The housing downturn gave us a two-year glimpse of what it takes to achieve housing affordability and not all of us liked what we saw.
With rates of home ownership in decline and a boom that had gone on too long there was justified alarm as the housing affordability crisis took its toll, before the downturn finally happened.
But while most had hoped for an orderly rollback in prices, the unusual combination of a threatened end to negative gearing and capital gains tax concessions given a likely Labor election victory, a preemptive money drought imposed by banks as an act of atonement for past sins and lax practices with able assistance from APRA, and the uncertainty created by the Banking Royal Commission, stopped the property market in its tracks.
People who’d bought at the peak faced the prospect of negative equity and prospective vendors looking at a paper loss from market highs went on strike, preferring to watch and wait until our rollercoaster boom-bust property market rose out of the shallows.
Now the banks are lending again and negative gearing is off the table but the vendor strike continues, resulting in historic low listing volumes creating a shortage of supply that is fuelling another round of inflationary house prices.
In the larger markets of Melbourne and Sydney the downturn provoked some cheering from the sidelines as first home buyers saw their chance.
Prices were down, banks were playing tough with investors, Beijing got serious about restricting money flow out of China while Canberra started making it harder for non-residents to purchase in Australia.
By December last year, as revealed in the 2019 ANZ-CoreLogic Housing Affordability Report, housing was more affordable than at any time since 2016, aided by the fall in prices and low interest rates.
Many first home buyers seized the moment but just as many had their hopes dashed, unable to secure a loan and take advantage of this once in a cycle opportunity.
And there lies the tragedy for first home buyers in the major markets of Sydney and Melbourne. The turnaround has been so quick that once again they face the prospect of being priced out of the market with some commentators predicting a swift return to double digit price growth.
In the more sane Brisbane market, where prices have been on a relatively even keel since 2013, a home of your own remains an achievable dream.
Just compare the Melbourne and Brisbane affordability figures in the ANZ Report, from December 2018. About the same $1600/week median household income, but servicing a loan in Melbourne with a median house price of $645,123 will eat up 41 per cent of income and require 10.1 years to save for a deposit.
In Brisbane, where the median is $493,568 the share of income to service a loan was 31.9 per cent with 7.9 years to save a deposit.
Little wonder Queensland had a net interstate migration gain of 24,700 people in the year to 30 June 2018. Notably, Sydney with its $808,000 median house price, requiring 46.3 per cent of income to service a mortgage had net interstate loss of 21,700.
If there’s a feeling of déjà vu about runaway house prices, forecasts of a looming lack of supply are equally familiar. The apartment glut is gradually being whittled down but the cancellation or deferral of so many major construction projects suggests that we might again be looking at a shortage of housing in Sydney and Melbourne by 2021, according to one economist.
Scarcity, FOMO and cheap money played a hand in the irrational buying behaviour of the last boom. For anybody old enough to have witnessed a few of these cycles it’s hard not to feel a touch of despair.
There must surely be a better way to manage something so fundamental to the wellbeing of individuals and society, than the boom-bust cycle we seem to be caught in.
As real estate agents we have a vested interest in seeing a healthy, balanced and sustainable property sector which is currently not the case in our two largest cities.
Naturally, we welcome the recovery but at least some of the price surge has to be attributed to the dire lack of stock on the market. The reluctance to list may well be a case of Catch 22, where nobody is selling because there are so few buying options.
But the fact is we have trained these dominant markets to expect strong price growth, in effect to fuel the boom.
Einstein defined insanity as doing the same thing over and over again but expecting different results. When it comes to the Australian property market, Einstein had it well summed up.
