Thousands of Australians are under mortgage stress, and thousands more are locked out of the housing market thanks to the housing-affordability crisis in Australia. Now the RBA is warning that some Australian cities like Sydney and Melbourne are in a housing bubble with highly indebted homeowners at risk of financial difficulty resulting from any fall in house prices.
So how do we avoid getting caught in the trap of too much debt on our home? One way could be to stop our obsession with the idea that bigger is always better.
The average house in Australia is now 797 square feet (243 square meters), an increase of more than 40% since 1984, 20% bigger than the USA, three times bigger than the United Kingdom (249 sqft or 76sqm), and more than five times bigger than Hong Kong. Around the world, there is a movement that is radically opposite to this Australian way: the Tiny House movement.
I, for one, think they’ve got it right.
Considering The Tiny House Movement
Two years ago, my wife and I took note of the Tiny House movement emerging in the US and actively discussed how much space we and our two teenage sons actually needed to live happily.
At the time, we were living in the typical “success” house—1476sqft (450sqm) of living space in a double story home on a 2625sqft (800sqm) block. This place came with everything, including a $600,000 mortgage.
We spent nearly a year wrestling with our questions about the Tiny House… could we do it? What would our friends think? Shouldn’t we be buying bigger and better to adequately represent our “social status?” When we looked deep, it was our happiness we wanted, not feeling pressured to live our lives by others standards.
The tipping point came from a late-night home invasion by a drug-fueled intruder. Shortly after, we made the decision to trial downsizing. We went from an 2625sqft block to a 459sqft (140sqm) apartment. Along with that change was a downsize from a $600,000 mortgage to being debt-free.
Dr. Tony is the co-founder of MindShift.money and the best-selling author of three books on personal and business finances. Having achieved Financial Freedom at 27, Dr. Tony believes that through Financially Fit Bootcamp and Cash Flow Cure everyone can get there. He has made it his life’s mission to help others live a life where their money works for them—not the other way around.