Is buying a house really a sign of financial success anymore?

Zoya Patel 28 October 2020 56
Home in Canberra

Is homeownership really the path to financial security? Photo: Supplied.

The dream of homeownership is one that is written about often. There’s an obvious reason for housing security through ownership being a major goal for many people – having a roof over our heads is important, and the rental market can be insecure.

In Canberra, renting can also be more expensive on a day-to-day basis than paying a mortgage. That was certainly my experience moving from a relatively old two-bedroom rental in Downer into a brand new three-bedroom townhouse in Watson where our mortgage comes in at just under our rent payments.

But on a more philosophical level, does owning a home signify the same level of financial success as it once did? We all know that buying a house was a somewhat easier proposition for previous generations, purely in terms of the median house price in comparison to the average salary.

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For my generation, putting our predilection for avocado to one side, the same equation has a much higher gap. Even on high salaries, my partner and I would have been a long way off saving a 20 per cent house deposit on our own while paying rent and living costs in Canberra, and were only able to buy with the help of my parents, which I gratefully accepted.

Every millennial I know who has bought a home has done so with parental support, either through the gift of a deposit or by living at home into their 30s without paying rent, and therefore saving a deposit. I’m not casting any aspersions on this, given I took free money in order to fund our house purchase, and I’m also aware that there must be people my age who live frugally and did save their own deposits (it’s possible, just really, really hard).

But what I want to know is, does owning a house genuinely say anything about your ability to manage your finances anymore? Or are there other, more achievable investments that are a smart way to get a return from your savings while still renting?

Had my parents not offered us a house deposit, my partner and I planned to continue renting and ethically invest our savings into the stock market instead. Renting could be frustrating at times, especially because we have pets, but we were comfortable with the fact that homeownership was way out of our reach in the immediate future, and we didn’t see buying a house as the only way to be financially secure.

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In fact, with the changing climate, the difficulty getting house insurance in certain areas or for environmental risks, and the uncertainty around where we might end up choosing to live, renting seemed a smarter option in terms of flexibility and risk management.

The cultural pressure to focus on homeownership, though, was immense. As we hit our 30s, this increased, with people regularly asking if we owned the house we lived in, or if we were intending to buy together, and a few comments from well-meaning friends and relatives about not wanting to raise kids in a rental.

When we did buy, I noticed some friends seemingly get anxious about what our news meant for them – they were in no position to buy a house and didn’t have access to help from their parents, and suddenly they seemed stressed at being left behind in the financial stakes.

To me, this way of thinking feels quite outdated. Yes, I’m very grateful to own (or at least own in principle, given the bank really owns our house), but I simultaneously don’t for a minute think it means we’re more financially successful, or even necessarily more secure than our renting friends. I also make a point of telling people that we could only buy with help, because I don’t want to contribute to this myth that hard work will equal homeownership when the factors determining what you can afford in the market actually have very little to do with how hard you work.

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I think the focus on bricks and mortar investments feels odd in a digital age, especially when I then watch things like the bushfire crisis decimating the carefully saved for investments of Australians who focussed all of their financial security into property. I know all investments come with risk and the stock market definitely has these, but are the risk really that much greater than property these days?

Whether or not it’s achievable for many, is homeownership genuinely still a marker of financial success, or do we need to think differently about the financial milestones we work towards?

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56 Responses to Is buying a house really a sign of financial success anymore?
ChrisinTurner ChrisinTurner 5:18 pm 06 Nov 20

Retiring without owning your own home (with no mortgage) is very difficult. Do the sums.

rossau rossau 9:41 pm 05 Nov 20

C’mon, support the pyramid and get onto the magic carpet.
Only the carpet has flown too high and its means of propulsion is in doubt.

Nick Werner Nick Werner 4:36 pm 01 Nov 20

Using a banks money to buy a house is not a sign of success....paying for one is cash would be

Geoffrey Bell Geoffrey Bell 4:41 am 01 Nov 20

The money is in the land if you want to upgrade down the track, steer clear of apartments. Rentvest is another way to get on the band wagon.

