People, put down your pom poms! In my opinion, whether you’re a contended home-owner, a buyer, a seller or a renter, the current escalating property market in Australia is NOT something to be cheering about. We are all being screwed by the current price hikes. Here’s why.
You’d have to be living under a rock (don’t laugh, many Aussies are!) not to have noticed the exorbitant rise in property prices across the country over the past 12 months; some certain cities and regions more-so than others. I live in Sydney’s busy suburb of Bondi Beach (renting, beyond my means, sadly). And just last week, I noticed a house up the road sold for $1 million… above the reserve.
What the heck! It’s no wonder Sydney has just been named as the third least affordable housing market in the world.
But it’s not just the metropolitan hubs that are eye wateringly over-priced of late. The nation’s housing prices overall have soared at the fastest pace in over 30 years, increasing by almost 18 per cent in 2021 alone.
Now if you’re a home-owner, considering selling or not, you might think this means it’s time to pop the champagne. But hold your horses. It also means that once you sell, your chances of re-entering the market are very slim, even if you’re doing a sea or tree change.
And if you have a mortgage, according to the Finance Brokers Association of Australia (FBAA), more than half of us won’t be able to make our repayments if our mortgages increase by just $300 a month. That’s just $75 per week between life as we know it and the local park bench.
Think I’m exaggerating? The Australian Council of Social Service (ACOSS) is urging calling on the federal government to fund a national campaign to boost housing construction, rent assistance and extend affordable housing programs.
In fact, Federal Housing Minister Michael Sukkar has devoted $9bn to housing and homelessness in the upcoming financial year. The Government is officially panicking, and rightly so.
The problem is compounded because, while house prices and rents are soaring, wage rises are stuck in the doldrums. So more people are finding it harder and harder to make ends meet.
I’m speaking from personal experience.
I am one of those idiots who decided to sell their property earlier this year. And I haven’t been able to get back into the market. At every single auction I’ve bid at during 2021, the properties have been decreasing in standard, decreasing in the number of properties available on the market, and increasing dramatically in price to market and the final sale price has been astronomically above and beyond the reserve. No thanks!
So now, here I sit in the rental market, which is not a pretty place to be. Sydney’s Inner city rent prices by mid this year were accelerating at more than 8 per cent – the fastest pace since 2008. And it’s worse in the bush, as regional rent spikes are worse than the cities, especially in NSW, Victoria and Queensland, which have soared by a whopping 12.4 per cent in the past six months alone.
And think again if you’ve been tricked by the banks into believing they’re looking out for us during these times of crisis. Australia’s interest rates have been conveniently dropped to a historically low level of 0.1 per cent. “How nice of them” you say? No, they’ve been dropped as an emergency incentive to stimulate the nation’s economy due to the financial impact of the pandemic – essentially trapping more and more Aussies into mortgages they can’t afford to repay.
So what’s the solution? Grab the next best bargain while you can and buy into the FOMO sweeping the nation? Rebel and refuse to buy an over-priced hell hole you can’t afford to renovate and attempt to rent it out for a rate that will bleed some struggling young family dry? Rent a dodgy place somewhere that equally leaves you without a spare cent to buy food or save for a mortgage you’ll never be able to pay off? Lobby for the banks, the pollies and the media to suddenly grow a conscience?
Believe me, if I knew the answer, it would be available in all good bookstores by this Christmas.
But one this is for certain. It’s not something market forces, driven by greedy investors and equally greedy real estate agents and banks can take care of for themselves.
For what it’s worth Really Simple Money’s advice remains: if you can, stay out of the market until the middle of next year, unless you are buying your forever home and intending to live in it for the next five years.