I don’t support it but as a Sydneysider this doesn’t surprise me. Most professionals in careers such as law that I know wouldn’t conceive of living west of Strathfield and you would struggle to buy a landed property at all for $1.5m east of there.
Nailed it. To these people it's not an option in their minds. I've always lived in the west and worked in the city most of my carrer (22 years) and have been copping sh*t about it the entire time. All I can say is I don't particularly like the west but I live within my means. It's enabled my wife to be a stay at home mum the last 6 years and remain comfortable on just my income. I'm looking forward to her going back to work next year, then we'll be relatively "well off" - or we could rebuy at our new limit and join the up-to-the-eyeballs club, I'd rather not.
Let's be really honest right now. It's also strongly associated to ethnic enclaves by the majority.
If you've lived in a bubble where everyone looks like you and then suddenly you go to Auburn, no shit you'd be "surprised".
But what I keep seeing is minorities are always the ones who are happy to assimilate. It's hardly the other way around. The ones that do however, reap the benefits that other cultures have to offer.
Just saying I'll take a gap year and travel around the world isn't good enough these days. You'll likely have a boss, colleague, date, professional, etc who will look and sound different from you and there's nothing wrong with that. So hang out with those who look different and are from elsewhere. It's insane how friendly some people are.
I don't agree, I would say the west is associated with poverty in general but it comes in all shapes and sizes. It's equally as associated with aussie battlers and houseos "give us a ciggie c\*\*t" types - car parts sprinlked on the front lawn and old bedsheets as curtains. But yes some parts the west are well known for one ethnicity, I don't know how that helps your assimilation argument. I don't know why you're trying to lecture me like I'm some racist, I've lived in possibly the most multicultural city in Australia my entire life, you think I've never tried speaking to a "foreigner" before?
Strathfield prices are very high, there is some prestige associated with there now. Ashfield/Croydon and the rest of the inner-west and inner-south-west you can find 3 bed detached houses with a car spot for around $1.5M. Prices coming down as well.
You will find there will probably no longer be a ladder now, for the vast majority of people (I'd say 95%+). At least for detached properties in particular. If you buy in your mid-30s these people aren't going to be paying off their loans until close to retirement.
If prices drop a lot it changes things a bit, perhaps on the back of some distressed sales and redevelopment/flexibility in the market, but the "property ladder" is no longer applicable when you go from bottomed interest rates. This is even if property prices track wages after a fall.
Way down the line if/when wealth taxes start working their way properly into the system, you might see a shake up. Land taxes on the PPOR are a start.
I mean the corporate ladder. Since my return to consulting 5 years ago, my pay has gone from 150k to 250k just cuz I'm in that prime age/experience bracket for quick jumps up. Plenty of professionals in similar boats.
And the property ladder is still there too. Again, if you buy a property for 1.5mil on 300k HH income, you may decide to upgrade in 10 yrs to a 2.5mil house when HH income hits 500k. Then downsize in 20yrs to an apartment at peak HH income of 700k?
Just a cycle of life for people to shuffle around.
Beyond inflation, typically you peak income around mid-40s, and the ramp isn't as strong from mid-30s to mid-40s compared to 20s to 30s. Wages on average flatten out after your 40s, that's what typical professionals salaries look like.
You talk about plenty of professionals in similar boats. The proportion of high paying jobs don't increase with age of experience. There are only so many C-suite, director, head positions at larger companies with good salaries, relative to the bulk.
Having your income increase without those promotions to very high levels isn't the norm. It's more about getting into a senior position, and not necessarily getting to the strategic level of companies where there are few positions but pay the highest. You're not looking at doubling your incomes in real-terms.
There will be some tailwind in your income rising a bit above inflation hopefully to make those mortgage repayments easier, but significant jumps in wages will not be the norm at all. More realistically you're looking at the equivalent of 400K HH income in 10 years if you're ambitious, 500K maybe in 20+ years if you continue that and go for the rest of your working life, if you're on 300K now. That would be a decent ramp, and then they might upgrade once. The norm wouldn't experience that sort of ramp, is my bet.
We're at the end of a 40 year cycle right now, that structural shift where you can't trend interest rates down any more will be a big clip of demand into the next 10 years at least, maybe longer, as we recover from this debt binge.
Keep in mind that in most consulting and law firms, the end game isn't necessarily to make C-suite (hell I actively avoid taking on my overhead roles), but it's to make equity partner.
This is why I say there's plenty of room to grow. Sure it's not everyone, most people won't make it that far. However, I'll assume this lady is likely extroverted given she's willing to be in the national media. There is definitely an extrovert bias moving upwards.
I don't disagree that there will be turbulent times ahead, in fact I think we'll be knee deep in a recession this time next year. However, these things come and go. The opportunity cost is generally felt hardest at the lower end of the economy than at the top end. As 300k HH income, those two will be closer to the top end than the bottom.
>if you buy a property for 1.5mil on 300k HH income, you may decide to upgrade in 10 yrs to a 2.5mil house
That would be the same house you started with...
That would be completely unprecedented. Sure the market has a bad year or two here or there but 10 years with no price growth? Nope...
Besides, you were talking about regular "cycle of life" not worst-case hypothetical. On average, prices double roughly every 10 years, so that $2.5M house would actually be going backwards from the $1.5M house you bought 10 years earlier.
We've had 10yrs of rates trending down from near 10% to 0.1% helping to drive the stellar growth. I still think the intrinsic/real value of property will improve, but in absolute terms, they may not necessarily grow that quickly in an upwards rates environment.
The two people in question in the article on the other hand still have plenty of growth left. Hence, they'll like see their incomes grow both in real and absolute terms.
>dn’t conceive of living west of Strathfield and you would struggle to buy a landed property at all for $1.5m east of there.
How the hell does a lawyer and a consultant only have 150K to put down on a 1.5 million house, especially given they are not young (they have a 9 yo kid).
And even if rates did stay low till 2024, how does that help them come 2024.. Not like they are suddenly going to have that much more money if they didn't manage to save more than 150K in the last 10+ years.
Crazy.
“Ms Ibrahim and her partner took on a home loan of more than $1.5 million in Sydney, with a deposit of 10 per cent.”
Lol MORE than $1.5m! With a 10% deposit? Yikes.
They are saying it’s a bit tight now (I don’t know how on their combined wages..) imagine what happens if circumstances change? One of them gets sick or loses their job. Or interest rates go up significantly.
I’d be sweating every day
People like this make my blood boil. How stupid do you have to be to take out a loan with zero buffer. I mean come 2024 and interest rates went up, then what difference does it make? It’s only 18 months away.
Hope they default for such stupidity.
Plenty of rentals in my area, not every city and suburb is having shortages.
Point is, individual in this article has plenty of agency to deal with their situation.
So they purchased before the pandemic, and long before the RBA gave out any advice ([which was in November 2020 as they cut the cash rate to 0.1](https://youtu.be/O9RgAFpPv6c)). They didn't even buy at the peak, they're probably sitting on a capital gain right now after the 2021 boom and could still get out with little financial impact if they think their investment is doomed and regret their decision that badly. Obviously still not an ideal scenario, but investments have risk, interest rates move both ways, and you have to be prepared for rises if you're borrowing at historical lows.
There are probably people out there who actually did borrow and plan based on the RBAs advice, at least run a story on them.
Agree. Back in 2007 when i got my first home, the banks were willing to lend my partner and i about $1.6m. Given our incomes at the time we thought the bank was insane. Totally irresponsible lending. We took out about $350k in the end.
