Australia housing markets unaffordable

Ozeire

Might be of interest for people moving or thinking of moving to Australia

https://www.youtube.com/watch?v=DBp0wPkV2jA

mandrake04

Too many immigrants and not enough houses.

FreeAnd..

and the last big mother bubble waiting to go pop...

FreeAnd..

mandrake04 wrote: »

Too many immigrants and not enough houses.

Isnt that what they said in Dublin too when it almost topped the list of unaffordable cities?

mandrake04

FreeAnd.. wrote: »

Isnt that what they said in Dublin too when it almost topped the list of unaffordable cities?

yip that perception is what caused it....an open door immigration policy & peoples greed

Too many houses (greed) and not enough immigrants (just carpet baggers)

mandrake04

I agree that Sydney and Melbourne are seriously overpriced but there is a major difference between those 2 cities and Dublin.

Sydney: the world's second most unaffordable housing market

Sydney ranks as the second-most-unaffordable housing market in the English-speaking world, stoking fears runaway price increases have made Australia a less equitable country.
Update

Sydney was ahead of only Hong Kong in a survey which ranked 325 markets by their affordability. Melbourne came in at No. 321 and the Sunshine Coast and Gold Coast also rated badly.
The Demographia International Housing Affordability Survey covering markets in six English-speaking nations and Hong Kong found that the ratio of house prices to median annual household income was 9.6 in Sydney. It put the median house price at $634,300 and median income $66,200.
Hong Kong had an income/house price ratio of 11.4, while Saginaw, in Michigan, US, ranked No. 1 with 1.6.
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Demographia, a US-New Zealand anti-regulation group, considers markets with a median multiple of three or less "affordable", while those with 5.1 or more are considered "severely unaffordable". All major markets in Australia were considered "severely unaffordable'', the report concluded.
A US geographer and author, Joel Kotkin, said that even after the housing bubble implosion in the US and Britain beginning in 2008, the ratio of home prices to incomes has continued to grow in major cities such as Los Angeles, San Francisco, Boston, London, Vancouver and Toronto.
"Perhaps most remarkable has been the shift in Australia, once the exemplar of modestly priced, high-quality middle-class housing, to now the most unaffordable housing market in the English-speaking world," said Mr Kotkin.
"The real issue is affordability, and Australia has gone from a middle-class paradise in that regard into a more stratified society - just as we find in the UK and parts of the US."
Demographia's latest report comes as Australian home prices are expected to show little growth this year, after a period of double-digit annual growth driven by the slow pace of construction approvals, immigration and an economy that hasn't experienced a recession in almost 20 years.
The rankings were compiled by Demographia from housing industry reports and census data.

'Severely unaffordable'

The Demographia report showed Australian cities shared the mantle of “severely unaffordable” with American, Canadian, British and New Zealand cities.

Brisbane's affordability trailed London’s so-called exurbs, which stretch into neighbouring counties in east and southeast England. Queensland’s capital ranked 303 in terms of affordability, with an income/house price ratio of 6.6 per cent while the English markets were 297, with a ratio of 6.5 times.

The median house price in Brisbane was $447,500, while the median household income was $67,900.
Perth, ranked 291, with a 6.3 ratio, based on a $480,000 houses with a median household income of $75,700, lower than the New York City areas, which scored 289 on the list.

Separately, a report from the Department of Immigration and Citizenship calculates that if 260,000 migrants come to Australia per year, both Sydney and Melbourne will need to expand by 430,000 hectares, or 4300 kilometers by 2060.

“Expansion of urban areas raises issues such as likely increases in traffic congestion, city (air) pollution, and competition for land as a resource,” the report concluded. “The latter is an important issue since peripheral land of a number of capital cities has been relatively productive agriculture land, which can supply fresh food to the local area with lower freight requirements.”

The report on the physical impact of immigration was prepared by Flinders University and the Commonwealth Scientific and Industrial Research Organisation Sustainable Ecosystems Department of Immigration and Citizenship.

jank

It is also bad planning on behalf of the government. Not enough urban centres in Australia. If you are an immigrant you are likely to settle in a handful of places. Blaming immigrants is a bit of a straw agrument.

