Post war and right up until the early 2000’s, the old fashioned Dad at work and Mum at home raising the children worked a treat. I am not commenting on the social status of women or starting any such argument. I am talking AFFORDABILITY!
The “Average House” which used to be say, a cottage of about 1400 square feet, 3 bedrooms, one bathroom, kitchen/dining and lounge room, with a carport or garage on just under a quarter acre, could be had for 3 times the gross annual income of the primary (and often, ONLY) wage earner.
This “multiple” persisted for more than 60 years until the whole thing went nuts.
The first house my father bought cost $10,000 when his annual salary was a smidgen over $3,000. The first house and land that I bought and built cost me $75,000 when my annual salary was about $25,000. The next house I built was a lot bigger, at 5 bedrooms and 3 bathrooms with a double garage on a fairly pricey piece of land. The “multiple” went to 3.6 for that one, but that was to be expected.
Today, for a modest house of about 1,500 sq ft, typically with a single garage and a carport, 2 bathrooms but on a postage stamp piece of land (no value there folks!) the multiple in the majority of markets lies between 7 and 10. In other words from seriously unaffordable to economic suicide.
Record low interest rates and “Honeymoon” deals have placed hundreds of thousands of people at risk of bankruptcy and homelessness. The overall economic fallout from such a disaster, and it will happen, will be incalculable. The media is full of people with “other interests at heart” who comment. Why ask a major developer who has 5,000 apartments coming on to the market if he thinks the market is overheated, and due for a cliff like correction? Is he going to answer YES and put people off buying? Hell No.
Or other commentators who have hundreds of thousands of Bank shares in their superannuation portfolios… are they going to tell the truth and watch their Bank shares tank? Hell No.
Go out into the market and SEE for yourself what is happening. I sold a number of 50 square metre studio units in 2004 and 2005 for $209,000 and $219,000. 12 and 13 years later they just changed hands for $159,000.
A large 2 story house I helped friends sell in 2007 for $650,000, had a minimum of $150,000 spent by the new owners on pool, gazebo, extensive landscaping and upgrades to 3 bathrooms and the kitchen. Sold for $795,000 this year. That is a LOSS over 10 years of at least $60,000 in stamp duty, legal and agents fees, not to forget interest on loans, rates and insurance.
I do not care what you read elsewhere. If you are in real estate now, get out while you can…