It is probably the single biggest question raised by Australians looking for a safe haven for their money today: should I buy property?
It occupies more column inches in newspapers and magazines, creates more dinner party debates and divides generation into haves and have nots.
This month, property purchase hit the headlines again for two completely contradictory reasons: The Reserve Bank said it would NOT be raising interest rates before 2024, despite a property market that is so red hot, your home is earning more per day than you are.
That means the cheap money boom fuelling the rises will continue unabated. Meanwhile COVID is keeping those with a home indoors – and declining to sell. FOMO is powering demand, and there is a shortage of supply. It’s classic boom bust territory.
Key data company CoreLogic said Australian house prices have become even more expensive, with Australia’s median property price up 1.5 per cent in just a month to $666,514.
Between January and April 2021, Sydney’s median house price rose $100,000 – that’s $25,000 a month or a salary of $300,000.
Here’s a rundown of what’s happening where you live:
Hobart (+2.3pc); Canberra (+2.2pc); Brisbane (+2pc); Adelaide (+1.9pc); Sydney (+1.8pc); Melbourne (+1.2pc).
Australian property values have jumped 15.8 per cent since the year began.
They were also 18.4 per cent higher compared with this time, last year — making it the fastest annual rate of growth in 32 years.
So you should buy, right? Most believe the answer is no.
What’s really throwing petrol on the fire is the fear of missing out. And there are some disturbing numbers beneath the pictures of beaming new owners shaking on the deal.
Macquarie carried out a survey of mortgage brokers recently and found about 38 per cent of customers borrowed close to their maximum capacity in the 2021 financial year.
Macquarie also reported that Australian banks were prepared to lend at about 7 times a borrower’s gross income – hugely higher than 5.2 times seen across Britain, the United States, Canada and Sweden.
Which may explain why the Reserve Bank’s governor Philip Lowe is so reluctant to move on rates. It could provoke a crisis of affordability and produce a housing market bust.
So if we can barely afford the houses we are buying, it’s hard to believe prices can continued to rise unless we all get massive pay increases. Which is extremely unlikely.
But despite many people believing now is not a good time to buy, tens of thousands still plan to purchase property in coming months. A National Australia Bank survey found 4 in 10 believed now was the time to purchase real estate.
But home ownership executive Andy Kerr said young Australians had the most desire to buy – the most aspirational, with 40 per cent of 18-29 group saving for a home.
How the other half in the property market lives…price expectations $6.5 million, sold for $7.1 million
If you want to know how the top end of the market is behaving, here’s how The Australian Financial Review reported one recent sale at the top end of the residential market in Sydney.
How long was this on the market?
Agent Michael Pallier: Not long. A few weeks.
Why did this one sell? It was a very nice apartment in a very good location; very large, with a good view. It’s in the Macquarie Apartments, and next to the Aurora Place office tower he also designed. The buyer looked on the Monday and within three days of looking at the property, it was sold.
Was it overpriced? I think it was underpriced. It sold for $600,000 more than the owner was prepared to sell for.
What did you think it would go for? $6.5 million. But obviously, the market thought differently.
What was surprising about it?
The pandemic has created an environment where [the use of] technology has accelerated. We’ve had a need to do it a different way. We’re doing Zoom auctions. They’re fantastic.
How did the sale play out?
We had a guide on this of $6.5 million. A buyer said he’d pay $6.5 million. Another buyer said he’d also pay $6.5 million. We organised the next day to do a Zoom private auction.
The seller was in Asia, the seller’s representative was in another country in Asia; one buyer was on the north shore and the other was in the CBD. They could all see each other.
How would you have done this sale pre-pandemic?
It was very, very antiquated in comparison to this. It would have been a lot more driving around – pick it up from here, drive there, pick up this contract, take it to the owner’s solicitors – now you don’t have to do any of that. It’s all done in the lounge room. It’s so much easier. You just sign it and it’s done. We did the auction around 1pm. We had it pretty much done within 45 minutes of the auction.
Do you reckon we’ll see another result like this: a) next week b) next year c) next cycle d) never?
We’ll see it happen tomorrow. I sold four in the last week.