Every fourth Australian home is now worth more than $ 1 million

Now they have managed to enter the market, she says, the overwhelming feeling is simply “relief”.

Real estate agent Rich Harvey, who helped the Farrar family secure their home, says the past two years have been the “perfect economic storm” for property owners with homes for sale down 30 percent, but at the same time a huge increase in demand.

“Now $ 1.5 million is unlikely to give you a house in many places,” he says. “We’ve seen the value of the housing market go from $ 7 trillion to $ 8 trillion to $ 9 trillion in a year and a half.”

The upswing has turned some Australians into “property millionaires”, and about a third of households live in a home they own. Between January 2020 and November 2021, the owner of a median price house in Sydney has raised nearly $ 340,000 in net worth. During the same period in Melbourne, the increase has been worth nearly $ 174,000.

There is no official figure on how many people are legal in the millionaire category once the debt has been recognized, including significant mortgages that some have taken to get on the ladder of rank. CommSec analysis of data from the Australian Bureau of Statistics for August shows that the average mortgage size for a new home loan in NSW was $ 760,800 and in Victoria it was $ 629,300. New buyers typically have much higher debt levels than long-term property owners, and nationally, the average new mortgage has increased by $ 80,000 over the past year.

Loading

But despite the rising debt level, many have benefited from the boom – at least on paper.

“Some are sitting on [millions] as lazy equity because they do not have the knowledge or the means to use it, ”says Harvey. He says others have leveraged newfound wealth by refinancing and building investment portfolios of both properties and other assets, as well as renovating and buying new furniture and appliances for their homes.

But the years of seeing prices jump so fast may soon be coming to an end.

“Over the last two weeks, we’ve seen a bit of a pullback in the market. Lockdown was the most intense period, and it’s slowing down,” Harvey says. “When you track what happens after the boom, there are often small fixes . “

He does not expect any major price declines, but says the wildcard is the interest rates and how quickly the Reserve Bank can raise them over the next few years. RBA Gov. Philip Lowe said last week that he still believes it is “plausible” to keep interest rates at record lows until 2024, but the market increasingly expects an earlier rate hike potentially as soon as the end of 2022. Harvey predicts a slight rise in interest rates by the end of next year and slower but rising prices.

ANZ senior economists Felicity Emmett and Adelaide Timbrell now expect capital prices to rise 6 percent in 2022 and then fall 4 percent in 2023 due to rising fixed mortgage rates, more supply in the market and buyers who can not afford more increases.

“We anticipate the strongest gains in Brisbane (9 percent), Hobart (8 percent), Melbourne (7 percent) and Sydney (6 percent),” predicts their latest research for 2022.

“In Canberra (4 percent), Adelaide (3 percent) and Darwin and Perth (3 percent), we expect more modest gains.”

Loading

While some have grown their wealth during the boom, others have been left much further behind. Modeling of the Greens shows for a couple on a median salary that it will now take 11 years to save a deposit of 20 per cent to afford a house at a median price in Sydney and nine years in Melbourne. This depends on the fact that there is no price growth during this period and that the couple can save 15 percent of their gross income annually.

If prices rise at typical annual levels, the couple would never be able to save fast enough in any of the cities.

Affordability concerns are at the forefront of both Labor and the coalition leading up to the 2022 federal election.

The leader of the Greens, Adam Bandt, says that prices have risen faster than the potential first home buyers can afford to save, as wage increases have not kept pace during the pandemic. He is also concerned about tax incentives that help investors buy and own more rental properties.

“It’s a crisis, it’s creating a two-tiered society, denying some a home, while helping others own six or seven properties,” Bandt said, adding that the Greens want to ensure that affordability is one of the issues at the forefront of their election campaign.

Loading

“It takes a change of heart. We need to think of housing as a human right and look at offering an alternative path to affordable housing for those who cannot afford it. [to save a large deposit],” he says.

CoreLogic head of Australian research Eliza Owen says the boom has been created by record low interest rates, driven by the pandemic’s impact on the economy, and it could also be slowed by RBA decisions over the next few years.

“It is certainly a function of the monetary policy response to the pandemic. It has created a much more expensive market because of the response to the economic crisis,” Owen said.

“It’s now subject to the cash exchange rate,” she says. “When the market recovers, some will drop out of the million-dollar club, but we know prices are rising for each real estate cycle and tend to stay up overall.”

Fascinating answers to confusing questions delivered to your inbox every week. Sign up to receive our new Explainer newsletter here.

Leave a Comment

Advertise