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First Time Homebuyers Priced Out of the Market, 90% Can't Afford

Discussion in 'Property Market Economics' started by House, 23rd Sep, 2015.

  1. House

    House Well-Known Member Premium Member

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    Well, back in 1988 anyway.

    Crazy how the headlines haven't changed nearly 20 years later but people seem to think unaffordability is a recent phenomenon.

    Sydney median was $83k.

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  2. TMNT

    TMNT Well-Known Member

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    To be fair. Even though we now have 1000 dollar iphone and ipads while kids seem to need one of these as well . Plus going out to fine dine once or twice a week.

    And our expectations are way overboard i think property comapring apples with apples is unaffordable.

    In 1988 if you paid 38k you might have got a reasonable house that was 45 mins public transport away from the cbd. Which might be say 3 years after tax salary

    Now you need for example 8 years post tax salary that is 1.25 hours away from the cbd


    Even though our expectations have changed, it is getting harder

    My two cents
     
  3. Big Will

    Big Will Well-Known Member

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    Supply vs Demand

    Everyone wants to live as close to the city as possible which increases the demand but there is only a limited supply thus prices increase.

    FHB in the 1980s were not buying the closest properties to the city they were buying on the outskirts/suburbs.

    Today it is the same thing.
     
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  4. JohnPropChat

    JohnPropChat Well-Known Member

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    Urban sprawl has to addressed. Look at Perth, for the number of people that are here it's way too big. WA has Directions 2031 which pretty much insists on infill and high density inner city living. In 15 years, FH buyers will be priced out of the apartment market too. The yields will probably drop to 2% and it just won't make sense to buy anymore.

    Housing affordability needs a serious look.
     
  5. SeafordSunshine

    SeafordSunshine Well-Known Member

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    Since when was being a First Home Buyer 'priced in the market?'
     
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  6. Big Will

    Big Will Well-Known Member

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    I can find a house for less than $10,000 including land only thing no one wants to live there.
     
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  7. TMNT

    TMNT Well-Known Member

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    True . But at what point will it just become ridculous. Maybe in 10 yrs for example. In todays dollars the median prixe is 1.8m . And for that price you have to travel say 2hours.

    There come s a point when it just becomes ridiculous that either people will stop buyinf or move cities or a new cbd will start to form.

    Even though i think people are spoilt little brats today, travelling 2 hrs per day each way is just ridiculous.

    Something has to change. But what??
     
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  8. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    Who would hold at 2% and no one buying? Scary stuff :eek:
     
  9. TMNT

    TMNT Well-Known Member

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    Exactlt. I laugh when a fho buyer says we cant afford anything at the median or above the median price!!!!!

    If a fho buyer is going to buy at or above the median , who the flick is going to buy below the median!!!! Slumlords? Centrelink bogans?
     
  10. euro73

    euro73 Well-Known Member Business Member

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    This article is from April, 1988.

    RBA had rates set at 13.5%. They moved upwards to 17% across the next year or so, and stayed there from June 1989 - March 1990, before commencing a rapid fall. From April 1990- April 1993 rates fell to 10% , then continued falling throughout 1993, reaching 8.75% by December of that year. Rates stayed at 8.75% for about a year, before increasing to 10.5% by late 1994. By mid 1996 they started falling again, and have pretty much enjoyed a protracted period of 8% or below, ever since.

    http://www.loansense.com.au/historical-rates.html

    Lower rates and significant increases to Australian incomes during the 90's obviously contributed quite a bit to improved borrowing capacity. But that only tells part of the story. The big game changers were deregulation and LMI. Deregulation allowed Australian banks to start utilising securitisation to raise debt and put simply, they could then lend a whole lot more money. LMI allowed for far greater levels of leverage, meaning much smaller deposits were required for each transaction. Combined with a big increase in double income families, big increases to incomes and more generous servicing calculators as competition bred innovation - borrowing capacity surged.

    Add CGT concessions and neg gearing to the mix, high levels of immigration and under supply of dwellings, and the end result in house price explosion isn't hard to understand.

    So while there are multiple moving pieces, the common theme in all of this credit. And as the new post APRA world is now demonstrating, even with ultra low rates, under supply and immigration still being drivers, without expansionary credit policies ie - easy money - the speed of growth in Sydney is slowing. Auction clearance rates have declined in recent weeks.

    But like all things - this too will one day pass, and we will have another credit boom. But unlike the last 25+ years , where growth was pretty constant across the entire period ( to varying degrees, but constant nonetheless ) I suspect we will move towards much longer periods of limited growth followed by short 2-3 year mini booms, moving forward.
     
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  11. Richard Williams

    Richard Williams Buyers Agent - Southeast QLD Business Member

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    Planning needs to change. So many silly rules by councils. In Logan you can build your granny flat and rent it to a separate party, but it can't have its own driveway... If its rented to the same household group as the main house it can have its own driveway! Why on earth this should affect anyone is beyond me, another example of planning gone crazy. Less red tape and more practical housing solutions needed.
     
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  12. D.T.

    D.T. Adelaide Property Manager Business Member

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    Peoples expectations are usually too high and most don't know how to save a deposit. At all points in history, a modest home in outer suburbs was a fine start til you worked your way up.

    However, cities are getting bigger, so outer suburbs are becoming further and further away. The solution to this, in my opinion, is to scrap the draconian planning laws. People will build what is economically viable and won't be unaffordable as a result.
     
