MAY PROPERTY REPORT
The high cost of housing in Australia has been creating havoc for many young Aussies. Between 1980 to 2015, the housing price to income ratio index has risen by 78% creating a housing affordability crisis. A recent study by The Age, has recognised the city of Melbourne to be the 5th least affordable city to buy a home in the world next to Hong Kong, Sydney, Vancouver, and San Jose taking the lead.
We see firsthand how difficult it is for first home buyers to enter the market in this current market. The longer they wait, the more savings they have, however the rate at which the market has grown since the pandemic began outweighs the accumulated savings suitable for deposit in this short space of time.
Experts often say the right time to buy was yesterday, and it’s never been so true. A house deposit of 20% used to be the norm but with the average price of property in Regional Victoria being at least $600k and in most cases more, first home buyers would need over $120k in savings respectively. A recent analysis found middle income earners are left with less than 5% of income after cost-of-living expenses making it near impossible to save such a deposit. Therefore the next federal election is going to be an important one.
The federal election is in full swing and before we know it, we will be on our way to the ballot. We know one of the main sticking points for many of our locals will be how the next voted party will alleviate housing market stress. As a part of the Federal Labour campaign, they have ruled out changes to negative gearing or superannuation to tackle the housing crisis and has instead promised to increase the supply of social housing by 30,000 properties over five years. Housing Minister Michael Sukkar said the federal government’s recent new programs including the New Home Guarantee and Home Builder initiatives will turbocharge the economic activity in the construction industry.
Experts said the post-election housing market this year will be the opposite of 2019 where we saw the end of an 18-month downturn. This election predicts a rise in interest rates as early as just weeks after the vote. This will result in buyers’ budgets being squeezed. There will be more to say about the parties promises towards the property industry over the coming weeks.
Most would have realised by now, that along with the unexpected effects of Covid-19 came the lack of depreciation value. Take cars for example, why are used cars now worth the same if not more than a brand-new car? Well, it’s the same scenario for property. Due to the rising construction costs for new builds, and exuberant land prices, established homes are often valued at a similar cost of a newly built property. So where has the depreciation gone? The insanity comes down to the demand far outweighing the supply pushing prices higher and higher.
In summary, there is a lot happening in the market at the moment and it is quite unpredictable. People react differently to situations happening around us whether that be the war, pandemic, election, and everything in between. As always, we find buyers and vendors alike are relieved when their questions are answered and concerns are eased, as we all want to know what is going on. Our door is always open, so pop in for a coffee or give us a call anytime. We look forward to updating you again at the end of Autumn.