Australia's housing affordability crisis? Where?

Discussion in 'Member's Articles & Videos' started by Mark, Apr 13, 2017.

  1. Mark

    Mark Founder Staff Member

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    Hey guys, I keep forgetting to post my videos here but this one is my opinion on the Australian housing affordability crisis we are continuously hearing in the media.

    My spin on the issue is people should be looking outside of the inner city (especially for a first home) and also considering the better bang for buck when buying a house and land on the city fringes or in regional centers.

     
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  2. Berkeloid

    Berkeloid Active Member Premium Member

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    I completely agree with everything you said in the video! Sorry this post ended up being so long when I could summarise it with just that statement :)

    I am always asking myself what am I missing when I hear stories about young people being unable to afford property. I got my first job straight out of university just after I turned 20, and 10 months later I had saved a deposit and bought a unit within walking distance to work. And on top of that it was only 15 minutes from the Brisbane CBD.

    Sure I lived with my parents for those 10 months so I was able to save almost every cent I earned, but other people I knew my age (who also lived with their parents) spent almost everything they made so of course they couldn't afford a place to buy. I always found it ironic that my parents rarely bought me things as they were always trying to save money, yet once I started earning money I didn't go crazy buying all those things I could never have. But those friends of mine who were always getting their parents to buy things for them turned out to be the ones who just could not save their money. Perhaps this taught me that spending money was something you only did for very special reasons? All I can say is that if there are any parents out there who feel bad that they can't always buy their kids what they want, you should be happy that you're actually setting them up to be really good at looking after their own money!

    After that first property, I continued to save my money and two years later, shortly after my 22nd birthday, I was just able to afford the deposit on an investment unit. That went up in value which allowed me to buy another place, and by the time I was 28 I had five properties to my name.

    I am of course under no illusions that this was only possible because of being in the right place at the right time (buying in the housing market just before a boom, and getting a decent job straight out of uni) however I am convinced that had the circumstances been different, I would still have been able to achieve much of this, it just would have taken a bit longer. This is why I struggle to understand why young people can't afford to buy - if I could buy five properties before I was 30 then surely most people can get at least one?

    Of course talking to other people my own age the reasons become pretty clear. It's all about being trendy and fitting in, doing the same thing as everyone else. That has never appealed to me, so I've never been interested in having the latest fashion, or going out drinking all weekend, or even going on about how badly I have to go buy an overpriced coffee, as if doing so proves you're a real grown up. It's amazing how much money you can save when you don't take part in any of that. As an aside I recently heard a 23 year old admit to spending $600 on his boots, which didn't fit properly but they looked great which apparently was all that mattered. Clearly he's not saving up for a place to live...

    A friend of mine in her late 20s recently bought her first place, and it was quite interesting watching the process. I was telling her to look at units to begin with, but no, units are too small and she was going to buy a house! That was really close to the office! One of those huge newly built modern monstrosities with almost no garden. I tried to explain that you have to start small and work up to something like that, but she was having none of it. That was, until her bank told her how much she could borrow. Then the despair set in, as she slowly realised that she couldn't afford to buy anything like that. Long story short, she took the long way round and finally ended up buying a unit just as we'd all originally recommended, and having a one hour commute each way to work. Not what she wanted, but hey, she could afford it and it worked out pretty well in the end.

    So it seems many young people are a bit out of touch with the realities of property ownership. It doesn't seem to occur to them that you have to start small and work your way up. But, just as you have said Mark in your video, if you're willing to look further afield and commute a little more than you'd hoped, you can find a nice affordable place to live and over time work up to something bigger if that's what you want.

    This message is getting a bit long, so I will just quickly add some answers to the most common questions I get when I tell people about my properties: No, having lots of properties doesn't make you rich. I owe the bank over $1 million and despite the rent coming in, exactly half my salary gets eaten up by the properties (loan interest, rates, etc.) If it wasn't for negative gearing I would probably struggle to put food on the table (but I'm single with no kids so I'm ok with that risk.) It worked well at the start when the property market was booming, but over the last few years it has been fairly stagnant, so overall I'm losing money now, which no longer makes it worth the risk/sacrifice. So now I'm planning to sell most if not all of the properties because I don't see things improving any time soon, and I want to move to acreage sooner rather than later for the reasons in Mark's video. I worked out that if I had put all the money into a term deposit instead of property over the same time period, it would have worked out much the same. Except a term deposit wouldn't have taken up so much of my time, because they don't complain that the taps are dripping or the lights have stopped working, or take you to court because they disagree with the way you organised the painting.

