Do You Find Sydney House Prices Depressing? (Part 1)- Jhai Mitchell

Think of the Gen­er­a­tions: Will they be able to afford a home?

I see many people com­ment­ing on for­ums say­ing “Sydney as a whole is way over­priced for what is selling” and oth­ers said “I really feel for young­sters (I’m in my late 50s) just start­ing out who want to buy, and may never own a house. Oh it’s great for us baby boomers who already bought in though.”

I have found this is a really touchy sub­ject.

Some people just don’t feel like they are get­ting any­where, rent­ing week after week pay­ing off someone’s else’s prop­erty. Some people even said “I’m wait­ing for the Sydney property mar­ket to get back to real­istic prices”.

In my opin­ion price is in the eye of the beholder…

If the buy­ers are will­ing to pay that price again and again it will stay at that price. Sup­ply and demand determ­ines price, does it not?

When I asked a good friend of mine “What are people com­plain­ing about? There is so much oppor­tun­ity out in west­ern Sydney,” he turned around and said “but the reason buy­ers are not mov­ing to Par­ra­matta or Black­town is because there work is in the city. Any­thing along pub­lic trans­port is very expens­ive,” to which I did not agree with.

I believe you can find a great home not far from a train sta­tion in west­ern Sydney. I will talk more about this later.

My friend went on to tell m:

“You have a look 30 years ago and what was your aver­age wage com­pared to your aver­age house? Aver­age wage $10,000 per year. Aver­age house, $25,000 — that is a 25/10 ratio which means about 5 — 8 years you could pay it off on ONE wage.

Now the ratio is 25/190, with an aver­age wage of $50,000 and an aver­age house price of $380,000 is much dif­fer­ent. The math is not the same.” I agree the game has changed, but our thoughts also have to change with it or many of us will be left behind.”

Where we all want to live, well most of us!

I can sym­path­ise that most people simply want the com­mute between work and home to be shorter, but these days we also want a great school for our kids and to be close to our family/friends.

Our men­tal­ity has changed because we also expect to step out of our door and walk to bars, res­taur­ants and the train station.[sam id=37 codes=’true’]

This is a life­style factor and some of us have accep­ted to live in a shoe box or pay big bucks for some breath­ing space. This life­style factor has become such an ingrained way of think­ing. People are even start­ing to think noth­ing exists past Par­ra­matta, such as mobile phone cov­er­age inter­net and connections.

A good example of this is a com­ment in reply to city people com­plain­ing about Sydney house prices “It almost sounds like they have not moved from the city for dec­ades and still think that the city is the centre of the uni­verse and that noth­ing else exists.”

He also added “Or is it that it is still the centre of the uni­verse for many people?”.

Check out this art­icle on Sydney­siders pay­ing huge Sydney prices for tiny places

How has afford­ab­il­ity blown out? 

As I read on, one forum user said “It’s unfathom­able that house prices could pos­sibly go up anymore.”

Well I believe the value of prop­er­ties tends to rise in waves. In some years there will be good strong growth and in oth­ers there will be low to no growth and in every prop­erty cycle there are times when prop­erty val­ues even fall.

As our pop­u­la­tion grows there is an increased demand for real estate and this causes an increase in rents and in demand for new homes. Sydney is a mega city like Singa­pore and Hong Kong.

We’ve got to start see­ing Sydney as a mega city (which is under-priced by inter­na­tional terms), not as an Aus­tralian city (of which most are under-priced in com­par­ison).

Some people say “I can’t wait till we get back to a real­istic mar­ket,” and yes real estate val­ues may fall and always will even­tu­ally.

In say­ing that, keep in mind in other years, val­ues may rise by over 20%.

Pin point­ing a time-frame to these prop­erty cycles is not easy, but what I will say is that it is a “real­istic mar­ket”. It’s just that the aver­age home buyer needs to under­stand that prop­erty goes up and down in cycles.

Prop­erty cycles of the gen­eral mar­ket is one thing, but Sydney is an entirely dif­fer­ent beast on its own.

It’s made up of a series of sub-markets and Sydney now has mul­tiple CBD’s e.g. Par­ra­matta, Black­town, Pen­rith, Liv­er­pool and not to men­tion we are about to link up with New­castle which is grow­ing 5,000 people per annum.

So now we have 4 factors mak­ing Sydney unaf­ford­able for Australians

1. Sydney is a world class mega city and we are cheap.

Sydney is a world city and people with money have a choice where they want to live, a lot of them com­ing from china because we are cheaper than Hong Kong to live in and own prop­erty.

I saw an out­raged Aus­sie com­ment “What I’m REALLY inter­ested in is……. WHERE ARE PEOPLE GETTING THIS KIND OF MONEY FROM..?”

Many Asi­ans are happy to pay $1M plus for houses in full and think it’s a really good deal con­sid­er­ing you get some­thing like 800msq land with a two-storey house, which is almost impossible in any of the Asian mega cit­ies.

To put into per­spect­ive how crazy hous­ing is all over Asia, a mate of mine liv­ing in Hong Kong had in-laws liv­ing in a shabby-looking three-bedder apart­ment with a pleas­ant view with around 240sqm interior area now worth $5Mill USD.

This is why hous­ing prices do not seem to stop. Even if the local Aus­sies can­not afford it, the inter­na­tional buy­ers will giddy up the cash without a second thought.

2. Immig­ra­tion in gen­eral is pick­ing up because Sydney as a Cap­ital city is a desir­able place to live.

Cap­ital cit­ies attract most of the pop­u­la­tion growth and Sydney got 62,000 immig­rants in 2012 to be exact.

Just last year, 17,500 people from China and India immig­rated to Sydney.

Just over 35,000 new migrants settled here from else­where abroad.

A lot have come from the Phil­ip­pines (7,000), Malay­sia & Viet­nam (4,000 each), Sri Lanka (3,500) and Iraq (2,500).

Our cur­rent rate of pop­u­la­tion growth is up 25 per cent on 2 years ago and I can’t see it slow­ing down any time soon.

3. High pay­ing jobs and cor­por­ate head offices are all in Sydney.

Of the 110 lead­ing com­pan­ies lis­ted on the Aus­tralian Stock Exchange, you will find 67 have their headquar­ters in Sydney.

I have not even begun to count how many world com­pan­ies have major offices in Sydney as well.

In say­ing all of that, I have noticed cor­por­ate work­ers are buy­ing in west­ern Sydney to take advant­age of the growth and con­tinue to rent in the city.

Basic­ally afford­ab­il­ity is mov­ing out to the west and the gov­ern­ment is invest­ing in infra­struc­ture to fol­low this pilgrimage.