Anyone else looking at buying their first home, but just can't stomach paying the ridiculous asking prices?

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  weezlebub on 14/03/2017 - 11:19

  lots of things to consider:
  Work - is your work transferable to a cheaper state (a lot more bang for your buck in Tasmania)
  Size - do you want to start a family in the next 10 years? (a unit wouldn't work if you want kids)
  Quality - "renovators delight" is a great option if you're handy or may want to one day sub-divide
  Strata - ugh, my experience with strata was nasty, hence why i opt for established free standing
  Location - if you're in NSW, I'd opt for the train line out north, if you work in an office, the train lines are a great way to get some work done for an hour or so each day
  Interest rates - yes, they will go up eventually, but that's tomorrow's problem :)
  Income - if you get an established with extra rooms, you could rent them out for extra money (living money if your income goes almost completely towards mortgage)

  My personal experience was great, even the dud's worked out in the end, my only regret is ditching the investment property for a steal when i wasn't working

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  OzTightArse on 14/03/2017 - 11:21

  +1

  Thord, here's my story fwiw. We have 2 kids and single income. Like you we saved and bought our unit in 2005 with $220k mortgage. My income was $56k and weekly rent was $180. Petrol was 98c

  I kept putting extra money (bonus, rise, etc) towards the house/unit and in 2014 paid it off. It wasn't a big mortgage in the first place. And we still drive our old cars and never bought a new one.

  NOW… with today's house prices we could NEVER afford doing that. In a mere 10 years things had changed dramatically. With my salary today and the prices in my suburb I would have been forced to rent. Because I am not willing to get a half million mortgage to pay those bankers' salary for 30 years :(

  I passed an auction once and the prices went from 400k…500k…600k… $740k sold! People must have $300k salary or something to afford these houses.

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  [Deactivated] on 14/03/2017 - 11:23

  Get a 10-20 year lease and invest somewhere else?

  I'm not sure that's even possible but I'm sure some owners would be willing to break the norm

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  aussie bargain on 14/03/2017 - 11:37

  +3

  There are so many comments on this already, but I thought I would add mine in (hopefully OP wouldn't get more confused).
  I refused to buy a home for many years until the RBA dropped their rates so many times (followed by the banks), it was just not worthed to save, so I ended up buying a house at the end of 2015. When people asked then, I said that Glenn Stevens (RBA governor at the time) forced me to buy a house.

  Was it a good decision? It depends on how you look at it. I got a house on a decent-sized land in Inner North West Melbourne for something that I consider "slightly over my valuation of face value" (most people I spoke to said it's cheap).
  It is true that the housing situation in Australia is not fair (especially for first home owners to be), ponzi scheme like, seems like a bubble etc etc.
  However, at the end of the day, if you would like to own a house, like it or not, you have to bite the bullet and buy something at a price that the market dictates (unfortunately we don't live in a society where housing prices are fully government controlled).
  In addition, prices are never going to come down unless A LOT of people are willing to sell below the current market prices - unlikely to happen any time soon.
  It is true that you are likely to be paying more than WHAT YOU THINK it's worth (like me), but it's the price you have to pay to get ownership of the house. There is no other way unfortunately (unfair as it is).
  Such is the reality of housing - you can complain all you can to the government, but before we have policies similar to that is proposed by Labour, this will keep going on (unfortunately).

  When I looked at my decision another way, with the money I spent on the deposit + stamp duty + etc, I could have bought a Mercedes or a BMW, but I ended up buying a house. To me, both Mercedes and BMW's are overpriced, so I decided to buy a house. There are just things in life where you have to buy some things that are slightly more expensive (I know that's a hard thing to do for Ozbargainers)

  Unfortunately, things are tougher for you in Sydney (due to the higher prices). My young family lived in Sydney for almost a year before my child was born.
  The high cost of living and housing prompted me to move back to Melbourne in 2010 (i'm originally from Melbourne, partner is from overseas). We were lucky enough to find a decent apartment to live in for almost 6 years (where the rent only went up once by $5 a week in 2013).
  Throughout the period, we saved our arse off and looked into buying on and off throughout the years.
  However, the interest rate cuts by the RBA (followed by the interest rate cuts in our savings account - UBank, RAMS, ING) just made it not worthwhile. From memory, my calculation was that when the savings interest went lower than 4% (I think), it was just not worthed to save/rent anymore.

  Note: If you want help calculating for your situation, here's a good tool to use:
  https://www.nytimes.com/interactive/2014/upshot/buy-rent-cal…

  A few other considerations when you want to buy:
  - Interest rates won't stay like this forever
  - Owning an older house with a backyard comes with responsibility like weeding, mowing, etc that can take away your precious weekend time
  - Various other costs will add up quite substantially (Do you know that it costs at least $100 for trade people to come and fix something at your house?)
  - Do you "like" the idea of a debt (especially a major one)? Philosophically, I never liked the idea of debt, but I acknowledge that debt has a role to play in today's world.

  One way to look at it is that we might think that buying a house (accompanied by a big fat mortgage) needs to be a rational decision.
  However, because the housing market is full of irrational people and those irrational people unfortunately "sets" the market price, then the price you pay for the house that you want becomes an irrational price.
  It is hard (maybe impossible to some people) to make a rational decisions to buy something at an irrational price.

  Note: There would be plenty of people arguing that the current prices are not irrational (e.g. Real estate agents, "we need more supply" rhetoric), however, simple economics and research from a lot of independent bodies outside of Australia has confirmed that Australian houses cost too much.

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    hahaboy on 15/03/2017 - 22:42

    cool website link. It's a quick estimate for sure. Based on it, it definitely appears renting is a better option currently.

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      aussie bargain on 17/03/2017 - 16:18

      Make sure you play around with the figures and percentages.
      I know when I did, the percentages that matter most are the rent increase and the house capital gain.

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  gizmocreative on 14/03/2017 - 11:44

  +1

  I am by no means an expert in the property market, but do have my own experiences that I can put forward if it helps. I read a lot of these discussions about property bubbles and economics and bigger picture stuff and to me I find that it is drawing too wide a brush over the things that make your goals achievable.

