The Cost of New Houses

[Hagar (Doug)]

Originally Posted by andyc

The point is Paul, that your basic house, unit etc with no trimmings has become twice as expensive relative to income over the last 25 years. ...

Funny you quote figures like this. The same house I bought in Craigieburn sold about 12 months back for $425K a fair jump from the $40K I paid for it in 1980. Then again my salary in 1980 was less than $100 take home as an electrical tradesman. The same tradesman today earns in excess of $1000 take home.
You should try and employ a tradesman for less than this. It's near impossible.

Which ever way you look at it it's just about even. The minimum wage is now around $700/ week.

It does seem to me to be a lot of keeping up with the Jones and having to be bigger and better. My kids would not even consider a tiny house like I started with and would not sleep on a mattress on the floor until they could afford a bed.

What is going to happen when interest rates start to climb again? When I bought my first home it was 9.25% and within a few years interest had jumped to 18%. If this happens again there will be a lot of cheap houses on the market.

What advise do you give your kids?

[multiweb (Marc)]

Originally Posted by andyc

Perhaps, you can point me to data that shows 2015 house prices are the same relative to average wages as they were when you bought your house/land? Then we can have a conversation about lifestyle choices or if people work hard these days...

You just have to check how many credit card/debt recovery services, etc... are advertised on TV. People spend the money they don't have. They get in debt. It's the new "normal". House prices have risen a lot but interests have dropped a lot too. Borrowing money and large amounts has been made very easy. Back in the day you were limited in the amount you could borrow and had to come in with a substantial deposit. Is it harder to buy a house today? Nope. You just walk in the bank, borrow half a mill and get all the trimmings. Is it dearer. Hell yeah! Doesn't mean common sense shouldn't prevail. If you can't afford it rent. If you can afford it, start small and work your way up getting out of debt as you move along.

[strongmanmike (Michael)]

Hmmm?...sorry but couldn't help myself - for the Yorkshire men in this thread

[multiweb (Marc)]

Originally Posted by strongmanmike

Hmmm?...sorry but couldn't help myself - for the Yorkshire men in this thread

Sooo.... 40 years later you're still sucking on a piece of damp cloth?

[strongmanmike (Michael)]

Originally Posted by multiweb

Sooo.... 40 years later you're still sucking on a piece of damp cloth?

Soaked in Chateaux le Shaseler

[multiweb (Marc)]

Originally Posted by strongmanmike

Soaked in Chateaux le Shaseler

Sucked on Chateaux La Pompe 1932 for years myself. Like the Aussie Merlot and Shiraz way better. Life is good.

[Larryp (Laurie)]

Originally Posted by FlashDrive

If I was looking for a house today ( and could afford to ) .. I would get a reputable builder to build me a house to ' lock up ' stage .....NOTHING ELSE.

No curtains ( can always hang sheets ) ... no paint inside or outside ( do it yourself over time ) ... no floor coverings ( they can come later )....no laid out ' turf ' .... no concrete driveways ( lay down some granite to cope with the wet weather...won't get bogged that way ).

You've got yourself a ' bare ' house with no ' frills ' ...and a heck of a ' savings ' on the Mortgage .

Do all the ' extras ' over time and do it yourself ( help from friends if necessary )

.... you can go one better ( if conditions are favorable ) ... be an ' Owner Builder ' and have some good mates who are Plumbers / Electricians.

For those who have done it either way, they have ' saved ' $$$$$ thousands..... ( and I know a few people who have done this )

Col...

This is what my first wife and I did, Col.
No curtains, no floor coverings etc until we could afford them.
And I used to drive 40Km to work each day, because that's where I could make better money.
It was quite common in our neighbourhood at the time, to live in an unfinished house.

[sn1987a (Barry)]

Cheaper option!

http://www.liveleak.com/view?i=eb0_1434780367

[andyc (Andy)]

Originally Posted by Hagar

Funny you quote figures like this. The same house I bought in Craigieburn sold about 12 months back for $425K a fair jump from the $40K I paid for it in 1980. Then again my salary in 1980 was less than $100 take home as an electrical tradesman. The same tradesman today earns in excess of $1000 take home.
You should try and employ a tradesman for less than this. It's near impossible.

