Story transcripts

The Big Squeeze

Friday, August 5, 2011

Reporter: Allison Langdon
Producers: Jo Townsend, Steve Burling, Hannah Boocock

We dodged a bullet this week.

The Reserve Bank decided to keep interest rates on hold yet again. And with good reason.

Record numbers of Australians are struggling to keep up with their mortgage repayments.

Home ownership has never been tougher or more thankless.

A generation ago, buying a house was the done thing - the one investment that was considered as good as money in the bank.

If you didn't own the roof over your head, you'd failed in some way.

Not anymore.

Now, renting might just put you ahead of the game.

Story contacts:

For more information or to get in contact with property expert Chris Gray visit www.chrisgray.com.au

If you would like to speak to a financial counsellor visit www.financialcounsellingaustralia.org.au or call the Lifeline Financial First Aid line on 1300 370 255.

Full transcript:

ALLISON LANGDON: To the world, Tracy and David Dodd are the very model of Australia’s relaxed and comfortable middle-class. They’re living the dream – three kids, a mortgage and a suburban family home on an acre block. But Tracey and David have been keeping a secret from their family and friends – they’re drowning in debt. No-one to look at you would think that you are struggling.

TRACY: It might look like we have got everything but you don’t see the mortgage, you don’t see the loans. You don’t see everything and nobody wants to talk about it you know, because it is embarrassing.

ALLISON LANGDON: Has it taken a toll on you both?

TRACY: Mmm…sorry.

DAVID: Oh it has – it has taken its toll but you’ve just got to do it.

ALLISON LANGDON: Like most young couples, the Dodds invested their heart and soul and every spare cent they had into the ideal of home ownership – the biggest mortgage their double income would allow. But last June, Tracy lost her job in the construction industry and David was made redundant. Just to keep money coming in, he’s taken a lower-paying job. Ever since, the Dodds, like tens of thousands of middle class families have been going secretly broke in the suburbs.

TRACY: We went from having a really great income including a company car, fuel card, phone – things like that – to basically losing all of that.

ALLISON LANGDON: So do you have more money going out each week than what you’ve got coming in?

TRACY: Absolutely.

ALLISON LANGDON: How much difference are we talking about?

TRACY: Probably – it’s getting very embarrassing – probably about 400 bucks…$400.

ALLISON LANGDON: This is the outskirts of the Gold Coast. When you look around and see the big, shiny new houses, the nice lawns and two cars in the driveway, you can’t help but think, ‘life must be pretty good here.’ But this version of the Great Australian Dream is just a facade – nowhere is mortgage stress being felt more keenly than right here. And the figures are staggering – one in 50 families are at risk of losing everything. The number of Australians behind on their mortgage repayments by more than a month is at an all-time high. Areas of mortgage stress can be pinpointed right around the country. Mostly in areas, that just five years ago, were booming. Families who borrowed to the limit in the real estate gold rush are the ones who are now struggling to pay their bills.

SANDRA: We’ve never over-spent, never gone outside of what we can afford. We’re just not spontaneous spenders like that who’d just go and blow it.

SANDRA: Phil and Sandra Box live in Capel, two hours south of Perth with their teenage boys Aiden and Keegan. Sandra’s a school teacher, while Phil runs his own business as a mechanic. Despite 40 years of hard work, their spiraling debt has forced them to come up with a drastic solution.

ALLISON LANGDON: From a nice family home to the takeaway store.

SANDRA: Mmmm.

PHIL: We’ll be comfortable enough here to get us through. The telly will go over here with the power point and probably the lounge around that side.

ALLISON LANGDON: This will be their new home – an empty takeaway shop in an industrial block.

PHIL: Out here we have got enough room for our bedroom to be set up. That’ll be storage and wardrobe – that sort of thing in the cool room.

ALLISON LANGDON: Where is the bathroom?

PHIL: Ah, bathroom is out the back, you’ve got to go through the rain unfortunately.

ALLISON LANGDON: The shop is one of six properties Phil bought in this industrial estate. He runs his business here, but the investment was intended to see them through retirement. So no-one could accuse you of waking up one morning and going, ‘oh wow, we want to retire in a couple of years – what are you going to do?’

PHIL: Oh no – we had a plan, we did…we had a plan. We just bought our own property and intended to live off the income from that property.

ALLISON LANGDON: Ironically for Phil, things started to go badly when his mechanics left to join WA’s mining boom. The Global Financial Crisis, interest rate hikes and the spiraling cost of living have combined to create a crippling mortgage squeeze.

PHIL: It’s just the disappointment I suppose, from coming down from being in a very comfortable position to a point we’re not accustomed to, that’s all.

SANDRA: Food’s gone up, rent’s gone up, mortgages have gone up, petrol has gone up – nothing has come down but house prices. It’s really working against us isn’t it?

ALLISON LANGDON: What did those people do wrong?

CHRIS: I don’t think it’s necessarily a case of doing anything wrong. Sometimes it’s bad luck and everything goes wrong at the same time, once one thing falls down, quite often the whole pack of cards comes down with it.

