There is a lot of attention lately around the affordability of housing and the fact that the current generation struggle to “get into the market”. The major reason most put it down to is property prices rising consistently while incomes have not followed the same trajectory over a long period of time.
To illustrate, let’s take a look at 1975 vs 2018:
|Population (Australia) ⚬ Almost 2 times more people||13.7 mill||24.6 mill|
|Full time wages ⚬ More than 9 times higher||$7,618 pa||$70,000 pa|
|Bread ⚬ Nearly 12 times the price||24 cents||$2.84|
|Milk ⚬ Nearly 5 times the price||30 cents||$1.45|
|Petrol ⚬ Only 2 times the price||57 cents||$1.15|
So, if the average annual income has increased from what they were in 1975, why is it that people are now struggling to be able to buy a home?
|Median house price (Brisbane) ⚬ 27 times higher!!!||$17,500||$473,924|
|20% deposit needed to purchase||$3,500||$94,784|
Another factor is the additional expenses that consumers in 1975 didn’t have the opportunity to want/need as easily, if at all in some cases. These can be one off or ongoing expenses such as:
- Electronics (Mobiles, laptops, video games)
- Gym membership
- Lifestyle (regular meals “out”, movies)
- Beauty trends
Coupled with these “new expenses” is the current generations desire/attitude to have everything now. The “need everything now” mindset makes saving money in general near impossible, let alone saving enough for a deposit on a home. The other thing that happens when people want something but don’t have the money or the patience to wait, they borrow to get it.
So, we have high house pricing with incomes not increasing in line with them, more things to spend money on and possibly less will power/better marketing to avoid buying them. On top of that, probably the biggest burden for the current generation is the debt. More to the point, it’s the unsecured debt on credit cards or loans against depreciating assets such as cars, bikes or worse yet, a loan for a holiday.
Most people now start their “financial life” in negative, getting their first job and straight away owing money on a credit card and then usually followed by a car loan too. I regularly sit in front of younger clients who are crippled by debt with multiple credit cards as well as loans on goods they might not even have anymore. Most are too oblivious to see the impact it is having and will have on their life. Looking at their financial position it will take them 10 – 20 years to simply get back to zero, and that’s if they stay become disciplined and don’t get into further trouble.
It has long been considered the Australian Dream to own your home. It appears that for many, due to a continued increase in property prices plus a desire of “want” leading to more and more bad debt, it may just be that……….a dream. For the ones who can still make the goal a reality, be proud or thank the people that helped you!