Property Prices Have Dipped But The Market Still Favours Rich Investors
The housing market downturn is bad news for owners, but it's still not the good news we need for young and single-income Aussies.
UBS’s Australian Economics Team has recently indicated that the housing downturn may continue for an extended period. That said, it’s a stretch too far to think that housing in Australia is suddenly affordable for the hundreds of thousands of young Australians who have been locked out of being able to buy and pay off their first home for more than a decade.
Growth in any asset, including property, is generally seen as a good thing by those who hold the asset. Sydney property owners have enjoyed growth of 103.3 percent to 112.9 percent over the last decade to June 2018, and Melbourne and other important regional centres aren’t too far behind those returns.
You can expect there to be lots of cheering with these kinds of returns. So when a five percent drop in prices appears, we’re sure to hear some noise about it from those affected. And when prices drop more, I expect we’ll hear even more.
Property is, however, like any other asset class. The price can rise and the price can fall. While I won’t speculate on where the market is going, the one thing I know for certain is that Australia’s emotional attachment to property continues.
Given these marvelous returns, and some might say unsustainable returns, it’s very hard to feel sorry for those with several negatively geared houses who don’t like the current outlook of the market, when there is still entrenched discrimination within the way the market works.
The discrimination is worst for singles of all ages and single income families. Over time the cost of a property in Sydney has risen to about 12 times a typical individual income, and this hits hardest when there is no second income to help.
International researchers Demographia say that home prices above three times average annual income becomes unaffordable. All major capital cities in Australia fit in the Demograhia unaffordable range.
So whilst recent small falls give some relief, the reality is that home prices are still expensive. They are still unaffordable for most young Australians. Many fear that a rapidly rising population will again ramp up pressures on affordability and lock a generation of young Australians permanently out of the market.