  I used to have 3 properties, and now I have only one and it is the other three that got me there. I was on a moderately low income at about $45,000 a year, living at home with parents and I bought my first unit and things were a bit tight, but it was what I could afford.

  The next step for me was a bit easier, but is achievable on your own. My partner moved in with me and I let her save up for a deposit rather than paying rent. She bought a unit that was similar, just a few suburbs out. She could afford the repayments on that one herself. Once the first year was up, she moved back in with me and rent hers out.

  After a few years with hers renting out, we did the sums and figured I if could rent mine for a similar amount we would have enough between us to buy a third property, so we did. We rented two units and bought a townhouse.

  After about 5 years managing the three, the rent had risen, the interest rates had dropped and the out of pocket cost for both of our properties including rates, body corporate and utilities was about $150 a month.

  5 years later and a new baby, we decided we wanted a house. The plan was to sell the current townhouse and upgrade to a house.
  We found the one we wanted but it was a bit out of our price range. So we decided to sell the other properties and with the extra get the house.

  Now we are in a decent sized 4 bedroom house. It took us about 10 years to achieve, but we got there.

  I know there will be people who will find issues or arguments to how to go about it, but I think that once you get a foot in the door, it gets easier. It might not be what you want on the first purchase, but its a start and just make sure you are smart about the decisions you make, think about worst case scenarios etc.

  I see people renting places for more than the repayments on a house. To me that doesn't make sense, but agree there is probably some benefits to it. But if you were able to get a foot in the door and find it a bit challenging, you can move out and rent for somewhere more affordable and rent out your property and at least keep the place as your standby for equity, or investment or to move in later on. Essentially you could stay renting and buy more property as long as you can afford the difference between the rent and the repayments plus other expenses.

  I hope that is some help

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    [Deactivated] on 14/03/2017 - 12:21

    +2

    Mate if you bought in 2008 in Ireland or Spain you wouldn't have a rosy picture post. Good on you for achieving your goals but understand you were lucky to live in Australia (in a major city) when making those choices and luckily the mining boom saved you and now the construction boom. You wouldn't be saying that if you bought in Port Headland. Understanding the situation rather than taking things on blind faith is always a better strategy

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      gizmocreative on 14/03/2017 - 12:48

      +1

      as I said, I'm not an expert but I don't see how you know for a fact that a mining boom saved me or a construction boom. The issue I see is that a lot of the things that are written are extremely circumstantial. If I was in the same situation I was 10 years ago, I believe I could achieve the same outcome. When I bought, the interest rates were at 8%. I am not sure what buying in Spain or Ireland has to do with it, nor Point headland. I understood my situation at the time and I understand my situation now, I just don't see the need to look at things on such a broad level. Every article I read about the bigger picture contradicts the last one.

      Just offering an experience I had and would do the same thing again.

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        [Deactivated] on 17/03/2017 - 12:50

        GDP was influenced by exports to China and the mining boom. If it wasnt for that we would have been in a recession (negative GDP) which leads to high unemployment and crashing housing prices.

        If you don't see broad level you are looking through a tiny hole. And that isn't healthy in anyway as you are unaware of potential risks.

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  Trying2SaveABuck on 14/03/2017 - 11:56

  +1

  If you where the vendor you would be doing the same thing Vendors arent charities - dont know what you are complaining about.

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  [Deactivated] on 14/03/2017 - 12:16

  +4

  Once interest rates increase you'll never see these types of posts again. Bubble trouble

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  sd4f on 14/03/2017 - 12:18

  +2

  If you're buying a home, then it doesn't really matter too much whether price growth cools down or whatever; it only matters when you sell. With that said, the talk of Sydney has been that there won't be a glut, because new construction is largely putting things back on track with demand, previously supply was significantly lower than demand.

  There's 1,100 (yes, over one thousand) new migrants to Sydney every single week so demand is being forced by our governments. My suspicions are that property price growth may cool off, but they probably won't go down. Basically in order for prices to go down, property investment would have to turn bad or economic situations would mean that investors on credit, can't service their loans.

  I also think that parliament (i mean this in a collective, bipartisan sense) will do just about anything to avoid a property market crash. For starters, parliamentarians are quite keen property investors, but also the contagion would have significant effects throughout the whole economy, the banks are significantly exposed to it. It's not like as if the banks aren't in the ear of parliamentarians either.

  Bottom line is, the high prices are really bad for the economy because land in this sense is completely unproductive. It literally does nothing, and is completely driven by speculation. There aren't really any winners in this either, there was an article on how the only real effect of high prices has been greater household debt; even people who didn't sell, have taken loans to spend some of their otherwise unrealisable wealth. Since property prices are almost entirely speculative, it means the money moving around doesn't really pay for much labour, and that's probably a good reason why in spite of what politicians say, everyone feels nervous about the current economic state of things. Rents are mostly tied to wages, and don't really reflect property values.

  The thing is, because of the current state of things, where else could you possibly invest money? Property has proven to be the best investment over the last few years.

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    2ndeffort on 14/03/2017 - 16:59

    +1

    Also, introducing policies that will wipe large $$ off existing owner's house value or off the value of their negatively geared investment properties isnt a great vote winner. Introducing policies that will impact on the value of our banks and by default of the value of most of our Superannuation investments (heavily exposed to bank shares) is also not a great vote winner. Widespread Negative Equity for people in debt up to their back teeth is also not a big vote winner! Probably the biggest problem for the government is that Wage growth hasn't kept pace with prices. It is all a balancing act. They want higher immigration to broaden the tax base but they haven't released enough land and invested in infrastructure to provide the places to live for all of the new arrivals.

    I would imagine that government of either side would do just about anything to avoid any significant reduction in house prices. They will skirt around the edges looking for a way to either keep most of the people happy or to distract us all until after the next election when their jobs have been extended. This is not a criticism of either side of politics as i believe both sides will have the same goal in mind, they might dress it up differently or use a different approach to get our votes but ultimately both will be trying to achieve the same thing…..upset as few people as possible in order to get re-elected.

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    bpop99 on 14/03/2017 - 17:57

    I've heard that Japan has had this problem - inflated property prices that that then went down over a decade. Basically several booms and busts over the course of several decades

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      sd4f on 16/03/2017 - 10:27

      Yea, the situation in Japan went somewhat crazy. At one point the Imperial Palace in Tokyo was, based on price per square metre, worth more than the entire state of California.

