An answer to housing affordability

Demand. Probably by those who saved, lived frugally, and invested in what they could afford at the time. Compounding of every dollar saved is an amazing thing.

 

Guest, I'm with you on house prices–definitely not suggesting we should be spending more on housing because we can, just a peek into what the future may hold..

Two other things to be mindful of, which are again, food for thought:

• How wealthy Australians are compared to the rest of the world (particularly Sydneysiders) and;
• The shift in desirability from freestanding homes to apartment style living. What people want and expect of homes is changing, particularly in areas where a cosy apartment may have everything the owner wants right outside (parks, waterways, dining, shops, recreation etc

More illustrations that there's scope for things to push beyond previous price-to-income ratio peaks.

 

Is that happening more out of desirability or necessity due to higher prices & catering to foreign investors in the market? The apartment construction boom only kicked off a couple of years ago. I find it hard to believe that this came about from an immediate switch in Australia's mindset where the great dream became a a shoebox instead of a house.

 

Guest,

I would suggest it's a combination of mostly necessity and partially desire, though the trend towards apartment living is very apparent.

Lots of my generation in particular are all about balconies over back yards–myself included. If I could have my pick, I'd take a well-located apartment over a house any day of the week.

I'm aware of the huge spike in apartments and no, I don't think an immediate change in what people want to live in is the cause.

 

Prefer a house with a backyard anyday over an apartment.

Every man needs a shed to build and store unnesscary things and escape there wife.

 

Really....have a look at Parafield Gardens....older stuff for under $270k definitely.....

 

I agree, which is the point I made in Hobo's other thread of a similar theme in this post. We should measure affordability against "disposable" income. We've all got so much more disposable income now given how much leverage our income now has in its purchasing power. You get a lot more for a lot less now and have a lot more left over as disposable which often gets deployed to purchase bigger shinier properties. I linked that too with the Ross Gittins article in that post...

Of course it does. You seem to consistently confuse purchase price with affordability. Affordability = debt servicability, period.

Let me put it this way. Regardless what ticket price there is on the item I am buying, if my surplus disposable income is sufficient to purchase the product either for cash or via a lending facility, then it is affordable to me.

Cheers,
Michael

 

Maybe, but I'm not a developer, so to me it's no use. Also prices in these places like you mentioned plus Ingle Farm are almost the same since 2003, no capital gain higher than inflation.

 

I have friends who live in Lane Cove and are paying in Rent what I pay in mortgage, they complain that they can't save for a deposit whilst renting........... so move somewhere cheaper.

I really have no sympathy for anyone who is not prepared to make a few sacrifices to get ahead.

I live where I can afford to live and this is the biggest tip of advice for anyone complaining about the price of housing, no point having champagne tastes if you only have the budget of beer.

 

The provision of housing is also based on a bigger is better model. Average household size is decreasing, yet we have the largest housing stock in the world.

I think it's time we need to ask ourselves if we actually need 5 bedrooms, a media room, a study, a games room, a kids retreat, formal and informal living room and a TV room.

This is not just a "first home buyers are all selfish in my day we were happy if our cardboard box under the bridge which I worked for 59 years for a deposit for had flaps to keep out the rain" type post. It's about revisiting what is actually needed for a house.

It's nearly impossible to find a project home that is below 4 bedrooms. Those that are are incredibly poorly designed and are just open wastes of space with no storage areas and pokey bedrooms. And at a price that is only a tiny amount less than the standard 4 bedroom jobs.

What's the actual point in all this space? And considering a large percentage of first home buyers are priced out of existing housing stock in existing urban areas and pushed to the peri-urban fringe, this really needs to be addressed.

This oversized housing stock also directly contributes to a massive undersupply of land, coupled with ludicrous policies. The 900mm side setback is one of the most inefficient and pointless building controls around. All it does it create a dank, dark corridor that nobody uses, that is impossible to grow anything in and is just a waste. 900mm side setback on both sides is 1.8m. Over a typical block if attached and semi detached housing was the norm this would allow an extra house per block, without reducing actual lot size.

 

Hmmm....beggars can't be choosers can they. I thought you were looking for some place to live. This level of fussiness.....is what the real issue is.....lets get real. It is a question of choice.

 

No, you are just using a different definition. You are welcome to your opinion, but that's all it is.

Afford: to be able to do, manage, or bear without serious consequence or adverse effect.

http://dictionary.reference.com/browse/afford

 

This was scene 1 http://www.news.com.au/finance/real...rdability-debate/story-fnda0j6w-1227465034343

Here's my take on the second scene.

[Son enters room]

Son: Hey dad, I just heard you spinning a whole lot of nonsense to sis about housing affordability.

Dad: What do you mean son? I was just telling her how it was back in my day.

