November 13, 2016
It’s no secret property along Australia’s east coast is becoming increasingly expensive, we seem to be amazed at what auction results are generating and many people are questioning, how will they be able to upgrade to their next home or for younger would be owners, how can they even afford a small apartment in Sydney?
Surely, the bubble has got to burst at some point, right or does it? Remember when it was inconceivable the median house price in Sydney would ever reach $1 million but, low and behold, look at the property prices across many local markets in Sydney.
Commentators continue to share their views on our property bubble and whether it will burst. You will also have your viewpoint on this, however let's take a high level view of factors to consider when we think about the Australian property market in 2040.
IT WILL BE EXPENSIVE … STILL
With Australia’s growing population, especially in Sydney, Melbourne, Brisbane and Perth, prices will be higher than they are today.
Data from CoreLogic’s Hedonic Home Value Index recently found, the median price of a Sydney home could reach a whopping $6.4 million by 2050, and the average buyer could fork out 18.7 times their annual income just to purchase a property.
This projection is supported by data showing house prices have grown at more than triple the rates of income in the past 20 years. In 1996 the average Sydney house cost six times the mean income, but prices have since increased 270 per cent while wages have grown 87 per cent.
The eastern seaboard will be the winner in 20 years’ time and Sydney will continue to be Australia’s most expensive city - reason being it’s Australia’s largest economy and has the Sydney Harbour where the most expensive homes in Australia are located.
- It will become increasingly harder for future generations to secure property ownership given the rising prices.
Research recently undertaken by McCrindle shows, Sydney’s population is currently 4.8 million, by 2034 it will reach 6.4 million and by 2053, 7.9 million. This large increase in population will again increase the cost of property in these local markets.
Some market commentators suggest our local communities will become more apartment dominated, with a lot of people going to smaller accommodation, given the costs required to afford larger homes.
There are many things to consider with property ownership, should a young (or older) renter buy, should you renovate your existing home so you can stay in the area without needing to sell and then re-buy in the same market? One things for sure, it's important to receive as much education as you possibly can so you can feel confident you’re making a decision that’s right for your circumstances.