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  Wakasonu on 14/03/2017 - 12:37

  Hi Thord, im really interested to read that , because im kind of in the same position, let me start with , putting off kids plan due to stability i dont agree with u because they are essential factor of stability plus life enjoys etc etc. secondly you should not be depressed because if you are keeping up with latest reports about housing booming you would be more relax to know that the prices at the maximum level and you should start seeing the sliding, and by the way this is the nature of cycle , just look back 10 years at the prices and you will that.

  The other most important thing is the overpriced assets, basically don't pay much attention to the low interest rate because they are at the lowest , so you do need to be more worry about the principal because this is what you will be ending paying it , imagine if the interest goes up what is going to happen with overpriced assets , and don't forget that once no more people are interested, then it is the time for the prices fall.

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    afoveht on 14/03/2017 - 16:33

    +1

    putting off kids plan due to stability i dont agree with u because they are essential factor of stability plus life enjoys

    You may not agree but that's not generally true. Many people have a stable(?) and enjoyable life without kids - some by choice, others by circumstance.

    Kids are like the house - often part of a "dream" package sold to a highly normalised society. And, like houses, can be pretty expensive too.

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  thanatos350 on 14/03/2017 - 13:04

  I am nowhere near buying my first home - it will be some time before I am financially stable enough to do so - but I definitely feel your pain.

  It seems that with even a stable, somewhat upper-middle salary, the idea of buying a home is still incredibly daunting. No matter how much you make, you're still going to be giving a significant proportion of it away every single week, right into old age.

  I don't know what I would do in your situation, but for peace of mind, I would rather buy a cheapish apartment in a half decent area and know that I can actually pay it off while I can still wipe my own ass.

  The housing market, however, is behaving wierd. I live in a recently gentrified suburb, where housing prices were historically quite cheap. However, houses have almost tripled in the last ten years -

  BUT, a guy I know recently sold his two bedroom home for 1.4m, which is actually significantly less than what we had all expected.

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    [Deactivated] on 14/03/2017 - 13:15

    recently sold his two bedroom home for 1.4m, which is actually significantly less than what we had all expected.

    What did you expect? 10m?

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      thanatos350 on 14/03/2017 - 15:53

      Hahaha. I just expected it to sell for at least what a few other homes had sold for in the previous year.

      For example, a few low quality homes were built where one home once stood. They are literally built to the minimum dimensions allowed and each sold for 1.8m+.

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        [Deactivated] on 14/03/2017 - 16:26

        For example, a few low quality homes were built where one home once stood. They are literally built to the minimum dimensions allowed and each sold for 1.8m+.

        F***ing investors and their depreciation deductions.

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        JimB on 15/03/2017 - 09:53

        @sp00ker:

        Unlikely it's investors.

        Investors are less likely to buy expensive (low quality) townhouses.

        They are more likely to buy the run down house on a 700sqm block. And then build 3 (low quality) townhouses to rent out or sell to owner occupiers.

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        [Deactivated] on 15/03/2017 - 15:51

        @JB1:

        They are more likely to buy the run down house on a 700sqm block. And then build 3 (low quality) townhouses to rent out or sell to owner occupiers.

        I would call that person a 'developer'. Developers doing this are actually serving a useful purpose - increasing housing supply, creating job, etc.

        A typical 'investor' in the Australian property market is probably aged 50+, has no real skill in property development (apart from watching the block or some some other home improvement show) and is more interested the tax deduction than any other aspect of the investment.

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        JimB on 15/03/2017 - 16:35

        @sp00ker:

        I would have never thought of myself as a developer because it's an one off event and not my full time job.

        Anyway, wish me luck (2 high quality houses).

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  Hearthstone on 14/03/2017 - 13:06

  +1

  buy what you can afford on the calculation interest rate is at 7%
  and if you can't with that rate you over committing and prepare for a nasty surprise if shit happen in your life

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  overlook on 14/03/2017 - 13:33

  I will enlighten you by saying, " You dont actually need to own a house. Just rent…"

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  Jenny Death on 14/03/2017 - 14:03

  Friends, We wonder why so many young people don't own their own house yet when we compare the rate at which housing cost is rising with annual income we can see they shift further and further away.

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  signanddatehere on 14/03/2017 - 14:09

  +1

  everyone had to start somewhere with buying their first property.

  some have unrealistic expectations that their first home has to be within 5km of Sydney CBD.

  I know some people who started with a unit first (in Hornsby or Castle Hills) and then upgraded to a house or a better property closer to CBD as their financial position grew stronger.

  problem is demand vs supply if you are looking in Sydney or Melbourne.

  Brisbane, not that bad yet. In Brisbane you can still buy a newish house for around $500k with >500m sq land but located in Durack or other suburbs with similar distance from CBD. That is the price of a 2 bedroom 20-30 y.o. unit in Hornsby!

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    norrisrules on 21/03/2017 - 13:58

    2 bedroom units in Hornsby are frequently going for 750k+. For people who already have houses to reduce everyone trying to buy to 'hippies trying to buy a house in the CBD' is completely out of touch with reality.

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  ExtraSalt on 14/03/2017 - 14:20

  i don't believe there is any money in Apartments….can i ask why you are considering an apartment if you are looking to raise kids?

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    thord on 14/03/2017 - 14:31

    We're not wanting an apartment, but we have kept the option open because there will always be compromise.

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      afoveht on 14/03/2017 - 16:38

      Consider that you might be so busy servicing your loan that come weekends you won't have the energy to maintain a house and its yard. Apartments can be a blessing in that way - just ensure the strata is paid and spend time with the clan rather than fighting the second law of thermodynamics.

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        ExtraSalt on 15/03/2017 - 06:53

        haha houses hardly come with what we'd consider a 'yard' these days…probably the reason why the Australian Cricket Team struggle these days. lack of Backyard Cricket.

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      ExtraSalt on 15/03/2017 - 06:51

      ah k..na all g. We were looking for apartments after we accepted the fact we couldn't buy a home and live where we wanted to…but then we wanted kids sort of nowish, so we moved 20mins further out and built a home instead…i know people do it, but i don't know how i'd cope with an infant in an apartment.

