FHB can't afford Sydney (Really?)

Well according to the RBA anyway.

Linky

Is that really the case or are FHB more selective than previous generations? Is it a beat up of the same story from the 1960s, 1970's, 1980's etc?

A 2/1/1 8 square home no longer meets the criteria for a FHB - it has to be 3 or 4 bed, 2+ bath etc as the barest minimum.

Is the issue unaffordability or expectations?

 

My god! I don't even live in a 3 or 4 bedroom property! My tenants like in a much better accommodation than I do because I was willing to forgo my comfort to use the funds to something that's going to grow in the future for me.

 

There are some seriously affordable suburbs in Sydney in Canterbury-Bankstown LGA with many older 2 bed Walk up units in the sub-$450k range.

 

That's how much the market has moved that we just assume $450K 2 bed unit's are just obviously FHB affordable. More people are studying for longer, so are entering the workforce later & with more debt. Now they have tightening lending to compete with too.
If on average they are spending their first few years on $45-$65K, it's going to take time some time to save a deposit+transaction costs.
Saying that, they probably have more of a chance going forward now that the $450K isn't going to be as much of a moving target.

 

I think it's expectations. My first home was an ex housing commission townhouse near St Marys. It was ugly, but it was mine. My cousins who are 10 years younger wouldn't dream of living that far away from the city or tolerate living in house that wasn't fully renovated or brand new.

 

I think it is both:
Consider that each generation has done better than the previous generation in Australia since its conception. It is almost ingrained that we should all do better and have a better life style than our parents.

And, in a way, we do: with the exception of property.

That being said, what has happened is a change in demographics and what a first home looks like. If you compare how easy it is to buy a unit now compared to how easy it was to buy a house in the 80s it was probably the same. What has happened is that units are becoming the new norm and houses are now reserved for the wealthy. This demographic shift will continue every-time a house is knocked down to make way for multiple units and as the population continues to grow.

The collective understanding of what a first home should be has therefore not shifted in line with the reality.

This of course only applies to the major capitals.

Also, purchasing property now compared to the 80s and 90s is just as difficult, but what makes it difficult has changed: 30 years ago it was much easier to save a deposit; however, thanks to interest rates, it was very difficult to make the repayments. Today it is the opposite. It is very difficult to get the deposit, but if you can afford to save for said deposit, then it is unlikely that you will struggle with the repayments.

But thanks to our growing cities the end product is not a house on a quarter acre, it is a unit in a tower on a quarter acre.

My take anyway.

 

FHB expectations are rolled out as an excuse. The first home my parents bought is now older and sold recently for the same as a brand new house. The brand new house is safer(no asbestos) and more energy efficient, better built and in a safer neighbourhood. The cost of rubbish housing keeps going up due to cheap credit and speculative behaviour.

 

Almost half a million dollars for an older dog box is "seriously affordable"?

I looked up the median unit price in Bankstown.. it is $515,000, up from $330,000 5 years ago (56 % increase). What do you think wages have increased by over the same time period?

Granted interest rates were a little higher 5 years ago, but that doesn't make saving the deposit easier (harder in fact with lower interest on savings accrued) and the buyers are taking on substantially more risk, which is not affordable in my mind.

 

Mine was on a busy road, close to housing commission. It was a cement rendered weatherboard dog box, with holes in the walls, old bus windows in the front, complete with holes for the hinges, tumbledown ugly piece of crap. Much of the furniture was threadbare secondhand nasty stuff too. But it was mine! And like @beachgurl alluded, try getting a young person these days to live in something like that & you'd be sorely disappointed.

I'm pretty sure neither of my children remember just how bad that place was & I'm sure neither of them would willingly live in a place like that, even if that was all they could afford to get started on the property ladder, and that's a couple of youngsters who have seen what can be done & have been educated on the benefits of property. Lucky for them, they don't need to go to those lengths, but just using them, as an example.

