This week, I had an interesting discussion with several members of an Australian property investment forum.
Foolishly, I made the newbie's mistake of mentioning that Australian house prices had become less affordable over the past couple of decades.
What a faux pas!
Immediately, I was pounced upon by the more senior members of the forum, keen to set me right and correct my silly mistake.
Courtesy of those wise property investors, I thought I'd share their thoughts on where I was going wrong.
Let's begin with my simple statement that preceded the storm.
Different Here: "The house price to single income ratio used to be 2-3x. Now it's 6-7x. People on single incomes are priced out of homes they could previously afford."
-- "Really? What if that income is $180,000 or more?"
-- "Sure you can buy a home for a 2-3x income ratio. Stop whinging"
-- "Buying your first home is never easy. It wasn't easy 20 years ago, and it is not easy now."
-- "Yet there are still those on single incomes doing it. Funny that!"
-- "Instead of waisting time rubbishing property on a property forum. Sit back, save and wait for things to improve."
-- "You can continue renting my properties while you wait for the crash. Even if it crashed I wouldn't sell it to you"
-- "This kind of comment/allegation is false without qualification."
-- "Where do you want to buy? What is unaffordable? Good suburbs 20 years ago were 'unaffordable' for most people."
-- "I can show you where to buy affordable housing, but you don't want that. What you want to do is rant and rave about how hard it is nowadays. Well you know what? Bleating about it here, to a bunch of investors is not going to change anything."
Most of those comments were accompanied by much 'eye rolling', if I'm reading those emoticons correctly. You could just feel the collective sigh among the property investors -- 'here's another nutter who thinks house prices are too high, get a load of the crazy guy'.
And then someone (who had been a member of the forum since 2005) kindly posted this image for me.
-- "Different Here, are you a student by any chance? We see a number of kids here come and go; mostly in shock at their own seemingly-distant ownership prospects, and the discussion always takes the same route: disbelief, incomprehension, emerging comprehension, half-baked hope, deepening personal reflection, explicit commitment to study harder and get into a career, too much time wasted on SS talking about piffle instead of studying, bad grades, silence."
Let's set the record straight. I'm not a student. I'm a middle aged father of two. I'm not renting. I already own my home, fully paid off. I'm not 'rubbishing' property. I wasn't 'bleating', in fact I only mentioned the affordability decline in passing, I wasn't even making a big deal about it.
What are these property investors so scared of, that they must attack a new member for mentioning the fact that Australian homes are less affordable then they used to be? A new member is labelled a troll for daring to mention Australia's affordability crisis?
Ironically, just today the Sydney Morning Herald published this article.
AUSTRALIAN house prices have moved from being affordable to severely unaffordable in the past 10 years - and Sydney is still the least affordable capital city, a new study shows.
The study, by the National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra, and AMP, says it will take at least another 10 years of flat house prices, coupled with income growth, for houses to regain an affordable status.
The study found median house prices in Australia grew 147 per cent between 2001 and 2011 to $417,000, while median after-tax incomes only increased 50 per cent to $57,000.
This pushed the price-to-income ratio - the number of years' worth of income needed to buy a typical dwelling outright - from an affordable 4.7 to a severely unaffordable 7.3.
You see, according to the property investors, nothing can ever be considered 'unaffordable' because there's always some rich family who can afford it. Nothing can ever be unaffordable, because if you make enough sacrifices anyone can buy a small run down unit. So what's the problem?
The problem is two decades ago, single income families could easily afford a certain standard of dwelling. Now it requires dual incomes to afford that same standard of dwelling. Houses are less affordable then they used to be, it really is that simple.
Of course, if you make enough sacrifices, scrimp and save, and take on a massive soul destroying mortgage, then anyone can 'afford' to buy. But does that make it affordable? I don't think so. Housing is not affordable if we're forced to trade housing for quality of life. If we're forced to take no holidays, never treat ourselves to any luxury, delay having children, put our children in daycare all week, just so both parents can work 80 hours a week to 'get on the housing ladder', then housing is categorically not affordable.
Yes, property investors, 'good suburbs' were always more expensive, cheap housing can always be found in the less desirable suburbs, people on single incomes are always able to afford something if they make enough sacrifices. But this doesn't change the fact that affordability has declined.
It used to be hard for young families to afford a home, but now it's twice as hard.
The APM NATSEM Report is here.