. All so people can have a once off increase in their on paper value.

Tetranitrate7:43 pm 05 Jan 12

NoImRight said :

Petty name calling aside not sure one block provides definative proof there would be variations above and below that Id expect but no that is not a challenge to cut and paste 47 other blocks to prove whatever the point of this has become.

Back OT what, in reality, can Govt do to help first homeowners and also what should Government do? A mention was made earlier of waiving stamp duty which was done as part of the GFC package. At the time is was both cheered and booed.

Any interference by Government in housing creates artificial changes. Or does it? Is Government charges or the lack of them just an inherent part of housing?Does the Government even have an obligation to first homeowners in particular? How much should market forces drive housing? If this was any other product would we expect the Government to step in and manipulate prices?

-Abolish negative gearing tax concessions
-return capital gains tax to the way Keating left it – CPI deflated capital gains taxed at the full marginal tax rate, not nominal at half (thanks a ton for that one Howard)
-Abolish the first home buyers grants completely
-Restrict the amount banks can lend to borrowers to buy an existing asset to some multiple of the rental income of the property in question. 10 times should do it. Applying to both home buyers and ‘investors’
-seriously loosen planning laws and end the NIMBY bullshit.

-(in my dreams) impose a federal land value tax (X% of the unimproved value of land), use the revenue to slash income taxes on low and middle income earners, reduce the corporate tax rate and fund the simplification of the tax system via abolishing taxes that provide little revenue. (something similar was suggested by the Henry Review)

Of course all these would reduce the value of existing housing assets, which their owners aren’t likely to appreciate and it’d seriously screw people with debt against said assets (most owner occupiers and almost every housing investor thanks to negative gearing).
As I said before, the situation has been deliberately worsened for so long that there’s now no easy way out of it. Remove the causes and it crashes, leave it and it eventually corrects one way or another, prop it up and kick the count down road so the next government can deal with an even worse crisis.

It’s actually a major macro problem too, since a great proportion domestic savings are poured into the housing bubble rather than going into investment in productive capital. Those business that can go overseas for funding do so, which is why despite an unprecedented mining boom Australia was/is still running large trade deficits.
Eventually Australians are going to wake up at the end of it all and find everything of real value has been sold, and that they own nothing but their (formerly) overpriced houses.

The boomers have truly screwed this country, I’d make some snarky comment about how glad I’ll be when I finally leave, but the same generation has ruined the rest of the developed world too.

Chop71 said :

As Zippyzippy said
Well this should be fun – let the political figure-fudging begin!

http://www.loansense.com.au/historical-rates.html
Interest rates were not 17% when Howard was in office

Interestingly you raise 17% rates, when Labor had them high people hurt for sure, but it was what was best for the country. Keating was right about the recession we had to have. Now is a time we could well do with one, but no pollie has the guts to slow the economy and bring things back to an affordable level. Instead the rich keep getting richer and the poor poorer and no hope of making it.

Also in this day and age, with the stupid sized mortgages people need to have 8 or 9% will have the same effect as 17% 20 years ago. Speaks volumes actually for how overpriced the housing market is in relation to incomes.

Tetranitrate7:16 pm 05 Jan 12

err make that ‘this year’ not next year.

Tetranitrate7:14 pm 05 Jan 12

wycx said :

NoImRight said :

Back OT what, in reality, can Govt do to help first homeowners and also what should Government do?

The ACT government should be less restrictive in their control of land.

If you could buy land at the edge of Canberra to build on for the same price as agricultural land, then there would be affordable housing.

Yeah, but if the entry level cost of housing was the price of agricultural land + building costs, the bottom would drop out of the market. You’d be looking at small houses at the bottom end of the market costing less than $200,000… and imagine the implications for the existing value of housing stock… thus why land ‘must’ be drip fed to the market.

This farce has gone on so long and so many people have bought in after the big runup in the early 00s – they’ll lose very badly in a serious correction. Governments have kicked the can down the road for so long and dug that much deeper that they’re pretty much totally committed to propping up the bubble until the bitter end. eg: the Feds bailed out the market with 1.5 billion in ‘first home buyer’ boosts in 2008/9 (and of course they’re then leveraged up by the banks).
Expect the Feds to use Europe as an excuse to do it again next year – we’ve had a solid year of slow melt more or less Australia wide but I really doubt they’ll let the market correct.

NoImRight said :

Back OT what, in reality, can Govt do to help first homeowners and also what should Government do?

The ACT government should be less restrictive in their control of land.

If you could buy land at the edge of Canberra to build on for the same price as agricultural land, then there would be affordable housing.

drfelonious said :

Over Chrissy I read a great book, ‘Boomerang’ outlining how binging on too-easy-to-get credit has caused nightmares all around the world in the last 5-6 years. We are no different – the ACT is not special or magical, and Australia is not protected from house price falls by kangaroos or China. Loved this quote from the book:

“Real estate bubbles never end with soft landings. A bubble is inflated by nothing firmer than people’s expectations. The moment people cease to believe that house prices will rise forever, they will notice what a terrible long term investment real estate has become, and flee the market, and the market will crash.”

That’s Boomerang by Michael Lewis and yes, it is an excellent read.

Getting back to the original post, I gather from the thread that despite a lot of sound and fury, there seems nevertheless to be agreement that house prices are now very high/expensive – whatever you want to call it. (I call it a grotesque bubble that will go down in the history books with tulips and dot com stocks but that’s just my opinion)

The Macrobusiness blog has some great analysis on this problem – they call the government intervention in the housing market part of a ‘politico-housing complex’. This is a great shorthand term to describe how all levels of government and both sides of politics have come to see their interests in terms of housing as indistinguishable from those of property developers, real estate agents and negatively geared housing speculators.

So yes, the ACT government is part of the problem, the Labor party is a big part of the problem, but (usually) so are the Liberals. While there are plenty of votes in action on affordable housing, the usual politico-housing complex playbook says you try to tap these votes by taking your lead from George Orwell (eg the first home buyers grant – which of course is nothing but a thinly disguised direct taxpayer subsidy to drive prices higher). Good on you Vicki Dunne for calling a spade a spade – a very rare commodity for politicians on either side (or even Greens) to step outside of the politico housing complex!

