No more avocados, let’s face the reality of property prices.

No more avocados, let’s face the reality of property prices.

It’s all fun and games to moan over $4 coffees and avocado based brunches, but are we focussing on the wrong issue?

Media coverage on property is no new event. However with every boom cycle comes the inevitable media cycle about the very topic. When is the inevitable downfall. It’ll come crashing down. It has to.

For those of you old enough to remember boom markets of time gone by, you’d know this same cycle. The same doom and gloom articles, the same rhetoric.

It is funny now to see articles from the 90s, and early 2000s citing prices being ‘far too high’ or the absolute ceiling of Sydney pricing. With pricing hovering at the time around the mid $400,000 mark (or lower for the earlier decades), it seems almost petty to us today with near million dollar median prices.

But we always, forget to heed the lessons learned from history. Sydney (and most metro cities in Australia) suffers from the same constant pattern. Every 7-10 years, prices tend to double. For many, seeing a $900,000 median price, it seems unlikely that our prices will rise to a median of $1.8 million. But tell someone in the early 2000s that prices would double by the mid 2010s to $900,000, they’ll tell you that they are dreaming.

So, extremely quick economic summary aside, what is the lesson here?

We can’t change the market

Our anger is often directed at the industry minds, or often than not, certain demographics that seem to have the financial capacity to buy. Not to bring up the smashed avocado debate again, or $4 coffees, but the authors or spokespeople behind these messages often receive the blame.

Similarly, blame and hatred is shared with those capable of buying in the marketplace. An extension of our typical tall poppy syndrome in Australia – cut down those doing well (in the property game).

At the end of the day, it won’t change anything.

Yes, there is a significant problem plaguing young people.

I’m not denying that, neither are most of these public figures we love to hate. It’s increasingly hard for young people in this generation to get into the market. Surging price growth, high immigration (both interstate and international) rates, low interest rates and slow wage growth are all strong contributing factors to the sheer cliff in front of some of us.

The hurdle, again is the deposit. It’s not the values of the homes really that is the issue here. The high values (that on the current market trends, building numbers, immigration numbers and loan data is sustainable and will continue to be) are attainable because bank financing is easier than it has ever been.

Playing the blame game.

It’s easy to lay blame on everyone else. Especially those who single out your brunches and coffees. However First Home Buyer numbers are not zero. There are those out there who can do it, and have been doing it. But blaming others won’t bring prices down or increase your deposits.

The smashed avocado and coffee examples are simply that. Metaphors. You can call Bernard Salt out of touch, but take out the poorly selected (in hindsight) metaphor and his point is still relatively valid.

In today’s day and age, if you wish to get into the property market, sacrifices must be made. There is no real way to avoid this. In order to save for a deposit, you have to do just that. Save. Whether it’s cutting everything but the bare necessities, or taking on higher income jobs (or several jobs) to supplement your savings plan, these are sacrifices that need to be made.

At the end of the day, how else will you amass the $60,000 deposit and buy a property? Unless you find yourself a briefcase of cash on one of your round the world cruises, you won’t find your deposit wherever you spend your disposable income.

Or don’t. You don’t have to buy property.

Seriously, if it angers you that much, don’t buy property. It’s not for everyone. Enjoy your holidays and brunches – you don’t have to buy houses and be a property mogul (an overused phrase but that’s for another article). But don’t expect to buy property without an adjustment in your mindset and some sacrifices. The choice is yours.

Give me a reason to change my mindset then.

I’ll leave you with one point about the realities of the property market. Sure, the short term process sucks. No more brunches, high amounts of savings. What a terrible life to go through for five years.

But take your slave money, buy a property – let’s assume it’s an investment property for the purposes of this scenario (this is not actual advice, and is general in nature, as always your situation may differ so please seek advice from a certified source to find out information that may be relevant to you).

This property, you’ve bought on the outskirts of town in a metro city, say $400,000. Rented out, the shortfall is $100 a week.

A year goes by, maybe even two years. The prices have risen just a touch to $500,000.

The next year, the market surges. We are talking a price value of $650,000. That’s a $250,000 capital gain over three years. That’s over $80,000 in growth a year averaged out.

How many people do you know that can save about $80,000 per year? Not many. And that’s very much the point here. That $250,000 you have in your pocket now, means goodbye deposit problem, and hello owner occupied home in Sydney.

I guess in summary for you, it’s not meant to be easy. It’s not going to be. But let’s face reality here. Let’s stop complaining about media metaphors and make a decision. Do it, or don’t. The decision is yours.

Author

Michael Turner is a Property Development and Analytics Specialist operating in Sydney’s Growth Centres and corridors. He is a Director of YPI, along with several roles at property development firms and agencies. He can often be heard on various radio mediums talking about Football and Property. You can find him on Twitter @mturnerypi or email him directly at m.turner@youngpropertyinvestor.com

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