$2 Million Chunky Home Loans - How Do People Feel Comfortable with It?

virhlpool on 23/07/2023 - 22:42
Last edited 23/07/2023 - 23:35

I see people buy $2m to $3m houses as if it's a cakewalk (very common in Sydney and parts of Melbourne).. Of course, some upgraders have a significant deposit from their previously sold house so they need a smaller loan but it's also not uncommon for the others to take a huge loan (80% of the house price) and go for such a house. Btw, I am not referring to any luxury home in a top-end suburb - $2.5m doesn't fetch you that in Sydney anyway. I wonder how these buyers feel comfortable with such massive loan amounts even if they have a borrowing capacity as per the banks' definition?

$2m PPOR loan holder would need to pay $12,500 a month in repayment at present and at least $8k-$10k a month even when interest rate gets lower. Remember, this goes from the 'after tax' income. More importantly, this commitment is for 30 years so an ability to pay this amount 'now' gives little reassurance, unless one sees a VERY stable income over the next couple of decades at least. Given how shallow the job market can be in turbulent times, most jobs aren't 100% secure on a 'permanent' basis, let alone the income. I wonder how do people feel ok with such a commitment every single month given obvious risk factors? Keen to hear views of people.

Financial Home Loan

Comments

  • Muzeeb on 23/07/2023 - 22:54
    +17

    Secure, well paid jobs and an inheritance due in the short term probably help.

    • virhlpool on 23/07/2023 - 22:56
      +2

      Out of these three factors you listed, #1 and #3 won't be as common, I would imagine. In the corporate world, higher the pay, less secure (and stable) the job is. Obviously, there are exceptions but I am referring to the majority.

      • stirlo on 24/07/2023 - 06:55
        +21

        The majority aren't borrowing $2m, about 1/3 are renting and 50% of purchasers are borrowing around $1 million or less (80% of $1.2m median house price).

        Add in that these are the desirable areas to live in and the wealthiest professionals will live there. Even though the percentage is small there's still 10's of thousands of households with a $300-500k income and those people aren't living in Parramatta or Bankstown. These people can afford the $10-15k per month mortgage. Also remember that there's a principal component to these loans so they're building an average of $67,000 in equity each year ($2m/30 years) so it's not just an expense like rent.

        Your thinking about the commitment to pay these amounts for 30 years is also kind of wrong. With each passing year there's more equity in the property to refinance against if times get tough, there's inflation which reduces the value of the payments in todays dollars, and there's a good chance that professionals will increase their income as they gain experience and promotions. For all these reasons the most stressful and hardest time is the first year of the mortgage not year 5, 15 or 25.

        • virhlpool on 24/07/2023 - 11:47
          +1

          With each passing year there's more equity in the property to refinance against if times get tough

          By doing this, one is only increasing the loan amount (and hence monthly loan repayment required).. it's not a solution of any kind.

          • md333 on 24/07/2023 - 12:48
            +4

            @virhlpool: Not true, it is a solution of the temporary kicking the can kind.

            • stirlo on 24/07/2023 - 18:52
              +2

              @md333:

              it's not a solution of any kind.

              It's exactly the kind of solution you need if you lose your job after 10 years. Refinance the loan (you'll have paid off around $500k by then so new loan is $1.5m) to reduce the payments until you get a new job and you income goes back to where it was.

              Not true, it is a solution of the temporary kicking the can kind.

              Which is exactly what you need if you lose your job and can't make the payments for 6 months while you secure another well paying professional job.

              • brandt on 25/07/2023 - 14:44
                +2

                @stirlo: And if you can't secure a job. Your $2m house is now worth $4m so you down size.

              • berry580 on 26/07/2023 - 22:29

                @stirlo: Banks won't lend money to anyone who's unemployed. Doesn't matter how low the lvr is.

                • stirlo on 27/07/2023 - 01:58

                  @berry580: True, but I doubt many of these buyers come from single income households

                • May4th on 27/07/2023 - 07:50

                  @berry580: I thought so too but my in laws actually was able to get a loan after they sold their house, and they do not work as they are retired. Apparently secured against their house/savings, almost like a reverse mortgage?

      • brad1-8tsi on 24/07/2023 - 20:43
        +1

        I would imagine. In the corporate world, higher the pay, less secure (and stable) the job is.

        You can imagine all you want but from my observations this isn't the case. How big do you think the turnover is in PE?

