1985 vs 2016

Not sure if there were more excuses however there was definitely more fear in the air. Also, there were no books (or none that I knew of anyway) or forums or plethora of online tools to help with DD and research as there are today. So the comment you make about support and like minded people is so true.

Communities such as this where people willingly share and help others lend massive support to those too hesitant ( for whatever reason) to take the first plunge or break inertia of moving forward and duplicating when they have achieved good equity milestones.

There will clearly be different personality beliefs from that time to now also as generations change. Even people in their early twenties now were born into a generation and era of not knowing what it was like when life had no mobile phones.

Whilst it is interesting to make comparisons between the ages and consider buying multiples and so forth, times are different, and demographic considerations mean that what typifies a "home" is also much different. Wait till Johnny cab arrives and the need for car parks in one bedroom inner city or cbd fringe apartments vanishes. Transport changes, autonomous vehicles and the lessening need for huge homes when entertaining might be undertaken in communal/shared spaces (which the current millennials would be adopting of moreso than those older than say circa 30-35 yoa) drives the type of dwelling that has demand. Markets to a point will only pay what they can afford whether it's owner occupied or investors.

If we get another cracker property market sugar rush with the continuing cash rate reduction, then at some point even investors will baulk at the yields they are ultimately getting. It will only be stupid money that buys before rates do rise and there will be some reversion to sensibility.

End of the day, things are different because times are different and people are different. I still hear plenty of whinging from single people and couples without children in their late 20's and early to mid 30's who are on reasonable money of 100-150 K per year who lament the difficulty of entering the market because they are out drinking and eating their deposits three or four nights per week. This wasn't a norm in the 80's
Okay now I'm showing my age.................

It's human nature to want it all, however sometimes we can't have everything we want all the time at the same time. If people spend more than they earn that's a choice. They may not be the majority of the cohort I've alluded to however there isn't a paucity in numbers either. It can be done as evidenced by plenty on this board who are young and have the go get 'em attitude.

These are the halcyon days. Everyone needs to grow where they are planted and do the best they can with what they have.

 

Interesting that I was labelled greedy and called a capitalist in the 90s by family members who are now thinking of getting into property investing because it's become sexy in modern age. Lol

 

"A man who is not a Liberal at sixteen has no heart; a man who is not a Conservative at sixty has no head." - Benjamin Disraeli (its also been said by about a dozen others in varying iterations in the last few hundred years).

Its all good to be passionate about the plight of the proletariat when you're younger, but I think its fairly normal to grow out of that when you realise that we don't live in a communist utopia and all your needs wont be catered for in old age. Look at the woodstock / baby boomer generation, they figured it out.

 

But what does this have to do with the topic?

Converting 1985 wages and prices to 2015 wages and prices shows just how dramstically housing prices have outstripped wages.

By the way, I put $38K into the commbank borrowing calc and it comes back with $132,300. How do those sums work to buy a unit $300K+?

 

I used to work for the NAB in 1985 in a permanent part time position. I earned $14 per hour and Hubby was unemployed. I remember the year well, I had my first baby at the end of that year and Mark was trying to start a business. I believe the average income would have been much higher than $14000 which is about what I was on, part time. It was about $20K, do you remember Wylie? If Mark still had his job he would have been on about $16K and he was always paid below average.

The typical first home at the time was a three bedroom one bathroom house in Strathpine or Petrie or Bald Hills and they would have cost about $40-$50K if I recall correctly depending on whether brick or weatherboard, carpeted or not. We used to live in houses without carpets, can you believe. People moving up the ladder would get a house with an ensuite or maybe a fourth bedroom. This was certainly not FHB standard.

In 1988 there was a boom in Brisbane and prices doubled in one year (thank you Expo 88). The inflation was crippling. We spent $100k on our new home, three bedrooms brick with one bathroom. We added the carport a few years later. Albany Creek and Eatons Hill is much higher class than Strathpine, even though we are just one suburb away.

 

Our parents where buying houses back then on the outskirts - probably 15-20km from the city.

