The pattern of changing times
1980 – 2015
The average income has increased by 570%
The average mortgage has increased by 1280%
The great Australian
The great Australian dream promised a home of your own, stable work and a comfortable retirement. But at the start of a new century those hopes are out of reach for many. Over five articles this week, The New Daily looks at how the dream arose, what fractured it, and how it might be reimagined for the 21st century.
For Max O’Andrea, Australia was the golden country. In his small high school in Rome during the 1960s, he listened to his teachers talk about the wonders of a fertile land, brimming with opportunity and unblemished by centuries of European history. But as a boy Max never imagined he might one day call it home.
After graduating from high s school he struggled to find work. He travelled a bit and found jobs here and there, but by age 24 he was unemployed and unsure where life was headed. Around that time he remembered the shimmering impression left in his memory by the land down under, a frontier country filled with fresh air and exotic animals, an undeveloped place “where anything could still happen”. “So I bought a ticket and got here,” he recalls. Initially it was a holiday, but the “open spirit” of the locals, the “delicious food” and the safe, smooth roads quickly turned it into much more – his new home. Four years later, at the age of 28, Max celebrated becoming a citizen.
Around the same time that he signed his citizenship papers, Max and his partner bought their first home. It was a two-bedroom flat in St Kilda East, a tram ride from central Melbourne. It cost $18,000. With plentiful work. he was living the great Australian dream.
But thirty-five years later, Max and generations that followed him would be living in a very different world to the one promised in the prosperous decades after World War II.
ORIGINAL ARTICLE: The New Daily (Great Australian Dream Happened) 24.11.13
out of reach for
within 50 years
We could soon be faced with an entire generation of renters. Despite recent data pointing to slowing housing growth, property prices are still earmarked to rise at a considerable rate at least in the short to medium term.
In fact, QBE’s recent Australian outlook suggested a growth rate of around 9% to June 2017. So much for waiting for the property bubble to burst.
For people who don’t already own a property, picturing the already overpriced market in the next 10, 20 or 50 years is quite frightening. Could a house in Sydney really be worth $48.5 million by 2064?
Well, if our love of property were to continue, such astonishing growth is not out of the question, particularly if 50-year historical June quarter house price data (1954 to 2004) and the June quarter report from Australian Property Monitors (APM) is anything to go by.
The historical data in question, from Dr Nigel David Stapledon’s 2007 report Long Term Housing Prices in Australia and Some Economic Perspectives, found median Sydney housing prices had grown at an average rate of 8.52 per cent per annum over the 50 years to June 2004. This would have placed the median house price at $569,840 in 2004.
According to APM, the average Sydney house price now sits around $812,000, an increase of more than $100,000 in the 12 months to June 2014.
Based on the current low-interest rate environment and housing supply shortage, a continued average 8.52 per cent per annum increase could see the Sydney median house price reach $1.84 million by 2024, $9.45 million by 2044 and a staggering $48.5 million by 2064.
Although it’s hard to say what property prices will do in the future. it’s likely that Sydney will one day go the way of cities like New York, where a majority of residents rent instead of owning their own home.
I think this generation will be the last to have a chance of owning a quarter block.
For the next generation, the Aussie dream of owning their own
home will simply be out of reach and most of them will be living in apartments. From the state of the economy, the job market and overseas investment, there is no one root cause for Australia’s booming housing market. What is even less clear is when, if at all, prices will head south.
Savvy investors could well be retiring by the age of 40 on the back of a decent portfolio and first home buyers may cease to exist altogether.
Despite these dire predictions, it’s important that home seekers keep in mind there are ways to buy a property without a deposit, an incredibly difficult amount of money to muster for those currently renting and having to cope with the high cost of living.
To avoid getting locked out of the booming property market completely, waiting is not a strategy for these young would-be buyers, especially if their parents are in a position to help them
by going guarantor on their home loan or gifting them the money for the deposit.
ORIGINAL ARTICLE: The Advertiser (Owning a property out of reach) 20.02.2015
Gen Y. Getting screwed by the
While debate rages about whether people who use negative gearing are rich or poor, there’s one group who are definitely not laughing all the way to the tax office.
New modelling shows that those aged under 30 are being royally screwed by the current tax system, which benefits older and wealthier Australians. In fact. young people receive just 6.4 per cent of the $37 billion that comprises our three most costly tax breaks: negative gearing, capital gains tax and superannuation
tax concessions. That’s a measly $2.4 billion, compared with the $34.6 billion their elders are clawing back to bolster their position
among the landlord class.
It’s no wonder so many young Australians are still living at home, staving off what looks to be a lifetime of serial house sharing.
The analysis comes after Opposition leader Bill Shorten announced on Saturday that a Labour government would change negative gearing laws so that they only applied to new homes purchased after July 1, 2017, and halve the current 50 percent capital gain tax discount when negatively geared properties are sold.
Ben Oquist. executive director of progressive think tank The Australia Institute, named the capital gains tax discount and negative gearing as “particularly unfair for the young·. with under-30s claiming only about one per cent of the value of these tax breaks -which add up to $7.7 billion a year. “It is a double hit for the young, with many being priced out of the home owning market in part because of the very tax concessions they are mostly missing
out on:· Mr. Oquist said. “It is often argued that tackling tax concessions is politically difficult, but the reality is that the bulk of the concessions flow to a relatively small proportion of the population and this is particularly true when it comes to younger Australians.
“The Government has made much of the importance of intergenerational equity, there is nothing equitable about retaining expensive tax concessions that deliver a fortune to wealthy members of certain generations and virtually nothing to younger generations.”
