31 Jul Why property is so 'unaffordable' – NOT – Todd Hunter
If, like me, you are sick of the winging about how un-affordable property is, especially for first home buyers, and that the fault for all this lies squarely at the feet of greedy investors and filthy capitalists who have invested in property and are reaping the rewards … then you will enjoy the comments by Todd Hunter, who is an author and also a founder of WHEREGROUP.
Kevin: We hear it all the time – don’t we – about how unaffordable property is, mainly coming from a number of people who either don’t own property – obviously – or from the younger generation who are always complaining about the fact that the older generation seems to have made it more unaffordable for them to buy a property.
I’m prompted to talk about this today on the show because of a blog article that was written by Todd Hunter, who is an author and also a founder of WHEREGROUP. I’m going to read a portion of it just before I introduce Todd to you. This is straight from his blog:
“All I hear about lately is how first home buyers in Australia cannot afford to buy their first home due to house prices being so unaffordable. I have to say, I’m sick of whining. This sense of self-entitlement is simply sickening. Apparently things are so much tougher than they were 10, 20, or even 30 years ago. But are they really?”
And that’s only just a portion of it. We’ll talk about the reaction to that as well, but Todd joins me.
Todd: Hey, how are you going?
Kevin: Good. I imagine from this, you’re speaking from experience, are you?
Todd: Yes, most definitely. I obviously already own property myself, but I’m in the business as well of helping people invest and helping people get into their first home. So I’ve seen it from both sides.
Kevin: In that portion that I just read there, you said that it’s a privilege not a right. Just talk a little bit more about that. What’s the attitude that you’re hearing?
Todd: For me, with property, it really is a privilege to own a property. It’s not a given right that we actually have to have housing and we can afford to buy our own home. If you can afford to do it – and I’ve shown that it can be done – then it is a privilege. It shouldn’t be taken for granted.
I’ve seen two sides of this, from the older generation and the younger generation, where some people are saying it’s an absolute right to own a home – and I don’t think it is.
Kevin: There’s been a slow creep here. I’ve done this show now for about 12 years, and I remember talking probably even 10 years ago about how the younger generation wanted everything quickly. In other words, that’s when we were talking about the McMansions and those really big properties.
I’ve often reflected back on the first property that Carolyn and I bought, which was a very modest three-bedroom, little brick home in Toowoomba. I sometimes wonder if our expectations are just too great and that’s actually what’s causing a lot of this, Todd.
Todd: Yes, I think it is. I’ve seen some of the comments on the blog where their expectations are that they want the glamorous property five kilometers from the CBD. They’re not willing to travel from Penrith or Campbelltown into Sydney or Milton in Melbourne down into the city. They want to be in that hub. It’s that sense of entitlement I think.
Kevin: We’ve looked a lot, too, at the generational attitudes and I think wanting everything too quickly and almost not willing to take some sacrifices. I know we’re generalizing a lot here because there are a number of people I’ve spoken to in the show who have taken some great sacrifices to get into their first property. Is that one of the causes of this – it’s this rite of passage and we’re not prepared to sacrifice for it and we’re looking to blame someone?
Todd: I think it is, yes. And I think that given the social media that we have now, it’s a very easy avenue to voice that, as well. Yes, most definitely.
Kevin: You said earlier in our conversation that you’ve shown that anyone can own a property. Let’s talk about that. For people who are finding it difficult to get into the market, what can they be doing now constructively to do that?
Todd: I think certainly just cutting back on expenses that they think are necessities that really aren’t – things like washing your car or having a coffee every day or all the apps that they download and pay for continuously. Things like that can be certainly cut back – and Foxtel – and just continue to keep saving, saving, saving.
It definitely can be done. We see that quite often with a lot of clients. They’re out there and they’re actually getting ahead and they’re doing this. We are generalizing in this aspect here, but there are some out there who are actually getting goals.
Kevin: We’ve heard a lot about rentvestors, too. These are people who are willing to rent right now where they want to live but then go and buy an investment property – not necessarily where they’d want to live but one that’s going to give them a fairly good return. We’re hearing some shocking numbers about first-home buyers falling out of the market. Do you think they’re just not looking creatively enough?