Anyway, no point moaning about it, housing in Canberra has I think in 2011 finally turned the corner downwards – auction clearance rates are the worst for years and unsold housing stock for sale keeps going up and up. When average incomes can’t buy average houses, when houses cost three times what they did just over a year ago there is demonstrably a problem that just can’t be propped up any more and the chickens are finally coming home to roost.

Over Chrissy I read a great book, ‘Boomerang’ outlining how binging on too-easy-to-get credit has caused nightmares all around the world in the last 5-6 years. We are no different – the ACT is not special or magical, and Australia is not protected from house price falls by kangaroos or China. Loved this quote from the book:

“Real estate bubbles never end with soft landings. A bubble is inflated by nothing firmer than people’s expectations. The moment people cease to believe that house prices will rise forever, they will notice what a terrible long term investment real estate has become, and flee the market, and the market will crash.”

NoImRight said :

HenryBG said :

devils_advocate said :

[Extra points for ignoring the reduction in household size, credit expansion and additional government incentives aimed at first home owners that have been offered over the years.

Petty name calling aside not sure one block provides definative proof there would be variations above and below that Id expect but no that is not a challenge to cut and paste 47 other blocks to prove whatever the point of this has become.

Back OT what, in reality, can Govt do to help first homeowners and also what should Government do? A mention was made earlier of waiving stamp duty which was done as part of the GFC package. At the time is was both cheered and booed.

Any interference by Government in housing creates artificial changes. Or does it? Is Government charges or the lack of them just an inherent part of housing?Does the Government even have an obligation to first homeowners in particular? How much should market forces drive housing? If this was any other product would we expect the Government to step in and manipulate prices?

Yep some people just cant have a discussion without it to prove their point (we need a rolling eyes emoticon)……

Anyway, your last paragraph was sort of my point. The house prices went up due to market forces. Stamp duty and associated taxes went with it. Then some bright spark said “The government caused this” & then it became gospel when the real story is that the real estate is an un regulated capitalist industry that fuelled itself into massive growth in the early naughties.

The mining boom has fuelled that again in areas that have an undersupply of accommodation with people paying extraordinary prices for rooms let alone houses.

I just dont believe a rant from an MP who is not in power who’s main aim at the moment is to discredit tha current government with no facts.

devils_advocate said :

Genie said :

I currently owe less than $2k on a car loan, have no other debt and have an excellent savings history. My problem is that I’m under 30 and trying to buy a place on my own. Even my bank told me to give up trying until I had a 20%+ deposit down.

I was 20 and bought (financed) a 4brm house and land package on an APS 4 salary. There were actual lending criteria back in those days – banks actually assessed people’s ability to pay back the loan. I didn’t have a 20 per cent deposit. Either you’re not trying hard enough or there’s something else you’re not telling us.

Yeah fair bit more than I haven’t posted… my down falls were my car loan and having a (paid off) credit card, plus being permanent for less than 3 months (despite being in my job for almost 18months). Bank told me something about only getting a 10 year loan for $300k would be more than what I earn’t. I can’t remember this was around 9 months ago.. and yeah I’m not really trying that hard to get the mortgage but am at the point where in the next 6-12months I will def be buying. Just need to cancel that damn credit card before I reapply ! Keeping one for emergencies bites you in the bum.

KB1971 – If you can find properties in seconds I guess I’m too fussy. My only criteria is that I want a HOUSE (or townhouse). Eg. I wouldn’t mind a bit of a backyard, not just a balcony. Since I catch buses to and from work I haven’t bothered looking in Queanbeyan or just outside Canberra (even though it is much cheaper)

Kinda of regretting not buying a house back in 06/07 when my $10k savings would have easily worked as deposit for a property <$250k. Now I'm looking at $50-$80k deposit and houses well over $350k

devils_advocate said :

Again at the risk of sounding “ignorant” I would also refer you to ABS cat 6416.0. Since 2002, house prices have increased by a factor of around 2.2, not 3.

So 220% since 2002 ..ah..”proves”… it hasn’t been 300% since 1998? Are you a confused person?

In any case, have ASO4 wages increased by 220% since 2002, same as house prices, or have they increased by around 30%?

And would the discrepancy between 220% and 30% indicate there just might be some affordability issues for people who would like to byu a house in 2012?

GBT said :

HenryBG said :

devils_advocate said :

Calling someone out on their math skills and in the same post claiming house prices have tripled since 1998… top effort. My house isn’t worth three times what I paid for it (in 2000/2001, BTW, in case it matters).

So….your argument is “prices haven’t tripled since 1998″ because a house you bought in 2001 hasn’t tripled in value”?

Have I got that right?

If devil bought their house in 2001 why are you using 1998 as a comparison? Is it just becuase it suits your argument?

You are having reading comprehension skills:
Devil’s tried to deny that house prices have tripled since 1998.
Devil’s was wrong.
House prices have tripled since 1998.
Wages have not.
Ergo, affordability is waaay down since then.

Devil’s return argument in support of Devil’s wrong position is to *persist* with the argument that “prices haven’t tripled since 1998 because they haven’t tripled since 2002”. It doesn’t get much sillier than that, even from a Uni of Canberra graduate in “Communications” or whatever they’re calling their 3rd-rate degrees these days.

And smugly telling everybody that you were clever enough to buy a house at a time of lower prices therefore there’s no problem today is a completely ridiculous argument.

Tetranitrate5:00 pm 05 Jan 12

amarooresident3 said :

Charnwood is less than 20 kms from the CBD (Civic). I’d challenge anyone to get a house the equivalent distance from the Sydney CBD for less than $400,000.

Oh come on, this is deliberate intellectual dishonesty. You don’t seriously believe that the inherent value of living 20km from the CBD of Canberra (~340,000) is exactly the same as for Sydney (~4.1 million)? Using this logic, an iron roofed shanty just off the main street in Yass ought to be worth millions as it’s ’20 meters from the CBD!!!!!!!111′.