Doug, personal anecdotes are not a great way to objectively identify what is happening here across the population. Look at the graph in this link. House prices are far outstripping wages growth across the country. [maybe less so if you're a tradie, building and fixing houses!] Tradies & builders do really well out of a housing boom (and a heap of 'home improvement' soaps on TV) - they are not representative of wages in the full workforce. I saw this firsthand with my dad in the 1980s and 1990s in the UK.

Originally Posted by multiweb

You just have to check how many credit card/debt recovery services, etc... are advertised on TV. People spend the money they don't have. They get in debt. It's the new "normal". House prices have risen a lot but interests have dropped a lot too. Borrowing money and large amounts has been made very easy. Back in the day you were limited in the amount you could borrow and had to come in with a substantial deposit. Is it harder to buy a house today? Nope. You just walk in the bank, borrow half a mill and get all the trimmings. Is it dearer. Hell yeah! Doesn't mean common sense shouldn't prevail. If you can't afford it rent. If you can afford it, start small and work your way up getting out of debt as you move along.

Marc, that's all easy to say, but personal credit card debt doesn't explain a relative doubling of house price. Easier mortgages might explain some of it, but that's spectacularly unsustainable - see the UK and USA around 2007-08. You can't 'start small' today, unless you want to start 50% smaller than your parents generation of 25 years ago. You'll probably also be further from your work, so spending more income on travel. Sensible rules such as borrowing no more than 3-4x your salary don't buy you what it did in those days. Part of the reason is that you are more than likely competing against investors rather than other homeowners, as the data shows.

[tlgerdes (Trevor)]

Originally Posted by AndrewJ

PS Another comment i got back from one of the kids was that when my generation bought their houses, they had full access to all of their salary, thus could pay off any loans quicker and reduce the long term interest loss.
These days, super is taken from them at the time they need it most to pay off the loans, thus exacerbating the time taken to pay off and hence the extra leeching of interest fees for many more years.
I hadnt ever thought of that effect of super.

I think they have been misled on that one. When compulsory super came in in 1992 (and when it has been increased), the employer had to increase wages by the amount paid (originally 3%), it did not get deducted from the employees base wage.

[multiweb (Marc)]

Originally Posted by andyc

Marc, that's all easy to say, but personal credit card debt doesn't explain a relative doubling of house price. Easier mortgages might explain some of it, but that's spectacularly unsustainable - see the UK and USA around 2007-08. You can't 'start small' today, unless you want to start 50% smaller than your parents generation of 25 years ago. You'll probably also be further from your work, so spending more income on travel. Sensible rules such as borrowing no more than 3-4x your salary don't buy you what it did in those days. Part of the reason is that you are more than likely competing against investors rather than other homeowners, as the data shows.

I realise this but you still have a choice. Buying a property is only if you can afford it otherwise you rent. Plenty of people do that. Nothing's wrong with that at all. And yes you do need a bloody good paying job to buy a house these days. You can start small. Buy away from the CBD, or a small unit to get in the game. Own it, then move on. Small steps, small risks, small earning but it all adds up. There's enough land and room in Oz for everybody. Housing pricing will go down and become more affordable again. Interest rates, well, they're as good as it gets right now and people who stretched themselves thin are going to hit it hard.

[AndrewJ]

Gday Trev

I think they have been misled on that one. When compulsory super came in in 1992 (and when it has been increased), the employer had to increase wages by the amount paid (originally 3%), it did not get deducted from the employees base wage.

I never got a "payrise" Plus super when it came in, i just didnt get a "payrise" the years they adjusted super. ie Even as the super percent increased over time, it has always been ammortised into the total wage rise, it was never increased along with a full pay rise. ( That only happens if yr a Pollie ).
Sooo when comparing pre 1992 wages and prices vs current wages and prices, the kids are currently on a 9% hiding when it comes to free cash that they can use to mitigate long term interest drain.

Andrew

I should add that with some of them, if they had the extra 9% available now, they would probably blow it, so super may be a better bet , but for those who can manage their money, its just that bit harder.

