[Australia] Is buying a house actually this hard? Are my maths wrong?

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Topic Author
JimboMutumbo
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[Australia] Is buying a house actually this hard? Are my maths wrong?

Post by JimboMutumbo »

I'll use myself as an example but the income is also what a couple could bring in per annum so let me know if my maths is off here.

If I work 60 hours a week @ $47.10ph then it gives me a before tax income of $2,826pw or $146,952pa. (Not including salary sacrifice for the example)

With a 37% tax rate it ends up being $92,579.76pa. If my living expenses as an absolute hermit with no life, no friends, no dates, no new clothes or even driving back home to visit family are $32,500pa, that leaves me a total of $60,079.76pa or $1,155.38pw.

Median house price is $1.09m in Melbourne, that's just over 18x what I can save each year if I live like a hermit and even pass up spending on fuel to go home and bury my friend this coming month. That also means that if prices stabilize and don't increase by a single dollar, then it will take 3.5 years to save a deposit from nothing, but obviously house prices will rise.

Not to mention, the cost of living is becoming higher, rents will rise, utilities will rise but wages haven't and won't. So roughly, since houses in Melbourne have averaged 10% per year for the past 25 years according to CoreLogic it will take 6-7 years (providing no black swan event aka a crippling injury or negative event costing me tens of thousands) just to get a 20% deposit.

Is this right? Is the only viable option for a young Aussie(s) to either live in a sardine packed noisy apartment or commute 2hrs a day while living far away from friends and family?

Or, should we just BogleMaxx and buy the dip?

I don't mean to sound hyperbolic but surely this isn't correct. (Link to CoreLogic data below)

https://www.google.com/url?sa=t&source= ... szllIGmC8H
AlohaJoe
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by AlohaJoe »

JimboMutumbo wrote: Fri May 13, 2022 1:48 am With a 37% tax rate it ends up being $92,579.76pa.
That's not how taxes work. They'd have $107,512.76 after taxes. You're off by $15,000 a year.

But yes, houses are expensive in the capital cities (and elsewhere). They have been reams written about it for years.
Valuethinker
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by Valuethinker »

JimboMutumbo wrote: Fri May 13, 2022 1:48 am I'll use myself as an example but the income is also what a couple could bring in per annum so let me know if my maths is off here.

If I work 60 hours a week @ $47.10ph then it gives me a before tax income of $2,826pw or $146,952pa. (Not including salary sacrifice for the example)

With a 37% tax rate it ends up being $92,579.76pa. If my living expenses as an absolute hermit with no life, no friends, no dates, no new clothes or even driving back home to visit family are $32,500pa, that leaves me a total of $60,079.76pa or $1,155.38pw.
You look to be confusing average tax rate with marginal tax rate. The 37% is, I think (I am UK based), what you pay on the next $1 you earn ie 37 cents. Not on every dollar you earn. There are exemptions and lower tax rates for the first parts of your income.

Median house price is $1.09m in Melbourne, that's just over 18x what I can save each year if I live like a hermit and even pass up spending on fuel to go home and bury my friend this coming month. That also means that if prices stabilize and don't increase by a single dollar, then it will take 3.5 years to save a deposit from nothing, but obviously house prices will rise.
You cannot really focus on the median home as your first home. I would suggest around the 25th percentile - but it's quite possible you will have to compromise on that. In many cities in the world, people own apartments not single family houses. For the latter, you usually have to move further out.

Some markets allow first time buyers in particular to put as little as 10% down. That's tricky if housing prices then fall (your equity gets wiped out and can even be negative) but as long as you can keep making that monthly payment, you can survive an extended period of lower housing prices-- mentally painful though it will be.
Not to mention, the cost of living is becoming higher, rents will rise, utilities will rise but wages haven't and won't. So roughly, since houses in Melbourne have averaged 10% per year for the past 25 years according to CoreLogic it will take 6-7 years (providing no black swan event aka a crippling injury or negative event costing me tens of thousands) just to get a 20% deposit.
Australia is "the lucky country". No recession in nearly 30 years. Can this continue? My logic says it cannot, but I have been wrong.

I am certain that housing prices cannot keep doubling every 7 years (10% pa appreciation) indefinitely. Unless inflation runs much higher than it has historically (up until the last 12 months or so). Inflation lowers the burden of mortgage repayment.

