The Sydney slum has become an impossible dream

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By Leith van Onselen

The latest CoreLogic Mapping the Market report showed the almost complete disappearance of affordable houses across Sydney:

Sydney Houses:

In June 2012, 21.3% of Sydney suburbs had a median house value of more than $1 million, by June 2017 55.7% of suburbs had a median house value in excess of $1 million while only 8.7% of suburbs had a median value below $600,000 and most were located more than 50 kilometres from the CBD.

Yesterday, The SMH’s Matt Wade produced analysis arguing that it now takes two full-time jobs to service a mortgage on a typical Sydney home:

The Housing Industry Association’s housing affordability index, which measures the capacity of households to service mortgages, shows Sydneysiders must fork out $4,729 per month, or nearly $57,000 a year, to service a standard mortgage on an averaged-priced home in the city.

That is more than 30 per cent of the earnings of a Sydney household with two average full-time wages – the portion of income widely accepted to be a manageable housing repayment.

“House buyers in Sydney now require more than double the average income in Sydney to be able to afford the averaged-priced house in that market,” the report said.

“This quarter’s result is a further widening of the affordability gap between Sydney and everywhere else. It has the lowest affordability in the country by a large margin.”

The association’s affordability index for Sydney dipped to an all-time low of 48.7 in the June quarter…

The findings come as opinion polls show an unprecedented level of public anxiety about the cost of housing in the wake of a Sydney property boom that has lasted nearly five years…

Melbourne was the least affordable city after Sydney. It takes 1.64 average full-time wages to affordably service a standard loan on a typical house in Melbourne.

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The sharp decline in Sydney housing affordability is perhaps best explained by the following charts.

First, Sydney’s population has boomed over the past decade, increasing by 774,000 or 18%:

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At the same time, fringe land supply has plummeted and costs hyper-inflated:

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Unfortunately, for young Sydneysiders, the city is already built-out with not a lot of developable land available within a reasonable commute. This means that land supply pressures will likely remain.

At the same time, our idiotic federal politicians remain wedded to Australia’s turbo-charged immigration program, which is projected to deliver more than 1.7 million new residents to Sydney (87,000 people a year) over the next 20 years:

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Young Sydneysiders and commentators concerned about declining housing affordability really need to push-back against mass immigration. Because it is the key driver of the shortfall in housing that has caused both prices and rents to escalate.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.