Kieran Schmidt Kieran Schmidt 8:33 am 31 Oct 20

I look at places like western creek and prices have quadrupled over the last 20 years from 200K to 800K. Considering inflation it’s a comparable 336K vs 800K today. I don’t think today’s low inflation rates make up for the 2.4x increase in real value.
Owning a house in canberra is a luxury asset and needs to be seen as one nowadays, if you got into the market in the past 5-15 years then gratz, you’re doing well and i’m actually happy for you.
But for my age group, Is it affordable? Well you cannot live like previous generations and expect the same results in life. I think it’s still doable with no help and median income if you’re willing to live povo for about 10 years, but that’s probably not viable for most people. Otherwise, i guess owning an apartment is still achievable and while weak on capital gains it is often cheaper than renting. From an investment perspective i’d imagine even the most relentless optimists going ‘yeahnah’ to canberra houses in the next 5 years. I don’t really see a massive crash occurring but maybe a 5% dip into a fairly stagnant growth period with a couple of rich suburbs continuing to rise. The market is pretty irrational so no real point getting to into short term speculation.

Anyway i still view financial success as having a paid off property (of any kind) with enough passive streams to continue living a similar lifestyle that you enjoy until F.

    Maya123 Maya123 12:42 pm 31 Oct 20

    You say, “Well you cannot live like previous generations and expect the same results in life.”

    The previous generation didn’t always start off in houses like we see our parents in now; it was a progression to that. It often appears that the present generation is looking at the house their parents have now, and saying, “cannot live like previous generations.” Although I am pleased you recognise that an apartment is still achievable, (for a first home).

    Here’s how it often used to be. First home for my parents after they married was living with my mother’s parents. Then they got their first home together; a flat, not a house, over shops in an undesirable location. One child. They then got their first house (likely about 100 sq metres, as that was the average size then). Now there were two children. They moved several times, until their final house was a home in a better suburb in Canberra. They did not get that first off, or even a house first off.
    My experience. After renting for awhile (shared house and then a section of a house split up for rental), I bought my first house. It was the cheapest house in the whole of Canberra at the time, in a place people warned me not to buy. Drug dealers and house robbers lived in my street, but strangely they never worried me; even would say hello. After many years living there (the area improving), I was finally able to move and have a nice house built.
    Start small; don’t expect what you have been used to. Buy an apartment, get equity and move on.
    These days the first home is more likely to be an apartment, rather than a house. But an apartment doesn’t have to be the last home.

    chewy14 chewy14 11:23 am 01 Nov 20

    You can’t possibly be trying to say it isn’t significantly harder for the younger generations to buy a house than it was in the past.

    All the data shows this to be the case.

    But if you want anecdotes, my parents bought a house in central Canberra at a small multiple of my father’s below average wage.

    It would not be remotely possible to do that today, the costs are ridiculously higher on all metrics.

    Maya123 Maya123 11:37 am 02 Nov 20

    Of course it’s harder to buy a house these days, that’s why people need to lower their expectations and buy an apartment as their first step. My parents first home together was a flat. That’s the first home I remember.
    My words as a conclusion were, “These days the first home is more likely to be an apartment, rather than a house. But an apartment doesn’t have to be the last home.”
    It appears you didn’t read what I wrote.

    chewy14 chewy14 4:42 pm 02 Nov 20

    No i read your comment and the tone it is written in. And I don’t agree with you.

    “The previous generation didn’t always start off in houses like we see our parents in now; it was a progression to that. It often appears that the present generation is looking at the house their parents have now, and saying, “cannot live like previous generations.””

    This is not remotely true and you even now admit it by saying it is much harder to buy a house.

    The vast majority of previous generations did start off in houses unless they had a particular reason to live in an apartment.

    The same houses that my parents and most other people’s parents started off in could not be afforded by people in the same situation today.

    You’re claiming it’s about unrealtisic expectations when that is simply a lie older people tell themselves to justify kicking younger generations and maintaining/growing their own wealth.

    And no, younger generations shouldn’t have to lower their expectations when the unaffordability is hugely driven by government policies and tax benefits deliberately aimed at maintaining and increasing previous generations wealth.