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        dcep on 26/03/2017 - 13:43

        Was it a stressful experience during the building process ?

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        ExtraSalt on 26/03/2017 - 21:26

        @phunkydude: It was, but it was all worth it. Really you could get anything, put a little love into it and you will never regret it. We just found there was more money in owning land.

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  daft009 on 14/03/2017 - 14:42

  +3

  If I was in the market today to buy a place I'd buy an investment property and rent somewhere I wanted to live

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  signanddatehere on 14/03/2017 - 14:50

  I saved for 9 years before buying my own property. drove the same car for 9 years too. had zero holiday during the 9 years.

  then took a BIG loan and had our first home back in 2008. we had no holiday until 2015 since buying the house but we have no regret now.

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    [Deactivated] on 14/03/2017 - 15:44

    +6

    had zero holiday during the 9 years. then took a BIG loan and had our first home back in 2008. we had no holiday until 2015

    16 years no holidays and no regrets? Did you find religion or something? I'd certainly have a lot of regrets in your scenario

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      signanddatehere on 15/03/2017 - 09:27

      +1

      some but not overwhelming. we now have 2 houses. I have upgraded cars about 6 times lately. I and my wife are in much better position financially than in 2008.

      life is just beginning for us at mid 30's :)

      have holidays planned for at least once a year now.

      but during my 20's my life was just work work work and save save save and it paid off. the number of times I had $20+ breakfast and takeaway coffees during my 20's was probably under 10 times a year, that's how thrifty life was.

      yet a lot of young people want to enjoy all the fruits now without willing to sacrifice.

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  goosegog on 14/03/2017 - 16:02

  Please don't think property prices will go down. Whilst there are peaks & troughs, basically they will always increase. If you don't get on the property ladder now, the further out of reach it will become.
  Yes we own our own home - bought 25 years ago for $160,000 - now after a couple of hundred thousand spent it's worth apx. $2 mill. - not that we will sell. Will your savings give you that sort of return?

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    thord on 14/03/2017 - 16:50

    +9

    "If you don't get on the property ladder now, the further out of reach it will become."

    This idea rings alarm bells in my head, because it doesn't make any sense.

    Are you saying that the next generation? Say, the 10 year olds of today have absolutely no hope of ever owning a house because they literally cannot get on the "property ladder" today due to their age?

    Talk like that worries me, but it also doesn't make a lot of sense, if you get what I mean?

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      z0s0 on 14/03/2017 - 18:34

      You're spot on.

      And - courtesy of the comment you replied to here - you now understand why the bubble has grown so absurdly. People genuinely fail to see the logical incoherence of their presumption that prices will grow faster than incomes… forever.

      Funny stuff, hey!

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        [Deactivated] on 14/03/2017 - 19:00

        +4

        The property bulls forget the investing fact "past performance is not a guarantee of future performance".

        They also believe we can't possibly be in a bubble because "you know, it didn't pop when people said it would, so" which conversely is evidence OF a bubble!

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      congo on 14/03/2017 - 23:40

      +2

      Yes the next generation will not be able to afford to buy their own home.
      This is fact in other countries like Singapore, Tokyo etc.

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        MrTweek on 15/03/2017 - 18:47

        +2

        But when nobody is able to afford real estate any more, that's the point where the bubble bursts.
        Prices only go up as long as enough people are willing to pay them.

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        dcep on 26/03/2017 - 14:12

        @MrTweek:

        They can always afford further outback.

        The land within inner city is limited and there is only so much apartments can be built before they ran out of buildings to demolish. (or they could even build higher up into the sky)

        When ppl can't afford inner city props. their only option is to rent at inner city or go buy further outskirts. (Afterall, there are plenty of land in Australia and bullet train is the future mode of transport for connecting satellite towns/cities together)

        So when will the bubble burst if demand is always there for inner city props with limited land there.

        Different story for apartments/townhouses/houses built outside inner cities though, as they're definitely prone to price correction if overvalued.

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        MrTweek on 26/03/2017 - 19:57

        @phunkydude:
        Buying further away is not really an option for many. Most people want/need to stay close to their jobs, families and social lifes and often all these are in the city.
        While 30-90 minutes commute seems acceptable for some, I doubt that will be the same for suburbs with 2-3 hours commute to the city.

        Afterall, there are plenty of land in Australia and bullet train is the future mode of transport for connecting satellite towns/cities together

        I agree that bullet trains could fix most structural problems that Australia has, but I doubt it's going to happen any time soon.
        For each minor metro project, there's years of arguing, years of planning and then years of construction, so plenty of time until it's done.
        And as far as I know, bullet trains are not really on anyone's agenda currently.
        I'm surely not going to move somewhere into the middle of nowhere just because there's a theoretical chance that it'll be well connected in 20-30 years.

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    TimApple on 15/03/2017 - 10:40

    +2

    It's funny how this is true only in the pas 30-40 years. You go back to 1850 and tell your Aussie great great grandpa to buy property and spend all their savings. They'll slap you so hard.

    What is true in 1980-2020 might not be true in 2020-2050, and so on. First rule of economics, past performance does not guarantee future.

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    Brianqpr on 16/03/2017 - 09:31

    While you are largely correct, what was that $160k, maybe 4 times income at the time? You are now paying close to 10 times income in the big cities.

    If you invested $160k 25 years ago and directed all the other costs you put into a property (you mentioned $200k) such as interest, rates, bills, maintenance, improvements, insurance, stamp duty etc, etc, etc to your investment, I imagine it would compare very well to property over a 25 year period. That said, it is a form of forced saving and in that respect it works well over time for many people who wouldn't have the discipline to save or invest other ways. Its just nowhere near the fairytale its sometimes cracked up to be when you work out how much money you have really put into it over the years.

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  2ndeffort on 14/03/2017 - 16:03

  +1

  I'm no property guru but by the general air of resentment going around and by the scenario painted by the OP, we must be getting close to a tipping point. When the average wage of the average family isn't enough to service the debt on an average house something has to give. I am a believer in supply and demand and when there arent enough buyers fronting up with ever increasing bags of gold to throw more fuel on the property wildfire then prices will have to come down. Parents giving money to kids, overseas investors and property speculators all complicate things but even then, when demand dries up things have to change.

