1. You bought a house at just the right time (did you get help with the deposit? please be honest) 2. this coincided with the end of the last recession Australia had (23 years ago) and the start of its largest housing price boom in history. 3. You were fortunate enough to be in a line of work that saw your salary treble in less than a decade. 4. You then met a bird who also had a good job and her own house, joint forces, and bought a bigger, better house.
And from this vantage point, having been blessed with extraordinary good luck, you poo poo housing affordability concerns in Sydney and adopt "If I did it so can you" attitude?
Seems to me you should reflect more on just how lucky you have been and how unlikely it is for the tide that lifted your boat to repeat the same feat in the immediate future.
On 1. - no help with deposit - I was always a good saver, and also enterprising (eg I had bought a few old/run-down classic cars, fixed them up, and sold them for a profit) and had the equivelant of 1 years of my then salary saved up by the time I bought the house, which was about a 20% deposit after covering purchasing costs. EDIT - was thinking about this while eating lunch and I remembered I did get some help (not with deposit though as stated) - my parents went guarantor on my first mortgage - credit was *very* tight in 1991, and the bank asked for this. I would imagine that I would not need that in today's credit environment under the same circumstances, but I could not say for sure.
On 2 - yes, this is the standard housing bear line - it was all just good luck / good fortune of course. No sound / smart personal judgement came into it at all in choosing to buy at times when most people were afraid to, (1992, 1999 and especially in 2008) - in 2008 epseically work colleagues again were all telling me property was going to crash and that I should take the $ and run rather than roll over into the next house - woops my property has appreciated 35%+ since then!. Likewise in choosing to buy a house at a young age when my peers were put off by the thought of being "saddled" with mortgage debt..... no personal judgement can be acreddited there either.... No hard work to save the deposit, no blood sweat and tears renovating / adding value to owned property. No credit for a focus on paying off mortgages to decimate total interest costs, no credit for entrepreneurship displayed in taking in boarders etc to help pay off my first house...... just all "good luck".
By the way the house price "boom" is actually more of a hinderance than a help when embarking on the property ladder / upgrade path - unless you take advantage of it with some investment in property as well as owning a PPOR (which I also did). But for most it's paying off equity that primarily enables the upgrades, not the price appreciation. Another key point to get ahead is to add value, and to understand the property cycle and buy in the slumps, or in the early part of an up cycle, rather than in the boom peaks - but don't misjudge the cycle by getting sucked into bubble talk and expectations of major wholesale 40% callapse fantasies etc and thus get paralysed into inaction by fear - like people did who missed the great opportunities to buy in '08/09 and also '11/'12 in Sydney. This has been pointed out to you before I think? In a year or 2 Sydney will offer up a similar buyers market. ... On 3 - my argument has aways been that someone with equivelant / similar socio-economics/career etc could easily today do exactly what I did back then today. I'm not saying every single person in Australia is going to triple their income in the first decade of their career, but I can tell you that someone starting out in the same field I was in then (my career has transitioned somewhat since those days), if they are good at what they do and manage their career path carefully, can certainly achieve the same outcome.
Yes house price / income mutliples are higher - but interest rates are 1/2 - 1/3 so loan repayments are actually equivelant or even more affordable than back then. My first house was worth 2.8 times my income at that time when I sold it - the ratio for a similar job today and a similar house would be 3.8-ish by my reckoning - so a bit higher, but not massively so. When you factor in the much lower interest rates and lower tax rates of today, that house is as equally affordable to someone in similar circumstances. Regardless, things change - everyone has to deal with the circumstances that they are presented with in life. There is no point railing against things that you cannot control.
On 4. Yes this is true - do you think I am Robinson Crusoe in this regard? Ie that a reasonably successful professional person should meet and marry another resonably successful professional person and buy a house together??? Do you think it is somehow "unfair" that people would so this? Or is it perhaps just a fundamental factor operating in the housing market???
I bought in '92. And as Peter F said, at the time I bought nearly everyone I know in my peer group thought I was mad - except for one mate who had done the same thing and we used to talk about property etc, so he kind of inspired me not to listen to the herd. My family (parents) thought it was a good idea of course. I was < 25 at the time. Paid it off by '97 - including having to deal with mortgage rates of between 9% and 12% pretty much the whole time. It helped that I turned it into a typical "share" house (I had 2 spare bedrooms plus a study), except I owned it so all the rent people paid went to help pay off my mortgage, but I still had the "fun" of living in a typical 20-something share house with all the partying, shenanigans etc that go on at that stage in your life. Once I was established and had the mortgage under control etc, I also took some time out to travel etc (back-packed Europe for 3 months one glorious European summer, ski trips to Canada and so on), and also by that time started to travel a fair bit for my work as well - so I didn't miss out on anything compared to my non property owning peers as far as I could see?