Todd: Most definitely, yes. I think it’s that expectation thing again. Part of that blog is that I put down a whole bunch of suburbs that were key areas within Sydney and Melbourne that seem to be the two areas that most people are saying they can’t afford. I said, “Well, I can find a bunch of one-bedroom units that are all very, very affordable.” How isn’t it affordable?
Kevin: Our right to actually own a property, it’s something that’s been born into us, that we have to own property. Do you think we need to change that focus a little bit and say, “Okay, we need to own property but not necessarily a home to live in. We need to build a portfolio.” Are they two entirely different things, Todd?
Todd: Yes, they are. We’re seeing a lot of people who are doing this rent-and-invest strategy to get into the market and buying in more affordable places to do so. We’re probably one of the only few countries in the world that has this great Australian dream of owning your own home. It’s bred into us, and I don’t see that coming out of us real quick.
Kevin: What can parents do to help their kids do this, and are you seeing a bit of that happening as well, Todd?
Todd: Yes, we’re definitely seeing that – and more and more so as it goes on. They’re guarantoring loans or gifting some deposits to help them along. Especially when mom and dad have done fairly well out of the property market over the last few years, they’re saying, “I can obviously help the kids along.” They can either do an equity loan against their home and gift them the cash or they can put one of their properties or home property up for security to help the children get into their first property.
Kevin: I did an exercise a couple of weeks ago where we had a look at property prices back in 1975 and the number of differences then – interest rates were much higher than what they are today and the banks would only ever look at the income of one person. Even though you’re a husband and wife and you’re maybe both working, they would still only look at the husband’s wage. There were a number of things against us in those days even though property prices were a lot less than what they are today, Todd.
Todd: Yes, definitely. There were shorter loan terms, like 25-year loan terms. There was the one-income scenario. You’re talking about those high interest rates. There were a number of factors that made it difficult back then, as well. I think that’s the key thing. I’m not saying that it’s easy to get into property now, but I don’t think it’s any harder than what it was back in the early days when we were buying property.
Kevin: I’m going to read now one of the responses to your blog article that came from Andy. I’m going to take out the first couple of sentences because he says some pretty uncomplimentary things about you and what you should be doing with your head. Anyway, he goes on to say:
“Just look at the intelligent comments on this feed and you’ll see that it’s not the same as it was when you were young. It’s your generation and the Baby Boomers who have ruined the whole world for future generations. It’s going to take many generations to fix up this mess of a world that you’ve made for them, and here you are acting all proud and high and mighty for it. You should be ashamed.”
What’s your response to Andy about that?
Todd: I’m not acting all high and mighty; we’re seeing a lot of these whinges and hence that’s why the blog was written. Have we ruined it for them? No, I don’t think we have ruined it for the Generation Y and the Millennials. No, I don’t think that at all. I just think they just have to think differently. It’s a totally different world out there, so they have opportunities that obviously we didn’t have, as well. There are certainly opportunities for them to do it.
Kevin: I think if they make some sacrifices like the ones that you’ve mentioned in your blog article – and there were about six of them there, which you might cover very quickly – if they take some of those sacrifices and get into the market, sure, it is appreciating but they’re going to be getting an appreciating asset. It’s only a matter of getting your foot on the ladder, isn’t it?
Todd: Yes, it most definitely is. Part of that comment there is amusing that they have blamed us for all the property prices going up and that we’ve ruined the world, yet they want to get into the property market and have their properties appreciate, which is exactly the argument that they’re fighting against there. Counterintuitive, I think.
Kevin: I’m just going to quickly summarize the points that you’ve made here – stay at home and don’t rent a place that you can’t afford, spend a year or two saving, start having conversations with your mom and dad about how they can help, adjust your expectations, and get your mates involved, too, so you can hang out and socialize with people who are like-minded instead of going out and having a few drinks. It all comes down to sacrifice, doesn’t it?
Todd: It does, most definitely.
Kevin: Todd, thanks again for your time.
Todd: Thanks for having me on.