Melbourne Property Market

[bunsen burner]

Where did I say that?

You didn't but you did say I avoided this board for 12 months because I was wrong. The market never dropped 30-40% as was suggested. There was no reason for me to avoid this board. Sometimes I don't come to BF for months, sometimes I don't go to regular boards for long stretches. Nothing in it.

Why weren't you on the front foot back then, like you are now?

Because not enough time had gone past to gauge who was right and who was wrong. Pretty obvious I would have thought.

 

[Z_K]

.....And indeed fuelling and profiteering from the same property/housing climate he claims to be so detrimental to social fabric of the country and creating a working poor underclass.

Calm down, Fidel.

I'm not indifferen't to your point, but it's a good problem to have. Maybe I'll rent out house number 8 to some poor refugees for a little bit less than market rate just to make myself feel better.

 

[Clay Davis]

You didn't but you did say I avoided this board for 12 months because I was wrong.

Not because you were wrong, but because things weren't going your way.

There was no reason for me to avoid this board. Sometimes I don't come to BF for months, sometimes I don't go to regular boards for long stretches. Nothing in it.

Hehehe, but you were still posting on BF in the meantime!

Because not enough time had gone past to gauge who was right and who was wrong. Pretty obvious I would have thought.

Fair enough.

 

[Lyyynnnchy]

I would not live there. Far too small. Either way I'm not willing to put more than a third of my weekly disposable income towards it (this currently = $300p.w). A guy my age used to be able to pay off a house and still have a life. Not anymore.

Aren't all those people with less financial comfort than me yet still in the market living beyond their means? How are they going to be if we go up another 3 percentage points in not much time? If they have to get out then they shouldn't have been in in the first place...

I pay my $300,000 mortgage with just over 1/3rd of my salary ($1650 a month to my mortgage). Go out Fri and Sat nights 75% of the time spending min of $100 a night and up to $300. Take the gf out to dinner once/twice a week, buy tickets to many events and have a great social life

You could take that $400 a week loan, rent a room out for $150 (what I do) and the loan would become $250 a week...easy

To get anywhere in life sometimes you need to take a risk. I did and now I have $100,000 equity in my CF+ house as a 22yr old

 

[bunsen burner]

These comments are fair. Although I wouldn't say I resent those who do, I resent the fact that they need to extend themselves so much for something (property ownership) I believe should be a entitlement, not a privilege or something you have to pay through the teeth for.

You need to snap out of this thinking. The world owes no one.

I'm still young so I'm not 100% certain but have things always been this way?

Yep. But it has just gotten harder over the years and will continue to do so. Regardless of right or wrong, this is how the trend has been and how it will continue. You need to drop the resentment and get with the progy.

I don't consider myself socialist, but I probably have a socialist view with regards to residential property? I think you should be able to afford to own a house as easily as you can afford to buy groceries at the supermarket.

That's preposterous. If housing is as affordable as you want it then there will be no investors. No investors mean no rental properties. No rental properties means the poor are disadvantaged.

The housing market has to be sustainable to investors. And don't forget building costs. It costs minimum $200k to build a small 3x1 house anywhere in the country. Property will always be unafforadable to many.

Thinking out loud here, but perhaps I should just face facts and move with the times...

bingo.

 

[bunsen burner]

Not because you were wrong, but because things weren't going your way.

Not enough time had gone past to tell. But it's wishful thinking if you think I ever thought I was going to be wrong, or avoided this board because of that. I was right and I was always going to be right. It was a no brainer.

 

[Clay Davis]

Not enough time had gone past to tell. But it's wishful thinking if you think I ever thought I was going to be wrong, or avoided this board because of that.

Quite easy to say now.

I was right and I was always going to be right. It was a no brainer.

You were wrong when you said Melbourne prices wouldn't fall from their position in Feb 08. They did.

But I don't think that's why you stayed away. The fact you weren't here sinking the boot in to the bears who were calling 30-40% falls while the market was turning down suggests something else.

 

[bunsen burner]

:

Champ?

Champ.

 

[bunsen burner]

Quite easy to say now.

Quite easy to say before too. I recall I was extemely confident about it - and for good reason too.

You were wrong when you said Melbourne prices wouldn't fall from their position in Feb 08. They did.

No big deal that one though. They are already above the level they were before they dropped.

But I don't think that's why you stayed away. The fact you weren't here sinking the boot in to the bears who were calling 30-40% falls while the market was turning down suggests something else.

I'd look stupid sinking the boot in when the time period hadn't lapsed. I did alos forget about it. The boom tripped my memory. Nothing un towards in that.

 

[Monkey Worshipper]

Bunsen

So you don't think this is a false economy we live in?

I understand the whole supply and demand thing, but then there's also the servicability / affordability of your loan.

To a large extent, Oz produces nothing, sure we mine a bit, export it and then bring the finished product back in at a higher cost. We consume, 85% of employees sell something that some other country produces. A big part of that are houses. We are a service economy.