        All these numbers and percentages you are quoting. Where did you source these statistics? Or do you just make them up from "imagining"

        • virhlpool on 24/07/2023 - 21:00
          +1

          I didn't quote any numbers except the house prices and loan amounts/ repayments needed. Everyone knows those numbers - they aren't hidden secrets of any sort.

          If your observation is different, that's ok. Our observations don't need to be same. I just mentioned what I have been seeing around.

          • brad1-8tsi on 24/07/2023 - 21:04
            +1

            @virhlpool:

            I see people buy $2m to $3m houses as if it's a cakewalk (very common in Sydney and parts of Melbourne).. …but it's also not >uncommon for the others to take a huge loan (80% of the house price)

            Who are these people you saw? Did you actually see them? How do you know it's not uncommon? Your statements are anecdotal and not based on any statistics.

        • abb on 24/07/2023 - 21:57
          +6

          How big do you think the turnover is in PE?

          Pretty low.

          We had the same PE teachers for the whole time I was in school. Don't think they were on big money though.

    • Brianqpr on 24/07/2023 - 13:32
      +1

      How short term depends on how desperate the inheritee is to get their hands on it I guess!

    • dealsucker on 25/07/2023 - 09:00
      +1

      A secure well paid job enough to pay 12500 monthly in mortgage in these times. You are dreaming

      • Muzeeb on 25/07/2023 - 09:30
        +1

        They exist. You'd be surprised.

        • dealsucker on 25/07/2023 - 10:54
          +1

          I am not saying they dont, i am saying it wont be status quo for the life of the mortgage

          • infinite on 27/07/2023 - 12:28

            @dealsucker: People earn more more money as they professionally develop themselves and their career, not less.

      • infinite on 27/07/2023 - 12:27

        You are describing the average salary of a sales manager, state manager or business manager for any 25+ person sized business or up. If they have a wife/husband who earns an average wage, then they'll have enough money to afford those mortgage repayments and in less than 10 years they'll have the equity required to purchase investment properties or alternate investments that will repay themselves and then more on top which can be used to pay down their house mortgage even faster.

  • Hybroid on 23/07/2023 - 23:00

    $10k/month payment isn't an issue for those on $300k+ a year (common salary for highly experienced Engineers for example which are very secure jobs). Even more so if dual career partners. Let alone those with businesses and investments bringing in tons more.

    It's also seen as an investment as you are building capital in property, which itself usually appreciates too.

    • virhlpool on 23/07/2023 - 23:02
      +17

      Is $300k+ a year a common salary for experienced engineers? Which type of engineers you meant? Not common in IT at least.

        • iforgotmysocks on 24/07/2023 - 09:00
          +21

          Generally the “experienced engineers” on that sort of money would be in executive management positions

        • mrvaluepack on 24/07/2023 - 14:00
          +18

          No way. Engineering managers are 130 -180k only. 300k is only for mining maybe and executive levels.

          • brad1-8tsi on 24/07/2023 - 20:56
            +5

            @mrvaluepack:

            No way. Engineering managers are 130 -180k only.

            I was on $143k (+O/T, + bonus) in 2021 as a Maintenance Engineer (and didn't have a degree but did have 35 years experience). Our engineering Team leaders were on $160k-$180k; Engineering Managers were on $190k-$220k; their bosses (directors) $230k-$260k plus large bonuses if they met KPIs.
            That was a government trading corporation.

            $130k as a manager would be a title job so they don't have to pay OT. It's like were I worked when I was 22 - we all got made managers within 6 months of being hired.

        • virhlpool on 23/07/2023 - 23:21
          +1

          Damn.. I am in a wrong place then, mate. :)

      • SBOB on 24/07/2023 - 05:22
        +18

        Is $300k+ a year a common salary for experienced engineers?

        It's not. There would be exceptions for some engineering streams, specialist roles etc..but most engineers with decades of experience aren't getting paid 300k.

        • Hybroid on 24/07/2023 - 10:53
          -2

          I'll beg to differ. I have put together a lot of cost plus commercial proposals for bids including for JVs with competitors. It's pretty common in Engineering consultancies. So much so they have had to add "Senior" Project Director and "Senior" Technical Director roles, which aren't a thing, to differentiate between the $200-250k bracket.

          Some Signalling or Fire Engineers certainly do earn even higher being niche and in high demand.

