Shocking Australian Property Prices

We were all at least relatively well aware that property prices in Australia were high and that the market had become comparatively unaffordable for many, creating a situation where it was difficult for first time buyers to enter the market and where talk for many months has been about whether the boom will be followed by a bust...but until the results of an international survey looking at the ratio between average household incomes and property prices were released this week, few of us had any idea just how bad things had become in the Australian housing market.

The bottom line is that the survey reveals how shocking Australian property prices have become.  In the survey Australia ranks number one in the list of the most expensive nations in the world in which to purchase a home relative to income...for locals living and working within the Australian economy this is frightening news.

The survey examined Australia, New Zealand, Canada, the US, the UK and Ireland and it looked on a major city by city basis at average household incomes and median property prices.  As stated, relative to their incomes Australians have to fork out more than any other nationality to buy a home.  An Australian needs to lay out 6.6 times their annual average salary for a home.  The situation is worse in Melbourne – here citizens must pay out 7.2 times, in a town called Mandurah in Western Australia the figure shoots up to 9.5 times and in Sydney it’s 8.5 times.

This bodes so badly for the ongoing state of Australia’s real estate marketplace – because how can such momentum remain in the market?  No first time buyers can enter the market meaning vendors have no one to sell their property to if they want to upgrade or even downsize which creates stagnation across the entire market.

Fortunately for Australia, it receives so many new citizens annually when people emigrate to live in Australia that it at least has some new money coming into the property economy each year – but this is not enough to sustain price gains or even maintain prices as they stand.  And there is nothing to suggest that the Australian economy is about to be boosted so significantly that every citizen is in line for a major pay increase…

So what does this mean?  Price crash followed by a recession?  That’s the worst case scenario…

As it is, experts from the property market in Australia are calling on the government to release more land for house building to relieve land demand and surging prices and to re-examine taxation on both property developers and buyers – particularly first time buyers.  But what action will be taken remains to be seen – meanwhile we watch and wait and see…

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