Let’s bust some housing myths – Dr. Andrew Wilson

Housing market activity is always fertile ground for debate given the significance of housing to Australians.

Predictably with sharply rising house prices over the past year in Sydney media chatter has recently focussed on the distress of first home buyers supposedly unable to afford to get into the market – perhaps ever.

This position has turned 180 degree from just two years ago when the usual suspects in the media were also bemoaning the plight of the then poor misguided first home buyer.

At that time however the issue was the supposed stupidity of first home buyers securing homes in a Sydney market where predictions were that house prices were set to fall by 20 percent over 2012.

Surely in those circumstances first home buyers would find themselves in a position where they would owe more on their property than it was worth – causing a fire sale of property and the end of civilisation as we know it.

Over the second half of 2011, first home buyers had rushed into the market before changes to the New South Wales stamp duty concession came into effect.

A similar drawing forward of first home buyer demand then followed in 2012 when the local first home buyers grant was restricted to new homes.

It’s those first home buyers that entered the market in waves in 2011 and 2012 despite the typically nonsensical rantings of the doomsayers that are now benefitting big time from the resilience of the Sydney housing market.

In the period from when the New South Wales government announced it changes to first home buyer incentives to when those changes came into effect, nearly 34,000 properties were sold to first home buyers according to ABS loan data.

Since then those households have witnessed the median house price increase by 20 percent or nearly $150,000, had mortgage interest rates fall from 8 percent to 5.5 percent and with rising wages have also had mortgage affordability improve to below 30 percent of average incomes. Does it get any better?

Is it no wonder that many cashed-up first home buyers from that period are now selling up and moving up the property ladder in record numbers into the inner west and the upper north shore?[sam id=41 codes=’true’]

And yes current first home buyer numbers are low – but unsurprising given the surge in demand brought forward over recent years together with the removal of buyer incentives for established properties and the strong increase in prices keeping prospective first home buyers in the saving queue longer.

But first home buyers have unsurprisingly started to rise again over recent months and given the strong underlying aspiration for home ownership and the undoubted long-term benefits that that accrues, this rising trend will continue.

And of course recent media hysteria regarding the supposed death of the first home buyer in Australia because of our so-called “unaffordable” housing is a myth.

First home buyers numbers are relatively low in Brisbane and Melbourne because, similar to Sydney, those states have recently changed their incentive schemes with similar outcomes.

First home buyer activity in Perth and Adelaide however remains strong with current levels at or above the long-term market share average.

The final myth is the most insidious and concerning.

According to a number of commentators, Sydney prices are rising strongly and keeping first home buyers out of the market because of a wave of Chinese buyers snapping up local homes.

And by Chinese the reference is to Chinese nationals and not Australians of Chinese heritage (I sincerely hope so)

In reality this is utter nonsense and a real concern because it brings in a racial stereotype to the prices blame game.

Sydney prices are rising because of thousands of local changeover buyers and thousand of local investors driven by the lowest interest rates in 60 years and a solid economy, not a handful of overseas investors.

The rules are clear and unequivocal.

Foreign investors can only buy new residential property – and not established residences – end of story.

And it’s clearly established home sales that are driving the Sydney market. Loans for established homes in New South Wales account for nearly 90 percent of all residential finance according to the ABS.

And the correlation between house price growth and the growth in home loans clearly reflects the overwhelming impact of local buying activity on price rises.

$87.4 billion in housing finance was approved in New South Wales over 2013 which is 23 percent higher than the $67.2 billion approved over 2012. And guess how much the Sydney median house price increased between March 2011 and December 2013 – 19 percent. And that’s no myth.

And to put the nonsensical racial element into perspective, according to the Foreign Investment Review Board $5.9 billion dollars of real estate was purchased by Chinese nationals over the 2012-13 financial year – and that included commercial property as well as residential.

If even half of this total was for residential property it represents just 1.3 percent of the $217.3 billion locally lent for residential housing in Australia over the same period – and that doesn’t include purchases by locals that didn’t require finance.

And this is only the value of the local loans not the full value of the property sold.

Says it all really. Time for (another) cold shower.



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Dr. Andrew Wilson


Dr Andrew Wilson, of www.MyHousingMarket.com.au is Australia’s leading property economist.

'Let’s bust some housing myths – Dr. Andrew Wilson' have 1 comment


    April 2, 2014 Jacqui Boyce

    This is very interested IF you are in Sydney


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