If we track median houses to median wages, historically houses have been at 4.5 times the median wage. In the last 3 years its at 8.5.

There will come a point that regardless of supply and demand, people cannot afford anymore, unless we go the Singapore route where it takes 3 generations of families to pay off a flat.

At some point people will not be able to afford more. At that point our 'false economy' will have no where else to go and it will be the case of who has hold of the hot potato and gets burnt. It's Russian Roulette and a game of dare.

So let me reiterate again, house prices going up produces nothing for the economy. Yes jobs are generated in servicing the home (tradies) and servicing the debt but our economy isn't growing from it. We aren't producing anything that we can sell to an overseas market. But this is the crux of the point, the economy is based on ever increasing debt to keep up this game of charades.

So if our economy isn't growing, how are wages going to grow to meet the increased debt? Forget about the internet lacky come millionare, the property tycoon, the mining magnate, the high powered lawyers, doctors, bean counters, CEO's etc... I'm talking about the average family, ala median income. How can median income keep on keeping up with median house prices?

I'll answer that question for you:

a). But but but House Prices always rise

b). But this time it's different.

 

[bunsen burner]

There will come a point that regardless of supply and demand, people cannot afford anymore,

And we are a long way from that point. It's often cheaper to buy than rent. Forget what wages are, there's short supply. The cost to build is expensive and this price won't "bust". The cost to build homes to service this demand is expensive. People have to live somewhere whether that be rent or buy. Until there's an over supply of property or until renting is a lot cheaper than buying, there will be no major bust.

I repeat, for the foreseeable future there will not be any bust of magnitude.

 

[Monkey Worshipper]

I repeat, for the foreseeable future there will not be any bust of magnitude.

I agree with you, forseeable being about 5-10 years (IMO), barring interest rates going beyond 10%.

 

[Monkey Worshipper]

Forget what wages are, there's short supply. The cost to build is expensive and this price won't "bust". The cost to build homes to service this demand is expensive. People have to live somewhere whether that be rent or buy. Until there's an over supply of property or until renting is a lot cheaper than buying, there will be no major bust.

Couple of different views

Yes the cost to build is very expensive, by virtue of wages being very high in the trades. Take away the demand in housing or a 'crash' (which won't happen anytime soon) and housing costs would plummet. These are all If's and but's, I understand that.

People have to live somehere, sure, buy a caravan and live in your folks backyard, shack up with 3 generations of families in the one house. All undesirable, but if people can't afford it, then people can't afford it.

Talking from experience, 13 years ago. Was studying full time at TAFE, 20 hours a week part-time on trolleys, thought "why not", I'll get a 2 befroom unit and see what happens. Not a lot of thought went into, it was just something I did. But then having saved $12K over 2 years, buying the unit for $55K, 8km from Perth CBD, $5K for reno's, so a $48K mortgage didn't require too much thought. What was the median wage back then? Don't know but an Accounts receivable / payable clerk in 96-97 was getting $25-$27K a year.

So I'm saying that back then there was huge margin for error. I could have lost my job and paid the darn mortage on Austudy.

In 2001 that unit sold for $125K, in the first weekend. I'm thinking, "how easy was that". Good location but a tiny shitbox.

That unit in 07/08 (at the height of the market) was going for $300 - $320K.

Now I don't know about you but if I was starting from scratch, there is no way I'd committ to a mortgage of that size, very little margin for error. Back then I'd paid it off in 7 years, working part-time and studying. How long would a mortgage like that take to pay off now?

And what does the current generation buy now when that shitbox is overpriced... only option I can see is a caravan. But then you don't have the capital gain of having a house / unit, so in years to come you will be even more financially worse off.

 

[saj_21]

I have 80k for a deposit and an annual salary 60k yet consider myself incapable of servicing a mortgage. I'm certain there are people in worse situations than me who are in over their heads.

I can see what your saying and noted in a previous post you don;t want to pay anymore than a third of your weekly income on repayments. However you are in a very good position to buy, but there is nothing with sitting out and waiting.

Pick an area you do want to live and keep a logbook on the slae of houses in the and around that area this will give you udnerstanding of what a property is worth. I studied my targert areas in north east melbourne for two years and recently purchase a 2 bedroom unit.

I had saved 65K deposit, i earn around 45k (ex super) per year so approx 750 per week. The unit was $310K got it for a good price as the owner had 6 properties and wanted to get one of his hands. I only borrowed $248 K so avoid lenders insurance, got 14K in FHOG which was slighlty less than the total stamp duty.

The unit is 12-15km from the city, 1 minute walk from plenty of shops. 5 minute walk from train station, but stop out the front of the unit. Schools, larger shopping centres are all close by.