To compare, you can now do the same for $350-400k but a bit further out 30km Werribee / Wyndham Vale

 

This fact alone shows that lending criteria has been changed significantly and no-body can borrow as much as they could a few years ago. This will determine how much a person can afford to spend on their home, rather than the usual "blame the oldies" mantra that some of us are really sick of reading. The media doesn't mention this much but everyone on this forum is feeling it daily.

Wylie's son would have a deposit, and we don't know what that amount was. Thirdly, never believe the bank's calculators for serviceability, they are known to be flawed.

 

Exactly. Affordable. Especially if you have $150K as your deposit. (Which thread is this?)

 

That's the other thread.

Incidentally, the young woman, who everyone is calling entitled, is looking in Kilsyth. That's a Melbourne suburb around 30 km out from the CBD.

 

??
1 Pitt Road Kilsyth Vic 3137 - House for Sale #122533738 - realestate.com.au
1/10 Belinda Close Kilsyth Vic 3137 - House for Sale #122528722 - realestate.com.au
1/21 Lucas Avenue Kilsyth Vic 3137 - House for Sale #122390318 - realestate.com.au

Not seeing where the difficulty is for her, some of these homes are beautiful.

I'm not being an arse here, I honestly am perplexed why she thinks that it's unfair and that investors are pricing her out of the market. These are all under her $559K budget

 

Great post. You have just convinced me that the sooner interest rates rise, the better it will be for all of us.

At 15%, the payments for PI and IO are basically the same. This will stop all of those investors taking out all of those IO loans and creating such risks in our economy.

Then once Australia gets rid of NG and the CGT concessions, we will all be living in paradise.

No more complaints, no more whingeing, no more blaming the Government, no more being jealous of the baby-boomers, ....

 

$150k is an amazing deposit. You have so many options.
Unless you're thinking of beachfront Bondi beach as your first property...

 

with a budget of 559 and 150K in deposit - there are plenty of places she can buy even within 15kms of melbourne. Not sure why she wants kilsyth it's just an OK suburb but nothing extraodinary.

 

The mortgage sums haven't changed that radically that someone on $38K was being handed $300K though, right?

That $330K unit requires $200K savings and then the $132K the bank are willing to give.

How long to save $200K on $38K a year, even living at home?

There are some serious missing numbers in the "$38K can buy a $330K unit" story.

 

A few more figures. The earliest I could find the average FHB loan size was for 1993, if I dig up the numbers for 1985 then I'll do another post.

1993: 10% Interest Rate

Salary: $2230 pcm
FHB Loan: $120,000
20% Deposit: $30,000 (13 months)
Interest Only: $1000 pcm (45%)
Repayment: $1060 pcm (48%)
Sydney Median: $188,000
Melbourne Median: $126,000

2016: 5% Interest Rate

Salary: $4960 pcm
FHB Loan: $362,000
20% Deposit: $90,500 (18 months)
Interest Only: $1510 pcm (30%)
Repayment: $1960 pcm (40%)
Sydney Median: $1,025,000
Melbourne Median: $718,000

So:

• A 20% deposit is about 50% larger than it was in 1993.
• Monthly repayments are less.
• In 1993, a FHB could buy a median house in Melbourne, and be a good way towards this in Sydney. In 2016, the property would be a lot further down the scale.

If interest rates returned to 7%, which isn't looking that likely in the short term with this week's cut, then a FHB repayment mortgage would go to $2430. That'd put the cost to being about the same as in 1993 when compared to salaries.

I think that a lot of affordability calculations in the press are treating what should be considered emergency base rates as being the new normal.

The problem for FHBs is really the deposit. Because house prices are a bigger multiple of income now it takes longer to get this together. The other issue is that it's a lot harder to move up the ladder now than it was in 1993, particularly if you compare what a first time mortgage buys relative to the market.

 

I stand by what I say about someone on $38K not being able to buy a house.

You just described what is bordering on fraud by the bank. Taking into account rent income when it's going to be a PPOR? That's illegal. Any known change of financial circumstance is required to be advised.

Parents coming in with $50K on a $292K property still leaves $242K. Current calculators gives around $130K from the banks - still a $112K gap there (and ignoring stamp duty and so on).

Even the best of brokers aren't finding $112K are they?

The sums for someone earning $38K to buy a house simply don't work.

 

That's right, most households are double income, at least for a time.
Cheap at half the price.