 

From my observations expectations of younger generations are higher for having a 'nice home' (even though as a Millennial I live with an original 1960s kitchen/bathroom). However, it is typically at the expense of land size. Boomers have been fine with a less refined home, but how many would have settled for a 300sqm block?

 

I'm not convinced that the Boomers were any less profligate or demanding than Generation Y back in their youth. The problem, as Guest pointed out, is that house prices, particularly in Sydney and Melbourne, are significantly higher than they were twenty years or more ago.

The other issue is that a wreck like @skater bought would be snapped up by a developer. For example, this place in Reservoir was sold to an investor for $651000 at an auction today. Twenty years of rapidly rising property prices, and an innumerable number of renovation TV shows, have made them hot buys.

 

If we go back to when I was a first home buyer, smaller blocks weren't available. If it meant that I could get a nicer house, or in a better area, for what money I had available, then yes, I would have certainly bought a smaller block.

But here's the thing......back then, we didn't see it as a 'wreck'. It was our home...and we would slowly do it up, as the funds & time allowed. We were not alone in this, as I knew many others with a similar mindset. These homes were not in areas ripe for development. They were typical first home owners homes, in not-so desirable areas. In saying this, though, the area where my first home was, is NOW a lot more desirable & there have been many knock-down rebuilds since then.

 

So which suburbs in Sydney today contain these thousands of affordable homes that just need a bit of work?

& for comparison, in which suburb was your first home?

 

I never said my first home was in Sydney. It was in Bellambi, a suburb of Wollongong, located next to a large (for Wollongong) housing commission estate. You may find similar quality homes today in, maybe Port Kembla or Cringila, although the outlook on the Steel Works is inferior to where we bought. My point is that the homes were not at all desirable. At the time, I could have bought a new property in Ambarvale (Campbelltown) for a similar price, but decided to go with a crappy one in Wollongong, as I preferred the location.

 

Dumbfounded when I found the house next door to us when we lived at Burwood [Sydney] sold for $3.75m last week - exactly the same as ours and sold by us for $500,000 1993.

 

Oh wow. But $500K in 1993 was quite a lot. Ps. As of 2 weeks ago, the Northern Line trains from Epping to the city via Strathfield no longer stop at Burwood. That would really suck for Burwood residents cause I think they mightn't get any other express services now.

 

About the same, if not more (I lead a sheltered life). My contract rates have increased dramatically yet some of my other less lucrative contracts haven't moved at all but the amount of work have slowed down.

 

It's all about supply and demand. As Australia gets more enticing and a great place to live as the decades roll on, so too does the demand for well located properties greatly increase. There is a reason why SA et al haven't reached even close to Sydney, Melbourne and to a lesser extent Brisbane prices.

The reality is as Australia continues to be a greater and greater country to live in, in particular the major cities, prices ain't gonna come down. It just is the reality imo. Futile to try and fight it. Adjust expectations (there are heaps of reasonable places to live in) and get on board otherwise move cities . But constantly whinging about it won't make a smidgen of difference. In 10 years time what do you think the price of high demand property will be? Less than today? Delusions delusions.

 

Gotta agree.
Anyway, people want to live here in Sydney. There are professional jobs and I think they aren't too hard to get in Sydney if you present well.
Jobs bring people in.
If there's employment and opportunities then people will come. I think the bulk of the major professional employment opportunities are really only in Melbourne and Sydney.

Sure, if you want to run a business then Brisbane and Adelaide would be ok. Not everybody wants to do that though.

Perhaps the governments of other states are fighting quite a tough battle to get big employers to put their Australian headquarters outside of NSW and Vic unless its an industry like mining or tourism. Happy to be wrong on this though.
But I still consider Sydney and Melbourne as being the places to be. Other Australian cities are way back, left in the dust.

 

Something not considered above is changes in workplace design - some industries have embraced technology to facilitate working away from the office, others utilising network hubs as remote office setups so you don't need to commute to a central office on a regular basis.

Obviously this is not the solution for all industries eg. I haven't seen a plumber who can clear a blocked drain remotely (yet)