          • Bren20 on 24/07/2023 - 16:38
            +7

            @Hybroid: Charge out rate "cost" can be very different to take home pay

            • Hybroid on 24/07/2023 - 16:39
              -1

              @Bren20: I'm aware of the difference between salary cost and charge out rates…

              Government contracts, especially panels, do not like fixed fee or blended rates. You have to provide certified actual salary costs, then add your operating margin percentage on top and then a fixed percentage profit/risk.

      • stirlo on 24/07/2023 - 06:58

        You could get very close to this in cyber security even with only a dozen years experience…

        • Ash-Say on 24/07/2023 - 08:31
          +5

          Even if you are earning $300k and sole earner, how $10k per month loan repayment is sustainable? I mean $300k net you around $15k per month tax. You are only left with $5k for zillion of other expenses( insurance, council, water, car, rego, food, utility etc.)

          • Aleigh123 on 24/07/2023 - 09:26
            +3

            @Ash-Say: I can only imagine you're joking.

            • Omarko on 26/07/2023 - 18:20

              @Aleigh123: He is absolutely right.

              • trongy on 27/07/2023 - 08:32

                @Omarko: Income tax on $300,000 is $105667 which is under $9k per month

          • trapper on 24/07/2023 - 11:31
            -4

            @Ash-Say: It's tough at the start for the first few years, and then after a few pay rises the guy is now on $350k and life gets easier.

            Another 10 years of inflation and he's now on $500k.

            • virhlpool on 24/07/2023 - 11:45
              +11

              @trapper: It's not as easy as you say. Wages in most white collar jobs haven't gone up much for last 10 years despite inflation.

              • trapper on 24/07/2023 - 11:49

                @virhlpool: There was very low inflation over the last decade though, only starting to pick up now.

                Only 20% total from 2010-2020 and most people would have seen a pay rise of at least 20% over that decade.

                Especially when most people are continually upskilling too - not solely relying on inflation related pay increases.

          • stirlo on 24/07/2023 - 18:54

            @Ash-Say: Who says these people are sole earners? Obviously most people buying in this range will be professional couples/families.

          • RefusdClassification on 25/07/2023 - 05:48
            +2

            @Ash-Say: What are all of these OzBargainers doing that are earning $250,000 a year? From previous threads it seems $250,000 is the median annual income here, and on Whrilpool it is $300,000. My annual income is just a tenth of that, $25,000. I want an OzBaraginer job! I want to get paid a fortune for sitting behind a desk, sending out the occasional email, drinking coffee, going to meetings, reading magazines, and surfing the net to plan my next overseas holiday.

            • whyisave on 25/07/2023 - 22:21

              @RefusdClassification:

              it seems $250,000 is the median annual income here, and on Whrilpool it is $300,000

              Like applying for a credit card,
              imagine if we all had to submit our pay slip,
              to get an account on OzBargin (or Whirlpool), haha
              how many of us wouldn't make the cut !?

            • YoungQuan on 26/07/2023 - 08:07
              -3

              @RefusdClassification: who is stopping you? If you are earning $25K p/a that's how much value you are providing to the economy. Thats actually disturbing that you find this ok and acceptable. You are obviously absolutely deluded if you think that people get paid $ 250K+ to do nothing. I guarantee they work far harder than you, or at least provide 10x value than you do.

              • djsherly on 26/07/2023 - 20:10
                +3

                @YoungQuan: Respectfully this is a load of bollocks. $25k is what OP is making. That's it. It's useless as a measure of value. I earn significantly more than that and if I were management at my firm I'd be asking questions about "value".

                Salary is what you're able to negotiate or accept. It has little to no reflection on value.

                So please, just quit that shit.

                • YoungQuan on 02/08/2023 - 16:01
                  -1

                  @djsherly: your income is your reflection of your value to society. feel free to stick your head in the sand, brokie

          • infinite on 27/07/2023 - 12:31

            @Ash-Say: You rent out 1 or more of your spare rooms. That's just one example, there are dozens of others you could pursue.

      • supersabroso on 24/07/2023 - 09:11
        +5

        Hahahaha agreed. Which field of engineering are you referring to, NASA? $300k/year lol what a joke.

        • nigel deborah on 24/07/2023 - 11:17
          +10

          Even NASA isn't paying 300k a year to most their engineers - you could pay minimum wage and you'd get good engineers wanting to work in the space industry (see SpaceX lol).

          The only 'engineers' on that kind of money are people who have moved into executive/leadership roles, and it's a very (very) small percentage of the engineering workforce. Only need to look at the ABS data to know that.