    So how about instead of expecting to continue the massive intergenerational wealth transfer to older wealthy people, we actually enact policies that make it easier for people to buy a home?

    This would also have the added benefit of redirecting investment funds into far more productive areas of the economy rather than the housing ponzi.

    Maya123 Maya123 6:34 pm 02 Nov 20

    So you are basically saying that people refuse to lower their expectations. Yes it’s true that most people got houses in the past as a first home. So what. Times have changed, there are more people than in the past. In recent decades, the city has increased at least 400%. That alone increased house prices, but there are other factors too. Now, an apartment will likely need to be the first home for many people. Later they can move to a house; it doesn’t need be a forever home. It’s a first step; to get out of the rental market.
    I get annoyed at people who WON’T lower their expectations and then complain they can’t afford anything, when they can, but what’s available they won’t consider.
    I was on a lower than average income (not a public servant) when I bought my first house, and to do so I had to lower my expectations from what I was used to, otherwise no house. It almost was one of those old flats I put links to, and if the very basic house at almost the same price hadn’t come on the market, I would have bought one of those cheap one or two bedroom flats, because that’s all I could afford. I found them depressing, but I would no longer be renting. A first step. I would have bought a house later, when I had some equity.

    It is best if people think ahead and buy their first apartment before children. Then hopefully, they will have built up some equity and can buy a house.

    As an added; these old flats, although very basic and boring, have no inflammable cladding to worry about, and are likely more structurally sound than some of the modern apartments.

    chewy14 chewy14 11:14 am 03 Nov 20

    So what you’re basically saying is that it’s fine that the government policies have changed to further enrich existing owners and younger generations should just accept that the system has been stacked against them.

    It is literally zero to do with people having unrealistic expectations and everyrhing to do with the property market being converted into a wealth accumulation and tax dodging sector for wealthy people.

    So how about instead of expecting younger generations to basically enslave themselves so you can be kept in the manner you’ve become accustomed too, we encourage government’s to repeal policies that make housing so unaffordable?

    The current situation is not the natural order of things.

    Property should mostly exist as a place for someone to live, not to make investors wealthy.

    And I say this as an owner of an above average price house so doing what I’m suggesting would actually cost me money. That’s how ridiculously out of touch I think the property market has become and how much it negatively affects pur economy and society.

    Maya123 Maya123 1:50 pm 03 Nov 20

    Please explain how what you are talking about can be done. Stamp duty is being reduced to make it more affordable to buy a house, while rates are going up for present owners, making it more expensive for them. What else do you want? How do you get around the free market that sets the prices. The government can’t tell people what they can sell a house for. Do you secretly want to put people over a certain age out in the street, so you can take their house? It’s coming across that way. Most people only own one house. And those who do own more, if they didn’t, there would be nothing to rent. I do think that negative gearing should be looked at and changes made, but beyond that, I can’t see what else can be done. So please enlighten me as to want you want done.
    We can’t keep spreading out further with green fields developments, as that unsustainable with public transport and encourages more car use. It’s also environmental, clearing bushland and farmland. We need farmland. I often think that people brought up in cities, can’t get that alien last thing through their urban heads. They are so removed from where food comes from. With the increasing population (which will unfortunately be pushed up again after Covid is over and the borders are reopened) people need to live somewhere. The least damaging way to build housing, is to concentrate it more, and that mostly means apartments and town houses. Therefore, many people, especially first home buyers, are going to have to live in them, at least for the first home. If you don’t want this to happen vote accordingly at Federal elections. I do.

    Maya123 Maya123 1:54 pm 03 Nov 20

    environmental should be anti-environmental.

    chewy14 chewy14 8:41 pm 03 Nov 20

    Are you serious?

    Just for the basics, removing negative gearing on existing property and the capital gains tax discount ( replaced with an inflation factor) would be an easy start.