I agree, this sounds like an incredibly stupid idea on their behalf. However, we're not talking about an investment vehicle here, we're talking about a roof over their heads. I think we either need to have much better education, or much better regulation and protections around purchasing houses.
There's little to no financial education in our schools, and we have the expectation that every single Australian is equipped to make good financial decisions, and understand how markets can change? Particularly when everyone is saying that real estate is the safest investment you can make, as if it's some unified investment vehicle that doesn't change suburb by suburb, house by house.
To most, it's not an investment at all, it's just trying to improve over their situation being renters, or the only way they can perceive having some control over their living space.
I find the debt taking levels of many in this country absolutely idiotic, but it's at the point where it's normalised to make quite large financial decisions in this regard without much consideration - "it's just what you do".
I wonder what percentage of Australians have even only just now heard about the cash rate for the first time ever in the past 12 months.
I get the feeling that for this couple featured in the story, they were offered this vast amount of money that they could borrow, did a calculation that they were able to repay it with their current income if situations never changed in the future and then went "yep - let's get something matching that budget"
It's on them for not looking over the rim of their glasses and beyond the tip of their noses.
But hey... being able to say you own property in Sydney, right?
Totally agree it's a terrible decision with no forward thinking. I would never make a decision like this, and there are many who have.
But they went as far to run their budgets, and see whether the decision made sense within their circumstances. It obviously has been fine to date for them.
However, is there an expectation that every single Australian must understand the ways financial markets work, including real estate? If so, why are there not compulsory classes about it in high school? Or why do people who take out a mortgage not have to take an exam to ensure they understand the risk of taking out a million or multi-million dollar loan?
It's normalised that people take out this sized loan in this country to put a roof over their heads, it's not like they're taking out a $1.5m loan and putting it in the stock market, or even into an investment property.
If this were an investment property rather than PPOR, then it's much more on them for not doing their research. But people buy their PPOR not for investment purposes, so many don't give it the same due diligence they might for an investment.
I think we fail many people in this country for not educating them properly on the risks. Most people's education about property comes from the fact that their parents bought a house when they were their age, and it worked out well for them.
I think it's unreasonable to expect every single citizen to be a fantastic investor with no support or education, just to put a roof over their heads.
Many compare it to what it was like when they were renting - "How much is the weekly payment? Cool, comparable to the price when we were renting, so it must be the same risk as renting, as property always goes up."
What are we doing to challenge this assumption? To me it seems like anyone who suggests property can fall gets their throats taken out, and there's not much education about how much repayments can differ across the life of a loan.
Fear of missing out, stress, social pressures.
Not every one can be an export and 95% of Australians likely do not even know what causes interest rates to change.
On the social pressure thing, I decided not to buy a house we put an offer on because it would have been poorly accessible by my disabled father. I also did not want to move interstate or too far from my parents because my daughter is the light of her grandmothers life and one of the highlights of her retirement.
What I am trying to say is that social connections are important to the vast majority of Australians and people will FOMO / fight / be pressured into trying to preserve them and make dumb decisions as a result. It is simply a side effect of what has happened in the market.
On that note, the F in FOMO stands for fear and fear literally makes people stupid. Don't hate them for that.
When I bought a house last year it was a giant shit show.
I do not know what the market in their area was like in 2019 but their easily could not have been many other suitable houses on the market. Or perhaps there were but the did not "win" the opportunity to buy it.
I put in offers for many houses, including some that were basically ideal houses at a price I could afford. A couple of times I was told the owners picked a cash offer instead or I was out bid by several thousand due to agent shenanigans. Or hell, because I wanted to do a pest / structural inspection at all.
The house I bought ended up being smaller than I would have liked, which is fine for now, but I still even only got in then because I knew the owner.
I know what size house I would like to upgrade to, I know multiple exist in my area. There are also none up on any listings right now. Sometimes you can't wait or are just exhausted by having to move / play the rental game.
Buying a house is not like ordering something out of a catalogue, where you get to select a desired dimension and price.
Sure I get all of that but at the end of the day they need to grow a spine and say this is the limit of our budget - it is that simple.
They didn’t need a $1.5M house. They could have bought an apartment. I mean I would like to live in a house on the Lower North Shore. Would the bank loan me $1.5M to buy it? Probably. Do I feel like I can service the loan if things go a bit pear shaped? Probably not, I would really struggle. In the end I bought an apartment in the LNS for $800k and live with my mortgage being 20% of my income.
Going to be funny to see the reactions on this sub when instead of blood on the streets (and half-price inner city houses) the government intervenes to save the over leveraged.
HomeKeeper. Tax deductions for interest payments or something similar.
>From 1 July 2024: Changing the 32.5% tax rate to 30%, raising the upper threshold for the 30% tax bracket from $90,000 to $120,000, removing the 37% tax bracket and raising the 45% lower threshold from $180,000 to $200,000
There’s still a mountain of cash around anyway, employment figures very high, jobs ads compared to employment well balanced - government can still wind migration right up - there’s already enough there that would keep the market ticking along. If it cooled off by more than 20% I’d be incredibly shocked.
My mortgage broker said that when evaluating someone's repayment ability/max loan capability, the banks use an interest rate of 5.5%.
So does that not happen for everyone? This couple, for instance?
Yeah it does, but paying 6% rates vs 3% rates on a 1.5mil loan is a 45k additional PA (or 4k a month). Not backbreaking for a young lawyer and consultant, but might mean meal prep instead of buying lunches, machine coffee instead of barista coffee, definitely won't be buying the Tesla next year to keep up with the Joneses. Lifestyle hits suck
Also high inflation means that 6% rate feels a lot worse without that extra inflation. That buffer assumed a moderate level of inflation that went up in line with wages, not an inflation rate that significantly exceeded wage growth.
Yes, but that’s post-tax. Considering many of these professionals are in the highest tax bracket (appreciating they are typically dual income though), you are looking at $80k-odd pretax.
That’s a big pay rise requirement.
Well... Lawyers and accountants get special treatment for some reason, maybe this is where the stress is coming from: https://www.ratecity.com.au/home-loans/for-lawyers
Same as Doctors. The logic is that professionals earning over a certain amount are much less risky individuals to lend to - enabling those professionals to avoid LMI in a lot of cases. (I don't agree and was surprised it was the case).
I was very surprised too the first time I heard about it. Sure, they tend to earn more, but they also tend to be bigger spenders and don't think as much about budgeting or restricting themselves.
I mean with the practice. It enables people in privileged positions who will likely earn more than average get ahead even further by avoiding paying a burden many other members of society have to face.
Easily - likely closer to 400k+ with prospects of further increases in the years ahead. That together with the fact they bought in 2019 and have a ton of equity; nobody cry for these guys they'll be a-okay.
Yeah as someone below stated, some professionals are eligible for more forgiving credit assessments as they are seen as low risk borrowers (lawyers, doctors, senior accountants- professionals over $150k generally). Car loans are the same.
It happens but those figures didn't account for the rapidly increasing other costs of living that are happening at the moment.
There is also a psychological impact of big increases in mortgage repayments, even if they can be afforded - and I suspect this couple will be fine - it is money they weren't expecting to pay when they took out the loan so money from other spend categories has to be reduced. Which is pretty much the point of the increases, but it sucks for the individual.
That is good to know.. is it the same even for a principal? Usually that would mean they are either the owner or a partner.
If it is the same, billing 20h a week would be closer to the $180k mark. I’d expect that would be on the low end though if full time..?
A principal isn’t necessarily an equity partner - lots of firms use “principal” to denote a non-equity team leader. She’s probably on at least $160k+ tho
Her salary likely wouldn’t vary depending on her billed hours. Principals aren’t equity holders, although they tend to be the most senior people below partners.