The sort of cities you ought to be comparing to are Newcastle (~290,000) or to a lesser extent Adelaide (1 million).

devils_advocate4:22 pm 05 Jan 12

GBT said :

If devil bought their house in 2001 why are you using 1998 as a comparison? Is it just becuase it suits your argument?

Good point, but there are more fundamental flaws in the argument. If we point them all out, this will win the mully award.

HenryBG said :

devils_advocate said :

[Extra points for ignoring the reduction in household size, credit expansion and additional government incentives aimed at first home owners that have been offered over the years.

Here’s the progression in unimporoved value of one block of land that sold for $140,000 in 1998:

Year Unimproved Value Growth
2001-2002 $139,000 n/a
2002-2003 $190,000 36.69%
2003-2004 $264,000 38.95%
2004-2005 $317,000 20.08%
2005-2006 $301,000 -5.05%
2006-2007 $301,000 0.00%
2007-2008 $352,000 16.94%
2008-2009 $423,000 20.17%
2009-2010 $500,000 18.20%
2010-2011 $500,000 0.00%
2011-2012 $552,000 10.40%

You’ve been called out on your arrogance, I called you on your smugness, and now we can just call you ignorant.

Petty name calling aside not sure one block provides definative proof there would be variations above and below that Id expect but no that is not a challenge to cut and paste 47 other blocks to prove whatever the point of this has become.

Back OT what, in reality, can Govt do to help first homeowners and also what should Government do? A mention was made earlier of waiving stamp duty which was done as part of the GFC package. At the time is was both cheered and booed.

Any interference by Government in housing creates artificial changes. Or does it? Is Government charges or the lack of them just an inherent part of housing?Does the Government even have an obligation to first homeowners in particular? How much should market forces drive housing? If this was any other product would we expect the Government to step in and manipulate prices?

devils_advocate4:19 pm 05 Jan 12

HenryBG said :

You’ve been called out on your arrogance, I called you on your smugness, and now we can just call you ignorant.

Again at the risk of sounding “ignorant” I would also refer you to ABS cat 6416.0. Since 2002, house prices have increased by a factor of around 2.2, not 3.

But hey you’re the resident statistical/mathematical genius here. Given your posts above, I’m sure it’s working out pretty great for you. Hell what am I saying, you probably work at the ABS and can’t get fired due to the performance management systems there.

HenryBG said :

devils_advocate said :

Calling someone out on their math skills and in the same post claiming house prices have tripled since 1998… top effort. My house isn’t worth three times what I paid for it (in 2000/2001, BTW, in case it matters).

So….your argument is “prices haven’t tripled since 1998″ because a house you bought in 2001 hasn’t tripled in value”?

Have I got that right?

If devil bought their house in 2001 why are you using 1998 as a comparison? Is it just becuase it suits your argument?

devils_advocate4:02 pm 05 Jan 12

HenryBG said :

devils_advocate said :

[Extra points for ignoring the reduction in household size, credit expansion and additional government incentives aimed at first home owners that have been offered over the years.

Here’s the progression in unimporoved value of one block of land that sold for $140,000 in 1998:

Year Unimproved Value Growth
2001-2002 $139,000 n/a
2002-2003 $190,000 36.69%
2003-2004 $264,000 38.95%
2004-2005 $317,000 20.08%
2005-2006 $301,000 -5.05%
2006-2007 $301,000 0.00%
2007-2008 $352,000 16.94%
2008-2009 $423,000 20.17%
2009-2010 $500,000 18.20%
2010-2011 $500,000 0.00%
2011-2012 $552,000 10.40%

You’ve been called out on your arrogance, I called you on your smugness, and now we can just call you ignorant.

Right, so now the unimproved values – that the ACT govt uses to assess rates – is a sensible measure of growth. Uh huh.

The ABS statistical releases include trades in existing houses as well as the new houses that are added to the housing stock each year. Basic understanding of statistics will tell you the extent to which price movements on existing houses is relevant to the question of first home affordability. My response related to whether someone with a particular income level could raise sufficient finance to buy an entry level house (if you care to track back through the actual comments). If you choose to expand those comments to a general statement of principle about housing affordability then good on you.

The fact is that plenty of people can and do buy houses each year in the ACT, and not all of them are on massive wages. Yes, the ACT has higher incomes than other areas, but if you are living the ACT then you would also be earning a higher wage than you otherwise would in some other place.

If it’s smug to point out that people can and have done more with less, then fine. If its a choice between smug and defeatist, then no choice at all really.

devils_advocate said :

[Extra points for ignoring the reduction in household size, credit expansion and additional government incentives aimed at first home owners that have been offered over the years.

Here’s the progression in unimporoved value of one block of land that sold for $140,000 in 1998:

Year Unimproved Value Growth
2001-2002 $139,000 n/a
2002-2003 $190,000 36.69%
2003-2004 $264,000 38.95%
2004-2005 $317,000 20.08%
2005-2006 $301,000 -5.05%
2006-2007 $301,000 0.00%
2007-2008 $352,000 16.94%
2008-2009 $423,000 20.17%
2009-2010 $500,000 18.20%
2010-2011 $500,000 0.00%
2011-2012 $552,000 10.40%

You’ve been called out on your arrogance, I called you on your smugness, and now we can just call you ignorant.

devils_advocate said :

Calling someone out on their math skills and in the same post claiming house prices have tripled since 1998… top effort. My house isn’t worth three times what I paid for it (in 2000/2001, BTW, in case it matters).

So….your argument is “prices haven’t tripled since 1998″ because a house you bought in 2001 hasn’t tripled in value”?

Have I got that right?

devils_advocate3:40 pm 05 Jan 12

HenryBG said :

Some people just aren’t so good at maths.

If house prices have tripled since you conducted Operation FutureSmugness back in 1998, and APS4 salaries have increased by only about 40% since 1998, do you understand the problem people are now having?

Calling someone out on their math skills and in the same post claiming house prices have tripled since 1998… top effort. My house isn’t worth three times what I paid for it (in 2000/2001, BTW, in case it matters). People that claim house prices have tripled are the same people that have fuelled the housing price bubble in the first place.

