Of course we do! In many places in Australia prices have almost trebled since 2000. Whereas houses were around 3 times average earnings, or less, the Australian average is now 6.6 times. (This compares with an average American value of 3.7 times � which commentators there have called possibly their biggest housing bubble in history - e.g. watch the full interview with Prof Robert Schiller of Yale University on the Four Corners website.)
As a consequence, indices of first home buyer affordability have continued to drop, reaching record new low after previous new records. The HIA-Commonwealth Bank index of Home Affordability reached another record low in December 2007, the worst in the 25 years the index has been compiled. Monthly repayments on a typical first home increased to $2,689. Their research suggests that a household income of $107,600 would be required to service such a debt.
The UDIA/Matusik affordability index shows that the proportion of areas throughout Australia where detached housing is affordable has decreased from 96 per cent in 2001 to 39 per cent by 2006. Moreover, they found that affordability in Australia was generally at its worst level within the history for which data has been available. In Brisbane, for example, the average household could afford only 15 per cent of the houses sold in the three months to September 2006, whereas in 2001 they could afford 74% of houses sold. (Bare in mind that house prices in the study were from 2006 and they have since increased significantly in many states � in Brisbane by over 20% - and interest rates have risen considerably.)
Consequently, throughout the naughties, first home buyers have been a shrinking proportion of purchasers, with investor sales increasing. In effect, investors and speculators have crowded first home buyers out of the market.
Moreover, international study after study continually points towards Australia having the most unaffordable houses in the world. Sure, someone has to head the list. But in our supposedly egalitarian society, this should outrage us. (I don�t recall Crocodile Dundee bragging about the [financial] value of his land - "that's not a property portfolio - now that's a property portfolio!")
The housing crisis does not relate just to purchasing. I know from first hand having had my rent raised by 20%, or $260 per month, in 2008. (That's equal to 6 interest rate rises on the average mortgage, with one month notice!) Statistics show that most renters are facing similar problems, which are hampering our ability to save.
I did not move further out to where rents are lower, because, if we all move further and further out, the people on the absolute edge will not be able to afford a home at all. That is what is already happening. Newspapers are increasingly reporting the struggles of people to just keep a roof over their head, with homelessness becoming more and more common. |
