There are no affordable houses left in Sydney or Melbourne

CoreLogic has released alarming research showing that there are no affordable houses in either Sydney or Melbourne:

While the median property value provides a useful reference point for the ‘typical’ home value in an area, buyers on a tight budget might find it more practical to narrow down their property search by examining lower quartile values…

The lower quartile (or the most affordable 25% or properties in a region) provides a better view of the market entry point, while the upper quartile (most expensive 25% of properties) gives an indication about premium values…

Sydney Australia’s most expensive housing market has a median house value of $994,300. However the lower quartile house value, at $697,370, provides an entry point to the market that is almost $300,000 lower than the median. In some cases, such as the North Sydney & Hornsby subregion or the Eastern Suburbs, the difference between the median and lower quartile can be more than half a million dollars. Across Sydney’s sub-regions, there are three areas with a lower quartile house value below $600,000. These are the Central Coast ($525,590), Outer South West ($564,730) and Outer West & Blue Mountains ($575,890). Additionally, Sydney has the largest inter-quartile range (the difference between the upper and lower quartile) with the upper quartile 126% higher than the lower quartile, implying a significant level of diversity in housing values across the city.

Melbourne With a city-wide median house value of $798,670, Melbourne is Australia’s second most expensive capital city housing market (after Sydney). The lower quartile value for Melbourne houses, at $614,330, is $184,300 lower than the median. This provided an easier entry point for budget-constrained buyers. Three sub-regions of Melbourne have a lower quartile house value that is greater than one million dollars (Inner, Inner East and Inner South), and four regions have a lower quartile house value below $600,000: North West ($549,790), South East ($573,590), West ($524,820) and Mornington Peninsula ($580,130)…

The situation will obviously worsen as the ‘Big Australia’ mass immigration policy doubles the size of Sydney and Melbourne over the next half century, swelling their populations to around 10 million each:

Full report here.

Leith van Onselen
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Comments

  1. The issue I have with this whole affordability thing (being extrapolated into the future) is that, unless wages push upwards, how are prices going to continue do the same?

    Every layer of housing (defined by price) provides the bedrock for the layer above, so …..

    Said otherwise, how many more Chinese multi-millionaires and billionaires are there today simply waiting to jump into the Sydney housing market and …. under which rock have these people been living for the last decade? The global economy is on the verge of contracting – hardly the environment in which new millionaires are minted by the thousand every day …

    • You’re not thinking about it right.

      Real Houses will stay expensive relative to salaries and possibly get more expensive. They will be passed down by inheritance and also bought by those winners who have managed to “have a go” and “get ahead”.

      The regular exponents of the young generation will get crammed into units, apartments, tiny homes, which will
      trade at prices/wage multiples previously applied to real houses.

      This is how it must be. Until the housing shortage subsides.

      • Oh, don’t worry, I have this under control. The US housing market was going gangbusters until it wasn’t and credit to the subprime market was withdrawn. But obviously, this time is different …. and the housing market will be unaffected by the coming global recession, I’m sure. Because, ya know, immigrants. Even though most don’t have a pot to p!ss in.

        • That “coming global recession”, it’s been enroute for a while, innit?

          If this solar cycle doesn’t make it rain, what will be the next likely ETA?

          • Relax, the day of reckoning has been delayed by endless rounds of money-printing. Sadly, this parlour trick cannot work forever but neither is it possible to forecast when that day arrives, however, arrive it will. Just think, every day that goes by brings us ever closer to the denouement. I don’t let this stuff worry me – I live a normal life – it’s just sensible to be aware what is coming down the pike 😉

      • You are so full of it. Have you ever seen a housing bubble correct? You’re making it it up as you go along.

        • Yes. I have also seen housing bubbles not correct. And I’ve thought about the differences between the fact patterns underlying correcting bubbles and not-correcting bubbles.

          • Yes, andI have seen them correct. And you can’t seem to differentiate the two. It is. inevitable, unless you think there is something magical about straya There isn’t.

    • Once it does start contracting, and the rule of law starts breaking down in various places you can expect moar millionaires and middle class peoples to make the permanent move elsewhere. The state of the global economy and the income growth or lack thereof at that moment they choose to emigrate permanently won’t matter. Not looking to grow wealth at that stage, they will be looking to preserver whatever they have. Thus overpaying for property will be the least of their concerns.

      In the meantime the RBA will remain confused as to where the banknotes are. How unaffordable do you think it will get by the time they figure it out?

      • I probably look at the world in a slightly different way to you. As a former finance guy I like to look at the monetary system from a global perspective i.e. China cannot create it’s own money independently of the US Dollar. The Chinese have created more domestic currency than they dare given dollar reserves and, with trade impacted heavily recently, they are desperate to take in more dollars – they just announced they were suspending most/all tariffs with the US. That’s how desperate they are. Their monetary system is on the verge of collapse I would say. This coronavirus could see it off. The money coming out China is most borrowed domestically or black money – not wealth. In a crisis there’ll be a heap of Chinese selling in our market, because liquidity becomes king. The idea that 100% of Chinese money is parked here permanently is BS of the highest order.

    • Mortgages are still only 30 years max. Plenty of headroom yet to push them out to 50 or 100 years.

  2. As an international city, Sydney property prices are no longer anchored to local wages and incomes. It is imprudent to analyse affordability on the basis of local incomes, esp for the east and northern suburbs. A better measure is the wealth and income of the global elite. On this metric the stratospheric prices make more sense. Esp. for those holding USDs, sydney property prices are actually very affordable, even cheap compared to other top tier international cities.

    • Partly true, yes. But the global elite have bolt-holes in places like Switzerland, rural Canada, New Zealand, private yachts etc.

      Sydney is home to gazzillions in Asian black money and that’s pretty much it. But as the global economy slows there’ll be much less of it around — and then, capital controls will make it worse. It’s not about the stock, it’s about the flow. When the flow slows, so do prices.

    • But why would one of the “global elite” (without any other local ties) want to live in Sydney ?

  3. With government, RBA and regulators complicit in blowing this bubble further, we obviously need something outside of their control to restore normal house prices. Corona virus or some similar event down the track may be it. Big Australia was created unnaturally, undoing big Australia may require mother nature to intervene.
    Less people equals less demand, higher vacancies and lower prices.