Great Australian Dream of home ownership 'unaffordable to the average Australian'

author-avatar By on June 03, 2021
Great Australian Dream of home ownership 'unaffordable to the average Australian'

It's been an uphill battle for first home buyers trying to get into the property market and now a sobering report from real estate professionals says most Australians may never achieve home ownership.

Australia's property market boom shows no signs of slowing, with this week's CoreLogic data showing Sydney house prices surged 3% in May - the equivalent of $30,000 on the average home in May.

Now, a report from the Australian Property Institute (API) and The Search People says professional property valuers believe property prices will continue to surge, locking more Australians out of the housing market.

The survey of 600 property valuers across Australia found 63% expect house prices in Sydney, Melbourne, Brisbane, Adelaide and Perth to continue rising over the next six months. 

“The majority of property valuers surveyed predict a continued positive growth story for property values in the short to medium term,” Rafe Berding, CEO of The Search People said of the findings.

“Whilst most respondents believe a continued boom is set for the Australia property sector, 59% of respondents also believe that Australia is currently witnessing the makings of a property bubble.”

Related: What is a housing bubble and are we in one?


Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
WIN YOUR HOME LOAN INTEREST FREE

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • WIN your home loan interest free and save up to $1.1 million. Refinance by 29 October. T&Cs apply.
  • Refinance Only. Fast online application, refinance in minutes, not weeks.
  • No Nano fees, Free 100% offset sub account. Mobile app. Visa debit card & instant payments.
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Rates correct as of September 25, 2021. View disclaimer.


The report also found more than half (57%) of valuation experts believe the Great Australian Dream of home ownership is now "unaffordable to the average Australian".

More than half (55%) of property valuers also believe Australians are overcapitalising when it comes to purchasing property.

"A combination of record low interest rates and buyer’s uncertainty of investing in other alternatives is fueling high-demand," Mr Berding said.

"This coupled with low supply is driving a ‘fear of missing out’ (FOMO) for many buyers.

"As a result, properties are being snapped up significantly above the asking price within moments of being listed”.

API CEO Amelia Hodge said the property market was "firing on all cylinders" and that real estate professionals were struggling to keep up with the demand.

“With record low interest rates, we’re seeing more and more buyers entering the market,” Ms Hodge said. 

“This is great news for Australians selling property, especially with values on the rise in most sectors and selling times decreasing across most capital cities.”

Almost half (47%) of property valuers surveyed said they believe Australians should be allowed to access their superannuation to buy a home. 

Related: Is the First Home Super Saver Scheme worth using?

Sydney's median property price rapidly approaching $1m as house price boom rolls on

Data from property research firm CoreLogic released on Tuesday found that Australia's property market boom rolls on, with Sydney values recording the largest capital gain over the last three months.

Sydney property prices surged 3.0% in May, and 9.3% over the last three months.

The median value of Sydney property (including houses and units) is now $970,355. 

The median house price has already reached $1.186 million, while the median unit price isn't far behind at $782,000.

Overall, national home values rose 2.2% in May according to CoreLogic.

May's bump in house prices was stronger than the 1.8% spike in April, but less than the 32-year high recorded in March when national property values surged 2.8%.

CoreLogic research director Tim Lawless said no matter where you were in Australia, property values lifted.

“Values were up by more than 1% across every capital city over the month, with both house and unit values lifting across the board," Mr Lawless said. 

"Such a synchronised upswing is an absolute rarity across Australia’s diverse array of housing markets.”

Tighter lending standards to come?

With house prices surging, big four bank Westpac has said moves to tighten lending standards could come earlier than expected.

"We still see prudential policy staying on hold this year but with prices surging more strongly than expected a move to tighten conditions now looks set to come through a bit earlier than we previously thought, most likely in the first half of 2022," the bank said in its Housing Pulse for May 2021.

The predictions come off the back of "the first rumblings of a shift in prudential policy" from the Reserve Bank.

"Most notably, the RBA has shifted its rhetoric on housing in its monetary policy decision statement," Westpac said.

"Whereas in April we had a general comment – 'Lending standards remain sound and it is important that they remain so in an environment of rising housing prices and low interest rates' – May indicated a clearer move into ‘watching closely’ mode – 'Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.'"

It comes after recent data from the Australian Bureau of Statistics (ABS) found investors are flooding back into the market, driven by the prospect of capital gains as house prices surge.

Investor loan approvals were up 12.7% to $7.8 billion in March, accounting for more than half the month's gains.

Noting the sharp rise in investor lending, Mr Lawless said there is a "strong chance" the Australian Prudential Regulation Authority (APRA) could intervene if lending standards worsen.

"We know from previous rounds of macroprudential policy, tighter credit conditions would likely have an immediate dampening effect on housing market conditions," Mr Lawless said.


Photo by Leopold Maitre on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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