Is real estate really unaffordable?
There is a lot of talk in the media about housing affordability and how a whole generation of Australians will no longer be able to realise the great Australian dream of owning their own home.
I’m sure you’ve heard how investors, negative gearing, foreign investment and the whole host of other factors are to blame.
To make housing more affordable we would have to see house prices fall.
So ... do we really want houses to be more affordable?
Now that’s an interesting question that I’m going to put to Dr. Andrew Wilson, Australia’s leading housing economist and chief economist of MyHousingMarket.com.au in this week's Property Insider Video
Watch as we discuss...
- Is housing really unaffordable?
- How to measure affordability and why the common method is really irrelevant
- How can we make property more affordable? In my mind there really are 2 ways:
- Give home buyers more money to spend on property – either by increasing their wages or by handing out grants or incentives. However, unfortunately this only works in the short term and for a few select buyers, because both these measures encourage people to spend the extra money they have available and this pushes up property prices leaving properties even more unaffordable for the next round of buyers.
- Decrease the value of properties –there were about 9 million private dwellings in Australia each with, on average, 2.6 occupants. Around two thirds of these were owned by ordinary Australians as their homes and they don’t want the value of their homes to decrease
- Clearly there is no simple answer – smarter minds than I have been debating this all around the world and have not come up with a solution.
- Also read:Home Price Growth Still Strong Over November | Latest Housing Market Stats
- Also read:Boom to bust: What makes property prices rise and fall
- Also read:The Rate Debate considering the RBA’s raft of failures | Property Insiders [Video]
- Also read:One million more cars: the suburban mobility challenge
- Also read:This week’s Australian Property Market Update – Latest Data, State by State November 28th, 2023
The bottom line...
This is a first world problem related to living in the best country in the world at the best time in history.
If you’re keen to get into the Sydney or Melbourne property markets, which are now global cities, it is unrealistic to expect to buy your first home near town.
If you lived in Paris, New York or London, you wouldn’t really expect to be able to buy a home a a first-time owner.
In fact, you wouldn’t even expect it to be able to afford an apartment.
Many first-time buyers will have to alter their expectations.
Some will need to rentvest – renting where they want to live but can’t afford to buy and invest in property in locations where they can afford to buy.
Others will have to learn delayed gratification, spending less than they earn and saving for a deposit.
More first-time buyers will have to count on the bank of mum and dad to help them get a foot onto the property ladder
So while I am sympathetic to the plight of those currently wanting to get into the property market, it is unlikely that home prices will become significantly more affordable in locations where most millennial’s want to live – close to where all the action is and where their jobs are.