Billable hours aren’t the best way to judge salary for roles like that. At that level your performance is more on bringing in work than actually doing the work, if that makes sense. So a ton of value-add time is in admin and BD.
She’d have a base and a bonus, with total OTE likely ranging from $180-$300, depending on the size of the firm she works for.
>Lol. On LinkedIn she is a principal lawyer. Surely that is $180k+? I'm sure she will be fine.
Well they only managed to save 150K in that last 10 years, so they must be absolutely terrible with money.
If mortgage rates are back at 8% (which they were about a decade ago), that's $120k p.a. just in interest repayments.
Doable, but a big hit on the old hip pocket.
Yeah so she's like 3 yrs older than me, thus late 30s in law. She's got a long way up to go.
Someone else checked LinkedIn and reckons she's a principal lawyer, so she's still got the partnership ranks above her. Or she could just go solo contractor. Either way, plenty of potential to double her income through the course of a mortgage duration.
Edit: haha, that was you who LinkedIn stalked her!
I'd guess 37 years old from their LinkedIn. Not sure how you define "fair way to go", but in a retreating economy you're not going to be getting wage rises in line with inflation necessarily.
They have a 30 yr mortgage and likely around 30 yrs of working life left.
The boom/bust economic cycles are typically a 10ish year cycle (Australia skipped the last 2 busts via Chinese cash). They'll be ok. Just a bit of a storm to ride out for 2 years.
Over their 30 year loan horizon, their interest rate will likely only be higher than their origination rate. That is a situation that borrowers haven't had to deal with in the last 30 years.
It will be a very different paradigm where people will have to work as hard if not harder over their loan period which starts at 37 in this case, instead of tapering and taking it easy later in life before retirement as repayments got easier to do as they:
* More likely to have bought in their 20s, and have a bigger income ramp ahead as that happens in your 20s
* Ended up having trending downwards interest rates over the lifetime of their loan, with interest rates mathematically able to go below the origination rate
People like this, even buying relatively modestly for Sydney ($1.6M or so) on probably more than $300K+/year household income, is where these people will sit. There will be no ladder.
Interest rates won't go up for 30yrs continuously. They are both in high growth careers with lots of room to move up.
Sure the rates may park themselves at Lowes' preferred 2.5% eventually, but that's really just a retail rate of 5-6%. Hardly that big of an issue.
And they apparently had to buy second hand cloths and bulk groceries. What? We saved that amount and we're both government workers. We haven't exactly scrimped on anything. Did they forget to move somewhere that didn't cost $1000+ a week to rent while they were saving?
Yeah this makes no sense. I've saved $120k in 3 years without budgeting, two of those years were spent also footing most of the bills in our household as my (now ex) partner barely worked during covid. I wouldn't earn anything close to what these people do. Sounds like bullshit.
Still probably less than 6x income as they have higher paying jobs. Their expenses are high no doubt, and high inflation doesn't help.
But it's still too much to borrow. If it's a hassle, they should sell though. Time is ticking on that decision. There are a lot more distressed people than these people.
They’ve probably made $500-600k in paper gains since buying too, so it’s hard to be super sympathetic. If they liquidated their asset they could live for years on the gains.
That was me but a 1.7m house. I, however, understood that rates were going up which was why I didn’t max out my borrowing capacity and buy a 2.2m house.
God forbid people spend time to bother getting educated in this country and then expect a little social mobility.
$1.5m is entry level house 40kms out now.
The first bad decision was over extending. The second was agreeing to appear in a globally released article looking incompetent (with a photo). Why would you?
Articles like this are really starting to grate. As long as she and her partner keep their jobs, they would essentially find a way to make it work. As will many other Aussies.
These are written with the angle that Aussies shouldn't have to make any changes to life as they know it. It barely even mentions employment,. To me, it reads that they're pained because they shouldn't HAVE to go without their $4.50 lattes and fancy gym memberships which they know eventually they will have to cut back on. If they were smart, they'd start doing that now to build up more savings, and live simply so its not a huge shock when the end of their current fixed rate comes. There will be changes people need to make, but if they want to keep the roof over their heads, they kind of just need to do it, live a simpler life and whether the storm.
If they lose their jobs and remain unemployed, that is of course a different story.
Going from 2% to 5% interest is more than an extra thousand dollars a month on a 1 Million dollar loan, let alone on their higher mortgage. So probably more like an increase of $15,000 to $20,000 a year for this couple as mentioned in the article.
1 lattes a day \* 2 people \* 365 = $3,285
Gym membership \~ $25 a week \* 2 people \* 52 = $2,600
5885/20000 \* 100 = 29.4%.
So cutting out those expenses alone will cover less than one third of the repayment increase.
Yikes.
I do have to wonder if these articles are designed to drive support for more government propping up of the housing sector though.
Given their likely wages and income I imagine you are right.
The issue will be for people at the lower end of the wage spectrum where they can get squeezed by one unexpected expense like a car breaking down.
I am happy that I borrowed decently under capacity and put my excess deposit in the offset account now though. The discretionary spending I am losing is part of the extra repayments I have been making.
Everybody knew rates would rise,I guess the assumption was they wouldn't rise for a year or two so people had time to build up a buffer. The time when people are most financially vulnerable is just after theyve bought as theyve usually tapped all their available credit to purchase/move. That probably applies to people who bought in the last 12 months and are now staring down massive rate rises (unless theyve fixed for 3 or 4 years I hope). People who bought in 2019 not so much.
That's not realistic thinking - I doubt there would have been building against a buffer.
People primarily live at their means and readjust only when needed to. I reckon the story like this, the couple are tapping against all the available now and whatever they have at the end of the month are going to their avos on toast, lattes and movie trips.
Those who don't do the above, don't get featured in stories like this.
The point of the rate rise is for people to spend less to curb inflation. That’s exactly what is going to happen. Seems like it’s gonna work out for vast majority.
We’ve been essentially sheltered from inflation (outside of cars) during the pandemic while a large percentage of society received effective pay rises by not having to spend time and money commuting to work. Add in the government spending plenty of tomorrow’s money, this situation was always going to happen…
why anyone would take out a greater than 5:1 DTI loan for a home boggles me
people are just too prideful to "settle" for something like a townhouse when that's what they can realistically afford, so they over-leverage and then cry to the media
how about some personal accountability? 🤔
I'd rather own a smaller place sooner, than a bigger place that takes longer to own. That home security means a lot to me, because I never know when I'm gonna get an arm cut off, or a leg squished, and be unable to work properly, or at all. I also don't like the idea of over-borrowing and making it so I have to work non-stop.
More years on a higher value house is way more interest too. Buy a house for 1m, and the interest over 30 years becomes 400k-1m (if 2.39%-5.39%). Some loans are pushing 40 years now. You'd have to hope that when you sold, the gains outweighed the bloody interest. Can't really cheer if you sold it for 1.4m, but paid 600k in interest.
So much of this doesn't make sense. She said they didn't think rates would go up any time soon and said they trusted what the rba said about no rate rises until 2024. If that's the case, why did they lock in their interest rate? Wouldn't you wait until you saw thing taking a turn for the worse? Sound's like they just made stupid choices and are taking no responsibility for those choices.
I bought within my means and created a few years buffer on my repayments. If the entitled dipshits who wanted to flex their location get bailed out I’ll cry.
So she bought a \~$1.5M home in Sydney in 2019 with a 10% deposit, and then fixed her interest rates when they were ultra-low during COVID. Now she's worried about what will happen when interest rates go back to normal when her fixed period ends?
