For many years, the median dwelling in Australia has earned more than the median worker. A new report by Core Logic property analysis shows this trend has continued over the previous 12 months.
Over the past 12 months, the median dwelling price in Australia increased by $63,000. It now stands at a whopping $766,000.
Meanwhile, in January the median rent passed $600 per week for the first time, or $31,200 per year. That represented an 8.5% annual increase, with 94% of individual properties seeing a rent rise.
Between capital gain and rent, then, the median Australian dwelling “earns” $94,200 per year. Contrast that with the earnings of the median Australian worker, which stand at $79,800 per year, or just $61,802 after tax.
Many economists are also now predicting interest rates are looking downward in the medium-term. In April the Reserve Bank is expected to hold, followed by potentially two cuts this year, inflation results pending.
With property prices having risen markedly during the interest-rate increases, one can only imagine the impact on affordability with rate decreases.
The Australian housing market is generally more responsive to interest-rate changes because Australian mortgagees are far more likely to sign on to a variable rate than in other country. Whereas 15% of Australian mortgagees hold variable rate mortgage, 80-90% of mortgagees in the US, Canada, Germany and France have fixed rate mortgages.
The heat sustained in the housing market through interest-rate increases indicates the structural problems in housing market supplies. Taken altogether, the scenario is clearly a recipe for a widening gap between the haves and have-nots and a less stable society.
Thumbnail image courtesy of @fonsheijnsbroek_amsterdam_photos via Unsplash.
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