[tlgerdes (Trevor)]

The seeds of Sydney's housing crisis started in the early 70s, with the lack of investment in transport infrastructure and the belief that everyone would work "in the city". It was exacerbated in the 80s and early 90s with a decentralisation of industry, again without the necessary transport infrastructure. All of Sydneys transport infrastructure is still predicated around everyone wanting to go to the city or through the city.

We then allow them to build new suburbs and at sometime later decide to build transport (look at Sydneys northwest/southwest)

If you could get across the city, say from Liverpool to Hornsby, blacktown to north ryde, or Hurstville to Parramatta inside 60mins in peak hour (that's about 40kms hour) then we are on a winner for homebuyers. I live 13kms from the CBD and it actually takes me less time to drive to the CBD than to take public transport (45mins v 50mins peak hour, 25mins v 60 mins off peak) due to inadequate services.

People pay a premium to live near where they work due to the time constraints, this pushes up prices for geographically beneficial locations, this has a flow on effect to neighbouring locations, which flows on to neighbouring locations etc etc etc.

But we as caring humans would rather have the government save the 3 legged bandicoot habitat in Mullumbimby, provide multi-racial tolerance co-ordinators to all schools, LGBTI equal opportunity service centers (link) or whatever social or environmental inclusion policy, than build appropriate transport infrastructure (link)

[tlgerdes (Trevor)]

Originally Posted by AndrewJ

Gday Trev


I should add that with some of them, if they had the extra 9% available now, they would probably blow it, so super may be a better bet , .

You are so correct there

Originally Posted by AndrewJ

but for those who can manage their money, its just that bit harder.

As a "wise" user of money, I haven't noticed this part.

[leon]

When we first bought our house it too was only 13 squares and that included the car port, we had sheets for curtains for years and I built the yard and all the extras in my spare time before and after work.

People tend to over borrow instead of buying modest.

Leon

[multiweb (Marc)]

Originally Posted by AndrewJ http://www.iceinspace.com.au/vbiis/i...s/viewpost.gif
Gday Trev


I should add that with some of them, if they had the extra 9% available now, they would probably blow it, so super may be a better bet , .

Originally Posted by tlgerdes

You are so correct there
.

Funny you mention that. You know why we have so many audit fees on SMSF now? Because 1000s of people used to default purposely on their home loan repayments until they got the third dreaded letter from the bank then went to their accountant with it and unlocked their super to lower the principal on their property. After so many cases of abuse they closed that loophole and now we're scrutinised for every buck/interest we make in our funds and charged accordingly.

[AndrewJ]

and now we're scrutinised for every buck/interest we make in our funds and charged accordingly.

I say Double or triple the charges.
How are all these poor accountants and white collar criminals in the finance system going to maintain their lifestyle and buy their houses unless you pay more
Andrew

[clive milne]

Originally Posted by andyc

Doug, personal anecdotes are not a great way to objectively identify what is happening here across the population. .

Ohhh, I don't know Andy... as long as you include an expression of the signal to noise statistically inherent in a sample of one... that being:
signal = 1
noise = square root of 1

Therefore, signal = noise
ie) a sample of 1 is meaningless.

[multiweb (Marc)]

Originally Posted by AndrewJ

I say Double or triple the charges.
How are all these poor accountants and white collar criminals in the finance system going to maintain their lifestyle and buy their houses unless you pay more
Andrew

Yeah, that's always baffled me that they charge that much to "oversee" money I can't use until I reach 70. I mean it's compulsory and self funded right? As I'm self employed, every buck I put in there, 9% or other, I still have to go out and earn it, right? Nobody is giving it to me for free. Maybe I should not worry about it, spend the money, live the life and when retirement age comes around, go back on the system's safety net and "demand" my due, my pension and whinge with the rest of them all.

[AndrewJ]

Gday Marc

Yeah, that's always baffled me that they charge that much to "oversee" money I can't use

I think you are missing the underlying problem. ( they are brilliant at this )
The financial industry can only survive if it has money to churn ( for a percentage ) or a big pile of static money that they can nip fees off the side when no one is looking. They can only do that from people who have actually saved money.
I stopped putting money into super as soon as i could and invest it externally myself.
I reckon in a few years when the finacial situation in Oz gets worse, super will become the feed stock for everyone who needs some money, and there will be nothing you can do about it.

Andrew