        • od810 on 24/07/2023 - 13:06

          Fake engineers :P i.e. software engineers can potentially make $300k as contractors. I don't see a lot of individual contributors can make that much. If you are managers, that is a different story, by then you are not considered engineers anymore.

          For australian companies, top band software engineers can probably make up to 280k package. If you work for american listed company i.e. google amazon microsoft, the top band is quite high due to big part of the compensation is in stock. I have seen number of over 500k

          • Kill Joy on 27/07/2023 - 12:05

            @od810:

            software engineers can potentially make $300k as contractors.

            This is the only way to reliably break into 300k as an engineer aside from working in high frequency trading where the pressure is next level and burnout is all but guaranteed. Or work on ancient rune tablets like Cobol for critical systems.

            If you work for american listed company i.e. google amazon microsoft, the top band is quite high due to big part of the compensation is in stock. I have seen number of over 500k

            AU is a vastly different market for these companies, and rarely anyone is signing FTE deals worth in excess of ~250k TC in AU today. I only know of 1-2 tech companies paying those kinds of salaries (atlassian is one) and its to existing employees grandfathered in on equity deals that have significantly matured over the years and maintain those some percentages.

      • dogboy on 24/07/2023 - 09:35
        +12

        You do realise that the monthly cash in hand from a $300k salary is $15k. How the hell are people happy to pay $10k of that on a mortgage??

        • Ghost47 on 24/07/2023 - 14:45
          +3
          1. They think propadee only goes up (and you can't blame them when the gov will implement policy after policy to inflate prices)
          2. When people earn more they succumb to lifestyle creep and end up being more carefree with how they spend money
          3. 10 years of rates headed downwards has created a lot of cheap money, people these days seem to think $1m "isn't much money". They probably think $1m is more like $100k back in the 90s so $10k is really only like $10 to them. They spend $10k here and there like they're buying a Big Mac Meal.

          I don't think this way but it's how I think a lot of people think about money now.

        • dmcneice on 26/07/2023 - 16:07
          +1

          You are correct, 300k is not as much as people think. I'm on around 220-250k with the mortgage of around 1.1m (I know thats a lot of money - but to be honest for a house for my family, it would have been in the bottom 10-20% of price for house sales in the region when we bought in January 2022 (when interest rates went "supposed" to go up for another few years).

          Although income increases, so do all expenses. Health insurance - more expensive, Medicare Levy and Taxes - more expensive, super - more expensive (Div293), Childcare - more expensive. Each extra dollar goes less far the more you earn to a degree.

          I'm certainly not comfortable with my mortgage (at around 8k/month now), but don't have much other option. If I moved, my income would drop dramatically anyway, and rent is pretty crazy too (like $1200/week anyway). What other option is there

      • kaleidoscope on 24/07/2023 - 22:45
        +1

        You'd need to get into people management + engineering to earn that bigger bucks. Engineering alone won;t get you there ;)

    • bahgsy on 24/07/2023 - 09:26
      +9

      $10k/month is most certainly an issue on $300k a year.

      • Ghost47 on 24/07/2023 - 14:42
        -3

        If that's $300k pre-tax it'll be $165k after tax as well.

        So after the monthly payments there's $45k left to spend, which IMO is a good amount for a single person but you'd also a) want to maximise your super contributions (~$27,500 a year), b) invest outside of property and c) enjoy life. Might be doable on $45k but throwing ~73% of your income into your mortgage sounds like a silly idea.

        • trapper on 25/07/2023 - 11:19
          +3

          On $300k your super will already be maxed out by employer contributions.

          Also on $300k your income after tax and Medicare levy would be $188,333 - so still $63,333 left after paying the mortgage.

        • MrFunSocks on 25/07/2023 - 11:52
          -1

          you'd also a) want to maximise your super contributions (~$27,500 a year)

          Nah, that $27.5k a year would be better in other investments or on the offset.

          • Ghost47 on 25/07/2023 - 16:26

            @MrFunSocks: Didn't downvote you but I'm not sure if I agree. Super is one of the best investments you can have because it's tax efficient and you pay no tax to withdraw when you're retired.

            • BobLim on 25/07/2023 - 23:57
              +1

              @Ghost47: I've interpreted early to mid-career super contributions as a high regulatory risk.

              I'm not currently putting in any more than the bare minimum.

