Sunday, November 26, 2017

A little rant on young people and their first home

I thought the arguments and reasoning in this Fairfax Press article, on high property prices and how young people are struggling to buy a home, quite sound until I reached almost the end and this single sentence caused some steam to emit from my ears.

Older generations who joined the housing party were able to take out large mortgages, safe in the knowledge that inflation would erode the real value of the loan, while wage gains would boost their ability to repay.

Believe me, when I managed to cobble together $5,000 in 1982, a couple of thousand first home buyers government grant, a few thousand borrowed on my credit card that I had to fudge figures for as it would not have been acceptable to the lender, a couple of thousand borrowed from R and a $30,000 loan from a building society (higher interest rate than a bank) to buy a $42,000 house, I was not safe with any knowledge that inflation would erode the value of the loan or wage gains would boost my ability to pay off the loan. I worked six days a week for a number of years before dropping back to six days every second week. I never felt any sort of financial security until about 1993. In a decade we had one modest holiday to New Zealand, the cost lessened by us having a third person with us, after which we vowed we would never travel so closely with a third person again.

The house had barely any hot water, clogged and rusted old pipes, non functioning Holland blinds, moth eaten carpet, a semi outside lav that was filthy in the worst possible way, broken sheets of fibro cement on the garage with heavy wooden doors that were nearly falling off, no roof insulation, a broken concrete driveway, a tiny fanless gas heater in the lounge room ....the list is very long. Over the years we worked very hard to turn it into a comfortable home, and we did.

Young people have my full sympathy and I do think it is harder than ever to get that start with the first property, but don't ever think it was easy for most of us and we certainly went without to make that start.

29 comments:

  1. Snap.
    And the interest rates were much, much higher too. I think we paid 16.5 per cent on our first home. And we most definitely went without. Rather a lot.

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    1. EC, at one point we were up to 18%, but then back then we could not borrow as much young people can now.

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  2. It all went pear-shaped when the McMansions became popular. My house in old money is 13.2 squares, more now because of the carport but it's almost the size of most apartments on sale.

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    1. Jah Teh, that is the same size as our apartment, excluding the balcony. I'll bet you've go a lot more in your 13 squares than we have :-P

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    2. Somewhere in my many, many notebooks, I've written down how many square metres equal a 'square', but I'm too lazy to find it. I do remember the first home we built was 18 and a half squares, but there were four kids bedrooms and a huge family room, along with a study off the main bedroom. It was huge and I loved every inch. I cried when we had to sell it before the bank took it from us.

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  3. My youngest son in Broadbeach QLD has two houses in Oz, another huge house here in France, and is thinking of buying again in Amsterdam. He seems to manage.

    We ourselves have three homes; one here in France, and two in the UK. It's all down to organisation.

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    1. Cro, once you get started, it is only your lack of ambition to acquire property that can stop you. But it is harder than ever here to get started, partly because expectations of the young are high, and then there is the infamous $20 smashed avocado sandwich for lunch, which one of our politicians, as an analogy the point has some justification, blames the young people not being able to save for a deposit. Sorry, very ugly sentence, but I can't be bothered fixing it.

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    2. no fix requd, we know what you mean.
      'saving' a deposit means taking a home made lunch to work and never 'dining' away from home.

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    3. Ann, I used to take lunch to work. But back then there was never cheap food around, like Subway or 711 BLAT sandwiches.

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    4. I think I read the same article you did, the $20 smashed avocado I remember, along with youngsters wanting the whole complete package including all furniture right away.

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  4. It actually surprises me to see news stories of young people being able to break into the housing market (maybe with support from parents?). I earn quite decent salary and still feel depressed when I go onto the real estate listings every time I fantasise about upgrading to a proper house.

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    1. AdRad, and I assume N works too, so you have a reasonable income. You are no longer a kid and perhaps the time for a house has passed for you and maybe upgrade your apartment to something bigger? Gosh there are some nice large apartments being built now. I casually asked R the other day about the figure our place would rent for and I was very taken aback when he said around $1,000 per week. I am not so surprised about its worth as I keep up with that a bit.

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  5. back in The Olden Days 1972 banks would only lend if a [married of course] couple had a savings account with regular deposits for 1 year+

    so of course we resorted to a building society loan for a $17,000 California Bungalow when the median price for the suburb was $14,000
    2 BR, WB, unrenovated [duh] toilet entered via back verandah.
    No home theatre, parents retreat, entertaining area, aircon or pool. Lovingly self-improved into a charmer.

