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Anyone on minimum wage can afford to buy or rent a home in Australia
Topic Started: 29 Jan 2013, 03:53 PM (22,065 Views)
herbie
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Sunder
29 Jan 2013, 11:27 PM
socialists want to bring everyone down to the lowest common denominator
Socialism/Communism doesn't work.

As Miles has pointed out, there's minimal chance of getting most people to stay off the piss, work hard and live frugally for four years for their own betterment. So there's naff all of getting them to do it for a lifetime for someone else's betterment.
Edited by herbie, 29 Jan 2013, 11:53 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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miw
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Andrew Judd
29 Jan 2013, 09:01 PM
How much does somebody working at Mcdonalds earn?

Is it possible that person can save 200 a week week in an week out for 18 months?? It sounds totally impossible to me.

Ok.....maybe they have no food bills. I worked at mcdonalds and use to take the thrownaway wrapped clean burgars out of the bin, nip out the back and eat them in a few seconds and come right back.

It sounds counterintuitive but probably they could save 300 or more a week

:lol
Actually, if you are really focussed on saving and your normal job is minimum wage, most people have other possibilities for extra cash. For example, extra shifts. For example, your tradie mate who occasionally needs an offsider for a rush weekend job. A minimum wage job doesn't exactly take up all of your time.

Saving $80 each and every normal week and putting away the odd $500 from an extra job adds up. And very few people remain minimum wage forever.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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herbie
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miw
30 Jan 2013, 01:12 AM
Actually, if you are really focussed on saving and your normal job is minimum wage, most people have other possibilities for extra cash.
The bulls did a pretty respectable job of making their point MIW - IMO.

But I still notice that none of them have felt to address my comment:

"While I do know people who bought their first home with family (or in one case a friend), I don't know any of my generation (late boomer) or my parents' gen who bought an apartment as their first home. They were the things one rented before buying. (And we typically called them 'flats' as I recall.) But anyway, yes it did cross my mind a few years back, that could be the way of the future. Namely the entry level home goes from being a house to an apartment. Couldn't see back then (and still can't,) how reducing the standard/price of the entry level home was going to especially increase house prices as such though. It would have at least as much of an opposite effect was my suspicion at the time ..."

'Course Peter's Inala property had some potential possibly? Especially as the character and desirability of suburbs does change over time - Witness a suburb like Geebung on the Northside and Zillmere though not quite as much yet maybe? - But definitely much improved. And Bracken Ridge. But anyway, as I've also said recently, I'm not actually feeling as bearish on some Brisbane properties as I have been in the past - Though hope that's NOT a case of some '(in)famous last words' ... :D
Edited by herbie, 30 Jan 2013, 01:34 AM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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miw
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herbie
30 Jan 2013, 01:31 AM
"While I do know people who bought their first home with family (or in one case a friend), I don't know any of my generation (late boomer) or my parents' gen who bought an apartment as their first home. They were the things one rented before buying. (And we typically called them 'flats' as I recall.) But anyway, yes it did cross my mind a few years back, that could be the way of the future. Namely the entry level home goes from being a house to an apartment. Couldn't see back then (and still can't,) how reducing the standard/price of the entry level home was going to especially increase house prices as such though. It would have at least as much of an opposite effect was my suspicion at the time ..."
Interestingly, I am probably fairly close to your age (officially I am still a boomer, but I have behaved more like GenX in my life), and the first dwelling I bought was a 2-bedroom apartment. It didn't even occur to me to buy a house. Any house I could afford was way too far away from my workplace.

But then I lived in Germany for a while and lived in a lot of apartments in oz as well, so maybe I was used to apartment living.

And yes. I always called them "flats".

As for the Inala property, I probably need to go back and have a look at Inala. Most people I know would never touch Inala, but that's probably because they don't know Inala. It is not a badly-located suburb and it will gentrify. The question is when. As I mentioned before, people have been predicting the rise of Inala since the 1980s, but it seems never to have happened, even as the suburbs around it have gone up in the world.
The truth will set you free. But first, it will piss you off.
--Gloria Steinem
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mango66
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Miles McCarthy
29 Jan 2013, 08:23 PM
I started to do a similar exercise for Sydney, but decided I would check your assumptions for Perth first.

Cheapest on your list was $205,000, which with 20% deposit of $41,000 and $7000 FHOG would result in a loan of $157,000, which @ 5.39%, the only way to get your mythical $207 per week repayment was to use a 30 year term. Well, I've learned something new today. Australian banks will loan on a 30 year term to someone earning minimum wage. Well, why not.

Then there is a matter of the deposit. $606 per week gross is $557 per week net.

Less $140 per week rent in shared accomodation = $417
Less $20 per week utilities = $397
Less $105 per week food = $292
Less $30 per week train or bus ticket = $262

Well assume that your hero doesn't drink alchohol, own a car or a phone, have a girl/boy friend, eat out or go out at all, has no unexpected outgoings,buys no gifts, and saves $262 per week, and that all expenses and minimum wage are tied to inflation, so rising wages cancel out rising costs.

Saving $262 per week, it would only take 156 weeks to save the deposit, which is a mere 3 years (and change) without drinking or socialising with your fellow humans in any way. Bears would find the first of those easy and the second difficult, bulls would be the other way around.

Of course, the price of houses will start rising again, so the goalposts get a little further away each year. Let's assume the great Australian mythology of 'double in ten years' which is 7% per year. So in 3 years the $205,000 unit is now priced at $251,000. Which means the deposit is now $50,200, which is 3 years 9 months to save the deposit, and the loan repayments are now $250 per week, but still within the realms of possibility.