Extra points for ignoring the reduction in household size, credit expansion and additional government incentives aimed at first home owners that have been offered over the years.

In any case, I’d rather be spearheading operation future smugness than be the present-day Captain of the HMAS Pissingandmoaning.

HenryBG said :

Mess said :

Actually I can afford them, and if you had dogs (and a heart) you would know how great it is to have them in your life. I refuse to live in a box just to be close to the city or live in one of the new suburbs where they give you next to no land. God forbid someone might actually want to be able to afford a house with a backyard, regardless of if they have pets or kids.

This is why I lived for so long in a 2-bedroom terrace with 3 children – it’s all I could afford.
And spare us the crap about how great dogs are – they are a pointless middle-class affectation designed to convey some sort of statement of status. In your case, you clearly can’t afford them, seeing as you can’t provide for them a decent space for them to live in. If you actually had a heart you would get rid of them.

Clearly not a dog person then. We are currently residing on a large block and my dogs have more than enough room to run around. You don’t anything about my situation, and yet you still judge. And since when have dogs been a status statement? What a load of crap.

My comments are based on the issue of the story which is housing affordability and the general trend in Canberra for new houses to be built on tiny blocks.

Thanks to those who have posted constructive comments about maybe looking outside the ACT.

devils_advocate said :

HenryBG said :

Yeah, and your average house was $140,000 as opposed to today’s $440,000. Slight difference.

The smugness is palpable.

Yeah, and APS4 salaries were much less than they were now also.

Some people just aren’t so good at maths.

If house prices have tripled since you conducted Operation FutureSmugness back in 1998, and APS4 salaries have increased by only about 40% since 1998, do you understand the problem people are now having?

Oh, and I totally agree with some of the earlier posts about the government being at fault for the ridiculous price inflation they have caused through their current methods for releasing under-sized plots.

Mess said :

Actually I can afford them, and if you had dogs (and a heart) you would know how great it is to have them in your life. I refuse to live in a box just to be close to the city or live in one of the new suburbs where they give you next to no land. God forbid someone might actually want to be able to afford a house with a backyard, regardless of if they have pets or kids.

This is why I lived for so long in a 2-bedroom terrace with 3 children – it’s all I could afford.
And spare us the crap about how great dogs are – they are a pointless middle-class affectation designed to convey some sort of statement of status. In your case, you clearly can’t afford them, seeing as you can’t provide for them a decent space for them to live in. If you actually had a heart you would get rid of them.

Mess said :

HenryBG said :

Mess said :

Not really no. I have two very energetic dogs, so it’s not an option for someone like myself to buy and apartment or a townhouse.

Looks like it’s your choice to own two perfectly useless pets which you can’t actually afford.

Actually I can afford them, and if you had dogs (and a heart) you would know how great it is to have them in your life. I refuse to live in a box just to be close to the city or live in one of the new suburbs where they give you next to no land. God forbid someone might actually want to be able to afford a house with a backyard, regardless of if they have pets or kids.

If you want a yard and an affordable property I think Captains Flat would be the place to look at. Depending where you work, it is not too long a drive. The old cottages are more atttractive than the newer suburbs in Canberra and are a lot cheaper than the Tocumwal (spelling?) places in O’Connor. It is ridiculous that you might have to look outside the city but this could match your needs.

devils_advocate2:41 pm 05 Jan 12

HenryBG said :

Yeah, and your average house was $140,000 as opposed to today’s $440,000. Slight difference.

The smugness is palpable.

Yeah, and APS4 salaries were much less than they were now also. Also my house wasn’t average, it was considerably more expensive than average. My point is, if I as a 20 yo can buy a brand new, fairly largish house on a modest salary, certainly a 30 yo can get approved to finance a basic house on a comparable salary. Some examples of houses currently on the market have been given above.

devils_advocate2:38 pm 05 Jan 12

NoImRight said :

Under a minute on the net. 2 Beds, garage and storeroom.

And it’s not even in a terrible suburb. And the asking price is under $300k – in this market, the selling price should come in at considerably less.

Well, when you look at it, some of the outer suburbs of Sydney and Melbourne are the same distance away so you can just tell people you live in outer Canberra and have your affordable backyard with your pets.

devils_advocate said :

Genie said :

I currently owe less than $2k on a car loan, have no other debt and have an excellent savings history. My problem is that I’m under 30 and trying to buy a place on my own. Even my bank told me to give up trying until I had a 20%+ deposit down.

I was 20 and bought (financed) a 4brm house and land package on an APS 4 salary. There were actual lending criteria back in those days – banks actually assessed people’s ability to pay back the loan. I didn’t have a 20 per cent deposit. Either you’re not trying hard enough or there’s something else you’re not telling us.

Yeah, and your average house was $140,000 as opposed to today’s $440,000. Slight difference.

The smugness is palpable.

Genie said :

NoImRight said :

Genie said :

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

Then buy something you can afford. Let it do at least some of the saving for you.No maybe you cant have the house you want right now but you can get a property of some sort.Its not fun and its not quick but eventually you will get what you want.

Find me a property for under 300k with at least 2 bedrooms.

It’s not a matter of buying something I can afford. Coz it doesn’t exist.

http://www.ljhooker.com.au/HMVZWF8H

Under a minute on the net. 2 Beds, garage and storeroom.

HenryBG said :

Mess said :

Not really no. I have two very energetic dogs, so it’s not an option for someone like myself to buy and apartment or a townhouse.

Looks like it’s your choice to own two perfectly useless pets which you can’t actually afford.

Actually I can afford them, and if you had dogs (and a heart) you would know how great it is to have them in your life. I refuse to live in a box just to be close to the city or live in one of the new suburbs where they give you next to no land. God forbid someone might actually want to be able to afford a house with a backyard, regardless of if they have pets or kids.

To Yass with you. The ACT Government has determined it doesn’t want your kind in Canberra Mess.

Genie said :

NoImRight said :

Genie said :

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

Then buy something you can afford. Let it do at least some of the saving for you.No maybe you cant have the house you want right now but you can get a property of some sort.Its not fun and its not quick but eventually you will get what you want.

Find me a property for under 300k with at least 2 bedrooms.

