Soaring house prices, Melburnians take an average of 14 years to save enough for a down payment, and up to 20 years in some areas!
House prices in Melbourne have grown at 2.5 times the rate of household income growth over the past 15 years, while in parts of the city the time it takes to save a deposit on a classic home has grown to 20 years.
From the latest Housing Affordability report from ANZ and CoreLogic, experts are calling for stamp duty cuts and a shift to non-conventional housing such as small dwellings to stem the worsening affordability crisis.
The report noted that “several housing cost indicators are at historically high levels in many regions of Australia”, with house price-to-income ratios and down payment thresholds growing the fastest.
In Melbourne, the price of a classic home is now 10.5 times annual household income, up from six times in 2006. In regional Victoria, the ratio was 7.5, compared with 5.2 in 2006.
Median house and unit values in the Victorian capital soared 134 per cent over the period, significantly outpacing the 54 per cent increase in resident income.
According to data from ANZ and CoreLogic, it takes an average of 14 years to save a 20 per cent deposit to buy a median-priced house in Melbourne, almost double what it was 15 years ago.
New buyers in Manningham West took an astounding 20.8 years to save for a deposit, while in Whitehorse West, Bayside and Monash it took more than 18 years.
In the Gippsland-South West and Surf Coast-Bellarine regions, that period also rose to 15 years.
The report added that while low interest rates ensured that mortgage servicing remained manageable, they also “increased inequality between those able to own a home and those trying to enter the housing market”.
Further research by the National Housing Finance and Investment Corporation found the bottom 40 per cent of first-home buyers could afford only 10 per cent of the Melbourne market.
Eliza Owen, head of research at CoreLogic, said during the pandemic, “affordability has deteriorated across much of Australia, including the capital cities”.
“There are places in Victoria where house prices are lower, particularly some apartment dwellings in the inner city, but it’s not a place where people want to live and build a family,” she said.
“The relief for potential first-home buyers is that we may see a downturn in the housing market over the next few years as this extra-long level of growth is unsustainable.”
But top industry bodies and economists say action is needed now to help those struggling to buy a permanent home.
Real Estate Institute of Australia president Adrian Kelly, realestate.com.au economist Anne Flaherty and Loan Market agent Jacob Decru have all called for changes to stamp duty to address deteriorating housing affordability.
Kelly wants states to discuss “better alternatives” at a national cabinet meeting, having previously told the Herald Sun that some Melbourne home buyers are “spending close to half their annual salary on stamp duty”.
Both Flaherty and Decru said the threshold for stamp duty exemptions and discounts for first-home buyers had to be raised in Victoria, from $600,000 and $750,000 respectively.
Real Estate Institute of Victoria president Adam Docking urged the state government to work with the industry to develop measures to help people get on the property ladder instead of taxing them that would “put a lot of people out of their homes”.
Melbourne builder Nick Todd said building more affordable housing should also be on the agenda. During the pandemic, he turned his homebuilding business into building tiny homes.
Expert: Every seven to ten years, the price of prime Australian property doubles.
In 2021, house prices in Australia’s capital cities will increase by 15%-28%, and local regional house prices will increase by an average of 25%.
Entering the new year, industry experts believe that the shadow of interest rate hikes will become the main resistance factor for the upside of the market this year, and the soaring momentum of last year may be difficult to reproduce.
Cameron Kusher, head of economic research at REA Group, said the recent decline in market demand was due to two changes. One was an increase in supply, and on the other hand, homebuyers took the rise in fixed mortgage rates as a signal that floating rates would also rise soon.
“When the economy reopens, people can move freely and will do a lot of things they couldn’t do before, and they may be reluctant to put a lot of their income into property,” he said.
The REA expects house price growth in Australia to moderate in 2022, but to remain solid.
According to the REA forecast, Sydney and Melbourne will increase by 4-7% this year, Brisbane 8-11%, Adelaide 6-9%, Perth 3-6%, Hobart 9-12%, Darwin 5-8%.
Investment buyers will be more active as first-time homebuyers back off as affordability deteriorates.
According to The Australian, Metropole Property Group CEO Michael Yardney said previously high demand was fading due to affordability constraints, while the Australian Prudential Regulation Authority (APRA) may introduce stricter policies to suppress the surge in house prices.
The intermediary industry is more optimistic about the market forecast. Buyers’ agent Chris Gray believes the surge in house prices in 2021 is unsustainable, but some capital cities will still see double-digit returns.
He noted that every seven to 10 years, the prices of well-located properties doubled.
“We’re just entering the first year of a new upswing cycle,” Gray said, noting that the last time house prices saw huge gains was a decade ago, after the financial tsunami.
What will the Australian housing market look like in 2022?Experts share 7 major trends
Here are the top seven real estate trends forecast for 2022:
1. One buyer activity will decrease
In August 2021, the number of buyers fell by 21.6%.Still, for the first time, interest in inquiries from buyers and buyers has peaked, with the number of inquiries increasing every month.
“Incomes have recently risen to high levels and first buyers have been squeezed out in key markets. For those looking to buy in 2022 and beyond, the biggest challenge will be their financial support.
2. Real estate prices are demand-driven, not desire-driven
Market growth in early 2021 has one common factor: stock
“Many areas have the continuation characteristics of their own cycles: economic growth, external persistence, restraint,
The pace of growth over the past 10 years has paved the way for Australia’s property cycle
3. As Australians come up with their work plans and continue to be flexible
After the epidemic, residents eager to live on the outskirts of the city decided to relocate to remote areas.
“The epidemic has made people rethink their living conditions and want to find better ways. We can see all kinds of different responses,
4. No-buy will become the norm as data increasingly influences investment decisions
While there are always opportunities to make money in capital cities, savvy investors are stepping out of their comfort zone and investing further afield.
Make it easier for people to buy outside their own city or state and ease buyer concerns through the presence of more buyer agents
5. All markets will not grow at a rate, markets will change differently
In 2021, when the property market across Australia was growing, by 2022, investors no longer think they can buy anywhere, so the same growth trend as in 2021 will happen again. Every micromarket is growing.
The last time such a similar increase occurred nationwide was from 2000 to 2004.
6. Condo rental vacancy rates will trend down and increase pressure on rental prices
With international reopenings, skilled migrants and international students returning, apartment rental prices rise with newer immigrant life updates.
7. More people will buy property through their own pension funds
More than half of the Queensland construction industry is insolvent and has accumulated hundreds of millions of Australian dollars in debt
Dozens of companies in the Queensland construction industry have gone bust in the past year, leaving behind more than $100 million in debt.
Builders are struggling as prices soar as prices soar for everything from lumber to bathroom fixtures.
Brisbane-based Privium, one of Australia’s largest home builders, declared bankruptcy in November after an estimated loss of $80 million, implicated 2000 homeowners across the country.
Queensland’s major civil engineering firm JWM Contracting went into liquidation in December after losing millions of Australian dollars and leaving about $4 million in debt over the past two years. On the Gold Coast, third-generation construction company Ben Murphy also went into liquidation in December, owed about $3 million in debt and affecting about 290 clients.
According to The Australian, the Professional Builders Association (APB) estimates that more than half of Queensland’s $48 billion construction industry is now insolvent.
Queensland Builders Association Master Builders vice-president Paul Bidwell said that under the huge pressure of rising building materials costs, it is expected that there will be further business bankruptcy, which will become more obvious in the first quarter of this year. Some builders choose to go out of business permanently after completing the contract at hand.
Bidwell sees supply chain issues extending even into 2023.