    Anyway, apologies for such a long ramble, I hope I didn't put anyone to sleep :)
     
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  3. ClissAT

    ClissAT Valued Member Premium Member GOLD

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    Berkeloid, you are currently experiencing the bottom half of a fairly long cycle.
    Hang in there & property values will change when we in the upper half of Australia will begin to feel the pinch of property values.

    I did some buy & sell in the early 2000's to build up a good pocket full of cash.
    Then along came the GFC followed by zero growth.
    Once people get back on their feet from GFC which is still affecting many, they will reach in their pockets & pay more like their southern cousins.
    I just hope I can buy a few properties before the next cycle begins.
    Currently Briz city commercial & unit prices are slumping but watch for them to turn around.
    That marks the beginning of the wave which works it's way outwards from the city to the suburbs, then inner acreage, then north along the coast to Sunny coast & to the more western suburbs.
    There are 3 waves then it all resets again. The whole process seems to take around 20yrs from bust to boom & back to bust.
     
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  4. Director

    Director Valued Member Premium Member

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    I wouldn't count on any prices rises for a quite a few years. We haven't really had our crunch yet, in the 2008 GFC U.S. and British property values dropped about 50%, ours didn't. We have been riding a wave of speculation ever since buoyed up but low interest rates (which are ironically countered by higher house prices) and propped up by the global reserve banking ponzi scheme and their 'quantitative easing' (a euphemism for 'printing money' which of course devalues the existing money supply). And then there is the broader economic situation both locally and globally. There's a few highlights in this recent vid (about 5 minutes in)



    And many other things going on that have me convinced that is a lot more pain to come before we see any type of recovery. I hope I'm wrong of course but I'm not seeing too many signs of hope but I'm certainly not going into debt until things resolve.
     
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  5. ClissAT

    ClissAT Valued Member Premium Member GOLD

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    Very interesting, Director. I also used to think we still had our GFC to come yet too.
    Now I'm not so sure. We are still blessed by the Howard govt huge savings drive, Heritage fund, etc.
    However, if our current & next govt fails to heed the warnings & signals & take moderating steps, we sure will have our very own GFC because now the country has no savings buffer.
    I still think that within each state there will still be the longer term cyclic rise & fall, purely driven by speculation & the needs of the owners to move on, up & out to greener pastures.
    It may not be as big a windfall as we had pre-2008 but people are driven non-the-less.
    All you have to look at is the rise of the stock market to see that people are back in business however they can.
    Once they make a bit on shares they are likely to want to put it into bricks & mortar in the hope that they wont get burnt next time & loose everything in the stock market or other investment as we had in GFC.
    I fell into that trap thinking I was taking good financial advice & invested my hard earned money including my super into what seemed strong companies so I would have small but solid income for many years to come.
    But alas, they banked on Lehmann's!
     
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  6. Flatland

    Flatland Well-Known Member Premium Member GOLD

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    From my experience many younger people are very quick to complain about how hard it is to buy a house but pretty slow at doing the hard yards. As Berkeloid said too many people want to start with everything not prepared to start smart & work their way up. If they are then they can do it. All it takes is a will to do it. An example is a young friend of mine who is on a care'ers pension because she had 2 severely autistic children who require 24/7 care is buying her own home. How? A country town, a small house & lots of determination. She tells me she has friends of her age with jobs who moan constantly that they can't afford to buy a house & she tells them to stop wasting their money & get their acts together. If she can do it on a pension it's certainly doable if you are prepared to start small & work hard..
     