It’s not a matter of buying something I can afford. Coz it doesn’t exist.

There are two on AH at the moment:

http://www.allhomes.com.au/ah/act/sale-residential/advanced-search/view?regionId=391#

Both new only one comes with some land renata agreement. The days of 2-300,000 dollar city homes are gone I am afraid.

A unit in Queanbeyan:

http://www.allhomes.com.au/ah/nsw/sale-residential/12-1-mowatt-street-queanbeyan-east-queanbeyan-region/1316806987111

They are there & they may not be the dram home as NolmRight say but they are a start.

I used to work with a guy that used to piss & moan about house prices but he wanted to buy a 3 bedroom house with a garage in the Woden area on a single income. Rather than buy something smaller & working up to what he wanted he preferred to piss & moan. It never got him anywhere, I was also speaking from experience, we bought our first house in a less preferred area & as life went on my wife & I secured better jobse & made capital in the house which moved us into a nice large 4 beddie job we live in now.

It is definately easier if you have two incomes but that can be ovecome too with housemates & such. You just need to think outside the square.

Housemates kill you on Capital Gains Tax.

devils_advocate2:01 pm 05 Jan 12

Genie said :

I currently owe less than $2k on a car loan, have no other debt and have an excellent savings history. My problem is that I’m under 30 and trying to buy a place on my own. Even my bank told me to give up trying until I had a 20%+ deposit down.

I was 20 and bought (financed) a 4brm house and land package on an APS 4 salary. There were actual lending criteria back in those days – banks actually assessed people’s ability to pay back the loan. I didn’t have a 20 per cent deposit. Either you’re not trying hard enough or there’s something else you’re not telling us.

Genie said :

GBT said :

If you can’t borrow more than $200,000 on 65k you must have too many other expenses. Just doing a quick calculation you can borrow over $300,000 on 65k. I’m sure if you had a large deposit and a good history of savings banks would consider lending more than that.

I currently owe less than $2k on a car loan, have no other debt and have an excellent savings history. My problem is that I’m under 30 and trying to buy a place on my own. Even my bank told me to give up trying until I had a 20%+ deposit down.

Maybe you should try a different bank or go through a mortgage broker.

I was able to borrow $203,000 when I was 19, only earning $38,000 and with less than 20% deposit.

Mind you it wouldn’t hurt to pay off the rest of that car loan and make sure you have no other debts/credit cards.

devils_advocate1:57 pm 05 Jan 12

Sir_Orangepeel said :

Wait for the APS’s 4% efficiency dividend to kick in and jobs to be shed…

Not really, the efficiency dividends have thus far been achieved through natural attrition (staff leaving, retiring, not replacing them, etc). In some agencies I have heard of hiring freezes.

So those with opportunities outside the APS take them, those without remain, and there is no intake of new talent to dilute the mediocrity. Efficiency indeed.

Back on topic, the only thing that will trigger serious price drops is a 1996-esque, Max-Moore-Wilton-esqe slash and burn. Small changes at the margins won’t do much.

NoImRight said :

Genie said :

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

Then buy something you can afford. Let it do at least some of the saving for you.No maybe you cant have the house you want right now but you can get a property of some sort.Its not fun and its not quick but eventually you will get what you want.

Find me a property for under 300k with at least 2 bedrooms.

It’s not a matter of buying something I can afford. Coz it doesn’t exist.

NoImRight said :

Mess said :

Not really no. I have two very energetic dogs, so it’s not an option for someone like myself to buy and apartment or a townhouse. I would need somewhere with a decent yard. What about families with young children? Again not really an option to buy somewhere small. These families are being forced to rent because the so called “affordable” housing options are just not viable. Anywhere with a decent yard and a livable house (read ‘not falling apart’) is in excess of $400k, usually around the $450k mark.

Not trying to be cruel but again the dogs are a lifestyle choice youve made. Id never suggest giving them up as I bet they are as much family to you as any child but we have to accept the price we pay for the things we want.In an ideal world you wouldnt be forced to make a choice and I do actually agree everyone should be allowed to have basics like family pets. I know someone mad on horses but she could never afford a property for them so she will probably rent all her life. Thats her choice and for her its the right one.

We seem to be blending the idea of the first house and our prefered house together. Not really the same thing usually. So its not “I cant afford any house” its ” I cant afford the house I want”. Bummer is neither can I but ill live with the house I can afford.

Sorry for the multi posting. Can someone point to a multi quote function for me? Buggered if I could see it!

Housing pricing in Canberra is expensive, and the point is something should be done about it. I remember hearing something a while back about stamp duty being waived for first home buyers which is a great idea. I’m not asking for houses to be handed out on a silver platter, I work as hard as everyone else for my money and save and budget, and have reached the position where I can buy a house, but at the moment houses are well out of reach of your average income earner. You shouldn’t have to live like a hermit and eat baked beans every night in order to afford your first house.

GBT said :

If you can’t borrow more than $200,000 on 65k you must have too many other expenses. Just doing a quick calculation you can borrow over $300,000 on 65k. I’m sure if you had a large deposit and a good history of savings banks would consider lending more than that.

I currently owe less than $2k on a car loan, have no other debt and have an excellent savings history. My problem is that I’m under 30 and trying to buy a place on my own. Even my bank told me to give up trying until I had a 20%+ deposit down.

Sir_Orangepeel1:39 pm 05 Jan 12

Wait for the APS’s 4% efficiency dividend to kick in and jobs to be shed…

EvanJames said :

NoImRight seems to be living in an alternative universe. Do the maths… what house in Canberra can I buy on an income of $67? Now, here’s something to be mindful of. Those of us without children or spouses have no automatic tax deducation, rebates or allowances. Family-based payments only apply if you have a family.

As for claims of people wanting to buy palaces, in Canberra there is no alternative. it’s all brick, and all expensive. There’s no fibros in Blacktown here. Queanbeyan property prices are reflecting the fact that Qbn is now a dormitory suburb of Canberra.

Many of the people who work in non-government jobs in Canberra are moving further and further out, where houses are within reach. you should see the line of commuters coming in from Goulburn, Cooma, Yass every day … and as petrol goes up, that’s going to get a whole lot more fun. Even Bungendore is out of the price-range of a single modest income earner.

