The great Australian dream becomes just that, for the kiddies

March 21, 2006

I’ve been thinking about the absurdity of the whole home ownership thing lately. I’m moving into the new house Friday week. I won’t quote the direct figures that it cost us, but suffice to say we owe the bank a whole pile of money, more than twice of what Jeremy will pay to buy a house in Canada. And yet I look at it now. We bought the block in October 2004. That block has now more than doubled in value. Indeed the block alone is now worth more than $80,000 AUD more than we paid for it (roughly $60k US). The replacement value of the house has gone up $100k AUD!. We’ve got a real estate friend who said he’d easily sell the house for us tomorrow at nearly 2/3rds of a million dollars. It’s nuts. Completely. In 18 months, a house we still can’t live in, has returned us, in theory, nearly a 100% profit. It would be, of course, tempting to sell, but we’d have to buy back into the market. As much as we could downgrade (when you are talking a roughly 340 sq m house with 4 bedrooms, theatre room, dedicated office (3 times the size of the bedrooms) and massive living areas) anything else out there is a downgrade, and we’d still be living in a nice house with a much smaller mortgage. I’d also have to give up a wired house, because the new house is totally network connected with Cat 5 cable 🙂 on the other hand, I could actually afford to travel if we didn’t have the house 🙂

We’ve been lucky, and silly along the way. My first house we bought back in 2000. It was a 3×1 ex-Miners cottage built in the 50’s in Mandurah. It cost us $120k. But it was on a block of roughly 1000 sqm and was literally 2 doors away from the water. We could see the estuary from our front door. Our little bundle of 3 year old joy was conceived at some stage in that house, and as much as I spent a long time painting and doing it up, we had to sell, because being Asbestos the house wasn’t suitable for a kid. We sold 12 months later for a roughly $60k profit. The 2 houses since we made a small amount of money on, but that first house today would be worth nearly a million on the land alone. It had to be sold at the time, and you can only do what you have to do at the time. I’m thinking now though that things have equalized, we’ve regained the money we should have made on that first house.

And yet I wonder about the kiddies. Or I shouldn’t really call them kiddies, call them Generation Y. Because starting off in the housing market here now for them would be nearly impossible. When we bought the first house we had to come up with a 5% deposit, and I can tell you know back then it was really, really hard. But we managed to do it. It was like $6,000. Imagine having to come up with 5% of $400k or similar, the base figure for most houses now in my neck of the woods. $20k is a lot of money to most people, a mortgage of $380k is just nuts. For a young person starting out, it’s a fortune. The next generation in Australia isn’t going to be able to buy into the housing market, unless they buy a house out the back of woop woop, or inherit a house (or fortune) from their parents.

Having said that though, housing in the Greater Bunbury Region, where I live, is now the second dearest market in Australia, only Sydney is dearer. It’s even cheaper to buy in Melbourne!. But that’s what you get when unemployment is 2% and the local mining companies are all taking on thousands of new people and spending billions in expanding. It’s like the gold rush of the 21st century, happening in my back yard. If you ever want to visit a place in the world where even the most lowly of worker gets paid a fortune, visit my neck of the woods. A while back, in my past job, I visited one of the local abattoirs. They’d received a $250k grant from the Federal Government to train low risk prisoners from Karnet Prison to work on the meat line when they were released. The starting wage for training on the meat line was $60k AUD. After 12 months, and being fully trained, the pay was $90k (AUD) a year. And they couldn’t find people to do it. Admitedly I couldn’t do it, the sight of the cows throats being cut on the processing line lives in my mind even today, but for that sort of money…..

food for thought.