It’s Not Unaffordable if You Get a Better Job

Posted by Daniel Joseph

Is there an affordability crisis in Sydney? Joe Hockey says no. In a masterstroke of communication, the treasurer affirmed that the answer to the question of affordability was to ‘get a good job that pays good money’. Although technically true, the response had him touted as being out of touch with the common man.

The facts:

SYDNEY IN 1995:

The median weekly income before tax at the 1996 census was $700
The median house price at that time was $195,000
How long would it take to save a 10 per cent deposit based on this scenario? It would’ve taken you 1.67 years if you set aside 30 per cent of your income
Yearly interest payments as a proportion of income: 40 per cent

SYDNEY IN 2015:

The median Weekly income before tax at the 2011 census was $1,447
The median house price as March 2015 was $900,000
How long would it take to save a 10 per cent deposit based on this scenario? It would’ve taken you 3.97 years if you set aside 30 per cent of your income
Yearly interest payments as a proportion of income: 53 per cent

Rewind to when Blue Wealth was active in the Sydney market – 2009

The median Weekly income before tax in 2009 was $1,300
The median house price as December 2009 was $500,000
How long would it take to save a 10 per cent deposit based on this scenario? It would’ve taken you 2.47 years if you set aside 30 per cent of your income
Yearly interest payments as a proportion of income: 45 per cent

As an aside, the interplay between rates, house prices and income has a more significant impact on the time it takes to save a deposit than the change in the debt to income ratio. With this in mind, regulation should focus more on reform to the costs of acquisition (stamp duty, in particular) than it does on restrictions on buyer activity.

No doubt, Sydney housing has become increasingly unaffordable. The median dwelling in Sydney is now 50 per cent more expensive than that in Brisbane and 30 per cent more expensive than that in Melbourne. Had you entered the Sydney market at the right time your position would’ve been vastly different, hence Blue Wealth’s philosophy of the right asset in the right market at the right time.

Posted by Daniel Joseph, on 16th Jun 2015