To start raving on about saving and driving old cars is arrogant, and ignorant. I’ve driven the same car since ’94. I save furiously, but as my savings go up, so do the median house prices. My dream home is a small weatherboard in Queanbeyan, but sadly too many people with more money than I also want those weatherboards. And since I’m somewhat old, those 30-year home loans are no longer within reach.

Well its an alternative universe where I have my own house so Im comfortable with my results how about yours?

You can come up with as many reasons as you like why it cant be done. Doesnt put a dollar in your pocket though.Or you can get on with actually buying something. Up to you. Im still on one oncome less than 67K and not a spring chicken either so if you are driving an old car to save money and not spending on anything else theres something you arent doing.If you see suggestions on budgeting as arrogant and ignorant maybe what you are doing is failing the atitude test. Have you actually spoken to anyone in the finance industry? You may be surprised and what is possible with a positive approach and some planning.

NoImRight seems to be living in an alternative universe. Do the maths… what house in Canberra can I buy on an income of $67? Now, here’s something to be mindful of. Those of us without children or spouses have no automatic tax deducation, rebates or allowances. Family-based payments only apply if you have a family.

As for claims of people wanting to buy palaces, in Canberra there is no alternative. it’s all brick, and all expensive. There’s no fibros in Blacktown here. Queanbeyan property prices are reflecting the fact that Qbn is now a dormitory suburb of Canberra.

Many of the people who work in non-government jobs in Canberra are moving further and further out, where houses are within reach. you should see the line of commuters coming in from Goulburn, Cooma, Yass every day … and as petrol goes up, that’s going to get a whole lot more fun. Even Bungendore is out of the price-range of a single modest income earner.

To start raving on about saving and driving old cars is arrogant, and ignorant. I’ve driven the same car since ’94. I save furiously, but as my savings go up, so do the median house prices. My dream home is a small weatherboard in Queanbeyan, but sadly too many people with more money than I also want those weatherboards. And since I’m somewhat old, those 30-year home loans are no longer within reach.

If you can’t borrow more than $200,000 on 65k you must have too many other expenses. Just doing a quick calculation you can borrow over $300,000 on 65k. I’m sure if you had a large deposit and a good history of savings banks would consider lending more than that.

Mess said :

Not really no. I have two very energetic dogs, so it’s not an option for someone like myself to buy and apartment or a townhouse.

Looks like it’s your choice to own two perfectly useless pets which you can’t actually afford.

Instant Mash12:54 pm 05 Jan 12

I work casually, do around 35-40 hours a week, and earn about $500 in a decent week.

Moving out of a share house is just not an option.

Mess said :

Not really no. I have two very energetic dogs, so it’s not an option for someone like myself to buy and apartment or a townhouse. I would need somewhere with a decent yard. What about families with young children? Again not really an option to buy somewhere small. These families are being forced to rent because the so called “affordable” housing options are just not viable. Anywhere with a decent yard and a livable house (read ‘not falling apart’) is in excess of $400k, usually around the $450k mark.

Not trying to be cruel but again the dogs are a lifestyle choice youve made. Id never suggest giving them up as I bet they are as much family to you as any child but we have to accept the price we pay for the things we want.In an ideal world you wouldnt be forced to make a choice and I do actually agree everyone should be allowed to have basics like family pets. I know someone mad on horses but she could never afford a property for them so she will probably rent all her life. Thats her choice and for her its the right one.

We seem to be blending the idea of the first house and our prefered house together. Not really the same thing usually. So its not “I cant afford any house” its ” I cant afford the house I want”. Bummer is neither can I but ill live with the house I can afford.

Sorry for the multi posting. Can someone point to a multi quote function for me? Buggered if I could see it!

Genie said :

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

Then buy something you can afford. Let it do at least some of the saving for you.No maybe you cant have the house you want right now but you can get a property of some sort.Its not fun and its not quick but eventually you will get what you want.

arescarti42 said :

Genie said :

NoImRight said :

Actually Ive done just that on less income.Still earn less than 60k and own 3 properties. I was prepared to sacrifice other luxuries to get myself started.Owned the same car for 18 years, didnt go out very often and didnt buy new clothes just to chase fashions. Also managed to bring up two children on my own while doing it.

Im not special anyone can do the same thing. My eldest son at 21 is planning on the same thing right now. Instead of a new car like all his mates hes driving a 20 year old Corolla and saving every cent he can.A few years from now he will be planning his second house while his mates are on internet forums complaining about how expensive the housing market is.

The average price of first homes is being driven by the right now generation.

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

Well if NolmRight has a 21 year old son, they are probably 40-50 years old, which means they probably bought their first house some time in the late 80s or early 90s when you could buy the median house for about 3x median disposable income.

The median house now costs 6-7x the median income, depending on which city you’re in.

Right about the age but wrong about the purchase times. Try divorcing with two very young children and basically losing every asset. It doesnt do your buying power any favours and starts that clock ticking all over again 🙁

Again im not saying Im anything special. I have no doubt I could have managed my finances better and been better off now than I am. I was just prepared to live in something less than what seems to be expected now.

Genie said :

NoImRight said :

Actually Ive done just that on less income.Still earn less than 60k and own 3 properties. I was prepared to sacrifice other luxuries to get myself started.Owned the same car for 18 years, didnt go out very often and didnt buy new clothes just to chase fashions. Also managed to bring up two children on my own while doing it.

Im not special anyone can do the same thing. My eldest son at 21 is planning on the same thing right now. Instead of a new car like all his mates hes driving a 20 year old Corolla and saving every cent he can.A few years from now he will be planning his second house while his mates are on internet forums complaining about how expensive the housing market is.

The average price of first homes is being driven by the right now generation.

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

Well if NolmRight has a 21 year old son, they are probably 40-50 years old, which means they probably bought their first house some time in the late 80s or early 90s when you could buy the median house for about 3x median disposable income.

The median house now costs 6-7x the median income, depending on which city you’re in.