My repayments are around $ 1400 per month, i am renting a room out for $400 a month and we will split the bills 50/50. So i am budgeting for $250 for food petrol bills etc and still plan to head one night into the city which isnt included in the $250 per week. I am planning on moving home after 7-8 months and renting it out for approx $1200 per month, so interest rates won;t bother me to much once i move back home. Even then i can't see them going up more than 2% between now and June next year.

 

[evo]

Although I wouldn't say I resent those who do, I resent the fact that they need to extend themselves so much for something (property ownership) I believe should be a entitlement, not a privilege or something you have to pay through the teeth for.

A lot of the guys I grew up with had the same attitude, so they never bought.

I bought when i was really young (20) rented the other 2 bedrooms out to mates and still nearly lost the place when interest rates went to 17% in the 'recession we had to had have' in the early 90s. i had to go and drive taxis full time for 2 years 7 days a week to get myself above water again -i was paying something like 70% of my wages to service the mortgage. Nevertheless it paid off the end. Like NB i bought a 2nd house in my late 20s.

Meanwhile most of my mates, now in their 40s are still renting but now they have kids and complain even harder how unaffordable propertyis ; and how they are entitled to be able to afford a house. I begged them for years to buy a house.

Back then a comfortable 3 bedroom house in Watirna South was going for about $120, 000. Even if they had've borrowed 95% they'd probably only owe about 20 or 30k on it now-- peanuts when you think the same house is probably worth $550, 000+

 

[bunsen burner]

I bought when i was really young (20) rented the other 2 bedrooms out to mates and still nearly lost the place when interest rates went to 17% in the 'recession we had to had have' in the early 90s. i had to go and drive taxis full time for 2 years 7 days a week to get myself above water again -i was paying something like 70% of my wages to service the mortgage. Nevertheless it paid off the end. Like NB i bought a 2nd house in my late 20s.

That speaks volumes. Hit the nail on the head.

Sure, these days property is more expensive comparitive to wages but it's not as if getting your own property used to be a walk in the park as many people think it was.

If you want to own your own home it's always been a struggle for most. Moving to a shit area just to get in the market, having that discipline to save a deposit, living on a shoe string budget through periods to make ends meet, dealing with the emotional decision as to whether the market will crash and you will do your dough, having to rent rooms out help pay the mortgage, having to work a second job etc.

IT'S NORMAL!

Some of these people need a reality check. I guess believing the market is over valued, and that it used to be easy to buy a house, and that it's everyone else's fault that I don't have a property at 40 go hand in hand. It's the same line of thinking that inevitably leads to tears.

 

[Clay Davis]

Jebus, evo. Renting while they're 40. Even if you're convinced the market might go down, you've still got to choose your sweet point. The price and deposit where it makes sense for you and it doesn't matter what the market does.

 

[Z_K]

With evo's mates relative to present day, the big question is whether in 15 years the same conversation re houses in Wantirna will take place. Will we look back and say that 450k (or whatever) was cheap as shit and anyone who didn't buy was a flog?

 

[evo]

That is indeed the million dollar question.

 

[bunsen burner]

With evo's mates relative to present day, the big question is whether in 15 years the same conversation re houses in Wantirna will take place. Will we look back and say that 450k (or whatever) was cheap as shit and anyone who didn't buy was a flog?

It's almost a no brainer.

Sure it's possible that within that 15 years there is a large crash - but that crash will only come after substantial price increases. There is absolutely no doubt that people will look back and go "imagine if we bought 15 years ago for only $450k".

Person who didn't buy - not necessarily a flog

Person who didn't buy because "there's going to be a crash" or "property is overvalued" - total flog.

 

[FIGJAM]

There's always the risk of a Dry Rot sponsored population cull.

 

[FootyJunkie]

With evo's mates relative to present day, the big question is whether in 15 years the same conversation re houses in Wantirna will take place. Will we look back and say that 450k (or whatever) was cheap as shit and anyone who didn't buy was a flog?

A Hot Dog in a bun will cost $10 in 2025.

It's called inflation.

 

[SirJimi05]

I resent the fact that they need to extend themselves so much for something (property ownership) I believe should be a entitlement, not a privilege or something you have to pay through the teeth for.

You will never own your own home with this sort of mindset.

Why should anyone be entitled to anything?

My parents had to work bloody hard to get their own home.

So did my grand parents.

 

[SolidTiger]

A Hot Dog in a bun will cost $10 in 2025.

It's called inflation.

A hot dog at the "G" will cost $10 in 2012 the the AFL's inflation rate.

 

[SolidTiger]

You will never own your own home with this sort of mindset.

Why should anyone be entitled to anything?

My parents had to work bloody hard to get their own home.

So did my grand parents.

I can sympathise those who are earning a below average wage and saving like heck to get into the property market. But it is a bit rich that those who blow thier money on holidays, plasma TV's, moding up their cars and going out every night expect owning a house to be an "entitlement".

As you pointed out. Saving up for a house requires sacrifice for most people.