Housing affordability is almost a conversation starter for millennials in Australia. The talk is that the average house price in Melbourne and Sydney could exceed $6M in just 20 years.
Even though Australia’s current yearly population increase of 1.4% might appear small, this adds nearly 340,000 people to our city every year, which equates to one new Darwin every 20 weeks or a brand new Tasmania every 18 months. However, Sydney itself is growing even quicker than that – averaging 1.8% per annum for the previous five years.
House prices in Sydney have escalated by fivefold over the last 20 years from $233,250 in 1997 to $1,190,390 now. While in Melbourne prices over precisely the exact same period have risen by over six-fold from $142,000 to $943,100 today. Keep in mind, Australia’s tax system plays a large part in encouraging individual investment in the residential real estate, which serves to increase housing values.
The effect of increasing demand on home prices is evident when costs are compared to ordinary earnings. Twenty decades ago, the typical Sydney home was 5.6 times average yearly earnings, whereas in Melbourne it had been a cheap 3.4 times yearly earnings.
The latest data from the Real Estate Institute of Victoria found 90 percent of suburbs within 10 kilometers of Melbourne CBD is now in the million-dollar club. In saying that, according to Victoria’s leading real estate body, 1 in 3 Melbourne suburbs now have a median house price of at least $1 million, with all surrounding area on the rise.
Today, Sydney houses are over 14 Times average earnings, and in Melbourne over 11 times annual earnings. Looks like the next generation will have an extremely hard time affording their own home without resorting to apartment living or the furthest outer suburbs.
While it’s true that salaries have grown over this time, earnings growth hasn’t kept up with the home price increase. In 20 decades, average yearly full-time earnings haven’t almost doubled from $42,010 in 1997 to $82,784 today.
But why do we keep paying?
Due to outer suburbs being poorly serviced by roads and public transport, Australians have increasingly chosen to spend a higher proportion of their incomes on housing which means they can afford less time commuting back and forth from work.