If interest rates go up and/or Australia has a recession, then housing prices might well fall. The "typical" falling market in houses is 20-40%, but there's no way of telling whether that will occur.
Is this right? Is the only viable option for a young Aussie(s) to either live in a sardine packed noisy apartment or commute 2hrs a day while living far away from friends and family?

Or, should we just BogleMaxx and buy the dip?
I would recommend a long term, sensible investment policy aimed at your retirement needs. As much as possible keep that mentally separate from your house. The power of compound interest, over 30-40 years in low cost index funds, is astonishing. In nominal terms, your money may double every 10 years (+ additional contributions you make) so 8x in 30 years, and in real terms (after inflation) 4x.

Save as much money as you can for that deposit. Engineer your lifestyle around that goal. There are apps which, for example, invest the change from every small transaction you make - buying coffee, etc. (at least there are in the UK).
I don't mean to sound hyperbolic but surely this isn't correct. (Link to CoreLogic data below)

https://www.google.com/url?sa=t&source= ... szllIGmC8H
Essentially it is, I believe. At least in US, Canada and Britain this is the case. Unless you have access to inheritance, or you work in a very highly paid sector, you are never going to own a house in London-- those of us who do bought our first properties (flats or houses) quite a long time ago and traded up using that additional equity - "rolling" it into the next home purchase.

I have colleagues, exploiting the new trend for home working, who are buying homes 120 miles away, or are shifting to our satellite offices in Wales or Scotland, where housing prices are much more affordable.

What has happened, partly due to international capital flows, is that a number of cities have gone "global". London or New York or Paris always was attractive to foreign buyers and investors. But now it's Vancouver, Toronto, Seattle, San Francisco, Portland (+ Boulder CO - those last 4 there are domestic US factors around tech sector that are really important), Auckland, Sydney, Melbourne -- these are attractive in varying degrees to foreign buyers.

So whereas maybe the historic max multiple of median income was 4x, in some of those cities it is now 10x. Vancouver it is probably closer to 20x.

Also with very low interest rates post Covid crash, that bids up the price of housing as people can afford bigger mortgages.

US interest rates are now on the rise - very risky assets are crashing. If that is sustained, globally, it will presage slower, or negative, housing price growth. However due to the Covid & supply chain interruptions, US housebuilders are nowhere meeting demand & are racing to catch up, so that is not in prospect as yet.
KlangFool
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by KlangFool »

OP,

1) Housing market in Australia is crashing. This is a 30+ years bubble.

2) The mortgage in Australia is variable interest rate.

3) Please make sure that you can survive in the coming recession before thinking of buying a house.

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Valuethinker
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by Valuethinker »

KlangFool wrote: Fri May 13, 2022 7:08 am OP,

1) Housing market in Australia is crashing. This is a 30+ years bubble.

2) The mortgage in Australia is variable interest rate.

3) Please make sure that you can survive in the coming recession before thinking of buying a house.

KlangFool
If one has a variable interest rate then it's important to model the scenarios.

What happens to household budget if interest rate +1%, +2%, say.

In the UK for this reason first time buyers normally fixed for 2 years & then floated. Hopefully income will have risen enough by that time to be able to take the pain of a higher renewal rate. Nowadays I gather a 5 year fix is quite common - they used to have prohibitively high interest rates (relative to 2 year fix). 2 year fix was always the most competitive part of the mortgage market (for buyers with less than 50% down payment).

Australia pioneered the "offset" mortgage - where your bank current account balance counts towards your mortgage repayment. We have those in the UK now - but they only work with a floating rate mortgage.
Topic Author
JimboMutumbo
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by JimboMutumbo »

AlohaJoe wrote: Fri May 13, 2022 3:46 am
JimboMutumbo wrote: Fri May 13, 2022 1:48 am With a 37% tax rate it ends up being $92,579.76pa.
That's not how taxes work. They'd have $107,512.76 after taxes. You're off by $15,000 a year.

But yes, houses are expensive in the capital cities (and elsewhere). They have been reams written about it for years.
Ah my bad, thanks mate.
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by KlangFool »

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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by KlangFool »

OP,

The short answer to your question is

It is not hard to buy a house after the bubble burst. Just don't buy it while it is in a bubble. Rent if it is not worthwhile for you to buy.