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  7. ClissAT

    ClissAT Valued Member Premium Member GOLD

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    I am also paying off this property mortgage on a pension.
    Having lost my substantial cash stake in the GFC, I had to start again in my late 50's with a mortgage & minimum deposit.
    Not easy, no mobile phone until recently & only then because it was given to me & I take the most basic prepaid over the longest period of time with no internet access.
    No processed food, no driving all around the place, I must fit everything into the one fortnightly trip to the shops.
    No new clothes unless the old ones are really bad & the new ones are on big special. Same goes for shoes.
    I regularly visit secondhand & charity stores.
    No alcohol unless someone else buys it for me, no smoking, no gambling, no take away food, very little in the way of luxuries, no going out particularly at night unless the event is free.
    Maybe a small treat 3 times a year.
    TV is my main entertainment but I still can not find the time to watch all the news & current affairs, docos, nature shows, building & gardening shows on commercial TV & 9Life. So I'm not watching crap.
    Gardening is my other main entertainment & exercise when all the property maintenance tasks are done.

    So yes it is possible to pay a mortgage or save for one on a limited income. However, people's priorities are vastly different these days.
    They are so used to living on the cream of life, they have no idea what a basic life actually is.
     
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  8. Flatland

    Flatland Well-Known Member Premium Member GOLD

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    Well done. Shows how it can be done if you really want too.
    I think a lot of the reason why a lot of younger people can't get the idea of doing without to get something you really want is because of the way they were brought up. My era 50's & 60's children were given presents for Christmas & birthday, lots of their clothes were hand-me-downs so when my era people grew up & had children they wanted the best for their children & many did that by giving their children everything. Whatever the child wanted they got given. This was partly because on the whole both parents were working so there was more available money different from my era when mothers never worked. This giving children everything was done with love but had the result of breeding children who have no idea of waiting for something they want. "You want that doll, train etc you'll have to wait & see what you get for Christmas/birthday" no more hand-me-downs only the best will do for my child. So again the now grown up children can not possibly make do with anything but the best

    Case in point just been with family for Easter 50/60's Easter saw me getting 1 Easter egg 2 if I was really lucky my grand nieces got 7 from their Grandparents plus a large rabbit that was on top of the 10 they got from their parents & the 10 more from the other Grandparents. I understand people wanting their children to have more & better than they did but it does have a down side.
     
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  9. ClissAT

    ClissAT Valued Member Premium Member GOLD

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    I got one of those tiny choc eggs for easter & only because my sons daughter didn't find it first.
    I don't get presents anymore because most of the family are gone now.
    My son doesn't believe in giving presents (probably due to being too lazy to remember!).
    But he's a cheapskate too & no I didn't teach him that! :)
     
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  10. stevo

    stevo Backyard Farmer Premium Member

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    Great discussion. I have no expertise in this area though.

    I do like to keep a safety buffer in the bank for bills incase I'm out of work, like if I fall off a ladder while using the chainsaw, and my debt is relatively low. I know a few people that have a pretty extravagant lifestyle but a lot of debt and I always wonder what would happen if something went wrong, they could end up losing everything, because I also know people that were quite well off once, lost everything and had to start again.
     
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  11. Mark

    Mark Founder Staff Member

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    @Berkeloid you really triggered this discussion off! Nice one!

    I wasn't too sure about making this video because it's out of my usual genre (and you know how some people can be) but I really do have a big interest in social politics and I'm keen to voice my opinion more even if people shoot me down I feel discussion is still healthy and I'll learn from it.

    Nothing is for free. I got my first deposit for a house by chewing sand in the Sahara desert for 11 months on operations. Dodging land mines and nasty people was dangerous work but good money for a 23-year-old and when I got back I put most of my savings into a house.

    I wish I purchased in Brisbane back in the early 90's, but I ended up buying an investment property in Toowoomba instead because A: it was more affordable, and B: I was in the Army and Toowoomba was my hometown so my mother and extended family could keep an eye on it - that was my rationale anyway.

    As it was, my Toowoomba property took nearly 20 years to double (and a bit) in value and in the end selling that helped us buy our current dream property (mortgage).

    Also, my wife and I were lucky enough to buy a property in Wodonga in 2001 which we sold for 100k profit 2 years later when subsequently posted to Brisbane. It's all relative though because I remember distinctly eyeing off buying an investment in Morayfield in 2002 off the plan house and land 4&2 for $199. At the time, I felt it was a very good deal but I didn't act then 12 months later similar properties were going for $285 so I had missed the boat, however with the boom looking to continue we got into the market regardless and then it all ground to a halt!

