Sydney house prices are depressing…? (Part 1)
Think of the Generations: Will they be able to afford a home?
I see many people commenting on forums saying “Sydney as a whole is way overpriced for what is selling” and others said “I really feel for youngsters (I’m in my late 50s) just starting out who want to buy, and may never own a house. Oh it’s great for us baby boomers who already bought in though.”
I have found this is a really touchy subject. Some people just don’t feel like they are getting anywhere, renting week after week paying off someone’s else’s property. Some people even said “I’m waiting for the Sydney market to get back to realistic prices”. In my opinion price is in the eye of the beholder… If the buyers are willing to pay that price again and again it will stay at that price. Supply and demand determines price, does it not?
When I asked a good friend of mine “What are people complaining about? There is so much opportunity out in western Sydney,” he turned around and said “but the reason buyers are not moving to Parramatta or Blacktown is because there work is in the city. Anything along public transport is very expensive,” to which I did not agree with. I believe you can find a great home not far from a train station in western Sydney. I will talk more about this later.
My friend went on to tell me “You have a look 30 years ago and what was your average wage compared to your average house? Average wage $10,000 per year. Average house, $25,000 — that is a 25/10 ratio which means about 5 — 8 years you could pay it off on ONE wage. Now the ratio is 25/190, with an average wage of $50,000 and an average house price of $380,000 is much different. The math is not the same.” I agree the game has changed, but our thoughts also have to change with it or many of us will be left behind.
Where we all want to live, well most of us!
I can sympathise that most people simply want the commute between work and home to be shorter, but these days we also want a great school for our kids and to be close to our family/friends. Our mentality has changed because we also expect to step out of our door and walk to bars, restaurants and the train station.
This is a lifestyle factor and some of us have accepted to live in a shoe box or pay big bucks for some breathing space. This lifestyle factor has become such an ingrained way of thinking. People are even starting to think nothing exists past Parramatta, such as mobile phone coverage internet and connections.
A good example of this is a comment in reply to city people complaining about Sydney house prices “It almost sounds like they have not moved from the city for decades and still think that the city is the centre of the universe and that nothing else exists.” He also added “Or is it that it is still the centre of the universe for many people?”.
How has affordability blown out?
As I read on, one forum user said “It’s unfathomable that house prices could possibly go up anymore.”
Well I believe the value of properties tends to rise in waves. In some years there will be good strong growth and in others there will be low to no growth and in every property cycle there are times when property values even fall.
As our population grows there is an increased demand for real estate and this causes an increase in rents and in demand for new homes. Sydney is a mega city like Singapore and Hong Kong. We’ve got to start seeing Sydney as a mega city (which is under-priced by international terms), not as an Australian city (of which most are under-priced in comparison). Some people say “I can’t wait till we get back to a realistic market,” and yes real estate values may fall and always will eventually. In saying that, keep in mind in other years, values may rise by over 20%. Pin pointing a time-frame to these property cycles is not easy, but what I will say is that it is a “realistic market”. It’s just that the average home buyer needs to understand that property goes up and down in cycles.
Property cycles of the general market is one thing, but Sydney is an entirely different beast on its own. It’s made up of a series of sub-markets and Sydney now has multiple CBD’s e.g. Parramatta, Blacktown, Penrith, Liverpool and not to mention we are about to link up with Newcastle which is growing 5,000 people per annum.
So now we have 4 factors making Sydney unaffordable for Australians
1. Sydney is a world class mega city and we are cheap.
Sydney is a world city and people with money have a choice where they want to live, a lot of them coming from china because we are cheaper than Hong Kong to live in and own property. I saw an outraged Aussie comment “What I’m REALLY interested in is……. WHERE ARE PEOPLE GETTING THIS KIND OF MONEY FROM..?”
Many Asians are happy to pay $1M plus for houses in full and think it’s a really good deal considering you get something like 800msq land with a two-storey house, which is almost impossible in any of the Asian mega cities. To put into perspective how crazy housing is all over Asia, a mate of mine living in Hong Kong had in-laws living in a shabby-looking three-bedder apartment with a pleasant view with around 240sqm interior area now worth $5Mill USD. This is why housing prices do not seem to stop. Even if the local Aussies cannot afford it, the international buyers will giddy up the cash without a second thought.
2. Immigration in general is picking up because Sydney as a Capital city is a desirable place to live.
Capital cities attract most of the population growth and Sydney got 62,000 immigrants in 2012 to be exact.
Just last year, 17,500 people from China and India immigrated to Sydney.
Just over 35,000 new migrants settled here from elsewhere abroad. A lot have come from the Philippines (7,000), Malaysia & Vietnam (4,000 each), Sri Lanka (3,500) and Iraq (2,500).
Our current rate of population growth is up 25per cent on 2 years ago and I can’t see it slowing down any time soon.
3. High paying jobs and corporate head offices are all in Sydney.
Of the 110 leading companies listed on the Australian Stock Exchange, you will find 67 have their headquarters in Sydney. I have not even begun to count how many world companies have major offices in Sydney as well.
In saying all of that, I have noticed corporate workers are buying in western Sydney to take advantage of the growth and continue to rent in the city. Basically affordability is moving out to the west and the government is investing in infrastructure to follow this pilgrimage.
About Jhai Mitchell
Jhai is an award winning Internet Marketing Real Estate Agent for Elders Toongabbie and Kings Langley. After running his own internet marketing business he has now set his own sites for the real estate industry. He observed that 90% of real estate agents did not know how to market themselves online. Jhai is now fixed on one goal. To teach real estate agents that they can market online so much better than they currently are.
Since then he has been consistently quoted in the Sydney Morning Herald and Real Estate Business online. He is a regular guest blogger on TheHomePage.com.au, sharing his expertise of marketing aspects for the Real Estate Industry. His biggest passions are his wife, martial arts, dogs and most of all property.