You’d have to be living under a rock to not know that house prices in our cities are verging on the outrageous. Sydney and Melbourne often top the tables as some of the most expensive cities in the world and that’s partially down to house prices. When it comes to forking money over to a landlord, Darwin gets the crown for the most expensive city to rent in Australia.
There are some who say rising house prices are a good thing. Our own Prime Minister, Mr Abbott declared last week, “If housing prices go up, sure that makes it harder to get into the market, but it also means that everyone who is in the market has a more valuable asset.”
For economists too, rising house prices mean an increase in consumer confidence and hopefully an increase in consumer spending – which is good for the economy.
But what about those who aren’t already on the property ladder? What about those who are stuck paying the high rents that are paying off someone else’s mortgage?
It’s not just young people who, having finished their studies, face either the prospect of huge rents, living in cramped sharehouses or moving back in with their parents. For young families, too, renting may be the only realistic option. These are the alternatives they must accept to owning a home.
Earlier this year research released by Australians for Affordable Housing showed that more families with children were in rental accommodation in 2011 than in the five years prior.This trend seems to be growing, with some families actually having to choose between buying a house or having children.
For the last 100 years families could afford to buy a house on one income. Now a house costs more than nine times the median household income. Now, more than ever, house prices are becoming less affordable on the average income. This, coupled with the high deposits needed to secure a property for sale, means many are being priced out from the beginning.
Does this mean that many Aussies - young and old, families and singles - are forever stuck being part of Generation Rent?
In places like London, Generation Rent is a oft-used phrase. many there openly accept they will never be able to buy property. All the while expensive areas like Mayfair and Belgravia are little more than ghost towns because wealthy foreign investors have bought up great swathes of property and are leaving these places empty, as it’s less hassle than renting it out to someone.
Foreign investors are currently investing in property in Australia’s urban centres at a record rate. Before 2009 developers could only sell-off 50% of their developments to non-residents – now the figure is 100% - which is leading some developments to solely be marketed to foreign nationals. This year alone Chinese investors purchased $600 million worth of development sites in Sydney . And that number is only going to keep going up.
Rather than place restrictions on such investment the Abbott government is under pressure to stick to its pre-election promise of bringing in more foreign investment, especially in property . So while foreign property investment is set to continue what other options are there?
Unlike the UK, we here in Australia have the benefit of having a lot of land to work with. Regenerating interest in our rural centres with job creation and better facilities has been on the agenda of many a ruling government both past and present. But until some concrete steps are taken to improve the situation in these areas, thereby making it an attractive option for those looking to buy property, people are going to continue to stick to living in our urban centres.
Most people aspire to own the home in which they live. Until recently this was an achievable dream, but for many starting out today it suddenly seems like a distant one. Unless things change and our government take seriously the idea that many find it hard to afford a house, it looks like Generation Rent is set to become a permanent feature in our society.
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