Advertisement

Why I'm stressed about property prices

Will your kids be able to buy a house that’s really a home in the future? I hope that mine will, but the economics of it are against them right now.

First up let me say that my partner and I own a property. We bought in a terrific area, just a few kilometres from the CBD, around fifteen years ago. It’s lovely, old, established area with plenty of trees and parks and high-performing schools, just a short commute to work. It was a stretch at the time but in hindsight we beat the start of the housing boom by about 12 months. Lucky, huh? We still have a big mortgage because back then we bought the smallest house in the street and, three kids later, needed to do a fair bit of renovation work, but the debt is manageable if not comfortable.

The big question is where, if they decide they want to, our kids could ever buy. Property prices have exploded since we bought and the idea of a couple, just starting out, buying in our suburb today is laughable. Unless they’re investment bankers or lawyers, I guess.  So if our kids want to work in a city and buy a property that is a true home, they’re going to be either:

  • Commuting a really long way to work with no time to spend in the home they’ve bought
  • Living in a 1-bedroom apartment with no room to move
  • Working full-time for decades with no opportunity for career breaks, just to service the debt
  • All of the above
  • Oh, and married or partnered, of course – singles stand little chance in today’s property market

I feel like their future lifestyle choices are being quickly and surely taken away from them by the current generation of Australian and overseas property investors – and I hate it.

I’m not alone in feeling this way: a national Canstar Blue survey of more than 1,300 parents with young children found that an overwhelming three-quarters of them had a common financial worry in terms of their children’s future: housing affordability. 74% of parent surveyed said that their children’s ability to buy a house in the future was a significant concern.

Well – d’uh!

With news from Domain that the median house price in Sydney has topped $1 million, it’s not surprising that parents aged 40 or more in NSW were even more concerned than the national average, with 82% listing future housing affordability for their children as a significant concern. This is at a time when home loan interest rates are at a record low.

I know politicians are keen to cater for the needs of SMSF trustees and other wealthy investors, but they should remember that all other parents are voters, too.

What will a home loan cost?

Even with our historically low home loan rates (and there are currently rates as low as 3.49% on the canstar.com.au database) the fact is that buying a 30 year mortgage will effectively almost double the purchase price of your property, once interest on that loan is factored into the equation.

For example, the average standard variable home loan rate on the CANSTAR database is currently 4.84%. That’s so low, right? Well yes, but this is what it could cost you over 30 years.

Loan size Monthly repayment Cost over 30 years

$500,000

$2,575

$927,068

$750,000

$3,863

$1,390,602

$1,000,000

$5,150

$1,854,135

Source: canstar.com.au. Based on rate of 4.34% over 30 years.

It’s absolutely vital that you find the best-value home loan you can, to help minimise that cost! Use our Home Loan Comparison Calculator to help you out.

What other financial issues stress parents?

In addition to future housing affordability, other financial issues that parents surveyed by Canstar Blue were concerned about, in relation to their children’s future wellbeing, were:

35%        Getting into credit card / personal debt

53%        Rising cost of health care

38%        Increased taxes to pay for aging population

39%        Paying off their student debt

They are all valid concerns, of course, but to a certain extent either controllable or for a good cause. The only people who benefit from shutting the younger generation out of the property market are landlords.

Compare Home Loans

Share this article