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andrew99999
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by andrew99999 »

https://paycalculator.com.au/: 146,952 shows 102,369.44 after tax, so an additional 10k/yr

As for house price rises this past 10 years — rates have come down aggressively since 2012 from 4.75% to 0.1%, and this has a direct effect on asset prices.

I can't see how that can continue with rates at 0.35% (they rose it by 0.25 last week).

I believe the RBA looked into it and said property prices move about 30% for every 1% in interest rates, so a 1% rise in rates is expected to make property prices fall 30%. This has been pretty accurate this past year, considering prices rose about 24% as rates fell 0.65%. The same is expected in the opposite direction now as rates rise. Although I expect they won't be able to raise rates that high as it may cause massive defaults and a recession.

Also, note that property prices tend to move in cycles
- Sydney had a massive boom until 2003, then did not rise beyond inflation for 9 years.
- Brisbane had a massive boom until 2008 and barely rose above inflation for the next 13 years
- Perth had the mother of all housing booms until 2008 and has actually gone backwards over the last 14 years, including some terrible periods.

Melbourne has been a weird outlier that has been relatively consistent since about 2000, although the magnitude over the whole period has not been much more than Sydney.

As for the data, you are looking at it right at the end of multiple booms in a row (driven by interest rate falls), which is pretty unusual, so along with the interest rate situation, I would not expect those returns going forward.

If you did the same data gathering around 2010-2012, you would get entirely different results for the previous 25 years.


--

As for predicting a housing 'crash', I will believe it when I see it.

I expect a fall now as interest rates rise, but the government will do whatever it takes to avoid a recession and more likely will end up with a small decline as the government would lower interest rate again to stop it from falling much. They seem to have vested interests in avoiding property prices falling much. But I suspect you will at least have some time to look for something in the next year or two (unless they raise rates and then drop them — if they drop them again, house prices could rise again shortly after.
Topic Author
JimboMutumbo
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by JimboMutumbo »

73%? Do you really think government will just let that happen? I know we're in a bubble but I can't base my investment decisions trying to time the property market by sitting on cash for what could be another 5 years. Also, when will this bubble burst? Because folks have been saying this for 20 years.
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by KlangFool »

JimboMutumbo wrote: Sun May 15, 2022 7:26 pm
73%? Do you really think government will just let that happen? I know we're in a bubble but I can't base my investment decisions trying to time the property market by sitting on cash for what could be another 5 years. Also, when will this bubble burst? Because folks have been saying this for 20 years.
JimboMutumbo,

1) Why do you think the government can stop it? Where would the money comes from?

2) Why should you care when the bubble burst? If it is not cheaper to buy, don't buy. Rent instead.

3) A bigger picture question. If Australia is in a recession and you cannot find employment in Australia, would you stay at Australia? Can you stay at Australia?

KlangFool
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Topic Author
JimboMutumbo
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by JimboMutumbo »

KlangFool wrote: Sun May 15, 2022 7:30 pm
JimboMutumbo wrote: Sun May 15, 2022 7:26 pm
73%? Do you really think government will just let that happen? I know we're in a bubble but I can't base my investment decisions trying to time the property market by sitting on cash for what could be another 5 years. Also, when will this bubble burst? Because folks have been saying this for 20 years.
JimboMutumbo,

1) Why do you think the government can stop it? Where would the money comes from?

2) Why should you care when the bubble burst? If it is not cheaper to buy, don't buy. Rent instead.

3) A bigger picture question. If Australia is in a recession and you cannot find employment in Australia, would you stay at Australia? Can you stay at Australia?

KlangFool
Well, the government has and will continue to keep pushing schemes to stimulate the buying of properties. They just announced a new scheme the other day allowing first home buyers to access 40% or a max of $50k from their super to buy a house now.

Fair point, but if prices crash 73% like that article you linked says then aren't I better off holding cash? We don't have a crystal ball of what will happen and to what extent.