Anyway high interest rates have certainly cooled the market, pity ireland couldnt do the same.:(

mandrake04

Yeah immigrants are only the symptom & bad planning is partly to blame.

Thing is to remember is a lot of Australians already have a lot of equity in their current property paid out long ago and are then buying a house 8 or 9 times their annual income but their home loan is only about 3 times their income. I have a few Aussie friends my age who have a house with no mortgage, thanks to their parents.

Sure for some people getting on the ladder is unfordable but there is always someone else with more money willing to pay that price.

Father Damo

Meh. Its still more affordable than it was in Dublin during the boom. The rents out west for two bed units are unbelieveably low (and when you compare it to Dublin, they are usually areas with good motorway networks, near- on express train services and, by Irish standards, very safe areas, even the ones with a bad rep.) Even the CBD and surrounding areas are low by Irish/ UK standards from when I left- I was paying (at the current exchange rate) the same for a room 8 miles from town as I was for my own room in a decent house a mile from the city here. Irish Celtic Tiger greed in regards to the cost of pretty much everything is truly put in perspective once you go abroad. Really annoys me to hear Aussies complaining this and that costs too much given what we have come from.

mandrake04

http://news.domain.com.au/domain/home-renting-tips/blogs/talking-property/no-end-in-sight-for-renters/20110125-1a3ee.html

ballooba

Reading news.com.au will only turn your brain to mush. Australia's property market is insane, leave well alone is my advice.

Zambia

Its only natural for a lot of us to be nervous in regards property.

If you wanted to buy property in Ireland now is the best time roughly. Yet from what I hear no-one is buying. So when is the best time to buy?

If you need a house and can afford a house the payments buy a house.

Each person knows their own finances and needs and should act accordingly. Then be prepared when life throws a curve ball.

ballooba

Zambia wrote: »

If you wanted to buy property in Ireland now is the best time roughly. Yet from what I hear no-one is buying. So when is the best time to buy?

Now is not the best time to buy in Ireland. There is too much of a gap between buyers and sellers. Most "prospective buyers" haven't prepared to buy either. I have cash ready to buy a house in either country should it become attractive but right now it is not. Maybe when the Irish banks start foreclosures it might be.

Australia has the most expensive housing in the world and little else going for it economically*. It's the world's last great housing bubble.

*Yes, I am aware of the mining "story", similar to the corporation tax "story".

Father Damo

Zambia wrote: »

Its only natural for a lot of us to be nervous in regards property.

If you wanted to buy property in Ireland now is the best time roughly. Yet from what I hear no-one is buying. So when is the best time to buy?

.

For an economy in crisis Irish house prices are still scandalously high, in Dublin at least. House prices in areas of the UK with a similar crime rate and less economic deprivation than we have are ridicicilously low, its just typical old Irish greed again. Irish developers and homeowners would rather hold onto an empty house for the next decade than sell it for even a slight loss.

uglyjohn

im actually looking around at the moment with a view to buying somewhere. i've run the numbers and with my plan of being here for 5 years or so i think it makes sense. The morgage repayments would only come to a little bit more than what i pay for rent now and then when the time comes to go home i wont have paid $100k off someone elses morgage.

even if things are over valued (and im not saying they are or arent) i cant see the price falling by more than i'd save on rent in the same period.

oh and the mining story is not similar to the corporation tax story. google can move an office a lot easier than BHP can move a mine.

TKline

House prices in Australia are crazy ridiculous and most sensible people expect the crash is coming soon (if not already here). Highly recommend you read some of these excellent blogs.....