  I missed the boat, could have overstretched and bought property in a safe inner city location pre madness then started gobbling up investment properties before it all went ballistic. Instead i bought in an unfashionable outer suburb and avoided investment properties, in retrospect bad move! I would love to move closer to town as i am no fan of commuting but if my choice was to rent closer or own further out I would own further out every day of the week. Expecting an entitlement to a trendy and convenient inner city lifestyle is like expecting a sportscar and an overseas holiday. Nobody has an entitlement to such things, i agree property prices are crazy but practically you need to make compromises or miss out.

  In general I have little sympathy for folks that bemoan not being able to live in a trendy inner city locale where they can walk to work and enjoy their local cafe or easily get to all the best things the inner city has to offer. That to me sounds a bit like those that expect to finish uni and start off as a CEO somewhere. if you arent loaded then you need to compromise somewhere. Personally I like having my own place and although commuting isnt great it beats having to live in a shoebox or to be paying off a landlord's investment for him. If nothing else my $$ are going towards a patch of dirt somewhere with my name on it!

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    Powershopz on 14/03/2017 - 16:33

    +2

    "In general I have little sympathy for folks that bemoan not being able to live in a trendy inner city locale where they can walk to work and enjoy their local cafe or easily get to all the best things the inner city has to offer."

    Do these people actually exist though? Or are they just a fictitious product of the media for us the vent our anger on?

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      2ndeffort on 14/03/2017 - 17:05

      +3

      I work with many! They love to make fun of the outer suburbs where I live in one breath then whinge about not being able to afford to buy property on the other hand. The stereotype of the outer suburban battler driving a ute with a carton of VB in the back comes up often. I often get jokes about me sitting on the freeway for an hour or jokes about me not being able to have a few drinks after work because I have to either drive home or take my chances with late night trains. I understand and would love to live across the road from work or a couple of tram stops away but realistically i couldn't afford $2m for a townhouse and dont want to rent.

    • 

      MrTweek on 15/03/2017 - 18:50

      Do these people actually exist though?
      Maybe migrants from one of the countries where this is actually realistic.

      You might be used to the bad situation in Sydney, but that doesn't mean there is no better place in the world.

  • 

    bpop99 on 14/03/2017 - 17:51

    I missed the boat, could have overstretched and bought property in a safe inner city location pre madness then started gobbling up investment properties before it all went ballistic. Instead i bought in an unfashionable outer suburb and avoided investment properties, in retrospect bad move!

    I think one hidden danger with investment properties is that if interest rates rise too much, some people will probably not be able to afford their repayments. Investing in property is the same as investing in any other asset. You either do your homework and know the market or you most likely will get burnt.

• 

  maddoglee on 14/03/2017 - 16:38

  We've moved out of Sydney… down to the Illawarra.. although it only takes a bit over an hour by train and an hour by car (50 mins to Redfern without traffic.. i.e late at night)
  We still would prefer to be back in Sydney in the CBD… which we could afford, but the prices are just stupid…. We're in the same boat but we might end up renting back in the city…
  Argggh we have no idea what to do and are just as confused as everyone else here.
  I won't go onto say the living down here is awesome.. although it is for the first few years.. its definitely a much more relaxing life.. but there is also that element of isolation.. That's mainly due to friends and family still being in Sydney.
  You could always do what the pollies say and get a better paying job…. That's what I did.. but it still doesn't help hahaha.

• 

  afoveht on 14/03/2017 - 16:44

  https://www.youtube.com/watch?v=F-QA2rkpBSY

• 

  Sinful on 14/03/2017 - 16:54

  -2

  Unfortunately with foreign investment pushing the market up, the price you will pay right now is the cheapest it will ever be.

• 

  NightVision on 14/03/2017 - 16:56

  +1

  Let me share with you an old man story about me…
  In 2001 just got married and searching to my my first house.
  Found one for 150K.. All my friend was laughing at me because they reckon the market is going to crash and it going be be around 90K.
  I bit the bullet and didn't listen to all the people predicting the market is going to crash. Because after 20 years they still predicting the market is going to crash.
  If I had of listen to them than and wait for the market to crash I probably be still renting instead of having my 6th investments…
  My advice to you is don't buy apartment. I few of my friend had bought them and sold at a lost price.

  • 

    congo on 14/03/2017 - 23:36

    -1

    Apts in cities are good investments. Houses are better in the suburbs IMO.

    • 

      JimB on 15/03/2017 - 09:57

      +1

      Apartments are terrible investments. In cities or not.

      Houses (in the same area)are much better investments than than apartments.

      • 

        congo on 15/03/2017 - 11:02

        -1

        Why?
        From past experience, my apartment have done just as well as my house investment.

      • 

        Powershopz on 15/03/2017 - 11:33

        +1

        @congngo:

        Anecdotal evidence.

        Go look at current third party market trend reports, analyst reports or property reports. Apartment ROI is lower than what you'd get for a house. There are exceptions to this rule but this is generally the case.

      • 

        congo on 15/03/2017 - 11:51

        @Powershopz: Yes, we can listen to others, the is merit to this.
        However IMO we need to understand why this is the case.

        Apartments are generally a lot cheaper, say 50% cheaper, but the rent return isn't 50%, for example it might only be 20% less.
        So ROI is better for apt.

        Apt generally have lower maintenance costs, because you are paying for strata which covers the building insurance and maintenance of the common areas & gardens.

        There is also more land tax for houses compared to apartments.

        Finding affordable houses in city area is extremely difficult and expensive.
        There are more choices if you were to look for apartments.

      • 

        JimB on 15/03/2017 - 12:24

        @congngo:

        Of course there are exceptions and it seems you are on of the lucky ones.

        Can you please provide me with the postcode of your apartment. I'll compare the median capital growth of units (incl apartments) and houses in the same suburb.

      • 

        congo on 15/03/2017 - 12:41

        @JB1: postcode 2000 and 2009

      • 

        JimB on 15/03/2017 - 13:52

        @congngo:

        Postcode 2000 doesn't have enough houses to make a meaningful comparison.