I'm a truck driver, I'm pretty sure that supply chains and logistics across all sectors won't come to an absolute halt. But I could be wrong. I am considering going back to TAFE or University.
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andrew99999
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by andrew99999 »

KlangFool wrote: Sun May 15, 2022 7:30 pm 1) Why do you think the government can stop it? Where would the money comes from?
Fiscal and monetary policy.
1. Monetary policy — not raising interest rates as much as they should (inducing stagflation) would reduce/avoid the collapse of house prices
2. Fiscal policy — laws, grants, etc to prop up the property market. For example, with the election in a few days, one party has just said they will allow taking retirement funds to use for purchasing a house, which will inflate property prices further.
KlangFool
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by KlangFool »

JimboMutumbo wrote: Sun May 15, 2022 8:06 pm
KlangFool wrote: Sun May 15, 2022 7:30 pm
JimboMutumbo wrote: Sun May 15, 2022 7:26 pm
73%? Do you really think government will just let that happen? I know we're in a bubble but I can't base my investment decisions trying to time the property market by sitting on cash for what could be another 5 years. Also, when will this bubble burst? Because folks have been saying this for 20 years.
JimboMutumbo,

1) Why do you think the government can stop it? Where would the money comes from?

2) Why should you care when the bubble burst? If it is not cheaper to buy, don't buy. Rent instead.

3) A bigger picture question. If Australia is in a recession and you cannot find employment in Australia, would you stay at Australia? Can you stay at Australia?

KlangFool
Well, the government has and will continue to keep pushing schemes to stimulate the buying of properties. They just announced a new scheme the other day allowing first home buyers to access 40% or a max of $50k from their super to buy a house now.

Fair point, but if prices crash 73% like that article you linked says then aren't I better off holding cash? We don't have a crystal ball of what will happen and to what extent.

I'm a truck driver, I'm pretty sure that supply chains and logistics across all sectors won't come to an absolute halt. But I could be wrong. I am considering going back to TAFE or University.
JimboMutumbo,

1) The USA is raising the interest rate.

2) If Australia does not raise the interest rate, the Australia dollar would drop against USD. Import price inflation.

3) If Australia raise the interest rate, real estate crash and recession.

<<I'm a truck driver, I'm pretty sure that supply chains and logistics across all sectors won't come to an absolute halt.>>

4) If there is a recession, everything would slow down. So, it would not be a total halt but a big reduction.

<< Fair point, but if prices crash 73% like that article you linked says then aren't I better off holding cash? >>

5) Why holding cash or buying the house is the only two choice available? It is not.

KlangFool
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Topic Author
JimboMutumbo
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by JimboMutumbo »

KlangFool wrote: Sun May 15, 2022 9:02 pm
JimboMutumbo wrote: Sun May 15, 2022 8:06 pm
KlangFool wrote: Sun May 15, 2022 7:30 pm
JimboMutumbo wrote: Sun May 15, 2022 7:26 pm
73%? Do you really think government will just let that happen? I know we're in a bubble but I can't base my investment decisions trying to time the property market by sitting on cash for what could be another 5 years. Also, when will this bubble burst? Because folks have been saying this for 20 years.
JimboMutumbo,

1) Why do you think the government can stop it? Where would the money comes from?

2) Why should you care when the bubble burst? If it is not cheaper to buy, don't buy. Rent instead.

3) A bigger picture question. If Australia is in a recession and you cannot find employment in Australia, would you stay at Australia? Can you stay at Australia?

KlangFool
Well, the government has and will continue to keep pushing schemes to stimulate the buying of properties. They just announced a new scheme the other day allowing first home buyers to access 40% or a max of $50k from their super to buy a house now.

Fair point, but if prices crash 73% like that article you linked says then aren't I better off holding cash? We don't have a crystal ball of what will happen and to what extent.

I'm a truck driver, I'm pretty sure that supply chains and logistics across all sectors won't come to an absolute halt. But I could be wrong. I am considering going back to TAFE or University.
JimboMutumbo,

1) The USA is raising the interest rate.

2) If Australia does not raise the interest rate, the Australia dollar would drop against USD. Import price inflation.

3) If Australia raise the interest rate, real estate crash and recession.

<<I'm a truck driver, I'm pretty sure that supply chains and logistics across all sectors won't come to an absolute halt.>>

4) If there is a recession, everything would slow down. So, it would not be a total halt but a big reduction.

<< Fair point, but if prices crash 73% like that article you linked says then aren't I better off holding cash? >>

5) Why holding cash or buying the house is the only two choice available? It is not.

KlangFool
Interesting points. I've decided to continue renting and plowing the difference into ETFs. I'll hold 12 months of expenses as cash but the rest will be rebalancing my portfolio.