Australian Property Crash Blogs

Several trends over past years related to household income and household formation have worked together to excessively and unsustainably force up property prices to unfair levels. These factors are combined with unchecked commodification of shelter for the population. This is caused by misguided governments who omit to regulate house prices, while unfairly allowing over-leveraged bidders to force up housing costs so they, the government, can benefit from vast streams of land tax, stamp duty, and council rates revenue.

uglyjohn

Australia is a big place and the conditions are very different in different states. the important thing to look at is real income(taking into account interest rates) vs house prices.

australia didnt suffer to the same extent from the GFC but the fact of the matter is the average income is now lower than before and a lot of the jobs being created (to replace the pre-gfc ones lost) are part time and so dont pay as well.

in the last year and a half interest rates have risen and in some spots (eg syd mel) house prices have started shooting up again. i think for the average person on average money buying somewhere in sydney or melbourne is not something i'd rush into.
That said with the underlying strength of the economy and population trending the way it is i cant really see a major crash. a slight adjustment is possible but i cant see the price of a nice house in a good location going into freefall.

ballooba

uglyjohn wrote: »

im actually looking around at the moment with a view to buying somewhere. i've run the numbers and with my plan of being here for 5 years or so i think it makes sense. The morgage repayments would only come to a little bit more than what i pay for rent now and then when the time comes to go home i wont have paid $100k off someone elses morgage.

I'd love to see your figures because that sounds to good to be true, unless you are in the outback or near a mine. That's on the point about paying someone else's mortgage too.

uglyjohn wrote: »

oh and the mining story is not similar to the corporation tax story. google can move an office a lot easier than BHP can move a mine.

My point is that the importance of mining to the Aussie economy is overblown similar to the way corporation tax was in Ireland. Has corporation tax saved us from economic Armageddon?

uglyjohn

ballooba wrote: »

I'd love to see your figures because that sounds to good to be true, unless you are in the outback or near a mine. That's on the point about paying someone else's mortgage too.

My point is that the importance of mining to the Aussie economy is overblown similar to the way corporation tax was in Ireland. Has corporation tax saved us from economic Armageddon?

i think i misunderstood your point about the mining. i agree that it didnt save australia and to be honest it is a double edged sword. its great for people like me in the industry but is terrible for everyone else trying to export anything (tourism/wine etc)
In fairness though i dont think you understand just how much cash is being thrown around over here by the mining companies. i could probably name $50billion worth of projects without trying and in a state with a population of 2 million that's a lot of money.

im not gonna get too detailed about my finances but working FIFO i can put a large part of my pay into repayments. With a 3 bed place (assuming i can rent out the other rooms) in a decent area (of perth) and a 20-25% deposit my repayments would work out at maybe $100 a week more than my rent now. (it helps that i'd be trying to pay it all off in about 13 years or so.)

i havent made a decision yet but based on my personal situation it could make sense.

ballooba

God no, I'm not asking for details of your finances. I'm talking about the premium to buy versus rent and the notion that your rent is paying someone's mortgage. It seems highly unlikely in an urban area that this could be the case. Are you taking into account the opportunity cost of putting the 20/25% into the house versus in savings/investment? Are you comparing like with like in terms of dwellings and suburbs?

Mining contributes about equally to the economy as property does. Mining is about the only sector of the economy that is in anyway safe. Even then, mining is dependent on China so it's only as safe as China's economy.

I should say that at the end of the day, once you have a decent deposit then I would agree that you're not going to get into too much trouble. At least then it's your own money you're risking to a certain extent. Especially if you are going to be building equity very fast. There are worse things you could blow your money on.

mandrake04

Its not hard to believe my place in Sydney is costing me $80 pw more in repayments than if I had rented it.

Of course I am up for Rates & water but sure thats only pocket change.

ballooba

mandrake04 wrote: »

Its not hard to believe my place in Sydney is costing me $80 pw more in repayments than if I had rented it.

Of course I am up for Rates & water but sure thats only pocket change.

When did you buy? How much equity do/did you have?

I don't mean to pry, it just seems that these circumstances sound very unusual for the Australian market(s).

mandrake04

what unusual about it?

Bought last July 2BR villa for $420K, stuck down $100K deposit and took $320K home loan over 30 yrs @7.1%

Paying Principal & Interest $2160pm... house next door is $450 pw rent.

Forgot to include insurance, but I was paying renters insurance anyway so only slight difference.

uglyjohn

mandrake04 wrote: »

what unusual about it?