As for Sydney, I found similarly priced share accommodation at $140pw, cheapest 1 bedroom I could find that wasn't a retirement home (assisted living) or a student dorm room (i.e. it had a kitchen), was $189,000 , although there were a lot of studio apartments for 90-160K as well.

Personally, I would pass on Cabramatta, but the opportunity is there for teetotaling hermits to save for 4 years and get their foot on the property ladder.
Shadow is a troll . He's basing his example on current low interest rates and assuming that's where they are set all the time. Work out the same senario with a median example of interest rates over the last 30 years. I don't think it will be 5.39% somehow. If interest rates rise even minimally in your example the whole situation becomes impossible.
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Dr Watson
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mango66
30 Jan 2013, 08:36 AM
Shadow is a troll . He's basing his example on current low interest rates and assuming that's where they are set all the time. Work out the same senario with a median example of interest rates over the last 30 years. I don't think it will be 5.39% somehow. If interest rates rise even minimally in your example the whole situation becomes impossible.
Yes, buyers must factor in reasonable interest rate increases. They simply cannot assume that rates will remain where they are today for the duration of the loan. That would be absolute folly.
The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt — Bertrand Russell
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Trojan
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mango66
30 Jan 2013, 08:36 AM
Shadow is a troll . He's basing his example on current low interest rates and assuming that's where they are set all the time. Work out the same senario with a median example of interest rates over the last 30 years. I don't think it will be 5.39% somehow. If interest rates rise even minimally in your example the whole situation becomes impossible.
No one knows where interest rates are going in the future - they can go down as well as up.
People didn't all default en mass when interest rates hits 17%.
Why because wages went up massively during that time.
So by the time interest rates go up, it means the economy is doing well and wages are increasing.

I (like many others here) think Shadow's example is completely viable.
Its only your rose-tinted glasses which makes you only see a one-sided view.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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Sydneyite
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herbie
29 Jan 2013, 10:55 PM
While I do know people who bought their first home with family (or in one case a friend), I don't know any of my generation (late boomer) or my parents' gen who bought an apartment as their first home. They were the things one rented before buying. (And we typically called them 'flats' as I recall.) But anyway, yes it did cross my mind a few years back, that could be the way of the future. Namely the entry level home goes from being a house to an apartment. Couldn't see back then (and still can't,) how reducing the standard/price of the entry level home was going to especially increase house prices as such though. It would have at least as much of an opposite effect was my suspicion at the time ...
I think in Sydney nowadays, more people would start out buying a unit or townhouse than would buy a detached house. It has been that way for sometime. In my case, I actually bought a detached house first, but it was 30km's from the city, then my next upgrade was to a semi, only 5km's from the city. I'm back in a detached house again now (with wife and kids) about 10km's out. My parents never upgraded - they bought land and built a house about 25km's out from the city in 1966 and are still there.

In terms of the impact of this trend on house prices, because the trend is driven by increasing population and density, house prices will continue to rise, as they become scarcer and scarcer relative to the demand for them. In the long run if enough units etc are built though (and this is a big "if"), the prices of the entry level properties may not grow as much (and thus the median dwelling price) - and this would be a good thing would't it?

Dr Watson
30 Jan 2013, 08:50 AM
mango66
30 Jan 2013, 08:36 AM
Shadow is a troll . He's basing his example on current low interest rates and assuming that's where they are set all the time. Work out the same senario with a median example of interest rates over the last 30 years. I don't think it will be 5.39% somehow. If interest rates rise even minimally in your example the whole situation becomes impossible.
Yes, buyers must factor in reasonable interest rate increases. They simply cannot assume that rates will remain where they are today for the duration of the loan. That would be absolute folly.
Shadow already addressed this point. He suggested usingh a fix rate for the first few years, and then suggested that even *if* interest rates did go up, enough principle would have been paid off the original loan for such rises to not be a deal breaker. Besides, it does seem that the last 30 years has been the "outlier" with higher than "normal" interest rates compared to the past 100 years, as shown in other threads, so it may well be that rates saty low for quite some time. If this does happen, the fixed rate / pay off principle approach will pay off even moreso.
Edited by Sydneyite, 30 Jan 2013, 10:22 AM.
For Aussie property bears, "denial", is not just a long river in North Africa.....
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Miles McCarthy
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mango66
30 Jan 2013, 08:36 AM
Shadow is a troll . He's basing his example on current low interest rates and assuming that's where they are set all the time. Work out the same senario with a median example of interest rates over the last 30 years. I don't think it will be 5.39% somehow. If interest rates rise even minimally in your example the whole situation becomes impossible.
I know Shadow is a troll, but it is an interesting exercise intellectually.
The whole premise is contingent on a lending institution making a fairly large loan to someone who is earning minimum wage for a term of 30 years. It may happen, but I wouldn't consider it to be prudent lending. Those on minimum wage are very susceptible to unemployment or even more so, underemployment. One sticking point that no one has mentioned yet is that $606pw assumes full time employment. But minimum wage earners often have their hours cut back in recessions, and although the casual rate is $3 higher, it doesn't make up for losing half your hours.
Edited by Miles McCarthy, 30 Jan 2013, 09:38 AM.


The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.
H. L. Mencken

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Simon
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Shadow
29 Jan 2013, 11:38 PM
Interest rates might be higher after the three-year fixed period, but the buyer should have knocked off a fair bit of the principle after three years (assuming P&I repayments), and they should also have had a pay rise or two after three years, so it would still be quite affordable even if interest rates did go up. They can also increase the rental income from the spare room.
+1 good point, mortgages get easier as years go by and principal gets paid off & wages go up, after 3 years fixed 5.4 percent it would be plain sailing after that for most even if IRs rose later
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