            • MrFunSocks on 27/07/2023 - 13:16

              @Ghost47: That's all well and good when you're retired, if you live that long and can't use that money earlier to make your retirement better. My goal is to not even rely on my super for retirement because I want to retire early. $27.5k a year isn't chump change. 99% of people don't have that in savings, so putting it on super is entirely out of the question.

              I care more about my next 30 years than the final 20 years of my life when I'm old and broken down. I'd much rather retire early than have to wait until im 70+ to access my money.

              • trapper on 28/07/2023 - 12:17

                @MrFunSocks: The tax benefit's are undeniable though. Especially if you are in a higher tax bracket, you get 30% back for every dollar you put into super.

                Also when you retire and start drawing it back out there is no tax on the investment profits! Very hard to beat this.

                • May4th on 28/07/2023 - 13:28

                  @trapper: div293 tax of 30% means you still only "save" 15% on your marginal rate >250k. but the tax benefit is more so in the gains within super that is not taxed which will yield the most tax benefit

                  • trapper on 28/07/2023 - 17:26

                    @May4th: No super is taxed at 15%, so you save up to 30% depending on your marginal rate.

                    ie, You put $10k into super, it gets taxed at 15% so you lose $1500, but now in your tax return you can subtract that $10k from your taxable income and so will get $4500 back.

                    So it only actually cost you $5500 but you get $8500 into your super, $3000 extra - so that's a 55% return right off the bat.

                    • May4th on 29/07/2023 - 10:08
                      +1

                      @trapper: I'm referring to capital gain within super, which is not taxed within super structure. eg. your 10k super becomes 20k, when you withdraw after preservation age you won't pay tax on the 10k gain

                      Your super is taxed at 15% or 30% as contribution tax ie. taxed when you contribute to super. 30% if you earn above 250k as div 293.

                • MrFunSocks on 31/07/2023 - 01:25

                  @trapper: The tax benefits are irrelevant if you can’t afford to park $27.5k a year until you’re 70 years old. It won’t help you retire early, in fact it will make that harder.

    • gromit on 24/07/2023 - 11:21
      +11

      As someone on around $300k I can tell you without question $10k a month is massive and I couldn't do it comfortably. Perhaps with dual incomes. also you will need extra to cover rates, maintenance, insurance etc on top of that.

      • Brianqpr on 24/07/2023 - 13:55
        +9

        https://forums.whirlpool.net.au/

      • May4th on 25/07/2023 - 16:30
        +1

        Yep 300k is about 180k after tax, 120/180 is almost 70% of your after tax income. you'd really need it <50% to be comfortable especially if you have kids.

    • Drakesy on 24/07/2023 - 11:31
      +5

      $300k+ a year is definitely not a common salary for highly experienced engineers. And the ones that are on that are rarer than hen's teeth/working in a FiFO environment.
      $300k a year is for managers/directors.

      Lawyers, investment bankers and Partners at the Big 4 maybe, but not engineers.

      They tend to top out around $200-$250k

      • virhlpool on 24/07/2023 - 11:44

        Lawyers, investment bankers and Partners at the Big 4 maybe, but not engineers.

        Agree. These folks may even cross $1m but they are a tiny minority.

    • Brianqpr on 24/07/2023 - 13:34
      +3

      A couple on $150k each, good money but not outrageous, gets you there and with less tax payable than a single person earning $300k.

      • trapper on 25/07/2023 - 11:31

        $25k less tax!

  • We Out Here on 23/07/2023 - 23:00

    they probably bought in the inner west of sydney, nice federation type homes in marrickville or the like

    they'd be on good coin, i dont think people who buy in that area would be struggling financially

    the ones in the western suburbs have much more modest loans, probably 7-800k - these are the ones that are feeling the pinch of the rate rises

    • virhlpool on 23/07/2023 - 23:04
      +1

      they probably bought in the inner west of sydney, nice federation type homes in marrickville or the like

      Not really.. $2.5m is a common price in many suburbs of The Hills Shire and Northern Sydney in general.

      the ones in the western suburbs have much more modest loans, probably 7-800k - these are the ones that are feeling the pinch of the rate rises

      Most new suburbs of Blacktown council command the price of around $1.5m for the new homes (how inflated and unreal the prices are, is a whole different topic) but even those folks would be on $1.2m loans easily.

      • We Out Here on 23/07/2023 - 23:21

        maybe. good luck to them

      • brandt on 25/07/2023 - 14:54
        +3

        1.2m loan is very achievable for family on 250k which for two professionals or one professional and one trades is not uncommon at all.

