A new loan now takes up roughly 54 per cent of a median-income household’s income, the highest level in at least 20 years. (Source: Getty/Domain)
Australia’s property market is getting more out of reach for first-home buyers as “affordable” home prices jump faster than premium dwellings. New Domain data has revealed just how hard it is for people to get a slice of the Australian dream.
A household on a median income now needs more than eight years to save up a 20 per cent deposit, which is two years longer than in the 2000s. A new loan also now takes up roughly 54 per cent of that household’s income, the highest level in at least 20 years.
Domain also found that only half of 30-34-year-olds now own a home, compared to 68 per cent of people born in 1947-51 when they were that age.
That statistic is the worst in New South Wales, with only 45 per cent of that age bracket currently having bought a home.
Domain said this trend was due to property prices rising because of long periods of low interest rates, income volatility and insecure work, as well as Aussies marrying later and having fewer children, which caused some to stick to renting rather than home ownership.
The report said that while interest rates have been falling this year, it’s being offset by property prices rising in many markets across the country.
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The June quarter confirmed that a lift in Australia’s housing market wasn’t just concentrated in certain cities or suburbs.
According to Domain, every capital posted gains for both houses and units between April and June, which is the first time that has happened in four and two years, respectively.
That resulted in combined-capital median prices also hitting new records, with houses now at $1.207 million and units at $689,588.
While the 5 per cent deposit scheme is being expanded next month, there are fears this will cause prices in many regions to rise even further.
People are spending far more of their income on their mortgages than in the last 20 years. (Source: Domain)
Back in the day, you might have been able to break into the property market in a capital city by buying a relatively cheap house.
But now that everyone is trying to find that same home, it’s pushed prices sky-high.
In Perth, homes in the entry-level or affordable price range jumped 19.8 per cent higher than homes in the premium range.
The entry-level range is listed as anything in the 25th percentile or the cheapest quarter of the market, while the premium is in the 75th percentile.
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Adelaide also saw affordable homes rise 18.7 per cent faster than premium, Brisbane had a 13.6 per cent lift, while Melbourne and Sydney were more subdued at 6.9 and 4.1 per cent, respectively.
The only market where entry-level home prices were outpaced by premium dwelling prices was in Canberra.
Nicola Powell, Domain’s chief of research and economics, said one way of changing this grim trend was by changing stamp duty to a land tax.
Stamp duty, depending on where you purchase and how much the home is, can be in the tens of thousands of dollars and can quickly eat away at a buyer’s savings.
Domain’s Chief of Research and Economics Dr Nicola Powell said there are some policy changes that could be made to help first-home buyers. (Source: LinkedIn/Getty)
Changing it from a hefty upfront cost to an annual and much smaller land tax could help address the length of time it takes for buyers to get into the market.
Powell said this policy change should happen “immediately”.
Domain echoed calls for a rethink on negative gearing and capital gains tax discounts on investment properties, as well as the exemption of owner-occupied housing from the Age Pension assets test.
“With home ownership rates declining and entry barriers increasing, particularly for younger Australians, there is a growing imperative to tackle the structural drivers eroding access to home ownership,” the report said.
“Doing so will require coordinated, sustained action across all levels of government, alongside industry and the community sector.”
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