Buying a house is supposed to be one of the most important times in your life. However, with rising house prices, many people are left disheartened. The already booming prices have continued to reach new heights. What this means is more grim news for Australians looking for a new house.
Statistics show that more than 60 per cent of Australians own their own home. However, home-ownership rates for people that are aged under 40 are quickly declining. While it may seem easier to simply build a new house, the hardship doesn’t stop there. House prices, in general, are rising, and that includes building prices.
Last year, all Australians were told that there would be a large market drop. Unfortunately, after saying that, the prices soared. Many people seem to think that the prices soaring can be attributed to not enough homes. That just isn’t the case.
Why we are dealing with rising house prices
People are generally believing that rising house prices equals not enough homes. This has been a common thought process; however, this is completely wrong. It just can’t explain the take off in 2000, the next take off in 2013, and the most recent take off.
We definitely have enough homes. The 2016 census concluded that we had 12 per cent more dwellings than we do households. This statistic is up 10 per cent since 2001. This means that 12 per cent of our houses and apartments in Australia are empty. Usually, they are used as holiday homes, second homes, or they are waiting for tenants.
If there weren’t enough homes available, it would be more than property prices soaring, it would be rentals as well. Instead, rent has barely been moving. It has been growing even slower than wages for around half a decade.
House prices in Australia haven’t just skyrocketed. To say that is a complete and utter understatement. We have seen the rising house prices reach the steepest increase in almost 18 years. Places such as Sydney and Canberra have recorded the fastest quarterly increases in almost three decades. Melbourne has also seen a new record high with their house and unit prices rising significantly.
It is said that median house prices are expected to far surpass $1m in the next quarter alone. It seems as if affordability is being pushed very far out of reach for many people looking to own a home. News.com.au reports that the major driving force in this boom has been first home buyers, in much the same way as they were during the global financial crisis.
Landlords contributing to rising house prices
Funnily enough, people often buy houses and don’t even live in them. This is something called ‘rent-vesting’ that has become more and more popular since 2000. Since this time, people have been wanting to buy houses to rent them out and become landlords. These days, one in 10 people are landlords which equals out to around two million Australians.
To get the properties, aside from buying them, they have had to outbid people. Most of the time, they outbid people who would have actually lived in the house. While doing this, they have subsequently been pushing up the prices. Rather than investing in companies or the stock market, they are buying rental properties more than ever before.
A continued rise
Apparently, the rising house prices won’t be ending anytime soon. With mortgage rates reaching new, extreme lows as well as wealthier Australians coming out of the crisis with their wealth intact, it could mean trouble. It makes a lot of sense to do what others are doing. However, it will push up prices resulting in even more hardship. This could create some very uncertain times.
The bottom line is that it is not attributed to a shortage in housing. Instead, it will be pushing home prices even farther out of reach. News.com.au says “Whether or not investor activity will rise sufficiently to make up for this inevitable loss of demand in the longer term remains a matter of debate. But in the short term with the growth in housing finance commitments currently heading ever higher, it’s likely that we will continue to see strong housing price growth in the months ahead”.
How you can find help with rising house prices?
A saving grace with rising house prices is the Australian Lending Centre offering home loans for anyone. Whether you are looking to upsize, downsize or invest, need a loc doc loan or you have bad credit. We have a wide range of home loans to suit most situations.
Australian Lending Centre can help to finance the purchase of a house in many ways. With standard Home Loans, First Home Buyer Loans and Investment Property Loans. If you can’t afford to buy a house due to the rise in house prices, then you could renovate your existing home instead. Contact us today for all your home loan needs and more.