Ian Higgins

The updated Australian Dream: Rent forever, splurge on

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Approx Reading Time-11Despite baby-boomers’ claims, the realities of entering the housing market are grim. Rent forever so we can live happily? Sounds like an Australian Dream to me.

 


It’s difficult to get a gauge of what’s actually going on in the property market, and Sydney in particular. For every two property “experts” that say the market will crash, there’s two more that say the boom will continue. Compounded with this confusion are the articles that are so far off the mark, so far out of touch, that you have to re-read it, because you mistook them for satire the first time ’round. #SmashedAvo

Brasstacks. There has never been a worse time in history to try to buy property. A closer look, or even a vague attempt to sort one’s finances, will make you quickly realise that the very notion of “the great Australian dream” of the 1970s to 1990s is the stuff of pipes.

The general consensus is that the median house price in Sydney is just over $1 million. This is utter rubbish. The median? The median house price? I absolutely, 100% refute that. If you go out this weekend with 1 million of your Australian dollars to an auction for a house, I suggest you would be able to buy something between a garage in a non-desirable suburb and a parking space in an affluent area.

Clearly, that is an exaggeration, however, I stand by the point that there is no way that that figure holds up. I think a more accurate reflection would be that an entry-level home in the majority of Sydney suburbs will cost you between $1.2m and $1.5m, at auction. An entry level home won’t be on the best street, it won’t be your first choice of suburb, it won’t have all the space you’ll ever need, it won’t even necessarily be close to public transport, but you will be in the market.

Yes, you can live in areas just outside of Sydney and if you want to travel around three hours a day to a job you probably hate anyway, fill your boots.

But, for argument’s sake, you can actually buy a house in Sydney for $1.2 million.

With interest rates being so low, a household with two full-time workers can pay off the interest repayments without having to sacrifice too much. I’ll admit, that’s not a massive problem for most. A million dollar mortgage means you’re paying around $40,000 a year; $770 a week. For two people working full time, that’s eminently doable. But this equation gets a little trickier if you want to have kids, because unless you want a group of rudderless 21-year-olds who are figuring out what they want to do with their lives in between shifts at General Pants, looking after your children in their formative learning years – all the while spending $20,000+ per annum on daycare (essentially private school fees for your 10-month-old) – for a lot of people, it’s preferable for one parent to stay at home and raise your kids.


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So now you’ve got one income to pay just the $770 a week interest on your mortgage. And you’re working for three people. Heaven forbid there are any rainy days around the corner because that fund is going to be low. In the meantime, you’re paying for groceries, insurance, car/petrol, Internet/phone and everything else you need to get by in this crazy, mixed-up existence.

The stamp duty on a $1.2 million home would be in the vicinity of $50,000, so with your 10% deposit, you’d need to have $170,000 in savings to be able to hand over, on the day that you outbid every other hungry buyer.

$170,000. Who on earth has that kind of money? Even if you’re working in a well-paid career full-time and you’re living with your parents or in some other rent-free utopia, you may very well be able to save $25k-$35k a year. This is not an option for most people. Or, at least, it’s not an option that most people choose to take.

But OK, so great, you’re saving $35k a year. Stuff it! Let’s call it $40,000 a year. Just think about saving that amount of money and what it would take for you, as an individual, to do that. The sacrifices you’d have to make.

Now do that for just over four years.

Congratulations, you can now buy the smallest, ugliest, most unreasonable, barely liveable house in your least-preferred suburb. You don’t have any money left over to do up the bathroom or buy any appliances or furniture or hardware for your new home, but you do have a roof. Unlike you, your neighbours have been there for 30 years and bought the house for $16 in 1978 and haven’t worked since not long after then. They’re nice people but their quad bikes do make an awful racquet.

You probably don’t care much for the couch on their front lawn either.

Oh yeah, but it’s now Christmas 2020 and the market has continued to grow. Even in a slow market $1.2m today may be $1.3m then. So you’ll need another 20-odd-thousand dollars.


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In the meantime, you haven’t met anybody because you haven’t been on a night out since the Obama administration, you haven’t been anywhere or travelled to any part of the world to further yourself as a human being, and you most certainly haven’t spoilt yourself on any material objects because: savings.

It’s the new Great Australian Dream. Maybe there are better ways about it. Maybe you can invest your money interstate, because that’s not risky at all (*satire klaxon*). Maybe you can buy with another couple because money between friends is always a good thing. Maybe you can inherent money from relatives. Maybe you can befriend a wealthy pensioner in the hope that she’ll see you for the caring soul you are and leave her $3.6 billion estate between you and her cockapoo, Boris.

The likelihood is that this generation will be among the first that will rent forever because even the thought of attempting to save the amount of money you need to in order to get into the housing market is preventing young people from even trying. And I, for one, completely understand that. More apartments are being built and more houses are being knocked down. It seems inevitable that Sydney will become more and more like New York and London where apartment living is the only option.

But maybe that’s OK. Maybe it’s OK to spend your savings on increasingly cheap travel, or a car or the new Yeezy’s or a nice breakfast with friends or whatever it is that makes you happy. I just think that if having a family home and space for your future children to run around in is what makes you happy, you will have to be extremely fortunate or even harder-working to make that dream come true. I guess we’re all just trying to do a little bit better than our parents did, or at least give our own children the same happiness our parents gave us.

Best of luck, I’ll be out borrowing money for a coffee.

 

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