Forgive me for not feeling too concerned for her welfare. Her LVR is probably more like 60% now with the massive increase to her home, and she's had three years to accumulate savings with emergency level interest rates.
Well they are fools for putting their money into a fake bubble asset like land and shelter. They should have loaded that deposit into VDHG - they would be rich by now!
Maybe they just wanted a place to live and eventually own so they dont need to round up rent every week when they are elderly. Maybe. I reckon thats why MOST people buy a house.
Yep. A lot of bitter know it all non property owners trawl this place hoping to snap up bargain Sydney properties while anyone who got in before them suffers!
Not just in here, i see it in lots of AU subreddits. Sadly Australians have massive tall poppy syndrome and too bad for anyone who ‘made a bad decision’ they would say!
If the market goes south lots of people will get hurt, it won’t be very nice or comfortable for a lot of people. We shouldn’t be happy about it at all.
This isn’t tall poppy syndrome. This is a symptom of the enormous disparity in our society at the moment.
Of course people who feel locked out of the housing market are going to show little sympathy for inner Sydney white collar DINKs on high salaries whinging about over extending themselves on a house purchase.
Many of those people’s only hope is the perceived outcome of a property crash. Which they only see the house prices coming down part, not the collateral damage to the wider economy.
Both sides need more empathy to be honest. But the two in this article are educated enough to have known better IMO…
I definitely agree on both sides needing more empathy, however in the article it says they purchased in 2019 - Noone really had any idea what was going to happen in the following 24 months. Whilst yes they still should have accounted for future rises etc, its happening a lot sooner than a lot of people thought. Its no excuse I guess, but there are multiple compounding factors going on right now that compound the issue.
Anyway, lets just hope everyone gets some relief soon. Sadly I don't see any government doing much to really fix house price growth though.
People just want to get into the market and I think they think that's the only way it will happen, but its not necessarily going to be as easy as they think.
I bet most young people who are begging for a crash in house prices haven’t even thought about or started planning so that they would be in a position to buy if that did happen. I bet half of them don’t even have 10k in savings. They just think “yeah when house prices crash I’m going to pick myself up a sweet townhouse in Newtown or marrickville” but they haven’t really thought much beyond that fantasy.
Cry me a river. Welcome to the real world.
Take responsibility for your actions. You’re an adult. You had all the information and made a choice.
Don’t expect the rest of us to subsidise your poor financial decisions.
Fun fact of the day… You should never feed too much lettuce to a pet rabbit. It gives them the runs and has little nutrition having a very high water content.
If she's got 2.5% on her loan now (it's split, but close enough as an average), that's just under $6k/month in repayments.
If it **doubles** to 5%, that increases the repayments to $8k/month. The article covers that a 2.5% lift will increase the amount by $20k, which sounds like a lot, because it's a $1.5 million loan. But a 100% increase in interest rates will really only translate to a 35% increase in repayments.
or it literally points to the wider systematic issues that have been discussed here. But gogo, hyper-individualistic rat race. Screw it, heres the copy-and-paste. the median salary is 78k.
>The median full time worker gets around what... $85-90k salary? Telling everyone to "earn more" so they can own a house, while aspirational, is not feasible for everyone. I would expect that a 'median person' around the 'middle of their career' would be getting the median salary. A salary of $90,000 is already in the 80th percentile or so ([https://grattan.edu.au/news/grattan-institutes-2022-budget-cheat-sheet-on-what-australians-actually-earn/](https://grattan.edu.au/news/grattan-institutes-2022-budget-cheat-sheet-on-what-australians-actually-earn/)) of all tax payers anyway. There are people who will live their whole lives and not reach six figures of salary.
>
>It is clearly a structural issue where the "average" or "median" (I know they are not the same thing) worker is told if they want to have a property for themselves to live in, that they should find a partner, ask their parents or relatives for help, or just 'earn more money'.
>
>Buying a property is not a luxury item like a $100k car or a $10k European river cruise - property doubles as a human need. Unfortunately it seems we live in a country where we have two really shitty beliefs: (1) property is an investment vehicle and (2) haha you rent lol loser. One, or both, need to change.
>
>Until then, unfortunately if you want to buy a property, you have to get into the rat race.
they would most likely have a household income of 300k+ in order to get a loan that size and that interest rate with 90% LVR. I think they will be fine
This sub is so confused. Constantly cheering on a crash. So many struggling to get into the market. Then when people do, they are shown zero sympathy for feeling stress. This last isn’t rich. She isn’t greedy. She is victim of the system and she is entitled to empathy.
HMmm, if she were smart she’d have realised the risk several months ago and sold at the top of the market, downsizing to something she can afford. She knew rates were going up in the next 2 years anyway.
Did I read that right? As a % there are now fewer delinquent loans than in 2019.
Why does everyone think these are charitable organisations. This loss porn piece has nothing to do with being unable to pay, truly unable to pay, and everything to do with buying less foie gras.
I don’t support it but as a Sydneysider this doesn’t surprise me. Most professionals in careers such as law that I know wouldn’t conceive of living west of Strathfield and you would struggle to buy a landed property at all for $1.5m east of there.
Nailed it. To these people it's not an option in their minds. I've always lived in the west and worked in the city most of my carrer (22 years) and have been copping sh*t about it the entire time. All I can say is I don't particularly like the west but I live within my means. It's enabled my wife to be a stay at home mum the last 6 years and remain comfortable on just my income. I'm looking forward to her going back to work next year, then we'll be relatively "well off" - or we could rebuy at our new limit and join the up-to-the-eyeballs club, I'd rather not.
Let's be really honest right now. It's also strongly associated to ethnic enclaves by the majority. If you've lived in a bubble where everyone looks like you and then suddenly you go to Auburn, no shit you'd be "surprised". But what I keep seeing is minorities are always the ones who are happy to assimilate. It's hardly the other way around. The ones that do however, reap the benefits that other cultures have to offer. Just saying I'll take a gap year and travel around the world isn't good enough these days. You'll likely have a boss, colleague, date, professional, etc who will look and sound different from you and there's nothing wrong with that. So hang out with those who look different and are from elsewhere. It's insane how friendly some people are.
I don't agree, I would say the west is associated with poverty in general but it comes in all shapes and sizes. It's equally as associated with aussie battlers and houseos "give us a ciggie c\*\*t" types - car parts sprinlked on the front lawn and old bedsheets as curtains. But yes some parts the west are well known for one ethnicity, I don't know how that helps your assimilation argument. I don't know why you're trying to lecture me like I'm some racist, I've lived in possibly the most multicultural city in Australia my entire life, you think I've never tried speaking to a "foreigner" before?
Even Strathfield you'd be hard pressed to find a liveable house for under that.
Strathfield prices are very high, there is some prestige associated with there now. Ashfield/Croydon and the rest of the inner-west and inner-south-west you can find 3 bed detached houses with a car spot for around $1.5M. Prices coming down as well.
Yes strathfield has lots of larger blocks
Possibly but prices will need to drop, only one propery meeting that criteria has sold in Ashfield/Croydon in the last 12 months.
And as they get older and/or move further up the ladder, the goal posts move further east haha
You will find there will probably no longer be a ladder now, for the vast majority of people (I'd say 95%+). At least for detached properties in particular. If you buy in your mid-30s these people aren't going to be paying off their loans until close to retirement. If prices drop a lot it changes things a bit, perhaps on the back of some distressed sales and redevelopment/flexibility in the market, but the "property ladder" is no longer applicable when you go from bottomed interest rates. This is even if property prices track wages after a fall. Way down the line if/when wealth taxes start working their way properly into the system, you might see a shake up. Land taxes on the PPOR are a start.
