The insane rising cost of real estate in Australia merits an open conversation.
The cost of acquiring a property in Australia’s most thriving cities – namely Melbourne and Sydney – is becoming increasingly prohibitive. Impossible, even.
A one-bedder in Sydney will set buyers back roughly $840,000 to $970,000, while two-bedders are going from anywhere between $1.25-$1.6 million – more than what it would cost for a mansion in Cape Town’s most prestigious postcodes. A three-bed penthouse will easily sell for more than $3 million. What gives?
Just how are millennials expected to keep up with the soaring pace of real estate’s rising prices? With Sydney’s population to grow by 2.1 million over the next 20 years, people have got to live somewhere – but the ridiculous cost of housing is sending many Sydney-siders into the city’s outskirts, or overseas. Millennials have been advised to stop dropping money on overpriced avocado toast if they wish to one day own their own property – humorous but oddly sound advice. Property mogul and Australian millionaire Tim Gurner received media backlash for his comments, which were spoken to encourage youngsters to spend less lavishly if they wished to have any chance of getting onboard the Australian property market.
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said.
And he makes a great point. Is it the lavish, over-the-top lifestyles of young Sydneysiders and Melbournites that is exacerbating the situation? Teens spending their wages on fancy cocktails, organic bread and overpriced hipster labels, in a bid to keep up with people their own age, rather than spending it on a deposit for a home? Perhaps the problem lies in the privileged lifestyle we are allowing millennials and the younger generations to have – lifestyles that prioritise good times, partying and “self-care” above hard work, patience, fortitude and ambition.
An Australian Institute of Health and Welfare (AIHW) report suggests millennials might also be keeping themselves out of the Australian property market due to their own personal choices, by spending their income on higher rents in order to live closer to work and to have a better lifestyle, rather than living in the sticks and saving. This, together with student debt and a lack of employment opportunities is seeing younger people jump ship more and more regularly, seeking overseas opportunities for a fraction of the cost of living in Australia.
And boy does the Australian dollar go a long way elsewhere.
For less than the price of a coffee, buyers can own their own home in crime-ridden parts of England. That’s right, $1.50 will buy an established house with a back yard in Stoke, Staffordshire, and to make the offer even more attractive buyers will receive a £30,000 ($44,000) low-interest loan for renovations. It seems unbelievable that a property will sell in the United Kingdom at such a bargain, but the council see it as the only way of filling and reinvigorating the 5000+ abandoned houses in Staffordshire’s largest city.
But it’s not just England where buyers can snag a bargain.
According to a study by the Organisation for Economic Co-operation and Development (OECD) which looked at house prices around the world relative to wages, 10 countries were identified as the most affordable in terms of real estate costs, and England was actually identified as one country that saw above longer-term norms relative to rents and incomes.
While apartments for rent in Estonia go for as much as 500 euros a month in Tallinn, an apartment in the lower-income area of Ida-Viru County can be bought for as little as €1,000. In Tallinn, one can however find cheap and decent housing offers for as low as €30,000. In Latvia, there is a vast market of inexpensive real estate, with typical Soviet era projects to be found in Riga, Jūrmala and Ventspils from €8,500. Then prices slowly but steadily increase in Bulgaria, Montenegro, Turkey, Albania and – in some of the less touristy parts such as Torrevieja – Spain. Even in sunny Portugal, one can snap up a lovely one-bedroom apartment with ocean views in the city of Santa Cruz, on Madeira for under €40,000. In Canada, one can buy a new home for the equivalent of the price of a car. A one-bedroom cottage in southern Saskatchewan, a three-bedder in Avonmore, Ontario, or a farmhouse in Souris with a detached garage – for less than the cost of a car.
But jump back to Australia, and we have some properties so coveted that property valuers are unable to name a rough pricing estimate, and foreign holidayers will pay up to $70,000 to rent them out for just 10 days. Millennials may as well give up all hope now of ever owning property in Sydney – Point Piper, Darling Point, Cremorne Point and Bellevue Hill in particular, with the median house price of $12.5 million in Point Piper last year. Woolwich, Vaucluse, Tamarama and Lavender Bay and Dover Heights bring in the rear, with a median house price in Dover Heights of around $3.23 million.
A new market survey published by Liveandinvestoverseas.com identifies the world’s best-value property markets today as Cayo, Belize; Medellín, Colombia; Crete, Greece; and Granada, Nicaragua as the most affordable but worthwhile choices, while Commonwealth countries including New Zealand, Australia and Canada were found to have the most wildly overvalued property markets in the world.
It will be very interesting indeed to see what happens over the coming 10 – 15 years, as younger generations sit up and begin realizing that house aren’t simply handed down – they must be earnt and paid for. Will they all end up overseas, disrupting the real estate market in Australia? Only time will tell.