Posted on 01/26/2007 9:00:31 AM PST by qam1
THREE decades ago, Denise and Ken Hardy devised a plan for retirement that depended on a rock solid economic premise: the first home buyer.
They bought five acres north-west of Sydney in Kellyville, believing there would always be a stream of young couples wanting to buy a new house on the suburban fringe.
Their land was zoned residential last year and they are ready to cash in. But the buyers have dried up. The urban fringe no longer allows first home buyers to realise the Great Australian Dream. "I just don't understand it. It's all here available, but it's got out of the reach of a developer to do it and make money," Mrs Hardy said.
The new millennium brought with it the steepest rise in house prices for two decades, according to the Australian Bureau of Statistics.
Its latest report on social trends shows in the 20 years from 1981, the proportion of home owners aged between 25 and 34 dropped seven percentage points.
Couples with families are still the biggest group of mortgage holders. However, Generation X, who are marrying later, have started looking for new ways to spend their money.
The old adage that rent is dead money is losing currency as the next generation of would-be home owners find other things to spend their money on. And they have more than their home-owning counterparts, according to the bureau. Housing costs as a proportion of income have risen for mortgage-owners while they have dropped for renters.
Max Joy and his fiancee Petross Pinatacan have abandoned a plan to buy property on Sydney's North Shore. Instead they invest $2300 a month in super. They are still left with change from the difference between the monthly rent for their three-bedroom house in Wollstonecraft and a monthly mortgage.
"It just works," said American-born Mr Joy, 36. "I would rather save up and get married to my girlfriend than save up and get married to Westpac."
Ms Pinatacan, 30, grew up with the Australian home-ownership dream and still puts up with pressure from friends to buy.
"People say, 'You should buy an investment property! Don't leave it too late!' But it's each to their own. I have friends that have houses and are stuck in traffic for 1½ hours each day getting home. I rent 15 minutes from my work, and we can afford to splurge on dinners and holidays."
Not to mention a harbour view. A house, as Mr Joy sees it, is not something that his life should revolve around.
"If you outgrow your apartment, you can pick up and move in six months. You don't have to go through the process of trying to sell it every time your life changes slightly," he said.
Serbian-born Ivan Paicav, 27, is another contented renter.
"The European model is there are a lot of happy families that keep renting forever," he said. "I think there's this baby boomer doctrine in Australia that says you have to buy property when you are young and that is a measure of how successful you are."
Mr Paicav and his roommate pay $175 a week each for their Lane Cove unit.
"I might want to own a property eventually, but there's so much for young people to do: to travel overseas, work in England, go see Africa, do an internship at the UN," he said. "If you bog yourself down now with a mortgage you will never get an opportunity to do these things."
Mr Paicav, a conference research manager, would rather invest in shares. "I have given my money to a reputable mutual fund and they help you choose an investment strategy," he said.
Some of those who bought real estate recently have come to regret it.
David Trainer swapped rent for a mortgage, which costs him $150 a week extra, to live in a $240,000 flat in West Ryde.
He now fears he can't afford to have children: "I am far worse off financially than I was renting."
These days he would not be able to afford most new housing further out in Kellyville.
But according to the Urban Development Institute of Australia, most builders can't put anything on the market at the price that first home buyers can afford. That is, less than $350,000.
This contradicts the Planning Minister, Frank Sartor, who declared Sydney had more land to build on than ever before.
Unlike other retiring couples, Mrs Hardy wants her Kellyville vista of paddocks and horses replaced with bricks and mortar. "We always thought in the long term, it would be our super."
You'd think if the situation were that dire that the market would have to adjust itself.
Ping list for the discussion of the politics and social (and sometimes nostalgic) aspects that directly effects Generation Reagan / Generation-X (Those born from 1965-1981) including all the spending previous generations are doing that Gen-X and Y will end up paying for.
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Australia needs a giant influx of illegal aliens to jack up demand. That's how we in California are handling it.
FYI this is about $279,000 US dollars.
When you hear that prices have shut people out of a market....it reminds me of the line 'Nobody goes there anymore - its too crowded'
As a 'boomer' who lives pretty well from rent rolls I welcome and fully endorse this 'x' folly. Please, do keep paying my mortgages. Thank you.
Slackers!
Except is there really any place in america where land bought DECADES AGO on the "urban fringe" would not have increased in value faster than inflation over that period, especially having been REZONED to residential?
Except of course New Orleans.....
Hehe...I know what you're getting at, but this article says that home ownership among certain age groups has dropped 7%. Which would suggest prices should fall, or at least stabilize since demand would be down.
>>Housing costs as a proportion of income have risen for mortgage-owners while they have dropped for renters. <<
I live in a ~$500k house with $400 a month property taxes.
I pay $1,600 a month in RENT and sock $2,400 a month away in savings. This is in the Seattle area. Rent has actually gone DOWN since the turn of the century.
When owning and renting is this lopsided, you know we have a major shift in house prices coming - especially considering this was fueled by "creative" financing about to bite the WORLD economy in the butt.
Apparently it aint just the US...
"If you bog yourself down now with a mortgage you will never get an opportunity to do these things."
I owned until I was 43 (1997). The freedom I enjoy renting is incredible!
BTW, when my father purchased a building permit in King county in 1968 to build our home, it cost $7. The same king county permit today would be somewhere in the neighborhood of $26,000.
I think that may stretch the limits of the definition of the word "inflation". Something else is at work here.
Yesterday the news was that used house sales were down 8% last year. Today the news is that new house sales are down over the year. At the same time, prices are holding fairly solid. CAT stock, an indicator of future construction continues to sit around 60, which is where it fell suddenly from 70 a few months ago.
This combination actually makes a lot of sense from a tax deduction standpoint, too.
The dollar figures vary, but other than that I would guess from your post that you are my son.
It is EXACTLY what he does, but he is 28 so you must not be him.
Home ownership is WAY overrated. A tax deduction is good, but who would say it is good economics to spend $1000 for a $250 tax decrease? And with the punitive property taxes today, who can say with a straight face that ANYBODY really "owns" real estate? We merely rent it from the government.
>>You'd think if the situation were that dire that the market would have to adjust itself.<<
It will. It is just beginning...
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