Whether you blame a proclivity for culinary luxuries (do you want your avocado smashed?), or think there’s a very real price imbalance in Australia’s property markets, the figures suggest that local real estate has a serious case of the ‘haves’ and ‘have not’s’.
Much of our collective household wealth is currently tied to bricks and mortar assets. According to the ABS, at the end of the December quarter 2015, household net worth rose to $8.62 trillion, up from $8.50 trillion in the previous quarter.
Almost 70 per cent of this was in property assets, at a sum total of $5.9 trillion. Financial assets such as cash reserves, term deposits and shares amounted to $4.3 trillion, while household liabilities totalled $2.1 trillion.
At the same time, the mortgage debt to residential property ratio rose to 28.4 per cent, indicating that mortgage debt grew faster than the value of residential real estate owned by households.
What all of these figures essentially tell us, is that the majority of wealth Australians own is tied to housing. Hence, if you’re already in the game, well…you’re virtually ahead of the game by default.
How far ahead?
According to the ABS, the average net worth of all Australian households was $809,000 in 2013-14, compared with $764,500 in 2011-12. Logically though, not every family is riding the same fortunate fiscal sea.
The ABS acknowledged that the spread of wealth across this country is more unequal than income disparity, predominantly due to, wait for it…home ownership rates!
Not surprisingly, average household wealth for those renting was about 21 per cent ($183,000) of the average wealth of owner-occupied households with a mortgage ($857,900) and 13 per cent of owner-occupiers who owned their home outright ($1.4 million).
Perhaps Gen Y’s and Millennials are not all just a bunch of over-entitled, whiners who want it all yesterday (I believe the baby boomers were accused of much the same…awkward). Perhaps it truly is tricky to get a foot in the door without already having your feet in another door. You know what I mean…
The good and the not so great…
Just suck it up buttercup and venture further afield! Hmmm…talk about mixed messages from all over the place. Today’s young people hear two conflicting theories:
- Buy closer to the city for investment value…stay away from suburbia if you want decent capital growth; and
- You can’t expect to have it all. Just buy a home in the ‘burbs!’
You see the confusion here, right? And of course the data only makes it worse.
According to Domain Group’s House Price Report: September Quarter 2016, Australia has a distinct two speed property market, as some capital cities hit record high prices, while others declined.
Just as our last interest rate drop saw a slight, but notable resurgence in the Sydney and Melbourne markets, along with increased investor activity, WA and the Northern Territory continued to feel the pinch of a depressed housing market.
Take a look around…
If you own property in Sydney, you’re doing pretty well. Although price growth stalled slightly for the same time last year, the boom returned in the 2016 September quarter, with average house prices reaching a new record high of $1,068,303.
Of course you might still be able to afford a small shoebox…err, apartment, in the Harbour City if you’re lucky, with an average price tag of $685,865.
Melbourne house prices are a little more attainable for the average house hunter (if you already have some decent equity up your sleeve), at a new record average of $773,669.
At the other end of the real estate wealth divide are Perth and Darwin, where house prices are averaging $566,609 and $595,466 respectively, after both markets took further tumbles in a downward direction for the September quarter.
I’m sure you recognise all of this for what it is, and don’t simply assume our children are slackers who want it all on a silver platter.
Given that housing markets hold the majority of our wealth as a nation, you cannot deny that how they’re performing directly reflects the fiscal health of local populations and the country as a whole
The extremes of fortune in real estate we’re currently seeing, mirror the extremes of fortune between those who already hold the majority of wealth in residential property assets (and hence control that wealth), and those who still aspire to home ownership.
No doubt that from this adversity, the next generations will find a new way of doing things when it comes to housing; as a commodity, but moreover, as a place to call home.