CBA recently published research showing that more housing was unaffordable, and that was based on two full incomes going to pay the mortgage. Now another report from Domain and Unloan shows that aspiring house buyers in Sydney are indeed largely priced out from the cheapest segment of the market after interest rates and home prices rose sharply last year.
For now, most aspiring home owners would have to rely on the bank of mum and dad to beef up their deposits, buy an investment property while renting, or consider a “lease to own” model.
Buyers have to look further out towards the city’s outer fringes to afford an entry-level house, or opt for a unit in the city. Unless they get help from the family bank, or buy a really cheap investment property and rent, or live at home. The property market is broken.
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The RBA minutes just out included a discussion about the case to raise the cash rate further. It centred on the observation that it would take some time for inflation to return to target and the labour market to full employment. Inflation was expected to take a further two years or so to return towards the midpoint of the target range under the central forecast. In the end, they held the cash rate target unchanged at 4.35 per cent, and the interest rate on Exchange Settlement balances unchanged at 4.25 per cent. But this is an important signal.
Yet the 13 RBA driven rate hikes have had a perverse impact on property. Since January last year, Australian property prices have been rising in many parts of the country, recouping almost all the losses incurred after the Reserve Bank of Australia began raising interest rates in 2022. They might be slowing a bit, now, but that was not meant to happen.
In fact, there is strong demand for property, buoyed both by increased population and a resurgence in demand from cashed-up older generations. Yet supply is not keeping up, and mortgage lending is tighter now for many as the costs of a mortgage rise. The signals are clear – we have a major crisis in housing. Renters are caught in the cross-fire, but purchasers are also in the firing line too.
Housing rapidly is becoming a lightning rod for a generation staring down the prospect of having next to no hope of buying a residence under their own steam. We may see ourselves as an egalitarian society with a universal education and health system that provides opportunities for anyone willing to have a go. Housing is broken, and politicians won’t tackle the real issues. Could it be that the fact they are much more likely to own investment property stop them from acting, or is it the fact that this would require real action, not political spin?
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This is a recorded version of my latest live show in which I discussed the current state of play of the property and mortgage markets with Chris Bates. Chris started as a Financial Adviser back in 2007 and sold his Financial Advice business in 2020. Over the past 9 years, Chris has grown into one of Australia’s top Mortgage Brokers and is passionate about taking the product providing industry to a trusted advice based profession.
Previously Weathful, Chris, and the team decided, in 2023, to rebrand and are now ‘Blusk’ – a name that better encapsulates the feeling they achieve for their clients. And further changes are afoot, as you will see on the show.
He is known for regularly airing his views on sound property investing on both LinkedIn and popular property industry podcasts The Elephant in the Room and Australian Property Podcast.
We are back for another Monday rant with our property insider, Edwin Almeida. We look at the political “fixes” versus reality as rental supply dwindles, and the costs of new builds go through the roof.
Its not a pretty picture and there are social consequences emerging. Can we get politicians to move beyond the political?
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Today’s post is brought to you by Ribbon Property Consultants.
In my latest surveys we showed that cash flow stress among households has risen to an all time high of 73.47% or more than 2.27 million households.
Mapping the Market data from CoreLogic shows the high proportion of areas where house rents have risen by 20% or more across Sydney, and Melbourne, those here, some areas especially to the east of the city did not follow suite. House rents in Brisbane showed more diversity, though central Brisbane saw consider considerable hikes. Adelaide and Perth also had many hot spot areas across house rentals, with some areas to the east of both CBD’s reporting slower growth rates over the past year.
That said, Canberra and Hobart bucked the trend with little or no growth – of course there are rents controls in the ACT which helps to moderate rents.
All this means that for many renters the ability to house themselves has become even more expensive, and this of course flows through into the inflation data with all rents – not just new rents running close to 10% annualised. It’s a real mess, and leading to real social consequences.
Then again, there are some winners as according to data from SQM Research residential landlords in some inner-city and middle ring suburbs pocketed up to $56,000 extra rental income in the past 12 months as rents hit record highs across the major capital cities.
A critical factor here is that some landlords, sitting on strong capital gains, are looking to crystalize their paper profits so have listed their rental property for sale, a trend we see most strongly in Melbourne, but it is spreading elsewhere. In addition, higher rents are not enough to cover the increased mortgage costs, even after negative gearing, so the supply on rental property is on the decline at a time when migration continues to run hot.
The Rental Market Is Broken but do those in political circles want to tackle this critical issue? Lip-service apart, I suspect not. So to that extent, Australia in broken too.
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Sydney is at risk of becoming “the city with no grandchildren”, a senior government official has warned, as high housing costs drive young families to leave.
The state capital is losing twice as many people aged 30 to 40 as it gains, according to a paper by the NSW Productivity Commission. “If we don’t act, we could become a city with no grandchildren,” the agency’s commissioner Peter Achterstraat said.
The exodus of that group is a problem, according to Mr Achterstraat, because people in that age range are among the most productive in the workforce.
“They’ve generally completed their training, they’ve had 10 or more years’ experience, and the majority are tech savvy,” he said.
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Another dose of reality from our property insider Edwin Almeida. What political games are being played at the moment, and how is this influencing markets, which according to some are taking off again. Or does it depend on where you look and who is buying. How big is the housing crises now? Will any of the “solutions” being discussed really assist?
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Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
This is an edited version of our live discussion about the current state of play of mortgage, rental and financial household stress across Australia, based on our latest surveys and modelling. We had our post code engine online.
Find out more beforehand by watching this show: Many Households Are In Trouble – Mate! https://youtu.be/np4H9RkPqEo
Original live version with chat here: https://youtube.com/live/Qs__lYQMhP4
Go to the Walk The World Universe at https://walktheworld.com.au/
Interesting to see the momentum now turning to discussion of whether the Government intends to tackle negative gearing having U-turned on the tax cuts.
As The Conversation put it, there are two things the prime minister needs to get into his head about tax. One is that saying he won’t make any further changes no longer works. The other is that negative gearing doesn’t do much to get people into homes.
Australia’s Treasury has begun publishing estimates of the cost of the present unfocused system of negative gearing. Its latest, released last week, puts the cost at $2.7 billion per year, to which should probably be added a chunk of the $19 billion per year lost as a result of the capital gains concession.
Albanese is normally cautious. But as he is showing us right now with his rejigged Stage 3 tax cuts, there are times when he is not. If he really wants to throw everything he has got at building more homes, he knows what to do.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Another week shoots past, so Edwin is back for another property update. The chaos continues with talk of “pre-war”, home price rises, and more Government support for property. What could possibly go wrong?
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you.
Buying property, is both challenging and adversarial. The vendor has a professional on their side.
Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make.
Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest.
Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.
