First home buyers: If you’re not prepared to make compromises, get used to renting
A Melbourne newspaper article this week bemoaned the fact that “first home buyers in Melbourne fall well short of the median house price”.
It noted that the median house price was $590,000 and the median unit price was $460,000 but, according to PRDnationwide research, the average first time buyer could only afford to spend $372,000.
“First home buyers are increasingly being pushed to the fringes of Melbourne,” wailed the article.
My responses to the information in those three preceding paragraphs are these: So what? So what? And, again, so what?
Newspapers never get tired of their pet real estate theme – i.e. the 'Great Australian Dream' is dead. Research companies, and others suffering from limelight deficit syndrome, know that if they toss together some figures, call it research and send a bleeding heart press release to a newspaper, publicity will inevitably follow.
Whether through ignorance or mischief, this article, like so many others, missed the point several times.
The first point they missed is that first home buyers are not being asked for pay the median house price for a home, nor the median unit price. If the median house price was $590,000, by definition it means that half of all house sales were for less than that figure – in many cases, for a lot less.
Another point missed is that if $372,000 is what people can afford, there are heaps of options in Melbourne. The Hotspotting team did some research, looking for suburbs with median house prices and/or median unit prices under $400,000. If the median is $400,000 or less, it means half of all sales are below that figure, so plenty of possibilities around $370,000.
We found 214 Melbourne markets that were affordable, by that criteria. And you don’t have to go out to the fringes to find them.
Brunswick West, where the median unit price is $385,000, is not on the fringes. Footscray, with similar numbers, is 6.5 kilometres from the Melbourne CBD. Neighbouring West Footscray is cheaper still.
The Sunshine suburbs, which all fit the affordability criteria (and offer major medical, education and transport infrastructure), are 10-12 kilometres west of the CBD.
Many of those 214 affordable markets were more distant. Some are right out on the outskirts of the metropolitan area (but many of them in areas with good capital growth records).
But there’s another point missed by the article: it’s not a national crisis if first time buyers have to go to the fringes to find a house they can afford. It has always been thus and, I imagine, always will be.
I bought my first home in the early 1980s. I was working in central Brisbane but had to go to the far south-west of the metropolitan area, out in Ipswich City, to find something in my price range. I spent three hours every day on trains.
It was a dogbox house in a dog of a suburb, but it got me started. And, like a lot of ugly real estate, it grew in value. My second purchase was a lot closer to the action and the third was a good house in a good suburb, not far from the CBD.
That’s how home ownership works. You make sacrifices and compromises to get started, and work your way up from there. If all goes well, you’ll achieve your dream home long before you retire.
The bottom line: the nation owes its citizens shelter. But it doesn’t owe anyone their dream shelter in their dream location as a first purchase.
If anyone wants it badly enough, there are hundreds of market options around the Melbourne area. But if you’re not prepared to make some compromises, get used to renting.
TERRY RYDER is the founder of hotspotting.com.au. You can email him or contact him on Twitter.