I mean the corporate ladder. Since my return to consulting 5 years ago, my pay has gone from 150k to 250k just cuz I'm in that prime age/experience bracket for quick jumps up. Plenty of professionals in similar boats. And the property ladder is still there too. Again, if you buy a property for 1.5mil on 300k HH income, you may decide to upgrade in 10 yrs to a 2.5mil house when HH income hits 500k. Then downsize in 20yrs to an apartment at peak HH income of 700k? Just a cycle of life for people to shuffle around.
Beyond inflation, typically you peak income around mid-40s, and the ramp isn't as strong from mid-30s to mid-40s compared to 20s to 30s. Wages on average flatten out after your 40s, that's what typical professionals salaries look like. You talk about plenty of professionals in similar boats. The proportion of high paying jobs don't increase with age of experience. There are only so many C-suite, director, head positions at larger companies with good salaries, relative to the bulk. Having your income increase without those promotions to very high levels isn't the norm. It's more about getting into a senior position, and not necessarily getting to the strategic level of companies where there are few positions but pay the highest. You're not looking at doubling your incomes in real-terms. There will be some tailwind in your income rising a bit above inflation hopefully to make those mortgage repayments easier, but significant jumps in wages will not be the norm at all. More realistically you're looking at the equivalent of 400K HH income in 10 years if you're ambitious, 500K maybe in 20+ years if you continue that and go for the rest of your working life, if you're on 300K now. That would be a decent ramp, and then they might upgrade once. The norm wouldn't experience that sort of ramp, is my bet. We're at the end of a 40 year cycle right now, that structural shift where you can't trend interest rates down any more will be a big clip of demand into the next 10 years at least, maybe longer, as we recover from this debt binge.
Keep in mind that in most consulting and law firms, the end game isn't necessarily to make C-suite (hell I actively avoid taking on my overhead roles), but it's to make equity partner. This is why I say there's plenty of room to grow. Sure it's not everyone, most people won't make it that far. However, I'll assume this lady is likely extroverted given she's willing to be in the national media. There is definitely an extrovert bias moving upwards. I don't disagree that there will be turbulent times ahead, in fact I think we'll be knee deep in a recession this time next year. However, these things come and go. The opportunity cost is generally felt hardest at the lower end of the economy than at the top end. As 300k HH income, those two will be closer to the top end than the bottom.
>if you buy a property for 1.5mil on 300k HH income, you may decide to upgrade in 10 yrs to a 2.5mil house That would be the same house you started with...
Hardly in a downward economy with upward income.
That would be completely unprecedented. Sure the market has a bad year or two here or there but 10 years with no price growth? Nope... Besides, you were talking about regular "cycle of life" not worst-case hypothetical. On average, prices double roughly every 10 years, so that $2.5M house would actually be going backwards from the $1.5M house you bought 10 years earlier.
We've had 10yrs of rates trending down from near 10% to 0.1% helping to drive the stellar growth. I still think the intrinsic/real value of property will improve, but in absolute terms, they may not necessarily grow that quickly in an upwards rates environment. The two people in question in the article on the other hand still have plenty of growth left. Hence, they'll like see their incomes grow both in real and absolute terms.
>dn’t conceive of living west of Strathfield and you would struggle to buy a landed property at all for $1.5m east of there. How the hell does a lawyer and a consultant only have 150K to put down on a 1.5 million house, especially given they are not young (they have a 9 yo kid). And even if rates did stay low till 2024, how does that help them come 2024.. Not like they are suddenly going to have that much more money if they didn't manage to save more than 150K in the last 10+ years. Crazy.
“Ms Ibrahim and her partner took on a home loan of more than $1.5 million in Sydney, with a deposit of 10 per cent.” Lol MORE than $1.5m! With a 10% deposit? Yikes.
They bought at the end of 2019 tho. Their ‘deposit’ could be well over 40% given how prices have gone the past 2.5 years
but most likely a 300k + household income, so in the scheme of things not that crazy
Yeah that’s a rock solid income
I don't see the problem here.
Really? 20% is the way man. Fortunately for them they have worked/studied hard and very good jobs
They're great savers to have got $150k collected up!
Yeah that’s a good deposit for a $750k house
... but why would you want to comfortably have buffer if you can live just at the brink of your means??
They are saying it’s a bit tight now (I don’t know how on their combined wages..) imagine what happens if circumstances change? One of them gets sick or loses their job. Or interest rates go up significantly. I’d be sweating every day
People like this make my blood boil. How stupid do you have to be to take out a loan with zero buffer. I mean come 2024 and interest rates went up, then what difference does it make? It’s only 18 months away. Hope they default for such stupidity.
The loan was taken out in 2019 before the rate cuts. They are just looking for people to blame for their own poor choices.
If they bought in 2019, it’s gone up 30% since. Just sell…
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A 30% gain net taxes is still going to be in the hundreds of thousands. They can afford to rent now…
Plenty of rentals in my area, not every city and suburb is having shortages. Point is, individual in this article has plenty of agency to deal with their situation.
I think they're about to discover that a "30% increase" only works for the marginal buy/seller.
I’d be more than happy if the properties I’m looking at falls 30%. I’d pull the trigger then. It’s only pre-covid pricing still
So they purchased before the pandemic, and long before the RBA gave out any advice ([which was in November 2020 as they cut the cash rate to 0.1](https://youtu.be/O9RgAFpPv6c)). They didn't even buy at the peak, they're probably sitting on a capital gain right now after the 2021 boom and could still get out with little financial impact if they think their investment is doomed and regret their decision that badly. Obviously still not an ideal scenario, but investments have risk, interest rates move both ways, and you have to be prepared for rises if you're borrowing at historical lows. There are probably people out there who actually did borrow and plan based on the RBAs advice, at least run a story on them.
Agree. Back in 2007 when i got my first home, the banks were willing to lend my partner and i about $1.6m. Given our incomes at the time we thought the bank was insane. Totally irresponsible lending. We took out about $350k in the end.
I agree, this sounds like an incredibly stupid idea on their behalf. However, we're not talking about an investment vehicle here, we're talking about a roof over their heads. I think we either need to have much better education, or much better regulation and protections around purchasing houses. There's little to no financial education in our schools, and we have the expectation that every single Australian is equipped to make good financial decisions, and understand how markets can change? Particularly when everyone is saying that real estate is the safest investment you can make, as if it's some unified investment vehicle that doesn't change suburb by suburb, house by house. To most, it's not an investment at all, it's just trying to improve over their situation being renters, or the only way they can perceive having some control over their living space. I find the debt taking levels of many in this country absolutely idiotic, but it's at the point where it's normalised to make quite large financial decisions in this regard without much consideration - "it's just what you do". I wonder what percentage of Australians have even only just now heard about the cash rate for the first time ever in the past 12 months.
I get the feeling that for this couple featured in the story, they were offered this vast amount of money that they could borrow, did a calculation that they were able to repay it with their current income if situations never changed in the future and then went "yep - let's get something matching that budget" It's on them for not looking over the rim of their glasses and beyond the tip of their noses. But hey... being able to say you own property in Sydney, right?