        2.5m houses are generally people upgrading so reinvesting their equity and repaying between 5 to 8k per month. You need to go talk to some brokers and bankers to understand demographic. There are a lot of people with cash from india or china (in hills district) and russia or middle east (in eastern suburbs) for large down payments as well.

  • bcarp on 23/07/2023 - 23:25
    +8

    I wonder how these buyers feel comfortable with such massive loan amounts even if they have a borrowing capacity as per the banks' definition?

    I would never buy a house on the bank's definition of whether I could afford it or not. The bank's offer will vary depending on the economic circumstances of the time & the regulations around borrowing. 15-20 years ago, they were lending money all over the shop. We were offered a loan we couldn't afford to pay, even the following month without any interest rate rises. Go figure!

    Then after GFC, the regulations tightened & only smaller loans were offered. Then people complained they couldn't borrow enough so the regulations were relaxes. A few years ago, they were tightened again, then relaxed again. Can you tell me that the borrowing capacity of any individual person went up, down, up, down & up with each of these regulation changes? No way, it's just a regulatory change.

    Do your own maths. Get someone independent to help you out if you can't do your own maths. Take into account losing a job, someone in the house being unable to work, having kids, etc. Don't rely on what the banks tell you. The person selling you the loan has a vested interest in pushing the loan size up as much as possible.

    • virhlpool on 23/07/2023 - 23:29
      +3

      I would never buy a house on the bank's definition of whether I could afford it or not.

      This sentence makes so much sense. Banks' definition will always be in favour of their business to the extent possible. They are in the business of lending and not in business of ensuring the most 'sensible' outcome for the borrowers. People, including myself, often forget this basic fact and need to be reminded.

      I remember, after Royal Commission in 2017-18, lending became conservative and strict (how it should be) but that effect remained only for a couple of years and then banks started going rogue again. I wonder what changed in that duration, that caused this.

      • bcarp on 24/07/2023 - 00:09
        +4

        I wonder what changed in that duration, that caused this.

        I don't think the banks necessarily went rogue. The natural result of a regulatory (note, not voluntary by the banks, but regulated) tightening of lending criteria was that people were able to borrow less. That was the whole idea. To protect people from unexpected changes in financial situations, such as a job loss, interest rate rise, etc.

        So what happened? People complained they couldn't borrow as much to afford that house they had their eye on. Instead of living within their means with a reasonable safety margin, people wanted to borrow more that was necessarily sensible. This made the news headlines as something along the lines of "people priced out of market by tighter lending rules". Well, that was the whole idea!

        Rather than hold the line, the APRA (I think) loosened the rules again, and the banks increased their lending since they were allowed to.

        This is my simplistic, non-financial-person view. Some smart financial guru can probably step in here & explain what I've done wrong in my thinking, or explain this better than what I have.

    • rambao9 on 24/07/2023 - 10:01
      -2

      So did you ever end up buying anything?

      Can't help but feel this is such poor advice as it sounds like almost to "not invest in property unless you can afford it" (which majority of us aint gonna have $2-3m in savings?)

      As unfortunate as it is, most people purchasing $2-$3m property are those who have earned good coin already in property investing. It's an upsize / downsize etc.

      By you skipping out on the "loan you couldn't afford" at the time, somebody else earned that $200-300k (assuming few years have passed). I mean, it's entirely up to you, but don't go about complaining later when you can't afford anything…

      • bcarp on 24/07/2023 - 17:42
        +1

        Can't help but feel this is such poor advice as it sounds like almost to "not invest in property unless you can afford it" (which majority of us aint gonna have $2-3m in savings?)

        Yes, we bought, but with a loan we could afford. Including contingency plans. Twenty years later, we're doing just fine. GFC passed & we had no issues. I worked overseas for a year with a negative income for that year (yes, that's correct!) & had no issues with the loan. Covid knocked my business to a negative income for 6 months & we had no issues with the loan. The contingency plan allowed us to do this with no stress.

  • SmiTTy on 23/07/2023 - 23:31
    +5

    I feel there are a lot more people who earn good coin than you think in Sydney. Esp when both working couples are highly paid professionals.

    Also.. They don't need to be committed for 30 years. They can sell and move whenever they feel they want to or need to.

  • AustriaBargain on 23/07/2023 - 23:42
    +4

    Inheritance helps. A lot of Australians can count on getting a million bucks when the parents die, from their own parents home value and sometimes millions in savings/investments/super.