    Anyway, the best advice I can offer young people is to never bite off more than they can chew and always allow a buffer for when you are out of work or interest rates go up. By all means, try to pick the market for the right time to buy and sell but don't bet on it! Doing well in property usually takes time (a long time) and the trick is staying afloat for all those years until the equity practically becomes a safety net - then it feels better.

    I hate the banks... Just wanted to finish by stating that :)
     
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  12. Peter127

    Peter127 Member

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    I am glad you had made the video - it is a subject that I also firmly believe in and you pretty much touched on all the important issues I am passionate about.
    I really wanted to add that almost every day I go outside, drive into my local village, or just remember where I am and where I live ....I thank my good fortune in being able to do as you have done - live in a beautiful part of the world, live with great environmental opportunities (clean air, electricity, clean water, communications etc etc) - the greater majority of people in the world don't have a choice (and you put it well) many Australians choose not to exercise that choice (and longer term benefit) of decentralizing!

    I am hoping that the Govt (State and Federal) are truly committed to a practical and expedited plan to move all GOVT based offices to regional areas - as the excuses I hear most often why families have to be in or near Capital cities is the jobs availability criteria - someone needs to start the process of decentralization first - i.e. the Govt! Make jobs and the people will come!

    I am aware of many instances (Bligh in particular) where poor decisions resulted in hundreds of jobs being lost in Cairns (Boat Building industry) - instead business being scooped up by international companies and additional burdens placed on Govt to support more unemployed people.

    I would also like to mention that I consider myself lucky because I have, as you do - land to spread out and grow food etc in a low intensity fashion - and that is not a sustainable situation for everyone in Australia let alone other western cultures (not enough land) (or too many people)!

    And a last note to you Mark - When I watched your Motorbike video - I was teary eyed for quite a while - lovely gestures by both of you. And as a side note - as a motorbike rider myself - it is really hard to take money out of your wallet or pocket or both while on a bike - I have to get off the bike first - I suspect your supporter did just that - and then had to catch up with you again to hand you the money .... great touching story.

    Cheers
    Peter
    FNQ
     
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  13. ClissAT

    ClissAT Valued Member Premium Member GOLD

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    It's not about liking(hating) those you need to do business with.
    It's about the important essential service they (the banks)provide that otherwise is not available to mere mortals like us.
    In the current economic climate, no-one can complain about the amount of interest they are paying.
    It's a time to profit from that & make inroads into the principal of your loan.
    If you aren't taking advantage of these remarkably lenient fiscal times, you are a bloody idiot!
    Even on my pension & small extra income from my granny flat I am able to make my fortnightly payment go even further. I recently renegotiated my mortgage & got a full 2% off my interest rate so the same payment now has a far greater beneficial effect on the principal of my loan. This makes my account look all the better.

    I don't like banks all that much either. For the most part they are money grabbing faceless thugs. But they do provide an essential service & afterall, money talks.

    Just as an aside, I read something about (I think it was) ANZ being one of the biggest banks in the world. It is a global bank now & whereas most banks in other countries are smaller, Aussie banks have had to get big to compete. Just think, I used to work for ANZ when it was still called The Scottish Australia Bank (even before it was ESandA) when it mostly funded cattle or sheep stations in Australian outback having come to Australia over 150yrs ago from Scotland. Then, after ESandA it merged with The New Zealand Bank. I think that was the start of the cannibalizing of most of it's opposition.
     
  14. Ash

    Ash Valued Member Premium Member GOLD

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    Mark, the video was a good conversation starter, pretty straightforward message and agreeable. And your next post was similarly convincing. In fact much has been said about affordability versus expectations, especially by financial experts and advisors. The newer generation want it all and want it now. Fewer and fewer are satisfied by building themselves up slowly and pacing themselves with their finances. People will soon learn that they can't have everything they want, and the government will be much the same when they start to realise they can't keep bowing out the budget.
     
  15. ClissAT

    ClissAT Valued Member Premium Member GOLD

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    It's a natural mathematical inevitability that when the graph begins to trend vertical, things are about to go pear shaped in a big way!
     

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