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Housing affordability – is it really about smashed avocado and lattes?

Glenn Fairbairn
Director/Private Client Adviser
23 May 2017

There has been a lot of media coverage in the last week following comments made by property developer Tim Gurner on 60 minutes (Sunday 14th of May), where he mentioned that when he was trying to buy his first home he wasn’t buying smashed avocado for $19 and four coffees a day at $4 each.

He went on the say that we are at the point where young people want to eat out every day and travel to Europe every year.

While there is some merit in living within your means and prioritising your financial objectives versus lifestyle choices, it is fair to say that, in the overall scheme of things, the odd latte or serving of smashed avocado is not going to be the deal breaker when assessing the affordability of a first home.

The price of property in inner Melbourne and Sydney has been driven to a point where cutting back on a few dollars of expenditure is not going to make housing more affordable.

For what it’s worth, my view is that those looking to enter the property market need to be realistic with their expectations. If they are adamant in entering the property market, they should maybe consider purchasing a property in a more affordable location. There is affordable housing but you may need to compromise that inner suburban lifestyle and look at property say 30km from the city. This property could then be used as a stepping stone to progressively move to your preferred suburb as you reduce debt and improve your financial position.

An alternative may be to do what is commonly referred to as “rentvesting”, where you purchase a property you can afford, rent it out to a third party and then personally rent a property in a more desirable location. The benefits of this strategy are that you get to live where you want and own a property without an expensive mortgage.

As mentioned by my colleague Nathan Lear in his recent blog “Looking through the Budget”, instead of providing financial incentives to young home buyers, which simply exacerbates the demand problem and pushes up prices, the government should be investing in infrastructure in the outer suburbs to improve transport and increase job opportunities in these areas.

Unfortunately there is no silver bullet to this issue and in the end the only viable outcome may be a number of compromises. After all you can’t have your smashed avocado and eat it too.

The information provided above is general information only.  It does not consider your needs, financial situation or objectives. You should seek specialised advice from a qualified financial adviser.

If you’d like independent financial advice, specifically tailored to your personal situation, please contact us. Hewison Private Wealth are specialists in financial planning, investment advice, property investment advice and self managed super fund (SMSF). Reach out to a qualified independent adviser on 03 8548 4800, info@hewison.com.au or visit www.hewison.com.au

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.