    The current market isn’t remotely “free”. If it was, I wouldn’t have a problem with it.

    bj_ACT bj_ACT 4:44 pm 02 Nov 20

    An issue two colleagues have had in Canberra is that they both bought small flats in two different parts of the city as their first step on the property ladder and the units are now worth less than what they bought them for. It can be a vicious cycle when there isn’t the opportunity anymore to affordably buy ‘land’ itself. It’s interesting that one was an older one bedroom apartment in Braddon bought for just $330k and it’s still dropping in value. Harsh lesson for her after the high annual rates and strata fees she pays.

    chewy14 chewy14 7:55 pm 02 Nov 20

    Yes I don’t think that buying units in Canberra at the moment (or for a while) is going to be a smart investment decision. Particularly not in Central Canberra, considering the (over) supply and proposed future projects.

Hayley Moeller Hayley Moeller 7:46 am 31 Oct 20

I think it’s really difficult for young adults to buy a house in Canberra (and Queanbeyan) - they are super expensive and selling for way over the asking price, and that’s just the basic houses.

Onelia Herriot Onelia Herriot 8:36 pm 30 Oct 20

The secret is remembering it is your FIRST home. It does not need to be your forever home. If you are single with no kids you don't need 3 bedrooms plus large yard. A one or 2 bedroom unit/flat which means your weekends will not be spent on maintenance (and owning a house requires a lot of maintenance) and if/when you have a need for bigger then you have equity in a property.

You can still get older style 2 bedroom units for under $250k and older 1 bedroom units for under $150k in Queanbeyan.

    Julie Macklin Julie Macklin 9:08 pm 30 Oct 20

    My first house was the cheapest at the time on the whole Canberra market. As you said, it's the first house; it doesn't need to be the forever home. Then I rented out the two spare bedrooms and doubled my loan repayments each month; sometimes even managing another payment on top of that. Grew a good proportion of my own food too and adopted other measures to save money and pay off that loan as quickly as I could. These days I suspect many people would not consider a 'mere' 99 sq metre house, even as a first house.

    Lizzy Cowie Lizzy Cowie 4:30 pm 31 Oct 20

    This is what i did. At 24 i bought a large 2 bedroom apartment on the ground floor. I have equity in my home and in 8 years time ill be able to afford my dream home.

Jill Lyall Jill Lyall 7:08 pm 30 Oct 20

Some older people have given up owning their own home to help their adult kids get into housing. It’s called inter generational poverty,

Sair Rah Sair Rah 1:36 pm 30 Oct 20

If our kids are planning on relying on the Bank of Mum and Dad to buy a house, they should probably lower their aspirations to buying a two man tent from Kmart 🤣

    Sair Rah Sair Rah 6:32 pm 30 Oct 20

    Nathan Lofthouse Totally... and the tent was in the Clearance bin due to half the pegs missing.

Eddie Majcic Eddie Majcic 1:07 pm 30 Oct 20

The market until CoVID was mostly fuelled by investors. That's driving up demand. Also migration which has all but stopped. So expect prices to plateau or fall over next year or two. Then back to Business as usual in 2023 and into 2024.

Ben Sweeney Ben Sweeney 9:50 am 30 Oct 20

Owning a house is a sign of financial success.. buying a house with the banks money isn’t

Andrew Dale Andrew Dale 11:36 pm 29 Oct 20

If a 3 bedroom house in Kambah be worth $700,000 now in 10 years you would think it might be 1.2m. The wages aren't matching increased house values so how is it going to work. This will be the last generation where a descent amount of twenty somethings will be able to afford to buy a house. Next generation it will be bugger all that can do it without mum n dad

    Julie Maynard Julie Maynard 9:16 am 30 Oct 20

    Andrew Dale some mum and dads can’t help now, let alone in future.

    Andrew Dale Andrew Dale 6:04 pm 31 Oct 20

    Julie Maynard I know. Heaps do now. But as I said the next generation bugger all will be able to do it on their own

    Julie Macklin Julie Macklin 7:10 pm 31 Oct 20

    Unless a person has a very good income, or have inherited money, they should not be looking at a $700,000 house as their first home. They should be looking at something about half that value, and there are apartments about half that value. That doesn't need to be the final home; it's a stepping stone. There are apartments available in Canberra and Queanbeyan for under $300,000, some as low as low $200,000s, if you bother to check. Some are two bedrooms too. Anyone who thinks otherwise, has not bothered to even check.

