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By Terry Taylor Specific Property
Can we expect housing prices to come down?
One of the most talked about topics relating to residential property in Australia today is housing affordability. There is hardly a day that goes by where a newspaper article doesn’t headline something to do with this topic and how younger Australians are never going to be able to buy their own homes.
The front cover of the Australian newspaper’s Weekend Australian Magazine this week had a photo of a young couple with their very young child who had moved in with their parents because they couldn’t afford to buy a house of their own. The subtitle of the front page of the magazine was “How housing affordability is changing the way families live”.
The same attention to this topic is regularly discussed on our radio stations and TV channels, who often have talkback shows to allow their listeners or viewers to feel the pain being experienced by first home buyers in Australia today.
But the problem is not that housing is so expensive today, more about that later, but that our poorly done by young people can’t buy the home that they want in the area that they want to live. The locations of these desired properties coincidently are where their parents and grandparents, after a lifetime of scrimping and saving, are currently living. In other words, many of today’s buyers want to start where those of the order generations are finishing. For most, it is just not possible.
There are still many parts of Australia and even in our larger cities where young, or older people for that matter, can secure a toehold in the property market. It comes down to the selection (type) of property and the locations of those properties. For example a quick search on the internet and you will find that in many of Australia’s capital cities, including Brisbane and Melbourne, you can still buy a brand new house and land package for well under $500,000 in fact $400,000 in outer Melbourne and even less in Brisbane.
That doesn’t sound to me like we can’t buy cheaper affordable housing. It does sound to me like we can’t find the houses in the suburbs we want at the price we want to pay. But if you must live closer to the centre of our major cities there are options available with very low entry price points. One and two bedroom units can be purchased, in Brisbane or Melbourne, from about $300,000 and sometimes less.
These properties may not have granite kitchen benches and Gaggenau appliances, but I am sure that when I bought my first home I didn’t know what Gaggenau was. People just need to start somewhere, pay some debt off, and trade up as we all had to do.
Now to the sub heading “Can we expect housing prices to come down?
In a recent article I wrote I was discussing the technological changes taking place worldwide today and how that will mean that most of the jobs we create in the future will not be in factories on the outskirts of our cities. This trend is gaining pace and in all likelihood will mean that the trend to live closer to the centre of our main cities will also continue well into the future. Land close to the centre of our cities is going to be in even greater demand than we are experiencing now and that is going to make it more expensive.
According to the Australian Bureau of Statistics (ABS), Australia’s population reached 24 million in March, 2016 and has a series of projection growth rates that are moderate, taking the population of Australia to about 54 million by the end of the century. If we look at their upside projections the population could reach 70 million by the end of the century, basically three times the population we have now.
Every Australian Capital City will share in that projected growth with Brisbane, Perth, Melbourne and Sydney being the main beneficiaries of that growth. Sydney and Melbourne are expected to more than double in population by 2061 (35 Years) whilst Brisbane and Perth will see their populations at least treble.
So do we expect house prices to come down in this environment, of course we don’t. Maybe some short term volatility on occasion but if you are buying for the right reasons and intend to hold property long term then we just see that volatility as an exceptional opportunity to buy.
Areas of Australia not experiencing the same growth in population or even in some cases, falling populations will not experience price growth to the same degree as the larger centres and there is always a chance that prices will fall in some locations.
More people compacted closely into the centre of our main cities means higher demand and following that, price growth must inevitably follow. I am certainly not talking here about buying into one of the multi-story high-rises that seem to be sprouting like mushrooms in the centre of our major cities. I am, by the way, not against high rise towers, it depends where they are built, who they were built for, what the floor plans are like and whether there is any pleasant outlook from the apartments.
The answer is as always, to do your homework, look at every property on its merits and make sure that the floor plan of the property you buy will suit a long term resident.