During the June quarter, median house prices across Australia rose. According to the Real Estate Institute of Australia (REIA) medians for homes jumped 2.1% during this quarter. Other dwellings increased by 0.4%. This increase pushed the detached home median to $700,000 in Australia, while other properties reached an average of $545,000.
Most Australian capitals saw an increase in property values during the June quarter. Perth was the only capital to have a fall in averages for both houses and other dwellings. This fall resulted because of a decrease in population and market activity. Adelaide, however, saw strong growth, and Sydney continues to lead the way with the highest median house price. At present, the REIA estimate that the median house price in Sydney is 46.5% above the national average.
The CoreLogic Hedonic Home Value Index indicates that this growth trend is escalating nationwide. During the September quarter, house prices nationally increased by 2.9%. As a result, capital city home prices are 41.3% higher than when this cycle began in June 2012.
Nevertheless, Melbourne is the nation’s strongest performer. Dwelling prices in this capital rose 4.5% during the September quarter. However, compared to figures recorded at the same time last year, the majority of capitals witnessed growth moderation. The only markets with quarterly growth higher than in September 2015, are in Adelaide, Canberra and Hobart.
Research suggests that Sydney’s quarterly growth peaked during the June quarter of 2015 at 7.4%. Melbourne, on the other hand, spiked during the same quarter at 7.9%. Even so, high growth is still continuing in the capitals, which is being driven by higher auction clearance rates.
Rising median house prices are making it difficult for Australians to buy property. In fact, many Australians are said to be looking at alternative ways to buy while renting. Recent survey data found that approximately 57% of Australians are purchasing a home, while 43% are renting.
Still, many survey respondents disagree about which generation has it tougher when it comes to housing affordability. Some said it’s the younger generation who suffer the most from affordability issues; others suggest that it’s the older. Thus, Gen Y and Baby Boomers are in a tussle to prove ‘who’s had it tougher’.
Looking at the survey data, numerous Baby Boomers had to grapple with 17% interest in the late 1980s. For many, this high-interest rate pushed them out of their homes with them having to sell. Gen Y, however, has higher home prices, but lower interest rates. Hence, it takes them longer to save a home deposit and break into the market.
Average sized Baby Boomer home loans in New South Wales during the late 1980s were around $80,000. Interest at this time was 17%. Over a 30-year term, the monthly repayments for a home were around $1,200. These interest rates saw the average weekly repayment reach $285. But, by 1990, when Australia entered a recession, the average wage, in this state, was $620. With an annual salary around $30,000, a 1990s mortgage was around 45% of yearly income. Throughout this time, it took on average, around three years to save for a home deposit
Today, the average Gen Y home loan in New South Wales is $420,000. Across a 30-year term, repayments equate to approximately $540 per week. Then again, the weekly wage in this state is around $1,700 a week. Therefore, a mortgage represents about 31% of average weekly earnings. It now takes around nine years to save for a home deposit.
So what’s your verdict? Who does it tougher Baby Boomers or Gen Y?