        Here is the history for 2009

        http://www.yourinvestmentpropertymag.com.au/top-suburbs/nsw-…

        The growth difference between houses and units is massive.

      • 

        congo on 15/03/2017 - 14:14

        @JB1: Thank you.
        I see what you mean.
        You get more rental yield with Apartments (4% vs 2.5%). However the capital growth for houses is far superior (30% vs 9%).
        So I guess if you have the cashflow and can support a $million mortgage then houses is a much better option.
        I am persuaded.
        Thanks!

      • 

        Powershopz on 15/03/2017 - 14:36

        @congngo:

        Combine this with negative gearing tax breaks and smart purchases with good rent/purchase price ratios and you can get some amazingly strong yields. You just need to have enough cash flow and liquefiable assets to cover interest increases if it turns pear shaped.

        My wife are dumping every spare cent we have into our offset account which is essentially netting us ~4.8% growth based on a conservative 6% capital growth for our area. it's actually been trending at 8% for the past 5 years and the neighboring suburb (5 mins closer to the city) is tracking at 12%. It feels like I'm cheating the system or something.

      • 

        JimB on 15/03/2017 - 14:41

        +1

        @congngo:

        30% vs 9% is extreme. Over 5 years, it's 13% p.a. vs 7.5% p.a. even that is an extreme difference, but you get the picture.

        Long term the major influence of capital growth of a property is the ground it sits under.

        Apartments have little land value.

        So while we bitch about land tax, the land is what appreciates.

      • 

        congo on 15/03/2017 - 14:48

        @Powershopz: In recent times, it seems that Property investing is the best way to make $$$. Business has been very difficult and a job doesn't pay enough.
        I feel that the purpose of a job, is so that you can secure a bank loan and buy more real estate.
        This to me is a bubble. But what can break this bubble? It would have to be something catastrophic.

      • 

        Powershopz on 15/03/2017 - 15:08

        @congngo:

        It will never happen. There may be a lull across the market but there are too many vested interests in the industry to see anything catastrophic happen to it.

      • 

        artfuldodger on 15/03/2017 - 20:13

        When the carnage begins it is uncontrollable. The market participants believe 'this time is different' but it never is. This is why it is a bubble. A price reality built on imperfect knowledge. The false belief that prices never fall/central banks will ride to the rescue ad infinitum.

        In investing, everything works until it doesn't. In essence, the game of investing is to put as many market participants onto the other side of the bet, then crash the game.It just takes time to position.

  • 

    Mrgreenz on 16/03/2017 - 13:19

    No one realised the extent at which the government would throw prudent financial managment out of the window.

• 

  sgtdanny69148 on 14/03/2017 - 16:58

  +7

  Better off buying a castle in France, it's way way cheaper than houses here.

• 

  ajGold on 14/03/2017 - 17:00

  +11

  Moving to a regional area is also out of the question

  As someone who lives in a regional area but works in a CBD office, I think this is unfounded unless you are physically required to assemble, repair, serve or clean something. You're fortunate to live in a period where employers are embracing the telecommute; where splitting your working week between home and the office is realistic. I take a 2hr train ride to/from work 3 days a week, and work from home the other 2 days. Washed out, that's only 2 hours more per week on the train than many city dwellers.

  It dawned on us that regional areas offer much better bang for your buck both financially and in lifestyle balance. Your kids will have a backyard to play in instead of a balcony, your 'peak hour' dropoffs will last 20min instead of 2 hours, you'll say hello to locals on the street who've gotten to know you, Bunnings and Officeworks will still be down the road, and you'll still have NBN to stream Netflix.

  I totally empathise with your frustration because I've been in the same despair. If all you want is a home and don't care about its perceived gains in value then please don't shoot yourself in the foot by discounting regional areas.

• 

  bpop99 on 14/03/2017 - 17:41

  +2

  Here's my non-expert take on this - and there are pros and cons to each argument. Yes its true that investors are buying up the houses such that we can't afford it but on the other hand, every dollar does keep the economy buoyed. Its the only reason that Australia's not in some recession given that its other saving grace, mining, is not doing well. Like it or not, China dollars are keeping some of us in our jobs both directly and indirectly.

  That said, I do put a lot of the blame on the government - both federal and state. Housing development proved to be easy money. Like someone high on other substances, this drug is tough to wean off from. And especially when it keeps getting you reelected. Not that the other party was better but this is the reality of human nature - they latch on to easy sells and both sides exploited that.

  Now, for someone aspiring to be a home buyer, this would be my layman's advice. Buy a house if you want a place to call home. Don't buy if you feel it will be some kind of security/investment/growing asset. Its never a wrong time to buy a home (especially if you know you're gonna be here and not moving to another city anytime soon) but investments are all about timing.

  The biggest issue is that people buy homes they can afford today - i would urge you not to fall into this mistake. If you're buying a home, you'll be in it for 20, 30, 40 years. And so don't buy places that are good today or that you can afford now. Buy a home that you can over-afford today in places that will be good in 20 years time. Yes, it may not seem ideal now but remember that many places in Sydney that are hot now used to be pretty shady even just one or two decades ago. Also, yes, your repayments will go up but guess what, you've already planned it. Yes, it gonna be a distance but if you know people will eventually move out of the city and they have to go somewhere. You know it will take 20 years but it will happen. And, if luck of luck your township grows, you may even make a decent gain from an increase in value.

• 

  RobVH on 14/03/2017 - 17:59

  +2

  I think most of our generation is in the same proverbial cluster #$#$. We have the money to buy the property, but wise enough to know deep down it's a terrible decision. With a struggling economy and job growth, homes are a ponzi scheme just waiting for the last generation to buy into it before it collapses. Of course land has value, there is limited supply, in key locations, but homes do not. You then fork out for Stamp Duty, Mortgage lenders insurance, any other duties, council rates, endless repairs, on homes averaging a -5 to 0% growth, it seems impossible to not lose money.

  The rental market has its cons, but end of day, pay the cheaper rent, and keep saving the difference. It seems deflating to not call something your own, but its just a mindset, as unlike home owners you can pack up and leave whenever you want.