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  13. Kashmir

    Kashmir Well-Known Member

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    Everyone wants to live close to the city is because of all the work available there.. changing slowly with the likes of Mac Park, Parramatta, Norwest..possibly Marsden Park in the future.
    Seriously, Sydney at least is so poorly planned.Bring on the rise of the satellite cities..
     
  14. euro73

    euro73 Well-Known Member Business Member

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    Take a look at Sydney as an example of why affordability will never be resolved by supply alone - you can buy a perfectly reasonable modest house, oh...say 50KM from the CBD...but many people will refuse to do so because the commute is crippling. Instead, they take on huge debt to buy TIME - ie be closer to the CBD or other major employment hubs. Sydney's particular geographic challenges will not allow for housing affordability to be resolved just by extra supply - unless its all in the inner west corridor and near rail.

    In order to improve affordability, what Sydney really requires is massive investment in a significant number of new rail lines, and rail links between major employment hubs such as Parramatta, Chatswood, Liverpool , Norwest and Homebush ... that would most definitely encourage more people to live further out, as commute times to work would allow for it. This would in turn, improve affordability.

    Unfortunately, because of Govt's aversion to debt - it's unlikely to ever happen. Politicians wont borrow to build infrastructure in any meaningful way. They just wont. takes too long to roll out and they see no ballot box uplift. They will never get ahead of the infrastructure curve. For example - the Badgery's Creek Airport isn't even going to offer a railway link.... I mean. Come On!

    One wonders how the entire Sydney rail system was built 100+ years ago with a much smaller population, in a period where Australia was not wealthy, yet the North West rail link, which is a "light" railway line at best, has taken 20+ years during the greatest period of wealth ever...

    All of this is the single greatest reason for owning INV property in Sydney - Govt incompetence underpins prices !
     
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  15. 2FAST4U

    2FAST4U Well-Known Member

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    Perth and Darwin have been expensive but the prices are going through a correction. Adelaide, Brisbane and Hobart are still affordable. Melbourne has got more expensive; however, if you’re willing to move to areas like Broadmeadows you can still pick up traditional 3x1x1 houses for 350k. The only place I would call expensive is Sydney where 500k will only get you an apartment.
    Low interest rates, foreign investors, easy access to credit etc. all play their part. However, the underlying issue to affordability is demand created through population growth. You either build up or you build outwards or ideally a bit of both.

    The NSW Government is now releasing more land supply South of Campbelltown after withholding land supply for a decade. This will see 35,000 houses being built. Of course the land is going to be 60km from the CBD so it will be affordable (for Sydney) but also make inner suburbs more desirable, which has almost always been the case. If better infrastructure was created (such as bullet trains) there might be more people who would be enticed to live in the outer suburbs, which would improve affordabilty. However, the biggest barrier to bullet trains is that people aren’t going to pay the money to ride a bullet train every day. Therefore, private sector investment won’t occur. As for the Government they are too busy trying to ‘get the budget back into surplus’ to spend money on infrastructure, such as bullet trains that would need Government subsidising.
     
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  16. 2FAST4U

    2FAST4U Well-Known Member

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    It comes back to economics. After Germany’s success of using budget deficits to stimulate employment and the economy post great-depression other developed nations copied the strategy. In the 40s, 50s, 60s and even into the early 70s the Australian Government wasn’t adverse to debt. Instead of taking a short term view they took a long term approach and didn’t obsess about all this surplus/deficit nonsense. Just as there is good debt and bad debt for property investors there is good debt and bad debt for Governments. Bad debt is middle class welfare and unemployment benefits etc. Good debt is infrastructure, which will lead to an increase in productivity throughout the city. Back in the day there also wouldn’t have been a 24 hour news cycle and obsession with polls so it was much easier for the Government just to Govern. These days our Government seems more like a reality TV contest concerned more over polls than the long term future of the country.
     
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  17. euro73

    euro73 Well-Known Member Business Member

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    Couldn't agree more. But that doesn't change the fact that in 2015, no Govt in Australia is willing to govern for a 20 or 30 year outcome. Let's see whether Malcolm Turnbull can change that... I doubt it - our system of Govt doesn't allow for visionaries- the back room boys would tear him down. They'd rather lose Govt than lose control over the party

    Really, you need someone completely unafraid of losing their job to make these things happen. OR, you need a deep and bloody recession - that's the only other thing that would allow for a visionary to set out a 20-30 year agenda.
     
  18. Bayview

    Bayview Well-Known Member

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    What's even crazier is how thew recent crop of folks are blaming NG and the evil greedy investors for it.
     
  19. Bayview

    Bayview Well-Known Member

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    The other problem with the proximity and the 8 times wages is; back then, the population was a much smaller amount of folks, and there were a lot less double-income households.
     
  20. 2FAST4U

    2FAST4U Well-Known Member

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    Agreed. I think it will take more than 1 person to stand up though. This will require joint cooperation between the LibLabs and they have to start explaining to the public that budget deficits are sometimes a necessity. Instead both parties have took the chance to use it as a way to score political points- Bill Shorten in his latest Q & A appearance was gloating over how the Liberals had ‘doubled the debt’. Yet if Labor were to gain Government again they’d be facing exactly the same issues.

    As for a recession the pain involved to get structural changes is barely worth it. Look at Europe and Greece in particular. Despite Greece being in recession since the GFC, having 50% youth unemployment, 25% unemployment and an absolute basket case of an economy they still refuse to leave the Euro and somehow think ‘austerity’ is going to solve their issues…