Tolling of Bells for Affordability in Sydney and Melboune

Hi All

More and more articles around affordability are being reported in the papers....see below. The masses read this stuff. Over time ...it will start to affect the Sydney and higher priced markets in Sydney and Melbourne. This will start affecting prices.

My first home almost sent me broke: This is why you can’t buy on your own

Last time when this happened the Brisbane market and other markets like Perth, Adelaide and to lesser degree Hobart also moved.

Interesting times indeed...

 

What a dill, you can still get inner city appartments for considerably less than the 590k she paid. She purchased in Brunswick, a great spot and very good for lifestyle hence the increased price. She bought a 2 bedroom place.....not sure why a single person needs 2 bedrooms. People need to take responsibility for their own choices.

 

When I bought my first unit to live in, I bought well below the median.

In contrast;

At $590K, even with a very decent deposit, is much higher than the state or NSW averages quoted in the article.

 

Ian...that is correct...but 80% of people think like this and get very emotional particularly on their PPOR.

Brunswick is an area on the up...but she could have bought for 35% less via H&L 27-30klms out...but judging that she is young she want to be near the action. But these are choices.....one makes and needs to live with.

 

Agree with @Ian87 except for I would always buy a 2 bedroom unit over a 1 bedroom just due to resale and rental appeal over a 1 bedroom unit.

 

Are you single, Ian and speaking from experience?

You do need two bedrooms, even as a single, in an apartment because usually they are tiny, with few cupboards and the second bedroom has to be used for storage or as a study/ place to hang damp washing over the clothes horse.

The woman featured in the article has two bathrooms so I expect she will be able to rent out the second room. Being inner city she'll also save on transport.

And she is a lawyer, so high earning capacity.

 

Yep...it is about choices.....she probably works long hours and needs to be close to the city. Brunswick is like Newtown in Sydney 10-15 years ago.

The point here is she is also putting herself in a position where would have better rented and bought the property as an investment...maybe even a couple of years later than now.

She herself has regrets.

 

You absolutely do not need 2 bedrooms. Maybe you need less stuff. If you want to pay an extra 100k for a room to dry your clothes be my guest but don't complain that it costs a little more.

I am in a relationship however we save one full wage plus a little of the other. Both wages are also below the median income so neither of us are earning big bucks.

If she rents out the 2nd room then she surely can not complain as it then becomes a much more affordable proposition. And makes the fact she is in the article complaining about a lack of affordability all the more baffling.

 

I agree I would also go for 2 bedrooms but do it with open eyes and know why I am doing it hence would not be in an article complaining that it costs too much.

 

I'm sceptical about this article. It's the media playing with the general public's emotions and they're turning the tide of sentiment from elation/euphoria to doom and gloom.

It's not relevant to the everyday property investor.

Sash is right. The majority of FHO and owner occupiers are emotional about the lifestyle impact, the mortgage 'burden', the cashflow implications.

'She gave me $5,000 to actually buy myself a fridge, washing machine and dryer. I had no leftover money. I was so broke. I still am extremely broke right now.'

A back of envelope calculation would put a white good investment at $1500 tops. Where did the other $3500 go?

As I said, irrelevant to an investor but good to know that the overall sentiment is likely changing as all those people who dived in with FOMO without understanding the basic maths and what sort of cashflow implications this would have. The stereotypical person who doesn't budget, focusses on lifestyle and spends their income without any financial burden will feel very much tied down with a mortgage.

 

'Ms Sayed said there urgently needs to be something done to improve affordability for younger generations. She told news.com.au that auctions were flooded with older buyers and investors sparking bidding wars.'

Disagree.
Yes, something needs to be done:
Younger generations need to realign their expectations.

 

This is great. Get used to it. If you ever decide that you want a family, you have proven that you can live on less than one income, afford to invest and not return to the workforce asap.

 

$24k a year is nothing! She must spend a lot of money on other things, or has a sub 80k salary. As a "human rights lawyer" maybe that is true. But if she doesn't have a high salary to support living there, she shouldn't be buying in trendy areas with $500k loans.

 

It's blatantly obvious this girl needed a better education and understanding of property...and finances..

A) she could of got a better deal....590k is steep for a 2 bedder in Brunswick... Plethora of choices
B) Moneywise, she's gone all in on the apartment and not even thought about furniture, fitout etc... Lucky her mum helped her out...
C) no $$ for a fridge means there's definitely no $$ buffer in place in case 'life' happens..

And now, when asked her opinion on housing affordability and her situation.....there's no self reflection or a hint of accountability.... She wants the government to do something about neg gearing and then takes a swipe at the baby boomers for driving up prices...

Typical gen Y copout..

 

She's broke after spending $120k on a deposit? That's unusual!

It's harder to buy as a single than as a couple? No way!

Housing becomes less affordable at the top of a boom... no way!

Love these articles, so lacking in substance and facts. Why do they insist on paying 20% deposit anyway?

$2k/month of expenses including mortgage repayments... if she can't manage that she's doing something very wrong. Especially when rates start rising. And what's she doing buying a 2br for anyway? My partner and I live quite comfortably in a small studio for the last 1.5years. If she has any smarts about her she'll rent the other room.

At least she reads the MSM and so has a good grasp on what she thinks causing the unaffordability and offers no solution whatsoever- "We really need to regulate negative gearing for investors,” Ms Sayed said, so younger generations can feel secure in their financial future, as she does now, despite the initial uphill battle.
15 year old article saying same- The young are growing up poor - smh.com.au

"As you can see from the below table our average annual salaries as a percentage to the prices of property have decreased from 23% in 1970, down to 8 % in 2016. Whereas Apartments have dropped from 32% to 12% over the 46 years"


Latest FHO figures I could find but seems pretty steady long term;

 

If she's complaining about affordability and having to cover all the bills as a single person, why not rent the spare bedroom?

Fake tan, designer cloths and furniture, a lawyer in her 30s. I have clients that are lawyers in their 30s, I've seen their payslips. Whilst they're not earning as much as some people think lawyers make, she probably makes well above the national average. She's bought a property with a 20% deposit in a price point that is very affordable.

Her problem is not that she can't afford the mortgage, she can't afford her lifestyle. In my experience this is the number one reason people get into financial stress.

 

$1,500 tops?

As the subject of the article is a high income earner, or soon will be, I'm not that sympathetic to her plight.

However, I think the tree appliances are definitely going to cost more than $1,500 if you get decent ones that will last (false economy to go really cheap, as I learned several times when younger.

I think you could do it for just over $2,000 though.

Or much less second hand (but, again a risk as I have discovered several times).

 

If you buy more house than you can afford it will ALWAYS be unaffordable. Period!

It's not rocket science....

In Melbourne she does have other options that she chose not to take.

In terms of the media coverage its worth remembering that most journos are young and getting paid 40 - 65 kpa. To them things are indeed unaffordable....

Still...that being said.. it is getting hard to argue that Sydney is not bat-poo crazy.... Melbourne isn't far off too..

You would think something has to give at some point...

 

Agree, Its not rocket science, there are cheaper suburbs in Melb in the 15-17 km ring, with good rail/transport, townhouses for around $400K.
The fact that this buyer is wanting to live in an area she clearly can not afford is just dumb, your budget has a lot to do with what and where you buy.

MTR