We often hear young people complain about how expensive property is to buy today.
They often blame the baby boomer generation for pushing the prices up. I often hear them say that it was a lot more affordable thirty years ago. Or that it was a lot easier thirty or more years ago as things were so much cheaper.
However as a baby boomer myself I have always recalled how expensive real estate was even when I was very young. How unaffordable it was. Sound familiar? So let’s have a look at the facts rather than listen to feelings.
Three decades ago the average full-time worker took home just under $19,000 per year in a time when the average house price was less than $150,000. That’s 7.89 times one’s salary.
Today annual earnings exceed $74,724* with the average house price in most capital cities exceeding $571,500*. That’s 7.64 times one’s salary. (*Australian Bureau of Statistics).
So in fact prices today are cheaper than prices thirty years ago, also we have the lowest interest rates that I can recall in my lifetime.
In the 80’s the interest rate went up to 22 per cent pa compared to 4.2 per cent pa today. The long term average interest rate is at 7% pa, so really young people of today should not be complaining because real estate is about the same if not a little more affordable today than thirty years ago, albeit it always feels extremely expensive no matter what era you find yourself growing up in.
My daughter is currently twenty five years old and she saved enough money working a casual job whilst at school and university and together with the first home owners grant and stamp duty concessions she bought a unit in Neutral Bay for $395,000 when she was nineteen years of age.
Over the last six years she continued to pay down some of her loan on the property and today its neutrally geared and she no longer needs to contribute financially to it. It simply funds itself and the property grows annually. Recently it was valued at $620,000. Admittedly I had a word to the Bank Manager about her character when she was nineteen but he assessed her loan application using normal loan conditions.
I am extremely proud of her. She wanted to buy a property by the time she was nineteen. She focussed on saving a deposit, she worked hard, was frugal and diligent and sacrificed holidays and parties and clothes to get a deposit together.
She did not make excuses nor blame anybody else for how difficult it was.
The younger generation should do what the baby boomer generation who bought property thirty years ago did. Work hard, be frugal, save, sacrifice on overseas holidays and fancy cars or other lifestyle expenses and pay off your mortgage as soon as you can and you too will be in the group who will own their own home and it will be worth a lot more than it does today.
However be prepared. When you are old, many years from today, you will also be accused of having it easy by the younger generation of tomorrow.
For further information about how Chan & Naylor can help assist you visit www.chan-naylor.com.au or phone 1300 250 122.