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In late 1980s Melbourne, Australia my dad and his best friend were accountants and bought their houses for ~$40,000AUD, ~3 times their annual income. According

In late 1980s Melbourne, Australia my dad and his best friend were accountants and bought their houses for ~$40,000AUD, ~3 times their annual income. According to the best friend, this was considered a lot to pay for a home. In 2020, those houses are around ~$1.8-2M, so ~22.5-25 times the annual income of someone that has their job today. In Melbourne and Sydney generally, housing is 10 and ~13x annual income. Above 6-8 is already considered _extremely unaffordable_. Sydney is 2nd only to Hong Kong in housing un-affordability. It's a profound change across a generation. Among my college-educated friends, the only one's thinking of buying property are either high income (doctors, investment bankers) or buying in markedly worse (thus cheaper) areas than they lived in as children.

flukus 7y ago
Mine did the same in the early 80's on a cleaners salary, granted the money was better for cleaners back then (no several levels of contractors) and in a less desirable location (Gold Coast), but on my top decile for the country salary there's no way I could afford the same house today. It was also a single income household since they started a family about the same time. It shows how much our standard of living has dropped in four decades. > Among my college-educated friends, the only one's thinking of buying property are either high income (doctors, investment bankers) or buying in markedly worse (thus cheaper) areas than they lived in as children. Personally I scaled down expectations and bought a small "affordable" apartment. It's fine for me and achieves some financial stability but I wouldn't want to raise kids in one.
sien 7y ago
In the late 1980s Australian interest rates were 17% so the repayments required were much higher on the same level of debt. However, your point in general stands that houses in Australia are much more expensive than they were 30 years ago. But a better metric is the proportion of income required to pay for a house. It's also worth noting for Australians and Americans that these housing cost issues are a global issues in many successful cities around the world. Some cities and states have avoided these issues. In particular Texas in the US has seen huge growth and has managed to keep prices down.
- JMTQp8lwXL 7y ago
  You could've just saved the 3x income and paid cash if you wanted. Today, it's a much longer path to use frugality to build up the pile of cash needed to buy a home outright.
  - JauntyHatAngle 7y ago
    And indeed, buying a home outright would sometimes be impossible depending on when you started saving. E.g. If you tried saving to buy a house outright in the 00's in sydney, the cost of housing would increase faster than you could save.
- flukus 7y ago
  > In the late 1980s Australian interest rates were 17% so the repayments required were much higher on the same level of debt. Inflation was also in the >10% range (https://www.abs.gov.au/websitedbs/D3310114.nsf/home/ABS+Chief+Economist+-+70+Years+of+Inflation+in+Australia/$File/CPI+70+Years.svg https://www.abs.gov.au/websitedbs/D3310114.nsf/home/ABS+Chie...) so if your wage kept up with inflation and you could weather the high interest rates for a few years then your mortgage:income ratio shrunk very quickly.
- nunez 7y ago
  Tell that to Austin and some areas in Dallas.
souprock 7y ago
You picked the wrong Melbourne. The one in Florida is a far better deal. Median household income is $40,000, and the median house is just $150,000. The house is 3.75 times the income. Of course, it is even lower for the typical people here on Hacker News.
- treebornfrog 7y ago
  Are we looking at income post tax here?
  - souprock 7y ago
    Pre-tax I suppose, but it hardly matters. The local and state tax is only a 6.5% sales tax, excluding food. The only income tax is federal, which is approximately nothing for people at that income who have children.
ggm 7y ago
I'm one of your dad's generation and we like to call this "inter-generational theft" because it kind-of sums it up: the spending patterns we established, are predicated on leaving our kids (and grandkids, probably) worse off. Not because of a debt burden, there is nothing wrong with long term public sector debt financing. The problem is the asset bubble in home ownership prices. We should have 10+ year secured residential tenancies and rent controls in place, and put home ownership back into the 3-5% compounding asset class. Sydney and Melbourne is insane. Brisbane (where I live) is better, but only just. I worry about Hobart: the longterm income levels in Tasmania are not going to keep up, the price of housing there is creating a huge social dislocation issue.
- gowld 7y ago
  What happens to those houses when you die? Are they mortgaged with no equity? If you leave an inheritance, you are giving the wealth back/forward.
  - sgc 7y ago
    And what happens when people live longer and longer, so that people have lived a longer percentage of their lives without that influx of assets? It is perfectly common for 60+ year olds to still have their parents living. That will stretch to 70 year olds, and so on. There is a demographic concern that needs to be acknowledged in order to develop societal solutions that provide even basic opportunities such as home ownership at an age when you are raising your own family. One potential contribution to a solution would be to tax investment properties/second homes at a very different rate than primary dwellings (which should be taxed at as close to 0% as is practically possible). This would help reduce compounding the effect of demographics with investment portfolio concerns. If governments are to be at the service of their citizens first and foremost, it makes sense to me that they also have a specific tax rate or other restrictions on property ownership by foreign investors. If those things are not legal, then laws should be changed. They exist in some form in many countries, but not all. I doubt those opinions are popular, but at least they are worth thinking about.
    - 7y ago
jotm 7y ago
This is not surprising at all. Population has exploded, immigration is easier than ever before (since the Industrial Revolution), desirable places have become even more desirable, plus real estate is used as investment. Under such conditions, wages can only stagnate or have modest growth, while prices for scarce resources like land in desirable areas can only go up. Good news is that there are still cheap places everywhere. But everyone treats them like they're all plague infested or something. Building a new town/city is no easy feat, but it sure used to happen more often in the past.
gowld 7y ago
How is that even possible? At interest rates that's 100% of income. Or it's becoming a rich area and next generation of up and comers needs to find a new frontier like the old generation did
- thundergolfer 7y ago
  > How is that even possible? At interest rates that's 100% of income. Can you elaborate on what you're saying here? > Or it's becoming a rich area and next generation... Yeah in a sense it has to become a rich area because of housing costs. The "new frontier" where houses (not apartments) are 3x median annual income is 2 hours drive out of the city.
foogazi 7y ago
> In late 1980s Melbourne, Australia my dad and his best friend were accountants and bought their houses for ~$40,000AUD, ~3 times their annual income. According to the best friend, this was considered a lot to pay for a home Something has to have changed since then. What was the interest rate like back then and what kind of terms did he get for his loan? (edit spelling)
- thundergolfer 7y ago
  > Something has to have changed since then. In 35 years an awful lot has changed. What are you thinking specifically? Interest rate wouldn't be too hard to find, though it'd be a lot of trouble to find out the terms of the loan. One thing I can comfortably say though is that they'd been living at home and saving for a while, so could pay quite a lot of the full housing cost up front. Maybe 30-50%. Nowadays it's a joke to think about doing a 50% down payment on a 1-2 million dollar home.
  - foogazi 7y ago
    I was thinking maybe it was a time when purchases were made in cash or seller financed But siem already posted that interest were around 17% and someone else mentioned 10% inflation in the eighties Then you throw in immigration and global markets and a somewhat clearer picture emerges

