Is buying a home in Australia only for the super rich?

Gobsmacking house prices are pushing first home buyers out of the market. New data reveals you would need to be making an extra $20,000 a month or even more to be able to save for the 20% house deposit in some suburbs. 

More than 250 suburbs saw their house prices rise by around $200,000 or more over the last 12 months. On top of that, investors are piling back into the booming property market. Their loan commitments rose 1.8 per cent offsetting a 0.4 per cent dip in owner-occupier mortgages. 

This boom has taken prices into new territory. Even people earning decent money are devastated about how the market has shifted, pricing people out. They’ve got a realistic price band but it just slowly got out of their reach. 

Is homeownership no longer attainable for us?

The dream of homeownership has actually never been more difficult than it is now. The reality is fewer people own a home now in Australia than it used to be. Home ownership rates among 25- to 44-year-olds declined sharply between 1986 and 2016, according to the Australian Housing and Urban Research Institute

You hear stories on the news all the time about the privileged few who bought a house at the age of 20. Most of them have the good fortune of...well, family fortune to help them out. For the rest who don’t have that, they keep getting kicked in the teeth by the property market. 

Are these prices here to stay?

Due to the super low interest rates (the rate at which we all borrow money), it’s never been cheaper to borrow money to buy a home. Picture this: you’ve got more people chasing the same number of houses. More people are competing for houses that come up in the market. As a result, we see a steep house price inflation.

The thing is: The RBA’s focus is not about house prices. They’re only supposed to think about how to push money out to the wider economy and make it more attractive for people to borrow money. So within the last decade, they have been cutting interest rates  18 times and all the while driving up house prices like crazy. Plus, they are not going to increase the rates anytime soon since it would be a big shock to the economy. 

Once the average price of a house is over a million dollars, it’s a scary prospect. Larger and larger populations are locked out from owning a home which could only mean one thing: Increasing Inequality. Without change, homeownership in Australia is at risk of becoming the preserve of only the wealthiest buyers and those with inheritance. 

What could this lead to?

The biggest barrier of all is saving for the deposit. People are extending themselves absolutely to their limits, putting all their savings into the deposit leaving them without a safety net. Problem is: people’s wages are not actually rising but what they have to pay to get into the housing ladder is increasing all the time. The sluggish wage growth has persisted long before Covid and it’s unlikely to improve even in the next five years as data from Deloitte Access Economics showed. So if wages aren’t going up and people have to pay a huge chunk of money into their mortgages. What happens then? It could be a real danger for the Australian economy but only time would tell. 

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