ALLISON LANGDON: Property Analyst Chris Gray believes what is wrong is Australia’s obsession with home ownership. Instead of chasing the dream and pouring everything into one asset, he believes there is another way. Chris never considered buying his multi-million dollar home on Sydney Harbour…it’s a rental.

ALLISON LANGDON: So if you were to buy the family home you wouldn’t be able to get this?

CHRIS: There is no way we could afford it. So no matter what your budget is, you can never afford the house that you really want, so I’d much rather have the view and rent it instead.

ALLISON LANGDON: So you are living the dream.

TANYA: Absolutely.

ALLISON LANGDON: He says owning your own home is overrated. And it’s time Australia followed the lead of Europe and Asia where renting is a way of life.

CHRIS: A lot of expats go to Hong Kong and Singapore and they get in the lifestyle of renting and it’s actually nice and flexible. And they come back to Australia and think, ‘why would we buy the family home?’

ALLISON LANGDON: You don’t meet many Australians like The Semmens family. They have no interest getting into the property market. And why would they? So what’s this property worth, where you’re living?

DAVID: I think it’s worth three million, I’ve been told.

ALLISON LANGDON: They rent 10 acres here in the Tweed hinterland, with breathtaking views from the Queensland border down to Byron Bay. There’s plenty of room for David and Kristen and their five gorgeous kids.

KRISTEN: Like, we don’t have to worry about you know, ‘have we have got enough petrol in the car for the week’ and all those kinds of things – we just put some more in.

ALLISON LANGDON: You’ve got that little bit of money if you want to spoil the kids, you can.

DAVID: Yep – that’s right.

KRISTEN: Yes definitely, and with five that’s a lot of spoiling. That’s not cheap!

ALLISON LANGDON: Instead of being slaves to a mortgage they’re investing their time and money in a new business – a kid’s hair salon right in the heart of the mortgage stress belt.

KRISTEN: I’ve got a mum here who owns a real estate – she was telling me they’ve just had their biggest boom at the beginning of this year because of all the foreclosures.

ALLISON LANGDON: Does it make you glad that you rent?

KRISTEN: We haven’t basically mortgaged our future based on our house.

ALLISON LANGDON: So life’s good for you?

KRISTEN: It’s very good for us, we’re very free. I guess we’re very secure even though you used to have to have a house to be secure.

ALLISON LANGDON: With the money left over at the end of each week, David and Kristen can afford to treat their kids to a day out. The decision to rent also means fewer arguments about money, one of the major causes of marriage breakup.

KRISTEN: We have peace between David and I.

DAVID: Yeah, yeah.

KRISTEN: Look – honestly there is so much stress that happens between husbands and wives over money and I think money just amplifies things.

ALLISON LANGDON: Does it put a strain on the relationship?

TRACY: Sometimes…

DAVID: Sometimes it does for sure – we won’t talk to each other for a couple of days.

ALLISON LANGDON: The strain is showing. Tracy and David even dipped into their superannuation fund to meet their mortgage repayments. But it wasn’t enough. The Dodds have just made the heartbreaking decision to abandon the dream and sell up.

DAVID: We were going backwards and backwards, we were going to lose everything and ahh… ‘cause of the market now it has gone worse. Not even one person has come out here to have a look at this house.

TRACY: It was our big dream. It’s a bit of a shock to think that you’ve worked so hard – to now be walking away with nearly nothing.

ALLISON LANGDON: They’ve tried their best to shield the kids from the stress of their financial worries, but at eight, their eldest son Caleb is aware that things have changed.

TRACY: His dream was always to join the army, since he was five. And he did say the other day that ‘it would be better Mummy, if I went to college’ and I said, ‘why is that darling?’ and he said, ‘well I could get a better paid job and I could help you and Daddy out’ and when…

ALLISON LANGDON: That’s hard…

TRACY: …So he does, he understands and he is such a good kid, we’ve got great kids.

ALLISON LANGDON: It’s this sort of pressure that’s forcing more and more Australians to rethink how they can secure their family’s financial future.

CHRIS: There’s a massive social stigma against renters. It’s always thought that poor people rent. If you look at purely the numbers, it actually makes more financial sense to rent your own home, than it does to buy it. The golden rule was that ‘rent money is dead money’ – whereas the rule now is ‘rent money is only dead money if you don’t reinvest the equivalent somewhere else’.

KRISTEN: You know we’re better off renting, keeping our overheads low and having the cash to do what we want to do. It’s a simple equation.

ALLISON LANGDON: So you’ve got no regrets about the decisions you have made?

KRISTEN: We’ve got all the things that happen to every family you know and don’t tell me running a business and five kids isn’t stressful, but we haven’t added to it.

DAVID: Yeah.

KRISTEN: You know, we’ve taken off what was one of the biggest pressures and it’s made it easier – we can enjoy it.

TRACY: We loving going to the park, meeting friends, you know riding bikes, that’s our fun. We’ve refocused our lives and realised that our children and our happiness is much more important, so no more stressing and it doesn’t matter what we live in so long as we are all together.

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