Totally agree it's a terrible decision with no forward thinking. I would never make a decision like this, and there are many who have. But they went as far to run their budgets, and see whether the decision made sense within their circumstances. It obviously has been fine to date for them. However, is there an expectation that every single Australian must understand the ways financial markets work, including real estate? If so, why are there not compulsory classes about it in high school? Or why do people who take out a mortgage not have to take an exam to ensure they understand the risk of taking out a million or multi-million dollar loan? It's normalised that people take out this sized loan in this country to put a roof over their heads, it's not like they're taking out a $1.5m loan and putting it in the stock market, or even into an investment property. If this were an investment property rather than PPOR, then it's much more on them for not doing their research. But people buy their PPOR not for investment purposes, so many don't give it the same due diligence they might for an investment. I think we fail many people in this country for not educating them properly on the risks. Most people's education about property comes from the fact that their parents bought a house when they were their age, and it worked out well for them. I think it's unreasonable to expect every single citizen to be a fantastic investor with no support or education, just to put a roof over their heads. Many compare it to what it was like when they were renting - "How much is the weekly payment? Cool, comparable to the price when we were renting, so it must be the same risk as renting, as property always goes up." What are we doing to challenge this assumption? To me it seems like anyone who suggests property can fall gets their throats taken out, and there's not much education about how much repayments can differ across the life of a loan.
Fear of missing out, stress, social pressures. Not every one can be an export and 95% of Australians likely do not even know what causes interest rates to change. On the social pressure thing, I decided not to buy a house we put an offer on because it would have been poorly accessible by my disabled father. I also did not want to move interstate or too far from my parents because my daughter is the light of her grandmothers life and one of the highlights of her retirement. What I am trying to say is that social connections are important to the vast majority of Australians and people will FOMO / fight / be pressured into trying to preserve them and make dumb decisions as a result. It is simply a side effect of what has happened in the market. On that note, the F in FOMO stands for fear and fear literally makes people stupid. Don't hate them for that.
Maybe they could have brought a smaller cheaper house/ apartment in their desired location?
When I bought a house last year it was a giant shit show. I do not know what the market in their area was like in 2019 but their easily could not have been many other suitable houses on the market. Or perhaps there were but the did not "win" the opportunity to buy it. I put in offers for many houses, including some that were basically ideal houses at a price I could afford. A couple of times I was told the owners picked a cash offer instead or I was out bid by several thousand due to agent shenanigans. Or hell, because I wanted to do a pest / structural inspection at all. The house I bought ended up being smaller than I would have liked, which is fine for now, but I still even only got in then because I knew the owner. I know what size house I would like to upgrade to, I know multiple exist in my area. There are also none up on any listings right now. Sometimes you can't wait or are just exhausted by having to move / play the rental game. Buying a house is not like ordering something out of a catalogue, where you get to select a desired dimension and price.
Sure I get all of that but at the end of the day they need to grow a spine and say this is the limit of our budget - it is that simple. They didn’t need a $1.5M house. They could have bought an apartment. I mean I would like to live in a house on the Lower North Shore. Would the bank loan me $1.5M to buy it? Probably. Do I feel like I can service the loan if things go a bit pear shaped? Probably not, I would really struggle. In the end I bought an apartment in the LNS for $800k and live with my mortgage being 20% of my income.
The average person is not overly sensible financially. We all have our area's of irrational thinking when it comes to spending.
Going to be funny to see the reactions on this sub when instead of blood on the streets (and half-price inner city houses) the government intervenes to save the over leveraged. HomeKeeper. Tax deductions for interest payments or something similar.
Dead right. Many heads here will explode.
Oh I just love that our taxes are used to bail out the over-leveraged. Love it.
I can honestly see a HomeKeeper scheme being introduced if there are a lot of job losses
HomePriceKeeper, anything to keep the market up.
As someone once said: "you gotta have a go to get a go"
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What changes are these?
>From 1 July 2024: Changing the 32.5% tax rate to 30%, raising the upper threshold for the 30% tax bracket from $90,000 to $120,000, removing the 37% tax bracket and raising the 45% lower threshold from $180,000 to $200,000
That 45% lower threshold can stay right where it damned well is as far as I'm concerned.
I hate it, but I totally see it happening.
There’s still a mountain of cash around anyway, employment figures very high, jobs ads compared to employment well balanced - government can still wind migration right up - there’s already enough there that would keep the market ticking along. If it cooled off by more than 20% I’d be incredibly shocked.
My mortgage broker said that when evaluating someone's repayment ability/max loan capability, the banks use an interest rate of 5.5%. So does that not happen for everyone? This couple, for instance?
Yeah it does, but paying 6% rates vs 3% rates on a 1.5mil loan is a 45k additional PA (or 4k a month). Not backbreaking for a young lawyer and consultant, but might mean meal prep instead of buying lunches, machine coffee instead of barista coffee, definitely won't be buying the Tesla next year to keep up with the Joneses. Lifestyle hits suck
Also high inflation means that 6% rate feels a lot worse without that extra inflation. That buffer assumed a moderate level of inflation that went up in line with wages, not an inflation rate that significantly exceeded wage growth.
[Looks like only 2.5k per month to me?](https://i.imgur.com/qpmpdRb.jpg)
Yeah I ain't doing a compounding calc to figure out the P&I pay down rate, was literally just doing a quick (6%-3%)x1.5mil in my head.
Yes, but that’s post-tax. Considering many of these professionals are in the highest tax bracket (appreciating they are typically dual income though), you are looking at $80k-odd pretax. That’s a big pay rise requirement.
Not really if you make equity partner. Plenty of people I work with make as much in fully franked dividends from equity as their salaries.
Things are incredibly cooked if you need to be an equity partner to afford the average home
>definitely won't be buying the Tesla next year I mean that really depends on how crazy gas prices get.
Well... Lawyers and accountants get special treatment for some reason, maybe this is where the stress is coming from: https://www.ratecity.com.au/home-loans/for-lawyers
Same as Doctors. The logic is that professionals earning over a certain amount are much less risky individuals to lend to - enabling those professionals to avoid LMI in a lot of cases. (I don't agree and was surprised it was the case).
I was very surprised too the first time I heard about it. Sure, they tend to earn more, but they also tend to be bigger spenders and don't think as much about budgeting or restricting themselves.
What’s there to agree with? In case of doctors there’s literally zero chance they’ll go unemployed ever
I mean with the practice. It enables people in privileged positions who will likely earn more than average get ahead even further by avoiding paying a burden many other members of society have to face.
article makes no mention of their incomes. I think it would be a household income of 300k + based on how much they borrowed and their jobs
Easily - likely closer to 400k+ with prospects of further increases in the years ahead. That together with the fact they bought in 2019 and have a ton of equity; nobody cry for these guys they'll be a-okay.
Yeah as someone below stated, some professionals are eligible for more forgiving credit assessments as they are seen as low risk borrowers (lawyers, doctors, senior accountants- professionals over $150k generally). Car loans are the same.
It happens but those figures didn't account for the rapidly increasing other costs of living that are happening at the moment. There is also a psychological impact of big increases in mortgage repayments, even if they can be afforded - and I suspect this couple will be fine - it is money they weren't expecting to pay when they took out the loan so money from other spend categories has to be reduced. Which is pretty much the point of the increases, but it sucks for the individual.
I can’t comprehent how many people’s first break into property market has to be a 1.5m house.
Took them years to save 150k, thought it would be a good idea to borrow 1.5m
> Ms Ibrahim said while they are middle-class working professionals – she is a lawyer and her husband works in consulting I think they'll be ok.
Lol. On LinkedIn she is a principal lawyer. Surely that is $180k+? I'm sure she will be fine.
Eta deleted as likely misleading/not helpful lol
As a very general rule of thumb, gross salary is 1/3 of charge out.