    Andrew Dale Andrew Dale 7:11 pm 31 Oct 20

    A 1 bedroom apartment is all you will get for 350k

Karen Feng Karen Feng 11:19 pm 29 Oct 20

Nope. I've ran numbers on a number of properties my mother wish to buy in the past.

Unless you have the money and don't need get a mortgage than buying is cheaper.

otherwise it is more expensive than renting.

    Karen Feng Karen Feng 7:49 am 30 Oct 20

    Heather Purvis Its my response to "is owning a home a sign of financial success".

    it is not, because you shell out more money in supporting the mortgage.

    Heather Purvis Heather Purvis 7:55 am 30 Oct 20

    Karen Feng 👍 it was your second sentence that didn't make sense to me & thus i wasn't sure whether you were agreeing or disagreeing.

    Heather Purvis Heather Purvis 11:44 am 30 Oct 20

    Jesse Mahoney no its actually the sentence structure that i mentioned that i couldnt understand - i suspect that there are words missing & misspelled which caused my confusion.. but thanks for your input

    Karen Feng Karen Feng 11:54 am 30 Oct 20

    Heather Purvis i should have worded it this way.

    "owning a home is not a sign of financial Success.

    you could have millions of money and have a house (no mortgage). you could be low on funds and own a house (owning a house just made you that much poorer). Hence, owning a house says nothing about your financial success"

    John Tozer John Tozer 1:40 pm 30 Oct 20

    Jesse Mahoney - or loss!

Roderick Saunders Roderick Saunders 9:07 pm 29 Oct 20

The article lost credibility when it said buying a house was easier for previous generations. One of the reasons houses were cheaper relative to incomes back in the day is because it was very difficult to get finance, and good luck getting approval for a home loan as recently as the 70s if you were an unmarried woman.

    Rheyce Spears Rheyce Spears 8:54 am 30 Oct 20

    Roderick my mother and my grandmother both bought houses as single unmarried women in incomes that are lower than mine today as a retail manager whilst raising kids.

    For me to buy those same houses today I would be paying about 4-5 times as much on an income only about 30-40% above theirs at the time.

    Yes they paid higher interest, no, finance wasn’t harder to get. If they were doing the same thing in today’s times they wouldn’t own houses.

    Anyone who says this isn’t an issue is kidding themselves.

    Onelia Herriot Onelia Herriot 8:18 pm 30 Oct 20

    Rheyce Spears and yet I know a single mother who had savings, was working full time for a major bank and yet could not get a loan from that bank or any other.

    Simon Dw Disndat Simon Dw Disndat 10:24 pm 30 Oct 20

    What was the deposit back in 1970? Now you can do 5% but 20-30k in hand outs

    Julie Macklin Julie Macklin 8:47 pm 31 Oct 20

    Rheyce Spears Did your mother and grandmother have male guarantors?

Rainer Busacker Rainer Busacker 6:21 pm 29 Oct 20

It's a matter of priorities for many. In the long term it gives one a sense of security. A difficult proposition with the lack of job security, permanence etc.

Corey Karl Corey Karl 5:33 pm 29 Oct 20

Maybe young people might have to consider stop having avocado on their chicken sandwiches with their lattes in the morning 😂😂😂🤣

    John Davison John Davison 7:40 pm 29 Oct 20

    Corey Karl yeah they should to go back to eating dripping on toast that will teach them

    Joanne Jeanes Joanne Jeanes 2:23 pm 30 Oct 20

    Corey Karl take their lunch to work instead of buying! Lol

JS9 JS9 3:47 pm 29 Oct 20

The greatest travesty was the move to allow assessment based on 2 incomes. That was ultimately the beginning of the end of affordable prices for households (said in a very general sense) – that combined with a raft of policy settings that skew investment decisions towards property over other investments and we have the unsustainable, debt laden households of today.

    Maya123 Maya123 2:20 am 30 Oct 20

    You mean when female income started to be considered! When it changed from female income didn’t count and from the days we couldn’t get a loan without a male guarantor, to our income being considered too. You call this a “Travesty.”
    Well, it’s a travesty that you think this way.