• 

  bl1027 on 14/03/2017 - 18:27

  +3

  Sounds like the OP is suffering from analysis paralysis. You need to stop reading the headlines. One day the housing market is booming. The next day it will crash. No wonder why you are confused.

  Instead, look up the housing trend over the past 50 years in Australia. It shows a line going up. There will be market corrections in the short term but long term, the housing market increases.

  Don't begrudge the person that was 'lucky enough' to be born 20 years before you. What's the point of being sour about something you can't change. Think about things that you can do.

  Also, look up data on the demographics of voters in Australia. You will find 70% are aged over 40 years, who most likely own a house. They will NEVER vote for a party that will do anything to lower house prices. Just the other month, Turbull's attempt to mess around with CGT was quickly quashed.

  Yes, the house prices are ridiculous. But if you're waiting for a 'crash', it just isn't going to happen. Especially for property with land next to train stations.

• 

  [Deactivated] on 14/03/2017 - 18:50

  +9

  It's insanely expensive, as Australians have the fiscal responsibility of a village idiot. They are borrowing with an expectation:

  a) Wages will forever increase
  b) Jobs will always be plentiful
  c) Nobody will ever fall ill (this is a big one)
  d) Prices will keep rising foreva and eva

  As a result, we are 2nd in the world in terms of private debt. That's supposedly "Envy of the world". Idiots.

  What's laughable is that a country as big as Australia "land shortage" gets wheeled out. It's a result of poor planning, non existing infrastructure spend, and a taxation system that massively distorts the market. End of story.

  I actually owned (outright) a house on 600m2 in 12kms SE of Melbourne CBD and have recently sold out to rent in a more convenient area, and ultimately move overseas where I believe has a brighter future for my kids. Remember: our pollies believe that the mining boom can be replaced with… a property market consistng of nothing more than flipping houses between each other for greater amounts. They don't have a plan B at all.

  Don't for a moment believe that ownership is a dream. Wait till you start needing to employ tradies when the house needs upkeep, or fighting with neighbouring developments which threaten to tower over your house and in Melbourne can and will build walls ON the fenceline.

  If this country is unfairly expensive, take the hint and experience another country and way if life.

• 

  SilentBob on 14/03/2017 - 19:18

  Housing prices are (profanity), rental prices are (profanity).

  (profanity) sydney.

• 

  gelatiman77 on 14/03/2017 - 19:49

  -1

  I think if you cant come to grips with "how it is" then move overseas to a country with affordable housing. We are all in the same boat as you, I've bought a house, I'm not depressed.

• 

  MondaySleeper on 14/03/2017 - 19:55

  +1

  Exactly my words, my feeling and its not you who put this discussion up, but its me. I feel helpless though I earn around 110K. Its not enough to pay the mortgage and rise the kids. Everyday I curse every politician who, for their vested interest, destroy this country. I wish they got all struck by a lightning and get hell out of this world….

• 

  MessyG on 14/03/2017 - 20:12

  +2

  This was my husband and I when we lived in Sydney. Both on pretty good wages, working long hours and the best we could afford was a 2 bedroom apartment in a suburb we didn't want to live in with a commute that was over an hour. Commuting in Sydney is terrible at the best of times and it was just too much. The worst part was when we started looking, we thought prices were too high. That was 2009, so we held off, believing everything we were told about the mythical housing bubble that could burst any minute. That bubble has been bursting any minute since then, and wasn't going anywhere, so we started looking interstate and discovered that in Melbourne, you get a house with an actual backyard for that price. So we moved. No the house isn't perfect and we have no money for renovations because we're trying desperately to pay it down as fast as possible, and we're both taking out income protection insurance which isn't cheap just in case something bad happens because the writing is on the bloody wall for this country, it's just a matter of time.

  That said, at this point there is still an undersupply of housing and a great demand so you do have time to get in. Apologies if this has been mentioned, I didn't have time to read all the posts but in Victoria they are about to get rid of stamp duty on properties under $600k and doubling the first home owners grant for regional buyers and I strongly suggest taking advantage of it early because when they did that in Sydney to try and tackle affordability, it had the charming effect of forcing the home prices up even more.

  Don't be disheartened, be strategic and focused. Find the hipster fence and buy one road over, or ten roads over if that's what you can afford. Have a listen to The Property Couch podcast which really helped us get into the market. Yes we moved states but our house has already appreciated in the 6 months since we bought it, and we didn't take paycuts (just not payrises).

  In hindsight if I was going to buy in Sydney now, I would buy in the Illawarra as someone has mentioned, probably just outside of Wollongong or on the central coast. The commute isn't that bad, it's in a beautiful area and the prices were shooting up as I left but were still affordable.

  TLDR; Get out of Sydney, it's too hot for everyone.

• 

  freakatronic on 14/03/2017 - 21:27

  +4

  Rent where you want to live. What makes you think a landlord is going to do anything to upset a tenant who pays on time and respects the property?

  Besides that though, don't get sucked into the bizarre flavour-of-the-month that is Aussie property. It's the second emptiest continent on Earth. The only thing keeping prices high is government manipulation. Sure, they might stay high for the rest of our lifetimes. That doesn't make Aussie property good value though. I think you need to think about some other options. Sydney isn't the only city in the world, and it's not the only one in which you can live. Traffic is better elsewhere. There are other jobs you can get. There will even be restaurants. Just think a bit more about what you really want in life. It doesn't sound like you want to pay $2m for a 1970s three bedroom weatherboard house on 400m² in a suburb 30km from city. So? Who cares what you don't want? What do you want??

• 

  simonjb on 14/03/2017 - 21:40

  The sooner you start the sooner you finish.In retirement the social security system is not designed for renting and will not be enough. Housing is and always has been expensive in my opinion if you want to live in in demand areas.

• 

  explosion on 14/03/2017 - 21:42

  I brought my first house considering below criteria with 97% loan to avoid cutting someone's else lawn.

  1. Interest only repayment is same as my rent.
  2. I can still afford to do the repayment if my salary is reduced to $20/Hour.

  In three years able to reduce my loan by 30% with extra payment.
  Now I rented out my first home and it looks after itself from the rental income.

