February 2020

This is the 22nd in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Sydney affordability – an oxymoron?

This month there has been a fair bit focus on affordability in the property press, possibly at least partially as a result of the launch of the new home owners scheme. The Real Estate Conversation discusses data coming out of the scheme which shows that a home deposit has indeed been the hump holding back many younger people from home ownership. TREC quotes a percentage of 76%, for applicants of the scheme thus far that are 18-34, and that a third of all applicants were 25-29 years old – far and away the largest segment.

Having said that, information from Core Logic discusses the change in purchaser dynamics between the two timespans of Feb 2012 – Oct 2017, and June 2019 – Nov 2019 (i.e. the latter having completed before the start of the first home owners scheme). The data shows that the percentage of first home buyers had already grown substantially then (but doesn’t discuss whether a decrease in investor purchasing has perhaps skewed owner-occupier statistics).

While affordability is not likely to improve as a result of the Federal Government’s first home buyer scheme, it does give a considerable hand up to getting over the deposit hurdle. That, coupled with data about how much better off people are buying and owning their own home over renting, perhaps suggests part of the uptake of the first home owners scheme is in a general movement towards understanding the absolute necessity of owning your own home. It’s not an option when you’re looking down the barrel of ‘the rest of your life’ – it has to work.

The other thing is whether in fact younger people looking at the market for the first time are actually seeing it as ‘expensive’ per se. They may not have anything to compare it to (since everything that occurred before an awareness is somehow less real), and so perhaps it is ‘just the way it is’. The SMH discusses some of the perspectives that millennials have and the majority see home ownership as a priority – even over and above having kids themselves.

Though it’s fair to say buying is not for everyone. According to the ABC, some, generally middle and high income people, rent by choice as it suits a highly mobile lifestyle. That said, one can’t help but wonder how that free and easy approach will go when they are 30 years older, without assets, beauty is starting to fade or vigour starting to falter, and starting to wonder where they’ll live after retirement (Or is that a projection…).

Attribution: Core Logic

Rightsizing

In a separate story, the ABC notes, downsizing, or right sizing, may free up housing stock for younger larger families. The problem is whether there is suitable, appealing housing stock available. In this survey of the attitudes of older Australians towards downsizing, the idea arises that perhaps government policies around the shrinking social housing stock might need to change rather rapidly in order to cater for an ageing population. The points raised include an increasing under-utilisation, such as 1 older person living alone in the family home with oodles of unused space. Sarah Webb, writing for Domain also notes the ‘rightsizing’ trend as families in ‘sprawling’ units save hundreds of hours a year in not having to mow lawns, maintain gardens and through the reduction of travel times to services. The story is positioned promoting easier availability of schools, cafes and craft brew.

Jessica Irvine writes for SMH, that, “ Even as young Australians can’t afford the homes they want, many older Australians say they don’t want the homes they currently have.” The problem in reconciling this mismatch is the ease – or lack thereof – which the process of change can be made. Irvine writes that as far back as a decade ago former Treasury Secretary Ken Henry noted that stamp duty should be replaced by an annual land tax, and Irvine suggests this change would help some with this transition.

“Such a switch could not only ease barriers to entry to home ownership for younger Australians, but also make downsizing an easier financial decision for older Australians.”