mlbonner

Quite an interesting article for anyone who thinks that Brisbane is a 'cheap alternative' to Sydney. Already it has a higher ave. house price than Melbourne and is now ranked as one of the top 15 cities in the world as 'severely unaffordable', as interestingly have four other Australian cities. The results aren't as international as they'd have you believe though; the study is based on USA, Canada, NZ & AUS only.


Media Release
Source Data

Brisbane ranked 'severely unaffordable' on international scale
Brisbane is at risk of becoming another Sydney if housing affordability is not urgently addressed and the city is already less affordable than most in America and Canada.

An international report into housing affordability released this month ranks Brisbane amongst the top 15 cities classed as “severely unaffordable”.

At the same time, the peak body representing urban development in Queensland, the Urban Development Institute of Australia (UDIA), has issued a warning that Brisbane affordability risks falling further.

The Demographia International Housing Affordability Rankings study compares property prices with household incomes from major centres in the United States, Canada, New Zealand and Australia.

UDIA President Peter Sherrie said the Demographia report confirms widespread concern that the Brisbane market could follow the same path as Sydney in becoming totally unaffordable.

Phoenixuk2oz

Good report Michelle but it makes me wonder if UDIA Queensland are priming Brisbanites for high rise development? [it must be difficult to back pedal this policy and I would think it eventually is a must?]

Also...unless I've misread the article, housing affordability is judged against salaries hence prospective house buyers being able to afford to buy. Well...having looked at salaries here, I'm not surprised people can't afford to buy a house as certainly many people here don't seem to earn a great deal compared to some of the other major cities and day-2-day living probably means they can't afford to save for a deposit on a house. Even us newbies have noticed a massive increase in house prices within the last 2/3 years and as salaries haven't risen in comparison, then eventually it becomes unnafordable.

Another cynical side to this argument is......maybe it's deliberate propaganda to kerb spending? Who knows

mlbonner

I would agree, like all reports this one is skewed towards what the source wanted it to say. The fact that the report is called an 'international' one, but only represents four countries worries me slightly. Regardless, a separate (PRD) report out in Q4 2004, now show's Brisbane with the second highest ave private house prices in Australia.... who knows whether this is a supply/demand thing or down to bad workmanship (as the UDIA report seems to imply).

Its definitely a buyers market in Brisbane at the moment, though in Q4 2004 my particular suburb ave. price was down .4%, as opposed to the Q4-03-Q4-04 rise of 18% previously. Who can tell whats going to happen - just driving through Brisbane on Saturday morning I counted 9 cranes, so someones making some money! (that'll be the cynic in me )

Phoenixuk2oz

Aye...I noticed this too and commented the same to the other half.

Thank god we're on the housing ladder.....but feel sorry for any poor buggars who aren't, including the young ones who've probably got no chance on one salary

Another thing I've noticed here in Brisbane...is the wealthy landlords who have 3/4 rental properties and who seem to be making a decent profit. How can people pay those rentals, on these salaries..... and save to buy at the same time

mlbonner

Yep, I was telling the other half at the weekend about how they had to bring in 110% mortgages in the UK, as the average age of the first-time housebuyer hit 30+ Things here seem to be heading that way too

Phoenixuk2oz

Now THATS scary isn't it :scared:

People are working longer in their lives and getting further and further from being debt free

I wonder if this really is an improvement in standards of living

mlbonner

Hmmm, not sure... but at least here we have a pool

jad n rich

One thing to note when comparing brisbane to Melbourne, we went down end of last year to check it all out.

Couple of points from critical builders eye, much of the cheaper housing in Melby is fairly old or built in that era of fibro houses aspo roofs and one bathroom, no car accom, much of it needs a lot of $$$$$$ spent on it. Also the stamp duty down there is double we looked at a very basic house and the stamp was $37,000. As someone said no pools included either. It all adds up.