    Lifestyle TV has created a generation who want to live like a romcom movie couple, but IMO nothing feels as cosy+safe as No Debt.

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    1. Ann, thanks for the colour and movement of the time. I've not considered lifestyle tv, but I expect you are right. No debt to anyone didn't happen for me until about 2005. What luxury.

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    2. I've been debt free since November 1999 and it's very comforting knowing the little cash left over after rent and utilities is all mine.

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  6. Anonymous8:18 pm

    Hi

    I feel sorrier for young people today than I do for me in the early 1980s - yes, my first place cost me more than half my post-tax pay every month, but this was mainly due to lying about my income when I got my loan, and then later due to interest rates.

    However, my friends were all going through the same thing, festooned by babies and painting everything mission brown acid green and orange. We used to drink cask wine and talk politics. And it was so easy to get together, we all lived within a few kilometres of our work, of each other and of the CBD. Our parents had grown up during the Depression and most had fought in WW2. We knew how lucky we were to grow up in peaceful times, although those of us who had travelled had been bewildered by the IRA.

    Nowadays the young people I know are living in far flung suburbs, paying over half a million for their houses (I'm in WA), both parents have to work from when the babies are TINY, and they seem to have swapped the peer support I remember for peer competition. Their jobs are not secure and they are always on the lookout for disaster. They just seem more anxious and on edge than we were, I don't know why.

    Cheers Marie



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    1. Marie, used to drink cask wine? You don't still? I am conditioned to cask wine and I rather like it. I am not poor, but as I queue at Dan's with my casks, much younger and struggling people to get into the housing market are there with their flash and modern drinks.

      I am blocking my ears at the mention of Mission Brown.

      I think our society has gone a bit wrong so far as housing goes and I don't understand it. But as an alternative to a flash new house in outer suburb, perhaps young people could consider a small one or two bed close to town to get into the market. I know they will do better in the long run if they do so.

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  7. Scrimping, saving and borrowing to own a home isn't easy no matter what generation you (they) talk about. I my entire lifetime, the only family member to ever own a home is my eldest and her husband. I think they're close to having the mortgage paid off.

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    1. River, for some it does not seem important to own a home, but well done to your oldest.

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  8. We live in the same three bedroom two bathroom house we bought over 30 years ago for 45 thousand dollars. We happily brought up two children who always had friends over to play and sleepover and the good thing is now that they have their own homes and it's just the two of us, we don't have to think of downsizing πŸ˜€πŸ˜€

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    1. Grace, not to be ignored is all the money you did spend on changing houses, stamp duty, agent fees etc. So it will be straight from you home to Shady Pines Care Home for you.

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  9. I think every generation has gone through some sort of struggle to buy their first house, but they probably didn't expect to buy their dream home straight away. Nowadays they just want the best and biggest they can't afford!

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    1. Sami, that is important point. People should start modestly and not overextend themselves into risky situations.

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  10. I do have a lot of 'stuff' in my 13.2 squares and wonder at times how I managed with 2 boys, 4 cats, 3 dogs and the imbecile I married. Going out for a drink in those early days was easy, the blokes sat on the nature strip, feet in the gutter and opened a tinnie, having your own stubbie holder was considered a bit 'toffy'.
    I did think though that it is made harder these days, when everything is driven by computers and mobile phones and jobs do not last until retirement.

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    1. Jah Teh, much of the job changing is by the workers themselves. The grass is always greener. Nothing wrong with a drink in the gutter, in my opinion. While my Mother is now a failed achiever, my god was she good when she was younger, looking after so many many people and critters. Just as you did.

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  11. Prices are high for houses in some areas as I see on Real Estate guides. Many young ones won't do what you did or 'we' did and in my day there was no 'first home buyers' money either.

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    1. Margaret, R ended a relationship before I met him and had nothing. He borrowed money from a friend to buy his flat. He worked so hard to own his modest flat, and did sell it at a good profit. But not you nor me nor R nor anyone else knew about how inflation and wage increases might help us.

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  12. My brother lucked out and got his first home for 40k I think it was in Portland and finally sold it decades later for over half a million, then moved to Idaho. He constantly struggled over the decades and nearly worked himself to death but his first house was nearly his last. I loved that Portland house of his.

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    1. Wow, he did exceptionally well. It does give you more options when you are older.

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