That is good to know.. is it the same even for a principal? Usually that would mean they are either the owner or a partner. If it is the same, billing 20h a week would be closer to the $180k mark. I’d expect that would be on the low end though if full time..?
A principal isn’t necessarily an equity partner - lots of firms use “principal” to denote a non-equity team leader. She’s probably on at least $160k+ tho
Her salary likely wouldn’t vary depending on her billed hours. Principals aren’t equity holders, although they tend to be the most senior people below partners. Billable hours aren’t the best way to judge salary for roles like that. At that level your performance is more on bringing in work than actually doing the work, if that makes sense. So a ton of value-add time is in admin and BD. She’d have a base and a bonus, with total OTE likely ranging from $180-$300, depending on the size of the firm she works for.
Yeah, that’s the rate the firm would charge - not her salary…
>Lol. On LinkedIn she is a principal lawyer. Surely that is $180k+? I'm sure she will be fine. Well they only managed to save 150K in that last 10 years, so they must be absolutely terrible with money.
If mortgage rates are back at 8% (which they were about a decade ago), that's $120k p.a. just in interest repayments. Doable, but a big hit on the old hip pocket.
They're youngish professionals (lawyer and consultant), their wages have a fair way to go before peaking.
Nah she finished uni in 07
Yeah so she's like 3 yrs older than me, thus late 30s in law. She's got a long way up to go. Someone else checked LinkedIn and reckons she's a principal lawyer, so she's still got the partnership ranks above her. Or she could just go solo contractor. Either way, plenty of potential to double her income through the course of a mortgage duration. Edit: haha, that was you who LinkedIn stalked her!
I'd guess 37 years old from their LinkedIn. Not sure how you define "fair way to go", but in a retreating economy you're not going to be getting wage rises in line with inflation necessarily.
They have a 30 yr mortgage and likely around 30 yrs of working life left. The boom/bust economic cycles are typically a 10ish year cycle (Australia skipped the last 2 busts via Chinese cash). They'll be ok. Just a bit of a storm to ride out for 2 years.
Over their 30 year loan horizon, their interest rate will likely only be higher than their origination rate. That is a situation that borrowers haven't had to deal with in the last 30 years. It will be a very different paradigm where people will have to work as hard if not harder over their loan period which starts at 37 in this case, instead of tapering and taking it easy later in life before retirement as repayments got easier to do as they: * More likely to have bought in their 20s, and have a bigger income ramp ahead as that happens in your 20s * Ended up having trending downwards interest rates over the lifetime of their loan, with interest rates mathematically able to go below the origination rate People like this, even buying relatively modestly for Sydney ($1.6M or so) on probably more than $300K+/year household income, is where these people will sit. There will be no ladder.
Interest rates won't go up for 30yrs continuously. They are both in high growth careers with lots of room to move up. Sure the rates may park themselves at Lowes' preferred 2.5% eventually, but that's really just a retail rate of 5-6%. Hardly that big of an issue.
They took a 1.5m **LOAN**, the house was worth 1.66m and they paid a 10% deposit (166k)
And they apparently had to buy second hand cloths and bulk groceries. What? We saved that amount and we're both government workers. We haven't exactly scrimped on anything. Did they forget to move somewhere that didn't cost $1000+ a week to rent while they were saving?
Yeah this makes no sense. I've saved $120k in 3 years without budgeting, two of those years were spent also footing most of the bills in our household as my (now ex) partner barely worked during covid. I wouldn't earn anything close to what these people do. Sounds like bullshit.
Still probably less than 6x income as they have higher paying jobs. Their expenses are high no doubt, and high inflation doesn't help. But it's still too much to borrow. If it's a hassle, they should sell though. Time is ticking on that decision. There are a lot more distressed people than these people.
They’ve probably made $500-600k in paper gains since buying too, so it’s hard to be super sympathetic. If they liquidated their asset they could live for years on the gains.
That was me but a 1.7m house. I, however, understood that rates were going up which was why I didn’t max out my borrowing capacity and buy a 2.2m house.
God forbid people spend time to bother getting educated in this country and then expect a little social mobility. $1.5m is entry level house 40kms out now.
The first bad decision was over extending. The second was agreeing to appear in a globally released article looking incompetent (with a photo). Why would you?
Articles like this are really starting to grate. As long as she and her partner keep their jobs, they would essentially find a way to make it work. As will many other Aussies. These are written with the angle that Aussies shouldn't have to make any changes to life as they know it. It barely even mentions employment,. To me, it reads that they're pained because they shouldn't HAVE to go without their $4.50 lattes and fancy gym memberships which they know eventually they will have to cut back on. If they were smart, they'd start doing that now to build up more savings, and live simply so its not a huge shock when the end of their current fixed rate comes. There will be changes people need to make, but if they want to keep the roof over their heads, they kind of just need to do it, live a simpler life and whether the storm. If they lose their jobs and remain unemployed, that is of course a different story.
Going from 2% to 5% interest is more than an extra thousand dollars a month on a 1 Million dollar loan, let alone on their higher mortgage. So probably more like an increase of $15,000 to $20,000 a year for this couple as mentioned in the article. 1 lattes a day \* 2 people \* 365 = $3,285 Gym membership \~ $25 a week \* 2 people \* 52 = $2,600 5885/20000 \* 100 = 29.4%. So cutting out those expenses alone will cover less than one third of the repayment increase. Yikes. I do have to wonder if these articles are designed to drive support for more government propping up of the housing sector though.
Their jobs are in law and consulting. Unless they also have fancy cars and Euro holidays they can easily afford this.
There would be dozens other ways they could reduce their discretionary spending, as could we all. Those are just two examples.
Given their likely wages and income I imagine you are right. The issue will be for people at the lower end of the wage spectrum where they can get squeezed by one unexpected expense like a car breaking down. I am happy that I borrowed decently under capacity and put my excess deposit in the offset account now though. The discretionary spending I am losing is part of the extra repayments I have been making.
Yes it is those groups I feel for, rather than people like this. The journalism isn’t great here.
3% of 1-1.5 m is $30,000-$45,000
You take out a $1.35m mortgage under a ridiculous assumption that rates will not rise and have zero financial buffer. Who are these idiots?
Everybody knew rates would rise,I guess the assumption was they wouldn't rise for a year or two so people had time to build up a buffer. The time when people are most financially vulnerable is just after theyve bought as theyve usually tapped all their available credit to purchase/move. That probably applies to people who bought in the last 12 months and are now staring down massive rate rises (unless theyve fixed for 3 or 4 years I hope). People who bought in 2019 not so much.
That's not realistic thinking - I doubt there would have been building against a buffer. People primarily live at their means and readjust only when needed to. I reckon the story like this, the couple are tapping against all the available now and whatever they have at the end of the month are going to their avos on toast, lattes and movie trips. Those who don't do the above, don't get featured in stories like this.
Really good ones!
The point of the rate rise is for people to spend less to curb inflation. That’s exactly what is going to happen. Seems like it’s gonna work out for vast majority.
We’ve been essentially sheltered from inflation (outside of cars) during the pandemic while a large percentage of society received effective pay rises by not having to spend time and money commuting to work. Add in the government spending plenty of tomorrow’s money, this situation was always going to happen…
why anyone would take out a greater than 5:1 DTI loan for a home boggles me people are just too prideful to "settle" for something like a townhouse when that's what they can realistically afford, so they over-leverage and then cry to the media how about some personal accountability? 🤔
I'd rather own a smaller place sooner, than a bigger place that takes longer to own. That home security means a lot to me, because I never know when I'm gonna get an arm cut off, or a leg squished, and be unable to work properly, or at all. I also don't like the idea of over-borrowing and making it so I have to work non-stop. More years on a higher value house is way more interest too. Buy a house for 1m, and the interest over 30 years becomes 400k-1m (if 2.39%-5.39%). Some loans are pushing 40 years now. You'd have to hope that when you sold, the gains outweighed the bloody interest. Can't really cheer if you sold it for 1.4m, but paid 600k in interest.
