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22/11/17
10:17
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Originally posted by wardo11
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I like to think about most things in life in a probabilistic and fundamental way. This is my take:
- Wage growth is at all time lows. Wages are at similar levels now to what they were in 2013.
- House prices in Sydney grew 70% in the 5-year period to December 2016, 40% in Melbourne and 41.4% in Australia overall.
- Wages grew 13.2%
I cannot be bothered finding more recent or statistics over a longer time-period and I don't know them off the top of my head.
The point is that mathematically, this increase in housing prices relative to wage growth is unsustainable. Not in a 'it will be unfair to millennials' kind of way, but literally impossible.
Let me put it in context. Most average Joes assume that their house will double in value every 7 to 10 years. The current Median house price in Melbourne (just using Melbourne as an example - please apply it to anywhere) is $880k.
According to the people I overhear on the train, this means that in 7-10 years (say, by 2027), their house will be worth $1.76 million. Meanwhile, wages may increase 2.5 % per year if we're lucky. Compounding this growth in wages over 10 years will result in a 28% increase in wages.
Hmmm, so a 100% increase in house prices vs. a 28% increase in wages? Seems logical..
Let's take it further. Assuming again that house prices double in value every 7-10 years (let's use 10 again), that means in 2037 the Median house price in Melbourne would be $3.52 million.
That means from 2017, house prices would have increased 300%, whilst wages would have increase 64%. Who would be able to afford a $3.52 million house on an income of $90k? No one.
My conclusion: house prices stagnate or increase very slowly until wages catch up (which I can't see happening given that this nation is built on iron ore and scammy education exports). Let's pray productivity increases a heap.
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Who can afford a $3.52million house on income of $90K? No one,
The overseas investors will keep buying and create a bubble that will burst,
Just like they did in their homeland...
And Unit prices are crashing,
Many people that buy off the plan are duped,
with it being worth less than what they paid.
The answer is to ban overseas investors buying real estate like many other countries do. IMO