flukus 7y ago

Mine did the same in the early 80's on a cleaners salary, granted the money was better for cleaners back then (no several levels of contractors) and in a less desirable location (Gold Coast), but on my top decile for the country salary there's no way I could afford the same house today. It was also a single income household since they started a family about the same time. It shows how much our standard of living has dropped in four decades. > Among my college-educated friends, the only one's thinking of buying property are either high income (doctors, investment bankers) or buying in markedly worse (thus cheaper) areas than they lived in as children. Personally I scaled down expectations and bought a small "affordable" apartment. It's fine for me and achieves some financial stability but I wouldn't want to raise kids in one.

sien 7y ago

In the late 1980s Australian interest rates were 17% so the repayments required were much higher on the same level of debt. However, your point in general stands that houses in Australia are much more expensive than they were 30 years ago. But a better metric is the proportion of income required to pay for a house. It's also worth noting for Australians and Americans that these housing cost issues are a global issues in many successful cities around the world. Some cities and states have avoided these issues. In particular Texas in the US has seen huge growth and has managed to keep prices down.

JMTQp8lwXL 7y ago
You could've just saved the 3x income and paid cash if you wanted. Today, it's a much longer path to use frugality to build up the pile of cash needed to buy a home outright.
- JauntyHatAngle 7y ago
  And indeed, buying a home outright would sometimes be impossible depending on when you started saving. E.g. If you tried saving to buy a house outright in the 00's in sydney, the cost of housing would increase faster than you could save.
flukus 7y ago
> In the late 1980s Australian interest rates were 17% so the repayments required were much higher on the same level of debt. Inflation was also in the >10% range (https://www.abs.gov.au/websitedbs/D3310114.nsf/home/ABS+Chief+Economist+-+70+Years+of+Inflation+in+Australia/$File/CPI+70+Years.svg https://www.abs.gov.au/websitedbs/D3310114.nsf/home/ABS+Chie...) so if your wage kept up with inflation and you could weather the high interest rates for a few years then your mortgage:income ratio shrunk very quickly.
nunez 7y ago
Tell that to Austin and some areas in Dallas.