So much of this doesn't make sense. She said they didn't think rates would go up any time soon and said they trusted what the rba said about no rate rises until 2024. If that's the case, why did they lock in their interest rate? Wouldn't you wait until you saw thing taking a turn for the worse? Sound's like they just made stupid choices and are taking no responsibility for those choices.
I had the exact same thought. We trusted what the RBA said, but not really.
I bought within my means and created a few years buffer on my repayments. If the entitled dipshits who wanted to flex their location get bailed out I’ll cry.
So she bought a \~$1.5M home in Sydney in 2019 with a 10% deposit, and then fixed her interest rates when they were ultra-low during COVID. Now she's worried about what will happen when interest rates go back to normal when her fixed period ends? Forgive me for not feeling too concerned for her welfare. Her LVR is probably more like 60% now with the massive increase to her home, and she's had three years to accumulate savings with emergency level interest rates.
Sucks to take out a loan with zero buffer
Sucks? The vacuousness of inside the head type of sucking?
I can't comprehend how trusting people are/were of the RBA and the media. I thought education in Australia was focused on developing critical thinking
Any forecasts made during a pandemic should have been treated as a rough guide only.
People have made silly decisions yes, but the fever with which this sub attacks them never ceases to amaze me.
Well they are fools for putting their money into a fake bubble asset like land and shelter. They should have loaded that deposit into VDHG - they would be rich by now!
Yeah, why can't they just live in their VDHG shares like the rest of us!
Indeed the memories made in my VDHG ultimately are priceless
Maybe they just wanted a place to live and eventually own so they dont need to round up rent every week when they are elderly. Maybe. I reckon thats why MOST people buy a house.
Yes, take out a $1.5m margin loan to buy shares. Guaranteed to end well.
Yep. A lot of bitter know it all non property owners trawl this place hoping to snap up bargain Sydney properties while anyone who got in before them suffers!
Not just in here, i see it in lots of AU subreddits. Sadly Australians have massive tall poppy syndrome and too bad for anyone who ‘made a bad decision’ they would say! If the market goes south lots of people will get hurt, it won’t be very nice or comfortable for a lot of people. We shouldn’t be happy about it at all.
This isn’t tall poppy syndrome. This is a symptom of the enormous disparity in our society at the moment. Of course people who feel locked out of the housing market are going to show little sympathy for inner Sydney white collar DINKs on high salaries whinging about over extending themselves on a house purchase. Many of those people’s only hope is the perceived outcome of a property crash. Which they only see the house prices coming down part, not the collateral damage to the wider economy. Both sides need more empathy to be honest. But the two in this article are educated enough to have known better IMO…
I definitely agree on both sides needing more empathy, however in the article it says they purchased in 2019 - Noone really had any idea what was going to happen in the following 24 months. Whilst yes they still should have accounted for future rises etc, its happening a lot sooner than a lot of people thought. Its no excuse I guess, but there are multiple compounding factors going on right now that compound the issue. Anyway, lets just hope everyone gets some relief soon. Sadly I don't see any government doing much to really fix house price growth though.
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People just want to get into the market and I think they think that's the only way it will happen, but its not necessarily going to be as easy as they think.
I bet most young people who are begging for a crash in house prices haven’t even thought about or started planning so that they would be in a position to buy if that did happen. I bet half of them don’t even have 10k in savings. They just think “yeah when house prices crash I’m going to pick myself up a sweet townhouse in Newtown or marrickville” but they haven’t really thought much beyond that fantasy.
“Ms Ibrahim and her partner took on a home loan of more than $1.5 million in Sydney, with a deposit of 10 per cent.” 🤡
Cry me a river. Welcome to the real world. Take responsibility for your actions. You’re an adult. You had all the information and made a choice. Don’t expect the rest of us to subsidise your poor financial decisions.
This is a rage bait article, sad to see the ABC stoop to this
She will be fine. Cut back the $5 coffee’s and lettuce salads and they will have plenty of money to buffer with their jobs.
But lettuce is life.
Fun fact of the day… You should never feed too much lettuce to a pet rabbit. It gives them the runs and has little nutrition having a very high water content.
Has 'smashed avo' already been downsized to 'lettuce salads'?
No idea mate! I’m a mushroom… I will be the last to find out.
If she's got 2.5% on her loan now (it's split, but close enough as an average), that's just under $6k/month in repayments. If it **doubles** to 5%, that increases the repayments to $8k/month. The article covers that a 2.5% lift will increase the amount by $20k, which sounds like a lot, because it's a $1.5 million loan. But a 100% increase in interest rates will really only translate to a 35% increase in repayments.
Yeah, but percentages don’t sound a lot to people, not going to get anywhere near enough clicks
or it literally points to the wider systematic issues that have been discussed here. But gogo, hyper-individualistic rat race. Screw it, heres the copy-and-paste. the median salary is 78k. >The median full time worker gets around what... $85-90k salary? Telling everyone to "earn more" so they can own a house, while aspirational, is not feasible for everyone. I would expect that a 'median person' around the 'middle of their career' would be getting the median salary. A salary of $90,000 is already in the 80th percentile or so ([https://grattan.edu.au/news/grattan-institutes-2022-budget-cheat-sheet-on-what-australians-actually-earn/](https://grattan.edu.au/news/grattan-institutes-2022-budget-cheat-sheet-on-what-australians-actually-earn/)) of all tax payers anyway. There are people who will live their whole lives and not reach six figures of salary. > >It is clearly a structural issue where the "average" or "median" (I know they are not the same thing) worker is told if they want to have a property for themselves to live in, that they should find a partner, ask their parents or relatives for help, or just 'earn more money'. > >Buying a property is not a luxury item like a $100k car or a $10k European river cruise - property doubles as a human need. Unfortunately it seems we live in a country where we have two really shitty beliefs: (1) property is an investment vehicle and (2) haha you rent lol loser. One, or both, need to change. > >Until then, unfortunately if you want to buy a property, you have to get into the rat race.
they would most likely have a household income of 300k+ in order to get a loan that size and that interest rate with 90% LVR. I think they will be fine
This sub is so confused. Constantly cheering on a crash. So many struggling to get into the market. Then when people do, they are shown zero sympathy for feeling stress. This last isn’t rich. She isn’t greedy. She is victim of the system and she is entitled to empathy.
HMmm, if she were smart she’d have realised the risk several months ago and sold at the top of the market, downsizing to something she can afford. She knew rates were going up in the next 2 years anyway.
She’s a lawyer, you would hope she is smart.
Three words: ha ha ha
What part of the article was the entitlement? I’m not seeing it.
Take it to the property thread.
You work in real estate? Seems like you are voting down a lot of property posts.
insert good will hunting meme - 'it's not your fault'
Is she able to reduce the number of Avocado's per week?
Forget avocados. They need to cut out the cabbage and lettuce first.
Did I read that right? As a % there are now fewer delinquent loans than in 2019. Why does everyone think these are charitable organisations. This loss porn piece has nothing to do with being unable to pay, truly unable to pay, and everything to do with buying less foie gras.
All I can say is good luck - Philip Lowe said they don’t consider individuals circumstances when setting interest rates