    JS9 JS9 2:52 pm 30 Oct 20

    Way to take 2 + 2 and get 365 Maya. Nothing to do with who is earning the $ at the end of the day – my point quite clearly said an assessment based on 2 incomes, rather then 1. and said nothing about gender – your the one that took it there.

    You are tying in a cultural element that is irrelevant to the point being made – I’m not suggesting a move back to the need for male guarantors, or only men can get loans. – never once did I say anything of the sort. I don’t care if its the dog that brings home the income at the end of the day while its owners bludge all day.

    The opening up to allow assessments on the basis of 2 incomes (rather than the primary income source) was a key element of the beginning of the end for affordability of housing. Do some research and you’ll see the empirical evidence supports that supposition.

    Because it fundamentally means a far greater chunk of the household budget is chewed up on housing costs, putting substantial pressure on and forcing both people to work full time to even get into a basic home in many cases – its had substantial impacts directly on financial affordability, and substantial pressure on life work balance too.

    Nothing to do with genders at all.

oh_ oh_ 1:50 pm 29 Oct 20

Pertinent article. Its even harder if you aren’t a couple ie on one income, even if it is a good income. I was only able to do it with a stint working overseas a good job in a low tax country. Otherwise as you say it would never of happened until into 30s, maybe 40, by the time you pay off HECS/HELP, then its maybe too late to start a family if that’s your preferred sequence. A lot of young people are getting into cryptocurrency now which can be a much better investment. That said you don’t have to save 20% deposit, with prices where they are now it may be better to save 10% and cop mortgage insurance premium eg 10K on entry level property.

    JS9 JS9 3:01 pm 30 Oct 20

    As someone in the group you are talking about, it is tough, but whether its any harder then other generations, who knows.

    But I feel a keen understanding of the scenario you paint. Without a bank of mum and dad to rely on (both of us come from very much a lower income working class background), we are now in our early 30s only just getting to a point where HECS has been paid off. We are earning good money, but will likely need ot start a family if we want to do that before we seriously look to build a substantial deposit. So very likely we will not purchase out first place till our mid 30s at the earliest, which means we are likely to still be paying it off as we approach retirement. And that is on decent wages for both of us – I’d hate to be on below average incomes and trying to juggle it all.

James Savoulidis James Savoulidis 1:48 pm 29 Oct 20

“not wanting to raise kids in a rental”….. But I thought you were one of those millennials who thinks climate change is a reason to not have kids???

Paul Murray Paul Murray 12:44 pm 29 Oct 20

1 – A home is not an investment. An investment is something that earns money. A rental property is an investment. A business is an investment. Buying a home because the value will increase is not investing, it’s speculation.

2- That aside: the #1 reason to buy a home is that you can’t be kicked out of it with a month’s notice. The money aspect: meh, you have to live somewhere. The security that homeownership gives is … is something difficult to appreciate when you have rented all your life, and are accustomed to living on sufferance..

3 – And yes, it’s crazy: it is cheaper to buy than to rent right at the moment.

    dolphin dolphin 9:56 pm 29 Oct 20

    I did a quick survey of a few of my friends last year, most of whom are either renting but intending to buy as soon as they can save the deposit, or have bought in the last couple of years. It arose after I was reading some research into taxation of housing and it was talking about motivations for home ownership (which was heavily focussed on the financial aspects. most of my friends laughed.

    for them the reasons for buying or wanting to buy were: first and foremost security of tenure – not being forced to move constantly or facing the fear of eviction for no reason; the ability to decorate and do want you want with the property including putting on solar panels, hanging pictures on the walls (!), planting a garden, keep pets etc; not having rental inspections and having to deal with real estate agents, (which is despised by every renter I know). growth in value was only a minor consideration for most of my friends.

    Not necessarily the most scientific survey, but I would bet its pretty accurate.

    Incidentally – nearly everyone I know who has bought had some help from family – towards the deposit or as guarantor for the loan to avoid mortgage insurance. its a sad situation that for a large chunk of the population on average or low incomes the only chance to own a home is through inheritance or parental rather than through earning their own money

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