I could be making the wrong move and I'm happy to wear that. We'll see how things pan out.
pseudoiterative
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by pseudoiterative »

JimboMutumbo wrote: Fri May 13, 2022 1:48 am Is the only viable option for a young Aussie(s) to either live in a sardine packed noisy apartment or commute 2hrs a day while living far away from friends and family?
I think the australian psyche is going through the transition from "land is plentiful and cheap, a single income family with a modest stable job can get a mortgage from the bank and retire owning their own home" to a more european established city style of "the major cities that are sought after places to live are all developed and packed with apartments owned by landlords who may have been in the business for generations, many people rent their whole lives as accumulating the capital to own a place is challenging, and rental laws allow long-term renters to live reasonable lives without ever owning a home".

One thing australia hasn't caught up with is that as a larger and larger proportion of the public finds home-owning out of reach financially, it'll become more and more politically feasible to legislate things such as changing tenancy laws to favour tenants in more situations, making long-term tenancy more viable, changing local council planning laws to allow more flexible development zoning and higher development, increasing the supply of land for housing stock, & maybe other things such as reducing tax incentives granted to home owners that people who rent cannot access, etc.

Another trend pushing in a completely different direction is for cube-farm-dweller folk like me who don't have real jobs that require actual physical presence, you don't necessarily need to live in a big city any more, you could live in a small town with cheaper land provided there's a decent internet connection. covid gave this trend a huge huge push. that trend might equalize property prices a bit -- raising them in more regional areas that have okay utilities and freeing up more supply of housing in the bigger cities as cashed up yuppies diffuse into the bush...


We're meant to steer well clear of politics on these boards, but there is an australian federal election looming, some parties have policies that implicitly or explicitly aim to support asset prices of housing, some of the other parties don't, make of that what you will.


FWIW: a few jobs ago I worked with a bloke who had moved to australia from canada, when we got onto the topic of australian real estate he immediately laughed and said something like "it's a bubble, renting is so cheap in comparison to buying". if buying suddenly looks like a good deal compared to renting, it'll be pretty obvious.
Valuethinker
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by Valuethinker »

pseudoiterative wrote: Sun May 15, 2022 9:18 pm

FWIW: a few jobs ago I worked with a bloke who had moved to australia from canada, when we got onto the topic of australian real estate he immediately laughed and said something like "it's a bubble, renting is so cheap in comparison to buying". if buying suddenly looks like a good deal compared to renting, it'll be pretty obvious.
It's generally the case that measures which increase the demand for housing don't make housing more affordable. For example first time buyer assistance schemes. The winners are usually the homebuilding companies (this was the case in the UK) and existing property owners - the value of the incentives just gets bid up into the prices of homes.

Canada is strange:

- Vancouver, rental yields have been down around 1-2% for a long time (last time I checked). Yield = net rent/ value. So theoretically below the cost of a mortgage. However interest rates were slashed in the Covid period, and more mortgage borrowers are on variable rate mortgages (historically 5 year fixed was the norm) so paying very low rates (the effect of offshore money in Vancouver is also palpable - a lot of people (not just from East Asia) hold property in Vancouver as a non-income producing bolthole, a safe place to stash wealth - politically stable, open to immigration etc).

(Calgary, centre of the oil industry, is the Canadian Perth (as opposed to Perth ONT which is a small town near Ottawa ;-). Prices tend to track the oil price, with a lag. Lowest income and sales taxes in Canada, and highest incomes. But Calgary sprawls in the foothills, and prices are probably less than 1/2 of what they are in Vancouver per square foot. Of the say 35m Canadians about 4m (?) live in Greater Vancouver Area and about 8m (9m?) in Greater Toronto-Hamilton Area - so some similarities to Sydney and Melbourne; the 3rd city is Montreal which historically has had relatively affordable housing).

- Toronto more like 3-4%. Greater Toronto Area has a deficit of Single Family Homes, but has one of the most active new condo markets in North America. In fact, *the* most active condo market - bigger than NY + Chicago combined! At least in some years

Average home price in City of Toronto (2.9m popn) is over $1m. In Vancouver, it was over $1.5m last time I checked. You are not going to afford that without significant prior home equity or wealth.

