I’ve often found myself wondering how my parents did it. Dad was a blue-collar worker, who toiled away dutifully for a middle-class wage, while Mum stayed home to look after the kids, cook and clean. Yet, somehow, they managed to purchase a house and own it outright by the time I headed off to Uni. Such a scenario seems like a fairy tale in today’s housing market. The media is awash with tales of the real estate bubble and the crisis of housing affordability right across Australia. Sydney has some of the least affordable property on the planet, and Melbourne and other cities are not terribly far behind. Even with recent data suggesting that the housing market has started a decline, the dream of owning a home looks set to remain just that for a significant proportion of the population. In fact, 35% of non-homeowners in Australia say that they have completely given up on the idea of ever owning their own property.

We hear so much chatter of how high housing prices have climbed. When I questioned my parents as to how they managed their stupendous feat of home ownership, they just shrugged their shoulders and muttered: “stuff cost less back then”. Thanks for the insights, guys. However, that got me wondering about whether this was indeed the case. After all, if you factor in inflation, surely there couldn’t be that much difference? So, I decided to do some detective work, and the results were truly astonishing.

I started with the house in which I live. It’s a 3-bedroom rental in a leafy suburb in Melbourne’s inner-east. I did some digging and found that the current owners purchased the property in 1978 for a paltry $72,000. A house of similar size and age just around the corner from me was sold at auction a couple of weekends ago for a tick over $1.7 million. As the first symptoms of hyperventilation began to appear, I quickly jumped on to another website to see what that 1978 purchase price converts to in today’s dollars. That’s when I started breathing heavily into the paper bag. You see, even with inflation, that $72,000 that my landlord paid when I was 4-years old is now worth just under $308,000! If they put the place on the market today and it got a similar price to its cousin down the road, they’re looking at a 550% increase in value in real terms. In anyone’s language, those figures speak volumes about just how insanely out of reach home ownership has become in this country.

So, how does that affect you and me? Let’s look at a couple of ways:

1. The Rent Trap:

Had real property prices remained flat, adjusting only for inflation, then the mortgage repayments on the amount that I would need to borrow to buy it with a standard 30-year loan with 20% down would be significantly less than half of what I pay in rent right now. When land prices rise, more people are forced into the rental market, pushing rents up as well. With so much cash going to rent, the ability to save enough to afford a deposit on a home is severely curtailed, trapping people in the rental market indefinitely.

2. The Budget Squeeze:

Similarly, with a far higher proportion of the monthly pay packet going to your landlord, there’s less left for everything else. No matter how assiduously you budget, this significantly erodes your disposable income, leaving many people without savings and therefore vulnerable to financial crises.

3. The Dampening Effect:

While many homeowners consider their mortgage to be a chain around their necks, the reality is that every dollar paid off the principle is building equity. Unlike rent, which serves only to make someone else rich, as equity grows, you are accumulating wealth and security for your future. Additionally, equity is itself an asset that can be used as collateral to obtain finance for other productive pursuits. Without such an asset on your personal balance sheet, it can be difficult or impossible to access finance in today’s economy.

The result for many is a life spent without the financial security and potential for wealth growth that property can provide. Stuck in the rent cycle, more and more people all over Australia find themselves on a fiscal knife-edge with precious little left over for emergencies or life’s comforts.

One consolation, if you can call it that, is that we are certainly not alone in grappling with the curse of housing unaffordability. From the well-known system of rent control in New York City and the UK purpose building cities like Milton Keynes outside major metropolises to boost housing supply, to Berlin implementing rules that tie rents to renter’s incomes or Tokyo relaxing planning restrictions - national and local governments all over the world have thought up novel and inventive ways to bring down property and rental costs.

At Speckle, we can’t make housing more affordable, nor can we help you with a mortgage. However, for those families watching with alarm as an ever-growing percentage of their income is syphoned off for rent, a fast, small, affordable loan from Speckle can make a palpable difference. Whether it’s a bit of extra help to cover bills or car repairs, purchase productive goods such as a new car, computer or phone, or items that can improve your quality of life, such as home furnishings or appliances; Speckle is here to provide a helping hand. Our incredibly low fees and costs mean that you’ll pay on average less than half the total repayment amount of a similar amount borrowed from a payday lender or other such financial product. A Speckle loan is about providing customers with the opportunity to enjoy some economic freedom without the associated price tag. Perhaps that’s just what you need to ease the pressure on your monthly budget, or perhaps it’s the first small step towards financial security and a better future. Either way, we’re here to help, so apply now and see how a Speckle loan can help you today.