There is something very smelly about this story.
First, you were born in 1960, but you were younger than 25 in 1992?? By my reckoning, you were 32 in '92. But that temporal anomaly aside ...
So let's say you were 24 in '92. You are tertiary educated, so you most like entered the workforce at age 21, and over the next three years, in a high tax environment in 'the recession we had to have' managed to save a 20% deposit for a 3 bedroom house on Sydney's North Shore!!!
By my calculations, this either makes you the highest paid graduate in the history of Australia, or mummy and daddy stumped up the deposit for your first house. Of the three scenarios presented thus far, I think the odds of you being Australia's highest paid graduate in it's history has a probability of around zero. More likely you were 32 in 1992, or mummy and daddy stumped up the deposit, and you partied on.
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There is nothing stopping the "FOMO kids" today from doing exactly the same thing, if they want to.
Other than having parents with a couple of hundred grand set aside.
------------------------------ " ... which is that all-too-familiar dynamic in Irish life where people tell lies, cover them up and create all sorts of collateral damage, sometimes spread out over decades, and never take responsibility." - Alan Glynn
First, you were born in 1960, but you were younger than 25 in 1992?? By my reckoning, you were 32 in '92. But that temporal anomaly aside ...
Where the hell do you get the idea I was born in 1960??? Complete made up crap - have never said that and it's certainly not true. I'm not going to be exact, but I will say I was born before Whitlam became PM, but a few years after Menzies stopped being PM. The only temporal anomaly here is on your head!
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So let's say you were 24 in '92. You are tertiary educated, so you most like entered the workforce at age 21, and over the next three years, in a high tax environment in 'the recession we had to have' managed to save a 20% deposit for a 3 bedroom house on Sydney's North Shore!!!
My first house was not on the "north shore". It was a below Sydney median priced house in the suburbs - 25km-30kms from the city. I am tertiary educated but studied (mostly) part-time so was earning an income from when I was 19, while living at home. I drove an old/cheap car that I fixed up myself, and as also mentioned I bought a few old/classic cars, fixed them up and sold them for a profit which also added to my savings when I was young. Before university I worked typical part-time jobs and had some savings even from then as well as starting point. I didn't blow all my savings on new cars and overseas holidays - instead I hung onto them with a view to buy a house - a goal I had set for myself after witnessing the late 80s Sydney property boom. I guess I also benefited from the high interest rates in 1990 as well - I had a term deposit once with St George bank that paid 18% interest for 6 months - I still have the pass book for that one! You really cannot conceive that people were able to do this? And still can?
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By my calculations, this either makes you the highest paid graduate in the history of Australia, or mummy and daddy stumped up the deposit for your first house. Of the three scenarios presented thus far, I think the odds of you being Australia's highest paid graduate in it's history has a probability of around zero. More likely you were 32 in 1992, or mummy and daddy stumped up the deposit, and you partied on.
I think that given all your key assumptions are flawed, that it should also be clear that your conclusion here is compete crap.
Although like most people you like to attribute your success to your chutzpah and smarts, It's much more likely that most of it is down to you being extremely fortuitous in your timing when you bought in '91, and it was this that allowed you to pay it off by '97:
In 1991 I passed up the opportunity to buy a beachfront house at Tamarama for $450K as I thought the price was ridiculous and that Australia like the UK, at that time, would half in price. I also believed all the kind of stuff the bear sites promote today about overpriced property excessive debt etc etc. So don't try to take from Sydneyite his foresight, he was right and the rest of us were wrong. House prices soared since then and so did debt.
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wages stagnating, high debt with less inflation to eat away at it, weak Chinese growth, creeping unemployment. You need more?
Individual debt levels are not high this is a bear fantasy, people are further ahead on their mortgages, save more and pay lower percentages of their wages on debt repayments than they have been for at least a decade.
\Chart showing low debt servicing costs
Chart showing best savings rate since the late 1980s
Chart showing debt liabilities relative to financial and other assets
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I spent nearly 10 years working in London - its financial system is a ginormous ponzi scheme that got a lifeline from the taxpayer 8 years ago to give it a second wind. As long as the pitchforks stay in the cupboard and rich people from Asia and the Middle East are permitted to continue to park their dirty money there it will survive.
Here we are in complete agreement, you will have watched the direct route traveled by the taxpayers bailouts into the bankers bottom lines. Financial crashes appear to be very good for the bottom line for banks and you will see this more clearly as the recovery sets in.
As I did in the 90s you have bet the wrong horse since the GFC, the doom and gloom and cheap house propaganda is insidious and pulls in young people during every downturn.
