The great Australian housing bubble creating a generation of poor youth

Where's rental income in the equation?
SVRs are no longer 6-6.5%, a 6% rental yield depending on expenses and depreciation is close to or better than cashflow neutral.

 

On the plus side, @Jennifer Duke 's getting lots of walking in! Won't hurt at all.
Also, it used to take me 2 hours to get home from school and an hour and a half to get there. Lived in Wahroonga. Things haven't changed that much. Even when I lived in Ashbury, I walked 20 mins to Ashfield station then a 50 min wait/train ride to St Leonards and then another 20 mins when I got off the train. This was the old normal - back when we were all skinny.

 

I'm not talking about rents here. It's in case of PPOR. In the last decade SVRs were about 6-6,5 on average.

 

Haha this is true

 

Absolutely . I think this could influence the financial future for many. I think it could inspire younger people to adopt a more self sufficient attitude. It's amazing how little most younger people know about basic finances and money management. The basics are not rocket science . Getting the message across would not be difficult . Families teaching finances are not reliable enough. Sadly I have heard far too much defeatist talk from working class parents and family members. So many accept such negative talk as facts and give up before they start.

 

Property costs 30 times more in 2015 than it did in 1975

A couple of key points to take from the article-
In 1975, the average full time earnings were $7618. Today, it’s almost 10 times more at $72,000.

In Sydney, the average house cost $28,000 in 1975. Today, it costs $850,194. That’s 30 times as much as it used to be. Your 10-times as much annual earnings isn’t looking too great right now, huh?

Melbourne is even worse, at 31 times the cost of 1975. Back then, the average house was $19,800. Now, it’s $615,068.

In Brisbane, it’s 27 times higher from $17,500 to $473,924.

In Adelaide, it’s 28 times higher from $16,250 to $459,258.

In Perth, it’s 32 times higher from $18,850 to $604,822.

In Canberra, it’s 21 times higher from $26,850 to $573,326

In Hobart, it’s 21 times higher from $15,200 to $322,274.

 

oh well....!

again, who's right is it to be able to BUY a home?

show me a UN Charter or a Constitution?

 

I don't know how it stacks up either way but that article misses a couple important points,
First, it references full time income which I take to mean a single persons income when you really should be looking at household income since there would be significantly more dual income households in 2015.
Second, you get more house for your money in 2015, I doubt there were many 2 story, 2 living area, 4 bed + study, 2 bathroom, double lock up garage houses being built in the 70's, in contrast building block appear to have shrunk some since 1975.
Third, since 1975 the population of Sydney has grown heaps, the amount of land in inner city Sydney and beach side estates has stayed pretty much the same, supply and demand suggests those suburbs would skew the results of any average of the whole city, comparing two suburbs from then and now with the same population demographic would be a more fair comparison.

 

There are significantly more dual income households these days, but females on average still earn less and work less hours. So even if both individuals earned the average salary (which is a huge IF) their combined income would have increased 20x, whilst house prices have increased 30x.

House sizes have increased, but it's the land that counts and it's the land that is the appreciating asset. Sydney has always been an expensive city relative to other Australian capital cities.Yet other cities have increased by roughly the same % as Sydney. Furthermore, if we did compare 2 suburbs from than and now with the same population demographic you'd be comparing suburbs 25-30km on the outskirts of the Sydney CBD in 1975 to suburbs that are now 50-60km. Apart from being half the distance to the CBD the land (the appreciating asset) sizes were also much larger as well.

Average block sizes:

• 1950s: 32-36 perches (810sq m-910sq m)
• 1980-90s: 600sq m
• 2000s: 350 - 450sq m
• 2015: 200sq m - 350sq m

I agree that houses these days are much larger and of higher quality though.I'm not saying it's impossible for young people to own property- it's just harder, which is a fact that a lot of people seem to refuse to acknowledge.

 

What were the mortgage rates in 1975?

 

If it's so much harder for young people to buy in these days how do we suggest they improve their chances?

 

Can easily buy CBD apartments for $500k. But oh nooo want to live in quarter acre block close to the city, but not exactly in the city because that would be yucky dirty concrete, need nice nature strips and good cafes but not too much commercial activity as that would be noisy and not hip enough. Oh and a triple door garage. Waste of energy explaining.

 

Pack up, take Mum, Dad, bro and sis, gran, pop, cats, dogs, birds, etc and move where the people are nice.

 

Combination of different things..save, higher salary, invest in non property and make $ than can later be used for property. Im sure there are many more..
Personally, i recommend the higher salary path..but id say its also one of the hardest..but also one of the most fulfilling.

 

Move to another location if its too expensive where you are

 

I agree with the moving part - but where it makes financial sense as the dominant priority, income and expense wise. Generally, finances will determine the sort of PPOR one can afford, the retirement options eventually and the potential of being a 'nice' person through charities, etc.

Personally, I moved from Melbourne to Canberra for career, regardless of the boss I had to deal with. It would be a sacrifice for many of us who had to deal with work changes, leave friends, relatives and familiar social life.

 

Yeah no take them with you. The bosses I can't comment on. I work for a non-profit atm and the bosses are fnidiots. Fortunately they have no idea how to do my job so I just play the game on the rare and unpleasant occasions when I'm forced to interact with them. Seems you've got to be lucky these days.
As for friends and social life, just the same old same old after your thirties. If they're real friends, you can stay in touch.
Not for everyone, I guess but it seems to be the next step in the cycle. Time for the sea/tree change again. There are some great places around, just need to explore a bit.

 

I do not agree with using "household" income to compare wages and prices.

Just because some households now have two incomes, there are a huge percentage of single person/single income households still. Think of all those who do not have a partner or who are single parents.

Apartments and smaller homes are perfectly suitable places to live in - not everyone needs four or five bedrooms and a large yard.

 

Yep, early! I don't bike ride - but have been looking into it (colleague is selling hers for about $100 and it is pretty good!).

 

The bubble in the banks’ eyes
(article has been edited/summarised for copyright purposes)




CBA lift the lid on what they think the key supports for Aussie property are.

How does Australia’s so-called property bubble look through the eyes of the banks?

Of course if they really thought there was a problem they wouldn’t be letting us know about it. The banks are in the mortgage business. Their share price would be hammered.

Michael Blythe is the chief economist at CBA. He says that a focus on trough to peak, rather than peak to peak, tends to make price movements look dramatic, but it overstates what trends are actually at play.

If you compared current prices with the previous trough, you’d see prices in Australia have grown a ball-tearing 8.7% a year.

But if you compared prices to the previous peak, price growth has been a much more tea-flavoured 4.2% a year.



Blythe also notes that Australia’s population is very concentrated – with 40% living in either Sydney or Melbourne. That means that comparing Australian prices, which are dominated by Sydney and Melbourne, with Australia-wide incomes will tend to give us the high house price to income ratios that foreign economists like to point out to us every two or three years.



A concentration in the two biggest cities also tends to amplify booms and busts, with movements in Sydney or Melbourne throwing around the national averages. Concentrated housing markets tend to have larger cycles.



However Blythe points out that a lot of what is taken for price growth is actually a shift to larger houses. The average floor sizes of Australian homes has increased 49% since 1985.

That means we’re not comparing apples and apples. It is not true to say that the market price of a house has necessarily increased, when that house has also seen major renovations, and massive improvements in quality.

At the end of the day, Blythe also points out that most people are well positioned to deal with any shocks. He reckons 78% of borrowers are 7 payments ahead of what they owe.

Australian house prices are expensive, sure. But we’re also one of the richest nations on earth