Housing affordability is a constant debate going on in Australia
There are real consequences if the Government move to make housing ‘more affordable’..
..by reviewing negative gearing or capital gains provisions for investors, for example – neither of which will actually make housing more affordable. Most major cities around the world who don’t use similar tax structures also have very high prices – like London, Hong Kong or New York – and any significant policy changes can have a real effect on the economy such as impacting the financial and retail industries, they have a dire effect on tenants and cause chaos in the property markets – so there just isn’t an easy fix.
And we mustn’t forget that Stamp duty has gone up 750% in the last 20 years – so homebuyers and investors are paying significant amounts in taxes which go towards improving our infrastructure, such as new investment projects in roads, hospitals, schools and railways.
In 3 or 4 years it is suggested by some commentators that property in fringe areas around Sydney and Melbourne may well become as “unaffordable” as some inner suburbs because of the sheer demand for property and the move away from our inner cities.
So we have to be very careful where we buy, as well as when. But the reality remains that the right locations close to larger urban centres, or at least in areas with great accessibility, are less likely to fall – as there is only so much land in these most desired locations.
Another fact is that…
Sydney and Melbourne have become international cities that are always listed at, or towards the top of the most liveable cities in the world.
So we can expect demand to continue to out-pace supply. Especially once the international migration rate is back to and exceeds pre pandemic levels. If interest rates continue to rise in the next few years, then mortgage repayments will rise further, and this will put extra stress on investors who haven’t planned for this or built these potentials into their budgets, or have bought in more vulnerable locations. This mortgage stress will be exacerbated if real wages fall.
Other impactful factors are rules around immigration and rules around foreign ownership. A study by Price Waterhouse Coopers back in 2016-7 discussed that by 2050 Australian growth will have slowed, and to counter this we need to keep allowing a steady flow of migrants to keep our service based economy flowing.
All of these factors and more show just how important it is to access the right advice and information and to have the right habits towards achieving our goals.
Habits keep us going.
With property now more than 12 times the average salary in Sydney, and personal debt levels rising, it is essential to have the right data. Keep in mind that 20 years ago housing cost on average closer to 4 times the average income. There is ongoing fierce debate as to whether this fact actually makes property less affordable or not. And of course there are property markets outside Sydney & Melbourne!
Whatever your opinion is on this matter, being ‘money smart’ is very important.
Monitoring your spending habits and sticking to it is very helpful – write down everything you spend for a month, add any other costs – and this way you can see clearly where you may be able to make some savings – like on discretionary purchases, or in reducing spending.
So to make Property Investing work for you, it requires access to the right information, as well as discipline and consistent effort. It’s essential to update and stick to your plan. This will include your earnings, savings and making sure you are making your property work for you.
Have a look at our article on updating your Property Portfolio Plan here.