Most poms coming out would find either place staggeringly cheap, would be silly to assume that situation would continue for their children, if they earn aussie wages it will be the same struggle as the UK would have been.

MrsDagboy

Rental costs in comparison to mortgage costs are very low, unless a landlord bought his properties well before the big increase in property prices, I doubt that any landlords are making big profits.

Most investors buy property knowing that the rental income wont cover the mortgage & expenses - it's called negative gearing.

brisnick

yup. i'm over 30 and looking scarily at how the hell i can buy my first home!!

Phoenixuk2oz

Not necesarilly true. Our old neighbours are paying for rental what we pay for our own house so their rental isn't very low at all. They are basically paying the mortgage so the landlord gets the house. Great business opportunity and I don't blame the landord....but I'd hardly say it wasn't profitable for him.

I'm familiar with negative gearing. I've never come across a landlord who rents for love rather than money. It's usually profitable and negative gearing is usually geared to utilise/gain benefits........or else they're crap buisnessmen/women

MrsDagboy

Assuming a property valued at $300K (less than the average Brisbane house I think), with a 20% deposit ($60K), mortgage repayments over 30 years on $240K are $1650/month or $380/week.


Dunno what you are paying or your neighbours, but my guess is that unless you were very lucky, $300K wouldnt buy you a house in Brisbane that you could rent at $380/week. Maybe a specialist market like inner city units or something, but those have body corp etc. On a house, by the time you take into consideration mortgage, rates & water, agents fees/advertising, time spent vacant & repairs & maintenance, your figures arent looking that good! Positively geared investment properties are the exception, not the norm.

Negative gearing is never meant to be profitable - its meant so that you make a loss so you can reduce your personal income tax. The profitable part is the capital gain that you will (hopefully!) make when you sell the property, but not the income from the rent.

Phoenixuk2oz

Ahh but that's the thing. The house they live in was built by the landlord for less than $300k [obviously don't know how much their landlord paid for the deposit] but the ex neighbours pay $400 per week to rent. So that's exactly my point. The tennants pay the landlords mortgage. Granted the landlord pays rates....but then no doubt that's when the negative gearing comes in as an over the odds loss to the landlord

And of course I know what negative gearing means.....but thanks again for the explanation. Again that's exactly my point...i.e the landlord can offset his/her loss against personal income tax. All in all no landlord in their right mind buys a house unless they think they'll make a profit and ultimatly this is realised at the selling stage however the costs normally "tick over" by being paid by the tennants. The crux of it is.....no landlord buys a house to rent out without profit in mind and however much we to and fro about the ins and outs, a landlord will always benefit, and rightly so if they've invested it for business reasons. Hence my initial comment on people not normally being able to afford to rent .....as well as being able to save up to buy.

Until salaries and house prices are such that first time buyers or low income earners have more disposable income or house prices drop substantially [highly unlikely] then there are going to be more and more people renting and the dream of owning their own house gets further and further into the distance.

bondipom

Around here a 450,000 to 550,000 unit will get 300 to 350 a week rent. That doesn't cover the interest on a mortgage let alone pay off any capital. The hoped for capital gains are no longer about in sydney.

First time buyers are needed to keep the chain going. Prices need to drop to affordable levels for the market to move.

Phoenixuk2oz

So the landlord would offset their loss using negative gearing.

Sydney like most capital cities world over have over priced the market. The "emotional" demand is still there i.e people would pay for the esteem value of living in the city...but the demand will probably drop as less and less are able to sustain the repayments on their current or forseeable salaries [which generally have not risen in the same proportion].

I agree whether in UK or Aus, either house prices stay as they are and people wait till earnings rise to the same proportion so they can afford to buy or house prices reduce to gain the same affordability for the buyer.

Clearly house prices cannot keep rising steeper than salaries unless mortgage companies encourage longer terms at affordable rates. Then the lender gets into debt over a longer period. Again..a bloody nightmare for prospective home owners who are trying to get onto this mad propery ladder