Property market then and now
Buying a property was difficult in the 1970s and 1980s as well but how much difficult is a question we need to analyse. In 1960s median price for property was $7,000 and average individual salary was $2073. In 1980 median price of properties in Australia was $44,800 and average Austrian individual salary for $12,580. Which accounted to a ratio of approximately 3.5 times the average salary to property median price. This ratio was escalated to 8 times in 2010 with average salary being $57,691 to $481,310 median price.
Now in 2019, melbourne median property price is $ 834,00 and average individual salary is $65,577. Which is approximately 12 times. What we have seen over the years is buying property has become more and more difficult as property prices kept on increasing at an average rate of 12% whereas salaries increased at a rate of 2%(Approximately) annually. Note, that we are not considering the inflation rate which makes it much worse as cost of living has increased much higher than the salary appreciation.
This leads to a worrisome situation for most of the Australian population who have not yet set their feet into property market. Young Australian finds it harder and harder to save deposit money for their first home or first investment property. After all this analysis, there arises a question to ask yourself if it is worth waiting for the right time or now is the right time to start investment with whatever you can afford. By the time you save for your dream home prices will go further up. Then why not investment in a property that is affordable now which will also support to endeavour to getting to your dream home sooner and as desired.
The statistics shows us that property prices always escalated in a long term and had always been a secure investment over time. There is no better time than today to invest in properties as in the long term you will always have significant capital growth, as world population will not come down. It will keep on increasing and need for rental and housing will always be there. Australia being a dream destination for most of the world population will always attract overseas migration. Local population is also increasing at a higher rate than anticipated.
In the first week of August, Australia’s population reached 25 million which was initially projected to reach in 2025. The population reached 8 years sooner than anticipated. Now next projection is to reach 40 million by the mid century. But, we know it will reach there much faster than projected time based on our historical analysis.
If we try to reflect on what happened in New York, London, Paris, Tokyo, Beijing and Shanghai, we can very well analyse what will happen to prices in Melbourne and Sydney. In New York, 70% of the residents are renting and more than half of New York residential market is owned by less the 20% of the population of New York. Rent of a small 1 bedroom apartment is more than $3,160 with an average salary of $4,850(Net) per month. Even a high earning professional finds it difficult to pay the rent of a 1 bedroom apartment. Forget about, saving for deposit for buying.
Similarly, in Beijing and Shanghai, it will take an average professional approximately 150 years to pay back the mortgage for their home in an average location. It has become next to impossible for young population to afford even a small apartment, considering their salary, property price, rate of inflation and cost of living.
Melbourne and Sydney are not different but are in an early stage of getting worst with property prices. Now the difference that can be made is by owning the property and benefiting from this price increase rather than regretting later for lifetime by renting and not been able to save anything.
You can wait for prices to rise or be smart by investing with what you have or whatever you can afford now and secure your future and children’s future. Otherwise, it will be nearly impossible for your children to afford a decent lifestyle and have their home with their fixed income and high inflation in the future. The decisions you make now will decide your retirement and wellbeing of your future generations.
If you are not already investing, we can help you get started. It is never too late to make a good decision. Call 1300 828 636 or email us at [email protected] for an appointment now.