EDIT: shows how out of date you can be. Single Family Homes in Toronto? $1.9m average. Vancouver I imagine must be closer to $3m. Even condos the average was $860k.

Rent for a 1 BR apartment near the subway seemed to be around $2-2.4k pcm. Many in older apartment buildings - in the 1940s-60s a lot of purpose built rental buildings were built.

I have been waiting for both markets to bust for at least 12 years (ie since US bust) and it never happens. Things go stagnant for a couple of years, then shoot right back up.

The big reduction in interest rates associated with the Covid-19 pandemic may turn out to be a historic mistake. Housing prices rose by double digits for 2 years running in virtually every Canadian city. Not just the 2 historic hot spots.

Like a stopped clock I shall be right at some point :? :?

Yes, new ways of working mean people can live further from the office. That said, there's definitely been a flow back towards the city post lockdown, both in UK & Canada (and big US cities too, I think). It's more communities at the edge of commutable that seem to benefit - a 90 minute journey to work is bearable if you only have to do it 2-3 days/ week. A bigger factor in GTA & GVA has simply been house price inflation - driving people to live further and further out (southern Ontario, people commuting 60 miles/ 110 km each way in heavy traffic & winter weather).
Last edited by Valuethinker on Tue May 17, 2022 3:00 am, edited 1 time in total.
pseudoiterative
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by pseudoiterative »

JimboMutumbo wrote: Fri May 13, 2022 1:48 am If my living expenses as an absolute hermit with no life, no friends, no dates, no new clothes or even driving back home to visit family are $32,500pa
[...]if I live like a hermit and even pass up spending on fuel to go home and bury my friend this coming month
For budgeting I found it easier to figure out the big impact one-off decisions that can permanently reduce ongoing living expenses, rather than stressing over each individual expense. I did decide to get back into share housing rather than renting an apartment or house for myself, which is occasionally a significant lifestyle concession, but does save around $5k-$10k a year in housing expenses and bills, some of that can be consumed for a less frugal lifestyle, and the bulk of it is invested.

Another way to approach the problem is figure out how to earn more money. Sometimes it is easy to reduce expenses, but if not, maybe that's a path forward.

It is important to balance short-term life with the longer-term goals. If owning a house in melbourne is an important goal for you, maybe some level of sacrifice is worth it, but paying off a mortgage takes decades, you've also got to live your life and not let finances be the sole driver of everything. Some other variables you have to play with are: buy a whole house or could an apartment do? (the one i rent & share would go for mid $400k or so). If you're thinking of getting a house to settle down and raise a family, maybe your significant other could be expected to contribute significantly toward a down payment, so that lops the years-to-downpayment roughly in half.

I am sorry to hear about the loss of your friend.
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JimboMutumbo
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Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by JimboMutumbo »

pseudoiterative wrote: Mon May 16, 2022 8:40 pm
JimboMutumbo wrote: Fri May 13, 2022 1:48 am If my living expenses as an absolute hermit with no life, no friends, no dates, no new clothes or even driving back home to visit family are $32,500pa
[...]if I live like a hermit and even pass up spending on fuel to go home and bury my friend this coming month
For budgeting I found it easier to figure out the big impact one-off decisions that can permanently reduce ongoing living expenses, rather than stressing over each individual expense. I did decide to get back into share housing rather than renting an apartment or house for myself, which is occasionally a significant lifestyle concession, but does save around $5k-$10k a year in housing expenses and bills, some of that can be consumed for a less frugal lifestyle, and the bulk of it is invested.

Another way to approach the problem is figure out how to earn more money. Sometimes it is easy to reduce expenses, but if not, maybe that's a path forward.

It is important to balance short-term life with the longer-term goals. If owning a house in melbourne is an important goal for you, maybe some level of sacrifice is worth it, but paying off a mortgage takes decades, you've also got to live your life and not let finances be the sole driver of everything. Some other variables you have to play with are: buy a whole house or could an apartment do? (the one i rent & share would go for mid $400k or so). If you're thinking of getting a house to settle down and raise a family, maybe your significant other could be expected to contribute significantly toward a down payment, so that lops the years-to-downpayment roughly in half.

I am sorry to hear about the loss of your friend.
That's a good point. It has been nice living alone but sometimes the company would be nice, I'm still young (30) so would be quite happy to go in a share house again for some time.