souprock 7y ago

You picked the wrong Melbourne. The one in Florida is a far better deal. Median household income is $40,000, and the median house is just $150,000. The house is 3.75 times the income. Of course, it is even lower for the typical people here on Hacker News.

treebornfrog 7y ago
Are we looking at income post tax here?
- souprock 7y ago
  Pre-tax I suppose, but it hardly matters. The local and state tax is only a 6.5% sales tax, excluding food. The only income tax is federal, which is approximately nothing for people at that income who have children.

ggm 7y ago

I'm one of your dad's generation and we like to call this "inter-generational theft" because it kind-of sums it up: the spending patterns we established, are predicated on leaving our kids (and grandkids, probably) worse off. Not because of a debt burden, there is nothing wrong with long term public sector debt financing. The problem is the asset bubble in home ownership prices. We should have 10+ year secured residential tenancies and rent controls in place, and put home ownership back into the 3-5% compounding asset class. Sydney and Melbourne is insane. Brisbane (where I live) is better, but only just. I worry about Hobart: the longterm income levels in Tasmania are not going to keep up, the price of housing there is creating a huge social dislocation issue.

gowld 7y ago
What happens to those houses when you die? Are they mortgaged with no equity? If you leave an inheritance, you are giving the wealth back/forward.
- sgc 7y ago
  And what happens when people live longer and longer, so that people have lived a longer percentage of their lives without that influx of assets? It is perfectly common for 60+ year olds to still have their parents living. That will stretch to 70 year olds, and so on. There is a demographic concern that needs to be acknowledged in order to develop societal solutions that provide even basic opportunities such as home ownership at an age when you are raising your own family. One potential contribution to a solution would be to tax investment properties/second homes at a very different rate than primary dwellings (which should be taxed at as close to 0% as is practically possible). This would help reduce compounding the effect of demographics with investment portfolio concerns. If governments are to be at the service of their citizens first and foremost, it makes sense to me that they also have a specific tax rate or other restrictions on property ownership by foreign investors. If those things are not legal, then laws should be changed. They exist in some form in many countries, but not all. I doubt those opinions are popular, but at least they are worth thinking about.
  - 7y ago

jotm 7y ago

This is not surprising at all. Population has exploded, immigration is easier than ever before (since the Industrial Revolution), desirable places have become even more desirable, plus real estate is used as investment. Under such conditions, wages can only stagnate or have modest growth, while prices for scarce resources like land in desirable areas can only go up. Good news is that there are still cheap places everywhere. But everyone treats them like they're all plague infested or something. Building a new town/city is no easy feat, but it sure used to happen more often in the past.

gowld 7y ago

How is that even possible? At interest rates that's 100% of income. Or it's becoming a rich area and next generation of up and comers needs to find a new frontier like the old generation did

thundergolfer 7y ago
> How is that even possible? At interest rates that's 100% of income. Can you elaborate on what you're saying here? > Or it's becoming a rich area and next generation... Yeah in a sense it has to become a rich area because of housing costs. The "new frontier" where houses (not apartments) are 3x median annual income is 2 hours drive out of the city.

foogazi 7y ago

> In late 1980s Melbourne, Australia my dad and his best friend were accountants and bought their houses for ~$40,000AUD, ~3 times their annual income. According to the best friend, this was considered a lot to pay for a home Something has to have changed since then. What was the interest rate like back then and what kind of terms did he get for his loan? (edit spelling)

thundergolfer 7y ago
> Something has to have changed since then. In 35 years an awful lot has changed. What are you thinking specifically? Interest rate wouldn't be too hard to find, though it'd be a lot of trouble to find out the terms of the loan. One thing I can comfortably say though is that they'd been living at home and saving for a while, so could pay quite a lot of the full housing cost up front. Maybe 30-50%. Nowadays it's a joke to think about doing a 50% down payment on a 1-2 million dollar home.
- foogazi 7y ago
  I was thinking maybe it was a time when purchases were made in cash or seller financed But siem already posted that interest were around 17% and someone else mentioned 10% inflation in the eighties Then you throw in immigration and global markets and a somewhat clearer picture emerges