The analysis was undertaken by the National Centre for Social and Economic Modelling using its database of Australian households plus up-todate information from the Australian Taxation Office commissioned by The Australia Institute.
Article: News.com.au (Gen Y getting screwed 16.02.2016)
End of the
Australian dream ?
25.8% of renters are aged 35-54, the highest proportion for an age bracket.
33% of renters spend more than 10 years renting.
77% of renters spend less than 4 years in the same property.
30% of renters spend less than 4 years in the same property.
More than than 60% of low income renters experience housing stress, where rent is more than one third of income.
For the young, owning a home is even
further out or reach
Like many parents, I wonder whether my children will ever be able to get a toehold in the housing market.
Thirty years ago I was a social worker and, with my school teacher wife, we bought our first house within 10 kilometres of the Melbourne CBD. Mortgage interest rates were higher than today and our incomes were relatively modest. yet we could afford the $73,000 price tag for a three-bedroom detached house in the inner west.
We still live in that house, but I worry about the housing prospects of the children we raised there. Now young adults, they are making their own way with all the advantages of higher education. But what are their generation’s chances of buying into the home ownership aspiration that sustained my baby boomer cohort?
The tragedy of our increasingly sprawling city is that the situation is far worse for low income earners who have no prospect of raising a home deposit and no choice but to rent.
Homes in the inner and middle ring suburbs both to rent and buy are increasingly beyond the reach of all but the well off.
The median weekly rent in Melbourne’s private rental market is now $365, according to Victorian government data. A house hold’s after-tax income would need to be more than $57,000 a year to sustain such a rent. This is bad enough, but the situation for low-income earners is worse. A single, unemployed person dependent on a Centrelink income last year could afford less than 0.5 percent of all private rentals. Thirty years ago a household would spend four times the median yearly income to buy a typical median-priced house. Now, it’s about eight times the median income unaffordable for many more people.
For those who can scrape together a deposit, or a bond, almost all affordable housing is on the fringes in growth suburbs such as Cranbourne, Whittlesea, Melton and Werribee. But people living in these areas, where there is little or no public transport, constantly battle long commutes and lack of easy access to health and
community services and other facilities. Alarmingly, these new areas are a long way from most jobs. This paucity of jobs will intensify with expert predictions that areas on the outskirts of the city will have fewer than 20 per cent of the new jobs the Victorian economy will create.
Essential workers such as nurses, teachers, police officers, paramedics and cleaners will find it even more difficult to live within a reasonable distance of the jobs a flourishing economy needs them to fill.
ARTICLE: The Age (For the young owning a home is further out of reach) 04.10.2014
A recent survey of around 321,000 first time buyer households has found the biggest barriers to buying are high house prices (52 percent) and finding the right property (24 percent).
The latest report by consulting firm Digital Finance Analytics, The Property Imperative 6, featured results from the March 2016 DFA Household Survey and noted 60 percent of households will need to borrow more than they can currently obtain to transact. whilst 62 percent of households will consider using a mortgage broker to assist with the finance arrangements.
The survey found more first time buyers in Sydney are considering or have bought a unit, with the preference for a house dropping in Melbourne and Brisbane. DFA founder Martin North said the traditional wisdom is that first time buyers are sitting out of the property markets, because prices are high, loans harder to get. and confidence is falling.
However, one of the most significant developments surrounding first time buyers is that many more are now going direct to the investment sector he said
Thanks to negative gearing, they could afford it. They often continue to live at home in the meantime hoping that the growth in capital could later be converted into a deposit for their own home
ARTICLE: Propertyobserver.com.au (strong fib investor appetite) 11.03.2016
“The number of first time buyers are still sitting at around 13,000 a month in total, still well below the peaks in 2009. Our surveys indicate strong FTB investor appetite. The changed underwriting requirements however are having an impact.”
“There are a number of drivers to this trend. First, most first time buyers were unable to afford to purchase a property to occupy, in an area that made sense to them and were being priced out of the market.”
“Next, many were anxious they were missing out on recent property gains, so decided to buy a less expensive property (often a unit) as an investment.”
Taking advice from family and friends
Now, there are plenty of excellent financial habits that don’t require a university degree to master. Learning how to control your expenses, how to save regularly, how to increase your capacity to earn and how to give back to your community are all common sense skills that many of your family and friends can probably teach you. These types of skills are the bedrock on which a financial plan will then be written.
But when it comes to investing, protecting your income and life, ensuring that your partner and children would be secure if anything happened to you, growing your retirement nest egg and navigating your way through the complex maze of taxation law to determine the best financial outcome for your personal circumstances and goals,
You need a professional. A qualified, experienced and ethical professional, with whom you feel comfortable.
It appears that the benefit of hindsight leads many of us to this same opinion. The survey I mentioned above also asked the Boomers who they would turn to for advice. In this age group, 70% had seen a financial adviser, with only 40% and 34% respectively willing to take advice from family and friends. Gen Y, take note.
A recent topic on my Gen Y column asked whether it’s a good idea to take financial advice from family or friends, or whether it’s a better option to rely only on a qualified professional. This was my response … .
Tread carefully if taking advice from
family and friends,
consequent loss of
money can create a
Nevertheless, most Gen Y are prepared to
turn to both family and friends when seeking
financial advice. Back in 2007 the Financial
Literacy Foundation ran a comprehensive
survey of Australians’ attitudes towards
money. When asked who they would turn to
for financial information and advice, 87% of
Gen Y nominated their family and 69% also
nominated their friends. Only 30% of Gen Y
had used a financial planner.