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Welcome to The Rentvesting Podcast!

If you’re a property owner, investor or looking to get into the market The Rentvesting Podcast will help cut through the hype, look at the facts and draw on decades of experience to help you make smarter property decisions.

Each week Red & Co Director, and Award Winning Finance Broker Jayden Vecchio will unpack the facts behind the property market, explain what’s really going & where the market is heading.

Are you ready to make better property decisions and learn to live where you want, but invest where you can afford?

Jul 1, 2017

In this week's episode, we're talking about Tim Gurner's latest interview and we're going to cover what our parents pre-1989 had in terms of net income and household budget, looking at what we've got and the cards we've been dealt and the ways we can all work through this.

Today we will run through:

  • Working overtime and incomes of Millenials verse our parents and the property price story.
  • The income over the years between our generation and our parents
  • What we spend our money on

You can see here that rent is significantly higher, along with tax and HECS along with hidden taxes like the GST.

Over the past 17 years, the cost of things have gone up due to GST and has increased the cost of everything by 10%.

 

Superannuation guarantee

A lot of people think the payments your employer makes into your super is what your employer covers. But really these days it's part of your total package. If you're on a $54, 500 income then you'll only get $50,000 and the other $4, 500 goes into your super.

 

HECS/HELP

In 1989, Hawkes government introduced HECS, under HECs there was a system where $1, 800 could be charged to university students and the government paid the rest. Now between 4 - 8% of your income goes to HECS and 9.5% of it goes to super, so you're left with a bit less than those from pre-1989. So that's about 20% of income that they had otherwise no have had to pay.

Also, the average HECS debt was $17k and now the average cost is between $30k - 50k for a standard bachelor degree.

 

Real wage growth is low

Wage growth is low.

Inflation - Actual Wage Growth = Barely Keeping Up

At the height of the last recession in 1990, the official cash rate was 7% and inflation fell from 7% to 2%, yet last month the Reserve Bank of Australia opted to keep the official cash rate on hold at 1.5% and inflation is currently sitting at 1%.

In reality, your wage is going backwards. Overall this is creating the effect of Millenials having less money than their parents in their pockets.

 

Property prices

Home ownership has gone down. For those between 25 - 34 in the '80s around 56% of people owned a home and now it's around 34%. The same with those between 35 - 44, home ownership has dropped by 15%. So generally, overall for people who own their own home, the younger they are, the less of them there are.

 

What can we do?

  • Fractional Investments

Fractional investments are where you invest in small parcels and still get same property exposure. This is a big market and there are a lot of positives but potentially negatives just so you know what's out there. The main ones are:

 

  • Have a budget

Try apps like Pocketbook or the Rentvesting spreadsheet to track what's coming in and going out. It's important to stay on top of your spending so that you can save more.

 

Times have changed, so we all need to change with it. It's not fair to compare now with the past as it's like comparing apples to oranges. So budgets of today compared to those of 1989 and earlier are completely different. It's just about being smarter with your money.

The light at the end of the tunnel is that although times have changed there are good tools out there to combat that. Try the Rentvesting calculator here to see if you should rent or buy.

If you enjoyed this episode, make sure you leave a review on iTunes for us here.