Sydney's property boom has been dead for three years, but that well-located family home. Changes to the city's median house price over the past decade explain why. It rose an eye-popping 250 per cent between 1996 and the peak of the boom in late 2003.
And it is still 2.3 times the 1996 level. So the recent weakness in the housing affordability during the previous decade.
A Macquarie Bank economist, Rory Robertson, showed just how far close to the coast have become for most new buyers. He chose five popular suburbs within 10 kilometres of the GPO - Bondi, Bellevue Hill, Bronte, Mosman and Paddington - and calculated the average median price for those neighbourhoods. It was $1.
6 million, almost $1 million higher than before the boom.
the halving of interest rates during the 1990s. That structural change in rates, made possible by low inflation, boosted the surge in demand for well-located houses.
The result was a housing affordability for newcomers.
faster than wages over the past two decades. Since buying and lives, the gap between the growth in property prices and wages has greatly devalued the lifetime earnings of non-home owners, particularly young people.
The average price of an Australian house, including land, has 20 years. That means an aspiring first-home buyer on average earnings of about $55,000 a year must contemplate borrowing $350,000 (assuming a 10 per cent deposit), rather than $200,000, to buy an average house.
been pushed towards the periphery of cities and beyond, priced out of the market for well-located family homes.
trend. The Urban Development Institute of Australia reach of those wanting to buy their first home. In 2001 the average the state, but that had fallen to 15 per cent by the September In Brisbane, just 7 per cent of homes were classified as urban fringe.
other states as well," Robertson says.
Despite the compromises being made by first-home buyers, they longer periods. That means today's young home buyers have far greater financial risks than was typical in earlier decades.
They for more of their lives than people were in the past.
those aged under 45. The ratio of owner-occupiers in the 25-35 age lower.
For most of the 1990s first-home buyers accounted for more approached its peak. By early 2004 the proportion of first-home buyers crashed to just 12.6 per cent and even less in Sydney.
The proportion has not risen above 18 per cent since.
cent crash in home prices across the board, he concludes there is no easy way to improve affordability.
Some commentators, including the Prime Minister, say a lack of cause of high prices for first- home buyers.
But changes to state influence on citywide house prices. Unfortunately, building more closer to the action.
price of Australia's 8 million homes over the past decade or so, influence," Robertson says.
Authorities could put more homes in high-demand areas, especially suburbs close to city centres and the coast. But such a much smaller house and yard sizes. A massive upgrade of transport the quantity of well-located homes.
Tax benefits to investors could to inland cities such as Dubbo, Wagga Wagga and Armidale.
the money into super, may put some downward pressure on house prices and therefore assist aspiring first-home buyers. But substantial and sustained improvement in housing affordability.
centres and global cities, where growing numbers of people - particularly the wealthy - want to live, always will be expensive, probably increasingly so in the long run," he says.
It's sad but true. Sydney will just have to learn to live with expensive housing.
Ross Gittins is on leave.
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