  • bobbified on 24/07/2023 - 00:17
    +1

    I guess the question should be - what other options are there? Having a home is a need, unlike buying a car or toy. Those that can 'afford' it are better off buying if they know they'll be around long term. Those that can't afford it have no choice and need to think of something else.

    • Some Human on 24/07/2023 - 00:40
      +5

      Another option is to not live in sydney.

      • bobbified on 24/07/2023 - 00:46
        +3

        I agree - but it's not easy to just pick everything up and go to a new place. Especially if someone grew up there.

        • Trying2SaveABuck on 24/07/2023 - 08:46
          +2

          I agree - but it's not easy to just pick everything up and go to a new place. Especially if someone grew up there.

          literally every Australian who isnt of TSI or Aborginal decent has somewhere in their bloodline picked up everything and moved….most moved from the other side of the planet, not speaking the language or understanding the culture….this includes mine ancestors and probably yours. If they could leave places like Europe after WW2 with nothing i dare say people can move out of NSW and Victoria to other states

          im a millennial but im a bit over people moaning about houses in Sydney and Melbourne if you cannot afford it move.

          • virhlpool on 24/07/2023 - 09:09

            @Trying2SaveABuck:

            im a millennial but im a bit over people moaning about houses in Sydney and Melbourne if you cannot afford it move.

            How easy it is. Isn't it? Sydney and Melbourne can happily retain their over inflated prices and people who can't afford should just move.

            • Trying2SaveABuck on 24/07/2023 - 09:24
              +1

              @virhlpool:

              How easy it is. Isn't it? Sydney and Melbourne can happily retain their over inflated prices and people who can't afford should just move.

              it is easy because you DONT have to live there

              Unemployment is under 4% it isnt like there is no work out side of Melbourne and Sydney. Id understand the argument if that was the case. ie most of the best paying jobs in the UK are in London makes sense you want to live there. That is not the case in Australia
              - if anything the best paying jobs are out in the mines.

            • infinite on 27/07/2023 - 13:30

              @virhlpool: You can easily live in an affordable outer-metro location in either of those places, it's not difficult at all.

              This generation of kids and starting young workers aren't willing to accept however that first home buyers have never had the capacity to afford something great or super nice and must purchase something very modest and affordable the first time out. Then they can work their asses off to move up into something better 10+ years down the line.

          • Ghost47 on 24/07/2023 - 15:35

            @Trying2SaveABuck: I'm guessing you've done it then (i.e. made the move)?

            Just because you can do it easily doesn't mean it's the same case for everyone else. If everyone could do it prices in other states would be higher than they are now.

        • Geoff01 on 24/07/2023 - 08:47
          +2

          Its a whole bigger world out there. Feel sorry for people who don't move because they "grew up there". We relocated to the UK for 13 years just to experience something different and discover Europe. Its not hard to do.

          • fantombloo on 24/07/2023 - 09:13
            +2

            @Geoff01: I'm with you, but just because that's us it doesn't mean that's everyone. Various people just find it harder to do for various reasons.

            The other aspect of this is the reason to move and the destination. My folks like tonnes of other wogs were heading to something bigger and better with lots of opportunity and good pay - what's been spoken about here is people going to something smaller with potentially less job opportunity and pay, just some supposed opportunity to buy a house. Probably not as relevant for skilled workers who may be highly desired for various industries outside the big cities but not much help for the unskilled who possibly have less job opportunity outside a big city.

        • abb on 24/07/2023 - 22:05
          +1

          Also most of the desirable jobs are in the capital cities.

          Sure, I could move to Wilcannia. But there are zero (or very few) jobs related to my expertise/interests, similarly for my partner, and even if we both somehow got 100% remote jobs, we couldn't do the things we like to do on the weekends.

          • infinite on 27/07/2023 - 13:33

            @abb:

            we couldn't do the things we like to do on the weekends.

            That's a lack of imagination problem, not a location problem.

  • Cluster on 24/07/2023 - 00:29
    +4

    The more I look at the Sydney and Melbourne market from afar, the more I'm convinced those cities have a large population of lawyers, doctors, dentists, board members, and other highly paid career people. Oh, and better not have a child and cut the family income in half, or it'll risk the mortgage.

    Where do poor people who can only afford a $500k house live?

    • hasher22 on 24/07/2023 - 01:12

      Prob never, a house is out of the option. Only possible home is a unit.

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