NoImRight said :

Mess said :

NoImRight said :

The average cost of a first home has risen to $400000? Is this not a choice to some extent? Quick look on all homes shows a lot of properties well under that figure.

Most places listed under 400k are small townhouses and apartments. If you want a house with some sort of yard (because, god forbid, you may have/want pets, or to start a family) then you are looking at over $400k.

So you agree its a choice issue then. I mean God forbid I should want a new BMW doesnt that become someone elses problem to make it affordable for me?

Not really no. I have two very energetic dogs, so it’s not an option for someone like myself to buy and apartment or a townhouse. I would need somewhere with a decent yard. What about families with young children? Again not really an option to buy somewhere small. These families are being forced to rent because the so called “affordable” housing options are just not viable. Anywhere with a decent yard and a livable house (read ‘not falling apart’) is in excess of $400k, usually around the $450k mark.

NoImRight said :

EvanJames said :

I’m sure Canberra is terribly affordable for these Working Families. If, however, you are a single on the average aussie income (not Canberra income), you are SOL. In Sydney and other capitals, there’s cheap options, little old fibro houses in Blacktown or whatever. here, the equivalent is Yass or Captain’s Flat. Not in Canberra.

How on earth do you afford a $400k house on $67k? Well, you don’t.

The person in ACT Treasury is clearly a wanker, and probably has My Family stickers on their back window.

Actually Ive done just that on less income.Still earn less than 60k and own 3 properties. I was prepared to sacrifice other luxuries to get myself started.Owned the same car for 18 years, didnt go out very often and didnt buy new clothes just to chase fashions. Also managed to bring up two children on my own while doing it.

Im not special anyone can do the same thing. My eldest son at 21 is planning on the same thing right now. Instead of a new car like all his mates hes driving a 20 year old Corolla and saving every cent he can.A few years from now he will be planning his second house while his mates are on internet forums complaining about how expensive the housing market is.

The average price of first homes is being driven by the right now generation.

Oh please tell us how you’ve managed to secure a loan then ?? I earn slightly less than the 65k mention and can’t even get someone to give me a mortgage for more than $200k.
So looks I either need to spend the next 5-10 years saving every cent I earn or give up trying to buy a house for the time being.

EvanJames said :

I’m sure Canberra is terribly affordable for these Working Families. If, however, you are a single on the average aussie income (not Canberra income), you are SOL. In Sydney and other capitals, there’s cheap options, little old fibro houses in Blacktown or whatever. here, the equivalent is Yass or Captain’s Flat. Not in Canberra.

How on earth do you afford a $400k house on $67k? Well, you don’t.

The person in ACT Treasury is clearly a wanker, and probably has My Family stickers on their back window.

Actually Ive done just that on less income.Still earn less than 60k and own 3 properties. I was prepared to sacrifice other luxuries to get myself started.Owned the same car for 18 years, didnt go out very often and didnt buy new clothes just to chase fashions. Also managed to bring up two children on my own while doing it.

Im not special anyone can do the same thing. My eldest son at 21 is planning on the same thing right now. Instead of a new car like all his mates hes driving a 20 year old Corolla and saving every cent he can.A few years from now he will be planning his second house while his mates are on internet forums complaining about how expensive the housing market is.

The average price of first homes is being driven by the right now generation.

arescarti42 said :

screaming banshee said :

God forbid people should start with a smaller property within their price range then build equity so down the track when dog and kids come along they can upgrade to a house.

NoImRight said :

So you agree its a choice issue then. I mean God forbid I should want a new BMW doesnt that become someone elses problem to make it affordable for me?

God forbid someone earning the average wage should be able to buy a house at the average price.

We are talking about first homes here which sadly for some may not be their dream home or even an “average” home. The problem seems to be no one wants to accept owning anything less than perfection straight away. You want lots of lifestyle options it costs. Champagne tastes on beer budgets etc.

devils_advocate10:00 am 05 Jan 12

johnboy said :

Don’t forget the ACT Government controls land supply.

I think the supply restriction is one factor, but also the fact that instead of the Government-run land development agency, they now just outsource the infrastructure development to private developers. In addition to running up the prices you get postage stamp sized blocks.

I bought land – a serviced block ready to build on – direct from the ACT government in 2000 and it was an easy process and I got a nice block at a price I was reasonably happy to pay (in retrospect, an absolute steal). Now the system is crap.

Don’t forget the ACT Government controls land supply.

JC said :

KB1971 said :

Pardon my ignorance but how does a government cause a massive rise in a greedy capitalist industry such as real estate?

When housing went berzerk around 2002 it wasnt just isolated to the ACT, we were well down on the list with the bigger cities going sky high. There were no political pressure then from memory, just greedy people.

Government does have an effect, thought not necessarily local government, but federal. In this case house prices started to rise after the GST was introduced and Howard started lowering income tax rates, meaning people had more disposable income and could afford to spend more which in turn leads to price rises. Coupled to this his fiscal policies also led to lower interest rates which also has the same effect in a rising market. So yep all ACT Labors fault.

As Zippyzippy said
Well this should be fun – let the political figure-fudging begin!

http://www.loansense.com.au/historical-rates.html
Interest rates were not 17% when Howard was in office

KB1971 said :

Pardon my ignorance but how does a government cause a massive rise in a greedy capitalist industry such as real estate?

When housing went berzerk around 2002 it wasnt just isolated to the ACT, we were well down on the list with the bigger cities going sky high. There were no political pressure then from memory, just greedy people.

The govt could have released land at a rate that kept downward pressure on price. but that would result in less revenue for them.

Other measures such as tax reform (capital gains tax concessions, negative gearing, first home buyers grants) are out of the hands of the ACT government.

KB1971 said :

Pardon my ignorance but how does a government cause a massive rise in a greedy capitalist industry such as real estate?

When housing went berzerk around 2002 it wasnt just isolated to the ACT, we were well down on the list with the bigger cities going sky high. There were no political pressure then from memory, just greedy people.