As for earning more money, I have been considering going back to school. Unless I buy a truck or increase my hours up to 84 a week which is the legal limit, and which would kill me, I can't do much else as a truck driver.

It's not that important. When I consider many lifestyles that I'd like to live, none of them involve buying a house here. Maybe in the later years if I meet someone I may considerate.

Yes, life balance is crucial. I'm happy enough with going to the gym each day but any more hours would cut into that and my health.

Thank you
Valuethinker
Posts: 44529
Joined: Fri May 11, 2007 11:07 am

Re: [Australia] Is buying a house actually this hard? Are my maths wrong?

Post by Valuethinker »

JimboMutumbo wrote: Mon May 16, 2022 11:52 pm
pseudoiterative wrote: Mon May 16, 2022 8:40 pm
JimboMutumbo wrote: Fri May 13, 2022 1:48 am If my living expenses as an absolute hermit with no life, no friends, no dates, no new clothes or even driving back home to visit family are $32,500pa
[...]if I live like a hermit and even pass up spending on fuel to go home and bury my friend this coming month
For budgeting I found it easier to figure out the big impact one-off decisions that can permanently reduce ongoing living expenses, rather than stressing over each individual expense. I did decide to get back into share housing rather than renting an apartment or house for myself, which is occasionally a significant lifestyle concession, but does save around $5k-$10k a year in housing expenses and bills, some of that can be consumed for a less frugal lifestyle, and the bulk of it is invested.

Another way to approach the problem is figure out how to earn more money. Sometimes it is easy to reduce expenses, but if not, maybe that's a path forward.

It is important to balance short-term life with the longer-term goals. If owning a house in melbourne is an important goal for you, maybe some level of sacrifice is worth it, but paying off a mortgage takes decades, you've also got to live your life and not let finances be the sole driver of everything. Some other variables you have to play with are: buy a whole house or could an apartment do? (the one i rent & share would go for mid $400k or so). If you're thinking of getting a house to settle down and raise a family, maybe your significant other could be expected to contribute significantly toward a down payment, so that lops the years-to-downpayment roughly in half.

I am sorry to hear about the loss of your friend.
That's a good point. It has been nice living alone but sometimes the company would be nice, I'm still young (30) so would be quite happy to go in a share house again for some time.

As for earning more money, I have been considering going back to school. Unless I buy a truck or increase my hours up to 84 a week which is the legal limit, and which would kill me, I can't do much else as a truck driver.
At the moment, at least in UK and USA, it appears that truck drivers are paid much more than university graduates. Say £60k pa v say in the £20ks (unless you are fairly elite)--even 5 years out. Of course some graduates will do much better than that. Given how hard a job long distance trucking is (and the stress and aggro of traffic near big cities) that's probably not unfair - but it is new.

(A friend of mine's son chose to go into landscaping/ tree surgery, rather than to attend university. As he said "we have university graduates coming to us, asking for work").

There is a looming threat of technological obsolescence -- my grandfather had a (horse) harnessmaking & saddlery shop--then the farmers moved to tractors after WW2 & he really struggled. He actually did better *after* he retired as horses-as-hobbies picked up (he worked until his early 80s: when he was nearly blind, he would do what he could still manage by feel). So Autonomous Vehicles (if they happen) could automate truckers out of existence. If someone does get an AV that meets the safety requirements then the "tipping point" will happen very quickly - all those logistics cos keen to cut a major cost.

So I am all for studying, school, education. But beware, we are in a world where in advanced economies, a good plumber can make a lot more money than a very average university graduate (I am aware that generally, those with university education still do better than those with high school education). So by all means study but unless it is very vocational, it may not lead to a better job.

(I don't know what the opportunities are to move up to a desk job in your current employer?)
It's not that important. When I consider many lifestyles that I'd like to live, none of them involve buying a house here. Maybe in the later years if I meet someone I may considerate.

Yes, life balance is crucial. I'm happy enough with going to the gym each day but any more hours would cut into that and my health.

Thank you
Concentrate on maintaining a good level of savings and investment in low cost index funds. The need to buy a home may come later but the one thing that does matter as one gets older is having money to live off of in retirement, whenever that comes.

Living with other people is hell. I did so until my mid 30s and would never want to again (other than my spouse ;-)).
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