  Once again I brought one more home now with above two criteria.
  Once you make some equity and saving than buy your dream home. Small steps/risk will get you into a good home with no risk over the period of time then putting all the money in a million dollar home.
  This is my personal choice.

• 

  plasmoske on 14/03/2017 - 21:55

  +3

  I rent and invest the rest. Probably retire like a king overseas in the distant future. Australia is too expensive.

• 

  BalsaBell on 14/03/2017 - 23:08

  +7

  We are in almost exactly the same situation OP and it's really good to hear there are other people out there like us, so thanks for posting.

  Like you, my partner and I have worked hard and saved hard for a decade or more. We've made a lot of sacrifices to save a really strong house deposit (well above 20%) and yet home ownership has remained illusive for us. We made the decision very early on that we would not 'start small and just get on the ladder', choosing instead to put up with renting far longer than any of our friends and try to buy an old unrenovated house in an area we liked that we could renovate/knock down as our lives and needs (and bank balance!) changed, particularly having a family. Our theory was that this would save us a great deal in changeover costs along the way. Boy do we regret that decision on our low days!

  We've also been in the same position as you - feeling completely crushed by the circumstances that are completely out of our control, despite doing everything we could to put ourselves into a financially secure position. So much so that I hit rock bottom about a year and a half ago. The rental we'd being living in had been sold out from under us (not the first time) and in an extremely tight rental market we were forced to accept the worst rental we have ever lived in (and we have lived in some seriously ordinary places to keep our investments/savings high!) Being completely consumed by the property search and dealing with underhanded real estate agents every weekend for years had taken its toll, and the final straw was when yet another offer we had made on a property had been rejected - this time the vendor had been happy with the price we were willing to pay, but an investor from out of town had offered a cash sale & as first home buyers we couldnt compete with that (certainly not the first time we'd had that experience). For us the writing was on the wall - we simply couldn't compete in that market, and while absolutely heartbreaking we admitted there was no point continuing our search.

  The point to this tale of woe is that in the weeks to come we felt like a weight had been lifted off our shoulders. We made the decision to suck it up and pay more for a rental we actually liked & we've been so much happier ever since. I never imagined I could have been this happy in a rental. Its not forever, and we certainly want to buy (and yes, we still agonise over the ever-increasing property & rental prices), but we couldn't have continued on in the depressive state we were in. We keep abreast of the market now, but it doesn't have the same torturous impact on us that it once had.

  Maybe the key is making a choice - to buy or not to buy - and sticking to it and really staying true to your reasons for doing that? We've written our reasons down so that we can refer back to them when we're questioning our decisions, instead of getting down about it.

  One last thing I wanted to mention is that we are in a regional area, so suggestions that you need to move and all your problems will be solved are simply not true. We are both tertiary-qualified professionals, who have been lucky to get long-term jobs in our field in the area. However, as you note, we are on a fraction of the wage of our city counterparts. That was our choice (we chose lifestyle over being rich), but an entry-level house in my suburb is $600k - over half of the $1 million you're looking at paying in Sydney - but our wages are at best half of what we could earn in the city. Professional jobs are also really hard to come by and there's really stiff competition for them. I would struggle to find another position if my job fell through.

  I hope that all your hard work pays off sooner rather than later, and that you can find a way to stop it from getting you down.

• 

  congo on 14/03/2017 - 23:28

  -4

  Wait for D. Trump to start a war. Prices will drop then.

• 

  Untameable on 15/03/2017 - 00:04

  +2

  You pay to live somewhere and deal with market rates, dealing with landlords, inspections, their whims, and being unable to change anything or have pets. Or you take a bigger risk to have a place of your own and hope things turn out.

  You can't change either you can only choose. Otherwise what are you doing - complaining that the world is unfair? LOL the world gets MUCH more unfair than this.

  I rented for nearly two decades. Then I bought. IMHO it's the same shit either way.

• 

  [Deactivated] on 15/03/2017 - 00:33

  This is the sort of problem a person with no kids and a fairly young mentality.

  Just have kids, you will enjoy life so much more. So much more!

  Then you will be glad you got rent so you can move after the schools you want.

• 

  bluesky on 15/03/2017 - 01:05

  +1

  I have been watching a few docos on TV on the tiny house movement, and can see the appeal in it for some, if the affordability issue remains or worsens. Since it is relatively cheap to own compared to a conventional house, one can trade freedom for a large mortgage.

  Some of the tiny houses look rather charming, here are some images, and inside, some make ingenious use of space.

  Maybe this movement will start to grow over here …

  • 

    SkMed on 15/03/2017 - 14:21

    I also love the idea of the tiny house movement and would be totally happy with one of these, however the issue is that the land is the thing that is expensive in Melb and Sydney, really it doesn't matter whats on it in the end. You will still pay more the half a million for a vacant block anywhere near the inner suburbs! :(

    • 

      bluesky on 15/03/2017 - 14:33

      +1

      Know what you mean; the hope is if this takes off in a bigger way, an association will be formed representing tiny home owners (like in America), states/authorities will take notice, new zoning regulations (tinier pieces of land) will come into being to accommodate them, and you start getting special "tiny house-friendly" estates etc. Since the land requirement for such a house is small, existing plots can maybe accommodate a fair few, reducing the price of each tiny house plot. Of course, we are a fair way away from this still! :-)

      • 

        SkMed on 15/03/2017 - 14:35

        +2

        Ah I see what you're saying. Unfortunately I highly doubt it will happen here though. people make too much money off apartments on those same plots of land.

      • 

        bluesky on 15/03/2017 - 14:38

        @SkMed: You got a point, and besides, it really takes a shift in people's thinking, to feel comfortable with this kind of downsized living.

• 

  drprox on 15/03/2017 - 07:22

  +1

  My 2 cents. If you are stable, want kids and can afford to buy seriously look at it now. Anything else is speculation. The prices are what they are and certainly whilst you should account for a number of potential scenarios when doing research the bank will sensitise your borrowing capacity to the tune of standard rate + 2.25% (at least mine does) which at present is 3+% above what you'll actually be paying. Cash rates will get there eventually but that's a lot of 0.25% hikes.

• 

  bighead on 15/03/2017 - 08:22

  Think of the children~

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