Government does have an effect, thought not necessarily local government, but federal. In this case house prices started to rise after the GST was introduced and Howard started lowering income tax rates, meaning people had more disposable income and could afford to spend more which in turn leads to price rises. Coupled to this his fiscal policies also led to lower interest rates which also has the same effect in a rising market. So yep all ACT Labors fault.

wildturkeycanoe6:12 am 05 Jan 12

EvanJames said :

How on earth do you afford a $400k house on $67k? Well, you don’t.

A $400k mortgage [3bed house Macgregor] is roughly $550 per week, the same house is about $450 per week to rent. I don’t see any real alternatives to surviving in Canberra except double income no kids or do it like me and pay over 50% of your wage into housing your family. It leaves you nothing after buying food, but that’s okay, working nearly every weekend means there isn’t any free time to enjoy anyway.
Incidentally, a mate recently bought a 3 bed house on a 600sq/m block 2 hours from the A.C.T for $135k. He now pays less per week than he did when renting. Now that’s a win!

screaming banshee said :

God forbid people should start with a smaller property within their price range then build equity so down the track when dog and kids come along they can upgrade to a house.

NoImRight said :

So you agree its a choice issue then. I mean God forbid I should want a new BMW doesnt that become someone elses problem to make it affordable for me?

God forbid someone earning the average wage should be able to buy a house at the average price.

“At the heart of all this is an assumption that all people are on average or median incomes, where in fact the average is formed by a great number of people earning well under it.

Basically if you’re a double income public service family Canberra is quite affordable. And if you’re not then you should be.”

This is the thing. Too bad if you work in retail or hospitality or something, you’re getting paid rest of Australia wages whilst paying Canberra prices.

I find it astonishing that the Liberals have the gall to criticise the government when they propose no legitimate solutions themselves, and in all likeliness would make no effort to do anything about it if they were the ones calling the shots.

EvanJames said :

How on earth do you afford a $400k house on $67k? Well, you don’t.

Actually I believe the done thing is to become a debt slave by taking on a ridiculously large mortgage and then start shitting bricks because you took on way too much debt.

davo101 said :

Ok, since Labor took office in 2002 the median house price has gone up from $200k to $550k and assuming that rates are levied as a cents per dollar value we would have expected them to go up 175%. Rents should also have increased 175% of the same period (to give the same return on the investment). Looks to me as if rates and rents are only going up at half the rate of the increase in house prices.

Rates are levied against land value, not the full property. There is an argument that the ACT’s policy for land release has caused land values to rise, therefore filling the coffers a little more. Meh.

I think they should be comparing the rate and rent increases against two sets of figures; overall ACT median income for the same period, and ACT median income without public service salaries. Not sure if the latter exists, and be buggered if I’d want to sort that spaghetti out.

screaming banshee5:37 pm 04 Jan 12

God forbid people should start with a smaller property within their price range then build equity so down the track when dog and kids come along they can upgrade to a house,

Also, not having any idea about Sydney suburbs I’ve chosen one a random the same distance from Sydney’s CBD as Charny and the median value is $700,000. Whinge and moan all you like we’ve got it good here, if you thought it was better somewhere else I’m sure you would up and leave.

Pardon my ignorance but how does a government cause a massive rise in a greedy capitalist industry such as real estate?

When housing went berzerk around 2002 it wasnt just isolated to the ACT, we were well down on the list with the bigger cities going sky high. There were no political pressure then from memory, just greedy people.

I’m sure Canberra is terribly affordable for these Working Families. If, however, you are a single on the average aussie income (not Canberra income), you are SOL. In Sydney and other capitals, there’s cheap options, little old fibro houses in Blacktown or whatever. here, the equivalent is Yass or Captain’s Flat. Not in Canberra. How on earth do you afford a $400k house on $67k? Well, you don’t.

The person in ACT Treasury is clearly a wanker, and probably has My Family stickers on their back window.

http://www.allhomes.com.au/ah/act/property-research/charnwood/121471712/top-50-sales

The top 10 houses on the list arn’t too bad. I suppose the buyers also thought that paying over 500k and one at $600k.

Mess said :

NoImRight said :

The average cost of a first home has risen to $400000? Is this not a choice to some extent? Quick look on all homes shows a lot of properties well under that figure.

Most places listed under 400k are small townhouses and apartments. If you want a house with some sort of yard (because, god forbid, you may have/want pets, or to start a family) then you are looking at over $400k.

So you agree its a choice issue then. I mean God forbid I should want a new BMW doesnt that become someone elses problem to make it affordable for me?

amarooresident34:32 pm 04 Jan 12

Charnwood is less than 20 kms from the CBD (Civic). I’d challenge anyone to get a house the equivalent distance from the Sydney CBD for less than $400,000.

NoImRight said :

The average cost of a first home has risen to $400000? Is this not a choice to some extent? Quick look on all homes shows a lot of properties well under that figure.

Most places listed under 400k are small townhouses and apartments. If you want a house with some sort of yard (because, god forbid, you may have/want pets, or to start a family) then you are looking at over $400k.

In my electorate, the median house price in Canberra’s cheapest suburb of Charnwood is more than $160,000 higher than the equivalent suburb in Sydney

Turns out that the equivalent suburb in Sydney is Willmot about 29km from Parramatta or 52km from the CBD. There probably is a reason why the properties are cheaper in Willmot.

Canberra has a much smaller range in the quality of its housing stock which is why you’d expect the cheapest suburb in Canberra to be much closer to the median for the whole city than in a much larger city.

Ok, since Labor took office in 2002 the median house price has gone up from $200k to $550k and assuming that rates are levied as a cents per dollar value we would have expected them to go up 175%. Rents should also have increased 175% of the same period (to give the same return on the investment). Looks to me as if rates and rents are only going up at half the rate of the increase in house prices.

It would also appear that the ACT Labor government has a lot more influence than you would expect. Not only have house prices increased by about 10% a year in Canberra, but also in most of the other capital cities.

The best bit of the press release was cut off, what the Liberal propose to do to help the situation:

cutting ground training and match fees by 50 per cent to help with the cost burden of junior sports.

Problem solved.

The average cost of a first home has risen to $400000? Is this not a choice to some extent? Quick look on all homes shows a lot of properteis well under that figure.

Well this should be fun – let the political figure-fudging begin!

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