Bought last July 2BR villa for $420K, stuck down $100K deposit and took $320K home loan over 30 yrs @7.1%

Paying Principal & Interest $2160pm... house next door is $450 pw rent.

Forgot to include insurance, but I was paying renters insurance anyway so only slight difference.

bear in mind your morgage has a fairly high interest rate and is over a long term. if you had a spare room to rent out at about $150 per week you could probably knock years off your morgage and save 100s of thousands in interest long term

ballooba

$100,000 in uBank @ 6.41% would give you $6,410 per annum less tax, or $122.93 less tax per week.

$320,000 @ 7.1% is $22,720 per annum in interest, or $435.72 per week.

$15 per week discount to buy versus rent, only to forego $122.93 (less tax) per week in interest on your lump sum.

ballooba

uglyjohn wrote: »

bear in mind your morgage has a fairly high interest rate and is over a long term. if you had a spare room to rent out at about $150 per week you could probably knock years off your morgage and save 100s of thousands in interest long term

Why not house share if you're going to do that? Much less hassle and you save more money. Your post sounds a little like Ireland 2006.

mandrake04

ballooba wrote: »

$100,000 in uBank @ 6.41% would give you $6,410 per annum less tax, or $122.93 less tax per week.

$320,000 @ 7.1% is $22,720 per annum in interest, or $435.72 per week.

$15 per week discount to buy versus rent, only to forego $122.93 (less tax) per week in interest on your lump sum.

Value of the property was assumed to $450K as at the time that is what the bank valued it at, indecently 2 other properties in the street both went in the 450's late last year.

What is the perceived current value might be overpriced speculation that everybody is banging on about or not (I agree I dont think its worth $450K), but I don't read into it too much... but If I put it up for sale 2moro I know I could probably get $450K.... whether thats the case or not in future I am not really thinking about it. Just at the moment there are people out there willing to buy at that price.


I have at least a 5 year plan to stay here, it 2.5km from my work and about 300m from the shops & public transport. Plus there is no stigma of being a renter... such things is hard to put a price on monetary terms compared to quality of life.

Its also worth pointing out that I have a 1/2 share in a 5 BR house and 20 acres in Ireland.... so I can sleep at night knowing that what ever happens I will at least have a roof over my head.

ballooba

It seems that on a cash basis that renting wins every time unless you are living in the outback. Financially the only positive risk is capital appreciation which seems quite low in probability right now or at least in the long term, the only time you ever realise that gain / loss is the day you sell. There are other cash benefits like not being responsible for maintenance or property charges / taxes. As for non-financial benefits these fall quite evenly on either side depending on your circumstances. As for stigma of renting? ROFLOL.

Zambia

Then some of us can not stand renting, sadly you pay for the luxury of doing what you like.

On a cash basis stating single and not having kids makes good sense.

uglyjohn

ballooba wrote: »

Why not house share if you're going to do that? Much less hassle and you save more money. Your post sounds a little like Ireland 2006.

you might save more money in the short term but you and your housemates are literally paying someone elses morgage for them.

If you think of it long term your rent is going to go up while morgage payments wont (im not going to get into the whole interest rate issue here).
ten years from now mandrake04 will be paying less to repay his morgage than his nextdoor neighbour is paying in rent.
maybe i am a bit "ireland before the crash" but it just seems so stupid to me to spend years paying so much money and at the end have nothing to show for it. over 5 years myself and my flatmate will pay 100k + to our landloard for a unit that you could probably buy for about 450k. even if i bought the place and in 5 years its worth 20% less than i pay for it i break even against renting.
its like everything in life, you have to put a price on the risk and the various costs of being an owner and see if it makes sense to you.

ballooba

Zambia wrote: »

Then some of us can not stand renting, sadly you pay for the luxury of doing what you like.

On a cash basis stating single and not having kids makes good sense.

Yes, it depends on your priorities. However, equating home ownership with family is a little over the top. There are a long list of things I would prioritise over home ownership, not so with family. It's a very expensive luxury.