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Personal Finance Specialists

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The constant price rises in residential property is leading to a permanent shift in property ownership.  Several mortgage professionals have also reported seeing a significant drop-off in First Home Buyer customers as well.

The housing affordability issue is leading to a permanent reduction in home ownership, particularly in the under-35 age group.  Over the next 10 years this shift in age group may also lead to a permanent reduction in the under-45 age group as residential property prices continue to increase.

People in their 30’s are struggling to get into a property now and we would expect this to be a permanent shift in property ownership dynamics even for people in their 40’s and sadly as property prices continue to increase there's no quick solution to this situation.  Home ownership may soon be beyond the reach of an entire generation!

As of March 2017 Melbourne's average house price has just passed the $750,000 mark for the first time in the fourth quarter of 2016. Sydney was rated the seventh most expensive city in the world, after Angola number one, New York number two, San Francisco number three, Zurich number four, London number five and Hong Kong number six.  Even Brisbane has seen a significant increase in prices and decline in affordability.

The amount of deposit that a first-time buyer now needs is $145,000 for an established property in NSW, $105,000 in Victoria, and $63,000 in Queensland. These are large deposit hurdles especially for a couple just starting out who earn a typical income of the 20-35 age group.  Ten years ago the deposit requirement for the same properties was less than 50% from what it is nowadays ($75,000 versus $150,000).

One couple who were trying to run the numbers to purchase their first home in Melbourne said “with the amount of money you have to come up with for a deposit and the sheer price of the property we’re buying, I think the days of being able to buy a property in the major cities like Sydney, Melbourne and Brisbane are getting further and further away.

Other people have told us “how do we do this? We might as well just give up because it's out of reach and since we can't get into the market now we won't bother at all, we might as well spend our money on travelling or a new car!”

The market is driven mostly by up-graders, downsizers and investors rather than first time buyers.  In the December 2016 quarter investor loans rose by 31 per cent.  Sadly it’s the investors who are pushing out first time buyers from the market because they already have a lot of financial equity and momentum behind them.

The census report that is due soon will show some interesting statistics about home ownership, with particular interest around owner-occupied property versus investors.  We estimate that by end of 2016 home ownership statistics will have fallen to 30 per cent in the 20-35 age group.”