That’s what you might be thinking.
But what I’m about to say has nothing to do with trying to get sympathy. I’m just sharing my experience of attempting to buy a home because it’s one a lot of Gen Z and millennials can relate to.
Unless we have these hard discussions nothing will change. The truth is real estate in many civilized places like Australia has become a joke.
The curse of Australian property
I live in Melbourne, Australia.
Everything we do in Oz depends on America. I often joke Australia is just another state of America. We have so many US military bases here it may as well be. If the Federal Reserve puts up interest rates so do we.
For the last 30-odd years we’ve had boom times in real estate.
You could literally buy any home in one of the major capitals of Australia and get rich. This turned real estate into a business.
As a result anyone who works in or around real estate has become cocky.
We have overpaid tradies who earn more than bank CEOs. We have entitled real estate agents who talk down to people and get to drive $100K BMWs in their first year on the job.
The entire industry is full of ego and out of control.
Australia is the second most popular place in the world for millionaires to move to. They can’t get enough of our sun and fun.
Trying to buy my first home
Recently my wife gave birth to a beautiful baby girl.
It dawned on me that my daughter needs her own bedroom and backyard. My wife and I are happy to live like plebs in low-budget housing, but we want more for our daughter.
So dear old dad (me) went looking for a home.
After months of searching we started to find some okay options. Because we didn’t want to be up to our eyeballs in debt, we chose basic properties that all had compromises.
- Instead of new we went for old.
- Instead of a two-car garage we settled on a single car spot.
- Instead of newly renovated we settled on ‘needs a renovation.’
This led us to two properties. In Australia most homes are sold through auctions. The only real chance you have is to attend and try to outbid the other people who are experiencing the same level of FOMO as you.
We kept losing at auctions so I convinced my wife to pay $100k above market value for the next house we went for.
What you can’t see about a potential house
We found a nice home that was 40 years old and needed some work.
The rules over in Australia state you buy the house as you see it. The trouble is there are often many underlying issues an amateur won’t notice. To protect us against financial ruin I brought a builder to come and inspect with me.
When you inspect you’re given 30 mins to get in, look, take notes, and get out. The home is usually flooded with other buyers at the same time so it’s hard to think.
My builder picked up a few issues but gave it the tick of approval.
But that’s not enough. It’s too easy to get scammed.
I then had to pay $560 for a building inspection. The report came back. There were many problems we didn’t spot such as a badly leaking roof. Still, we were happy to proceed.
Throwing away your life savings at an auction
On the day of the auction I stayed in the car.
If you show any interest in a home, you’ll be suffocated by real estate agents who see blood in the street. They’re desperate for a commission.
So I sent my wife to bid on the home instead. She wore earbuds covered by her long black hair so we could communicate. Then I got my father-in-law to stand next to the auctioneer with his phone so I could hear the prices.
The price for this average home started at $1.35M Aussie dollars. That might sound expensive, but it’s not considering the average home price in Australia is $1.066M.
The bank valuation on this home said it was worth $1.4M.
Based on similar homes selling in the area it should have sold for no more than $1.45M. To guarantee we won I was prepared to pay $1.55M. The bids came thick and fast.
(Keep in mind this is the middle of a recession.)
You might think the other bidders were families like me. You’d be wrong. I’ve been going to auctions for the last 12 months and my competition is never families.
It’s always overseas investors.
In the blink of an eye the price went from $1.35M to $1.5M. I felt okay because there was still $50K to go. I was confident we’d have a chance.
The bids started to slow but there were still four of us in the race. To slow momentum we only did $1000 bid increases. It wasn’t enough.
A group of Hong Kong businessmen in suits kept bidding as if money had no value. The property set a new record in price for the street, selling for $1,566,000.
At the same time as this auction another one took place on a similar home we were interested in. That one sold for a record $1.7M to investors, too.
It was a shanty shack at best.
When you can’t buy a home it rips you apart emotionally
We’ve tried for a while to buy a home. It’s extremely difficult.
The crazy part is my wife and I have zero debt and earn decent incomes. Even then it doesn’t buy you much in Australia.
Some days it can get to you or make you feel like you’re not enough. You can even begin to envy friends who bought years ago and enjoyed the luxury of low prices.
When we tell family and friends about our home-buying experience they just say “well, you’ll have to buy a house far away from the city.”
The challenge is we need to live close enough to the city so my wife can get to work. I don’t want her spending 4 hours every day commuting to an office and being away from our family.
The frustrating part of the whole experience is the US and Australian media keep saying housing prices will crash.
They’ve been saying this since the 2008 recession.
Despite all the clickbait headlines house prices in Australia aren’t crashing at all. The same house I could have bought at the start of 2020 for $1.1M now costs $1.55M minimum.
That’s a $450k increase.
Even if house prices cool down they’re not going to drop that much. And from what I’ve seen prices aren’t going down at all. They’re going up.
1.Supply and demand.
People want to live in Australia. They prefer homes with backyards over apartments.
2. Real estate has become a booming business.
It’s profitable for businesses to buy up homes and rent them back out or put them on Airbnb to make money from it. This artificially puts up rent prices and causes more people to rent forever and never own a home.
What this all means for you
If you’re struggling to own a home I feel your pain.
Real estate has become expensive because it’s a financial asset that gets traded on Wall Street. And Airbnb has made it into a thriving business.
When you go to buy a home it’s investors that’ll either force you to pay more, or guarantee you go from auction to auction and leave disappointed.
Many of you are aware of the trillions of dollars created out of thin air since the start of the 2020 bat virus.
These dollars have helped inflation skyrocket and caused homes to become unaffordable. The only real solution is for governments to outlaw the ability for businesses to buy family homes.
It’s unlikely to change though.
In Australia, they’re already talking about letting millennials like me use our retirement funds to unlock more money to pump into a family home.
The positive of all of this is it motivates you to earn more money. Because that’s the main solution for now. Own or be owned.