Is it any wonder first-home buyers baulk at what’s on offer?
Regardless of the accuracy of the Demographia report, Australia's housing market is definitely unaffordable for those trying to get into it. Analyst Catherine Cashmore explains why.
Economy
Jan 29, 2013
So is Australia’s housing market "unaffordable" or not?
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I agree housing is unaffordable, but the less often raised issue – which this article does touch on – is that a lot of the construction in the boom has been simply bad. There are massess of appartments available in Canberra – and almost none of them have the sound or thermal insulation you would want in an owner occupier dwelling. I’m not talking about excessive standards, I’m talking about not having to agree on a TV channel and date night with your entire floor. If you are going to drop 500K on something you want the product e.g a fit for purpose dwelling. And it just is not available, largely because the politics of development have been in favour if maximising investor profits with nothing which passes for consumer protection in most other products.
Fear not, Catherine, there is a small group of “housing market” enthusiasts who appreciate and applaud your rare voice of reason on housing affordability.
Surely there are some votes to be garnered by political parties who offer policies to assist the voters and the businesses affected by this “Market”?
Appearing on real-easte signs in my area is confirmation of the phenomenon of “Land-Banking”, where owners are told of the option to leave their houses empty and rely upon capital gain to “obliquely” pay for their costs, while avoiding the hassle of tenants.
Ironically the laws of supply and demand ensure these capital gains by restricting the supply of homes.
(Chuckle, chuckle insider trading?)
With none of the champions of “free-market” competition seeming to notice.
One such closed market seems to be enforced in the conservative stonghold of Shoalhaven, centred on Nowra on the NSW South Coast.
Here, in this market, we see an early test of the Baby Boomer retirement effect of increasing supply of housing.
The Shoalhaven was a retirement centre for the pre-Baby Boomer generations and now those generations are quickly passing on or are in retirement homes.
And their homes are increasingly being Land banked by the consortium of local real-estate agents, in order, clearly, to put a “floor” under rents and property prices.
Cannot help but recall a blatant Brisbane Courier-Mail Front-page “Free-Advertisement” from Winter 1996, with the local real-estate institute calling for an across the board, $20/week rise in rents, in order to make the expense of owning a newly built, but persistently “undersold”, house more “Attractive”.
As said before, yours Catherine, is a rare voice of reason.
There is an undersupply there as well as in affordable housing.
Unlike a certain political leader, you are “doing important work for Australia”.
Terrible, terrible comparison to Dallas and Atlanta. Has the author actually been to these cities? Not only do they have market fundamentals completely different to Melb and Syd, they are universally acknowledged by urban planners, policy makers, transport experts etc as the worst examples of how cities should evolve.
@Altakoi: “not having to agree on a TV channel and date night with your entire floor”. LOL
@Andy – Author used to live in the USA so v aware of both cities and markets. Disagree with your analysis. .
You cannot be serious about the effect of the Dallas public transport system, Catherine. It is miniscule. The Dallas metropolitan area has a population of 6.5 million and 4 light rail lines and 1 heavy rail line for a daily ridership of 109,000 (excluding buses). Melbourne has 4.2 million, 28 tram lines, 16 heavy rail lines and a daily ridership of 1.1 million.
Also, Texas has virtually no planning controls – you can build a 60-storey building almost anywhere you want – this is part of the reason why land is relatively cheap.
Moreover, Australian cities are so heavily centralized with government, transport, education, business etc. all focused around the CBDs of just a handful of big cities. That means the CBDs have huge concentrations of jobs – and so everyone is clamoring to be as close to the CBD as possible. This is the biggest reason why city real estate is so expensive. Compare, for instance, the San Francisco area. You have the state capitol an hour’s drive away in Sacramento, major universities in outer suburbs like Palo Alto and Berkeley and major employers (e.g. Google, Apple) headquartered on suburban fringes in Silicon Valley, with some banks still in SF downtown. Most other US cities and states are similar to this. If this were an Australian city or state, however, all of these things would be concentrated in the CBD.
Part of the reason why US cities are decentralized like this, is because downtown areas became very unsafe in the 1960s and 1970s – due to homelessness, drugs, gangs and violence. That meant major companies relocated to the suburbs (the so called “white flight” phenomenon.
So in some ways, Australia’s high property prices are an unintended consequence of how safe and pleasant our CBDs are – we never experienced the “white flight” phenomenon, and we’ve got the property prices to prove it!!
When the various state and federal cadastres or property ownership records finally go on-line perhaps via the NBN then these hitherto inaccessable public records, used in conveyancing at an exorbitant price, will reveal much about the operations of the housing market.
One of the reasons for antagonism to the NBN and the internet?
Many years ago the Sydney CBD started decentralising to Chatswood, Parramatta and North Sydney,
Mainly on the instigation of the boards of construction companies, accessing London Insurance Company money looking for a home and providing post-graduate employment for the former students of the Civil Engineering professors on said consruction company boards.
What? engineers can build massive high rise office blocks but somehow do not know anything about finance?
So are these things all concentrated in the Sydney CBD or not? Somebody might be kidding themselves here?
Residential property prices are expensive due to -ve gearing and other rorts gouged out for babyboomers. So are Gen X & Yers just getting even by underfunding aged care & pensions?
Re Demographia – its their sort of deregulation that puts poor people on the river flats in SE.Qld, if there were any justice they’d hang.
Why ?