Son: Well you know finance and history aren’t her strong points…

Dad: Speak nicely of your sister please.

Son: Ok, as I was saying, you claimed that it took mum and you longer to save a deposit, because a 25 per cent deposit was required to buy, but isn’t it true that some building societies loaned up to 95 per cent, meaning similar loan to value ratios were available even 30 years ago?

Dad: Well, yes, but the interest rates were often higher than the major banks...

Son: But isn’t it also typical today for the lenders offering the easiest credit conditions to have higher interest rates?

Dad: You have me there son.

Son: And isn’t it true that in the early to mid-1980s that the First Home Owners Scheme was far more generous paying up to $7000 in benefits, equalling more than 10% of the purchase price you mentioned?

Dad: That is true. Your mum and I took full advantage of that and the First Home Owners Grant isn’t nearly as generous today.

Son: You did pay 17% interest rates for a short period of time, but isn’t it true that the higher level of inflation at the time reduced the real value of the loan rather quickly with wages rising faster than they are today?

Dad: Yes, but it was tough for the first few years…

Son: Didn’t you brag to me one time that you paid off your first home in less than 10 years because interest rates fell in the years after you purchased allowing you to pay off the mortgage much faster? Do you think that it will be made so easy for sis who would be borrowing at historically low interest rates with rate rises more likely in the future?

Dad: I hadn’t considered that.

Son: You mentioned her trip to Bali, but you know she got those tickets for only $300 return and the accommodation, food and entertainment over there is far cheaper than in Australia. In real terms wouldn’t her week in Bali be cheaper than the long weekend holiday you told us you took to the Gold Coast in the early 1980s while saving for your first home?

Dad: You are probably right.

Son: It’s also the case that a median house in Adelaide today will be on a far smaller block than you got in 1985. In fact if I recall correctly you said your first home was on a subdivisible block once the council changed the zoning, do you think sis will be able to do that with the typical 375sqm blocks of today?

Dad: No, I suppose not.

Son: Look, I know you think you had it tough with the mortgage and for the first couple of years that may have been the case, but if sis takes a larger mortgage today, to buy a smaller block, in a lower wage growth environment, with the possibility that interest rates may rise making it difficult to make the repayments in the future, isn’t she taking a greater amount of risk?

Dad: If you look at it that way...

Son: And shouldn't being able to afford something take into account the level of risk associated with doing so?

Dad: I’ve had enough of this, I am going to watch some TV in the lounge.

Son: Weren’t you going to have some dessert?

Dad: I’m going to put it aside until your sister returns from her friends place so we can sit down and eat it together while I explain that I wasn’t as right as I thought.

Son: You don’t say.

 

Houses are getting bigger but blocks have been getting smaller.
http://www.macrobusiness.com.au/2011/07/block-sizes-shrinking-blame-government-
policy/

 

Smart policy.......most people don't need such large houses. A small backyard and couryard will do.

Absolute waster of resources...and potentially a energy sucker. People in OZ have to adjust to the new reality. No point living in the past.

 

Which is completely absurd.

As we get more affluent we get more selfish and want to internalise everything rather than having to share communal space with someone who might not be in the same tax bracket.

There will need to be a change. Land is a finite resource. A 4 bedroom house on a 800sqm block 30 minutes from work is not a sustainble outcome for any major city - except for the very, very wealthy where it does exist as an aspirational option.

Better parks and public spaces are far more utilised than a small backyard (because a house is built over most of the site with spaces that are never used). Being able to walk places should be seen as a positive, not a negative. There is nothing prestigious about having to rely on a car for every trip.

The entire notion of what constitutes housing in this country needs to be radically altered, because otherwise the current view of housing affordability will be looked back as golden days when people under 50 could actually dream of owning their own home.

The current approach taken by local government (and in particular Labor and The Greens) is to opposed any development that any community group is opposed to. Ignore the fact that it is environmentally sustainable, and built on an old paddock with weed infestation. Mavis and the Save Our Marigold brigade don't want a medium density development on the same street so we'll refuse that one. Instead, we will construct an isolated 700sqm lot subdivision with no services, and no public transport that will create real social isolation, result in clearing native bushland and will make every resident car dependent. Yeah, that's much better for the community.

And suddenly we have no more land surrounding the major cities to develop. And what then?

It is a moral imperative to increase density in existing areas.

 

Brilliant!

 

You are using the wrong definition in your link. The correct definition that applies to affordability as MichaelW has pointed out is;

''to be able to meet the expense of; have or be able to spare the price of''

Hell the very definition of affordable is; ''that can be afforded; believed to be within one's financial means:''

 

That is your opinion. It's not what I'm talking about when I write about property affordability and same goes for most MSM articles on the subject.