Forum Archive Index - February 2003

[Travis Morien <travismorien@yahoo.com>]

--- michael gore <michgore@yahoo.com> wrote:
> My apologioes for this off topic message but I know
> some of you are interested in housing.  My parents
> are
> fond of saying that a general rule is that you
> should
> spend a third of your take home pay on accomodation,
> i.e. mortgage or rent.  I recently heard someone say
> that it is a good idea to spend no more than 2.5 to
> 3
> times your gross annual salary on a home.  These two
> ways of looking at things would work out about the
> same perhaps.  The way my parents talk I have the
> impression that these are or were general rules of
> thumb that were "common knowledge".  The problem is
> that when I look around I see people buying houses
> and
> from the sale price I work out approximately what
> their salary must be if they are following the rule
> of
> thumb and well - there's just no way!!  I read Brian
> Gaynor's article in the Herald this morning (see
> Sharechat Daily news links) and noted the huge
> increases in house prices that he documents and I
> wonder if someone's wages must be going up a lot
> faster than mine!!  Or are these "rules of thumb"
> just
> not that relevant.
> Can anyone help clear this up for me?
> Thanks,
> Michael  

These rules of thumb come from "The Millionaire Next
Door" by Thomas Stanley and William Danko.

I can only assume that in the USA houses are cheaper
than here, compared to average income, because there
is bugger all chance of adhering to that rule in
Australia.

I don't know about NZ, but its probably the same.


Travis
www.travismorien.com

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