John Frum
29 Jan 2015, 10:23 PM
That you could even equate the scale of what Sergey and Larry built to some boneheaded shmuck who sets out to enrich themselves via the roof they live under just shows how clueless you are.
People don't set out to get rich on the roof over their heads. You are having to assign stupidity to others and this is always a very dangerous basis for logical deductions. People buy a home to avoid paying rent all their lives, to add value to their home, to live freely without inspections nor restrictions, and to lock in residence in a suburb of a growing city.
Some people try to build a business or profit from property but anyone who thinks this is a work-free gravy-train will ultimately pay the price. Those who think property is a ponzi are dead set to get their fingers burnt eventually.
To make money on property you need to buy well, put in heaps of elbow grease and financial investment and you need to be in it for the long term.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
In 1991 I passed up the opportunity to buy a beachfront house at Tamarama for $450K as I thought the price was ridiculous and that Australia like the UK, at that time, would half in price.
Yes there were some bargains going around '91. The parents of someone I knew actually got divorced that year, and they owned a Balmoral slopes Federation house / mansion, which they sold quickly in a shit market for $900k - which was still a crap load back then of course, but a bargain for what this house was. It has changed hands in recent years for $5M+. If they had waited even a couple of years to sell they would probably have gotten double the price they sold for. I wished at the time I had access to $900k so I could have snapped it up, but alas it was not even close to being achievable at that time for me.
In my capacity I work with a lot of 457 Indians in various consultancies - they're definitely making great strides within the industry, but can often have trouble interpreting business requirements, so there'll always be a place for someone who can articulate problems as well as solve them.
I'm sure in a few decades it will be a concern, but it certainly won't be as dramatic a reversal of fortune as we're seeing in the mining industry.
Your arrogance is sometimes staggering. Decades ago I supervised students from India with excellent skills and the smarts to excel in every walk of life.
In your world everyone is stupid and you are going to sit back and make a fortune watching them fail.
Pride before a fall young man
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Veritas are you really so naive as to believe this - do you know nothing of banking in Ireland?
No, I don't . Tell me.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Yes there were some bargains going around '91. The parents of someone I knew actually got divorced that year, and they owned a Balmoral slopes Federation house / mansion, which they sold quickly in a shit market for $900k - which was still a crap load back then of course, but a bargain for what this house was. It has changed hands in recent years for $5M+. If they had waited even a couple of years to sell they would probably have gotten double the price they sold for. I wished at the time I had access to $900k so I could have snapped it up, but alas it was not even close to being achievable at that time for me.
My husband has never let me live down the house in Tamarama, it sold for nearly $6m during the early 2000s and there is another one nearby for sale at the moment valued at close to $5m.
My Uncle always used to tell the tale of the house in Centenial Park he was going to buy for $25k in the 60s.
I think the biggest thing that people (including my younger self) fail to understand is the effect of population growth on property prices as the rich move from one suburb to the next. People who can predict these trends make a lot of money.
I never believed that Alexandria nor Marrickville would do anything when people were telling us to get a foot in those markets either.
Despite all our mistakes we ended up doing ok and i am sure everyone has tales of what they could have done with hindsight
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
Individual debt levels are not high this is a bear fantasy, people are further ahead on their mortgages, save more and pay lower percentages of their wages on debt repayments than they have been for at least a decade
First time buyers you idiot.
they are the ones taking on all the debt.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?
The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly. Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
Here is what you do not understand - the majority of property NEVER gets sold in a downturn- just think about that one for 5 minutes.
The Irish market is driven by wealthy expats returning from overseas. There is more Irish in Boston than in Dublin. There was very good reasons for the price growth for a long time the market was destabilised by speculators treating it like a Ponzi - the way that you and your mates are doing right now in Australia only they were betting on continued speculation you are betting on dropping speculation.
You know nothing about Ireland Veritas - you are just a pompous spoilt brat rich Aussie kid who needs to call the Irish stupid to sustain his cheap house fantasy.
You logic is the Irish were all stupid - the Australians are all stupid hence there is no difference between the two economies and sooner or later I will get to pick over the ashes of everyone else's stupidity.
All this because you guys think you have the entitlement to buy in the suburbs your parents bought in without any competition from all the new people who have arrived in this country since then.
Veritas
30 Jan 2015, 12:02 PM
First time buyers you idiot.
they are the ones taking on all the debt.
No they are not - they are not allowed to make the maximum use of interest rate drops as the banks factor in higher rates when assessing loans (Maybe Peter can tell us about this)
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Lenders build a margin into your serviceability, allowing for rising interest rates.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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