House Prices In Perth & Sydney Hit All Time High!

Sydney, Brisbane, Adelaide, and Perth have all just hit an all-time high with their house prices. 

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Affordability right now is probably at its worst in decades. So let's make sense of what's happening and why so many people are out there stressed and anxious, while at the same time calling for a drop in prices, yet we're seeing most of the market continue further. 

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Now, before we jump into finding out what's happening in the market right now, if you’re sitting on the fence wondering if it’s too late to make a move, if this is the right time to buy, I urge you to start talking to the right people. 

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If you need help chatting with people in the space, then definitely reach out to us. 

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All you have to do is visit our website and book a FREE discovery call and chat with our consulting team, who can guide you on where you’re at and where you want to be—a lot easier than sitting there confused while the market moves at its current pace. 

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You need to be moving with speed.

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Cost of Living Hampers First-Home Buyers

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Stressed, overwhelmed, and anxious: the cost of living crisis hampers first-home buyer plans. 

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According to new research, nearly two-thirds of aspiring first-home buyers are feeling pessimistic about the current property market, with 56% indicating that the cost of living crisis is impacting their plans to purchase a home.

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In a report written by Karen Dellow, a Senior Data Analyst, it was revealed that: 

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Now, I'm going to pause here because it says 20% of first-home buyers believe it’s a good time to buy property, and this is the issue: we get into this analysis-paralysis mode. 

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We’ve never purchased anything, we’re so attached to our money, and we don’t want to make the wrong move—yet we also may not want to pay for the advice to make the right move. 

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What ends up happening? 

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You say: Okay, I don’t want to pay, say, a buyer's agent or someone who’s an investment strategist. 

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Instead, you decide: I'm going to wait because I don’t know if this is the right time to buy. 

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Now, 20% of first-time buyers think it’s a good time to buy, meaning 80% of people—80% who have never bought property—think it’s a bad time to buy. 

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This is the reason why they’re kept out of the market time and time again. 

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I’m not saying it’s necessarily the best time to buy now or that it’ll be better in two or four years, but I know that even for my first property purchase, I didn’t know what was going on. 

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I didn’t know there were going to be multiple geopolitical issues, that we’d see some sort of collapse, or that the Australian Prudential Regulation Authority would come in and overhaul the banking system. I had just learned about what happened in the The Global Financial Crisis and the housing bubble.

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Knowing all of this, I knew one thing for sure: I needed to be in the market because time in the market is going to be better for me than sitting on the sidelines, hoping the market comes down. 

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Nobody actually knows whether the market’s going to go up or down, but just keep this in mind—that 80% of people who have never bought property think it’s a bad time to buy—as we go through this article.

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Now, the top reasons for first-time buyers to delay purchasing a property are as follows: 

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There’s an upcoming election, but that’s not for a while, so that shouldn’t really be a factor in your decision right now.

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Now, if you are thinking about the US market and the fact that there is an election happening very soon—depending on when you're watching this, it may have already happened—you might expect some volatility. 

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However, let’s be real, whoever wins tends to end up doing nothing anyway. They have a bunch of promises they never deliver on, and four years later, you’re back to square one, choosing the next person. That’s my take on politics. 

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Now, this might sound pessimistic, but just as most people are pessimistic about the property market, I'm pessimistic about the leaders who run the country. 

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The same report also revealed that: 

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I remember a couple of years ago when 30% was the rule: if people were spending 30% or more, they were considered to be in a stressful financial position. 

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Spending more than 30% on rent or mortgage repayments was a bad sign. 

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Now, it seems almost impossible to stay under 30%. So, if you’re one of the lucky few with rent or repayments under 30% of your income, well done. 

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To calculate this, you’d look at your overall income after taxes and see how much goes toward rent. 

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For instance, if you’re making $100,000 after expenses and your annual rent is $25,000, then 25% of your income goes toward rent, putting you in a strong position. 

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Right now, though, we’re seeing cases where 40%, 50%, and sometimes even over 80% of people’s income goes toward housing needs.

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Affordability is a Concern

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Now, this ties in well with how affordability is a concern. 

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According to the recent PropTrack Housing Affordability Report:

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This effectively means the median house price across Australia has increased by about $4,000 every single month—almost $1,000 per week. 

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We see online, for example, that Sydney has gone up from $1.5 million to $1.6 million or, take Perth—it has gone from $500,000 to $650,000. 

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You think: okay, the market’s getting more expensive.

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However, if you’re sitting on the sidelines thinking: I’m not going to enter because it might not be a great time, consider calculating your hourly or daily rate from your income and then comparing it to being in assets. You might be really surprised.

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Now, you may not want to do this because it is very scary. I know that I’ve done this with a couple of people, and they were shocked when they found out how much they were losing by not being in the market. 

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I know some might say: Well, property is not everything, and I agree. 

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However,  investing *is* everything, and I stand by that. 

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If you’re only saving, you’re essentially holding onto a currency that’s lost more than 90% of its value over the last 100 years. 

You can’t just save your money; you need to be investing it. You need to have that growth mindset, thinking about how you can grow your nest egg and continue adding to it. At some point, you’ll be able to reap the rewards of that machine later on.

Now, this is the PropTrack Housing Affordability Index:

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What we can see is that we started seeing a decline in affordability all the way back in the 1990s. There was a sharp drop-off up until the GFC, and from there, affordability has pretty much decreased consistently. We are now at a point where it’s the lowest on record.

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In addition, this table here might be surprising as it shows the affordable share of homes for median-income households:

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The average across Australia is about 14%, with New South Wales being one of the lowest along with Tasmania at 10% and 9%, respectively. 

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However, there’s the big question around whether you should buy in Perth or not, because they have the largest portion of affordable homes relative to their median income. 

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You might be wondering: Is it a good time to buy in Perth?

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Some people think it’s going to collapse, while others believe it’s going to continue going higher.

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Here’s another table that really makes me question how things are perceived: 

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It suggests that it takes 5.6 years to buy a home in Australia based on a 20% deposit for the median-priced home. 

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Here’s the issue—unlike 100 years ago, when you could only purchase with a certain deposit, now you can get in with much less than a 20% deposit. 

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If you save for a 10% deposit, it would mean only about 3 or 4 years to get there. This is why headlines that claim it will take 15 years to buy a property are just misleading.

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If you’re interested in investing and having your money work for you, it might make more sense to build a portfolio and, at some point, use that growth to buy your dream home. This approach could take you less than 12 months, depending on where you start, to get into the property market. 

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For example:

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If you’re in Sydney and looking at median house prices around $1.6 million, you might feel it’s unaffordable. 

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However, if you can afford something at $500,000 to $600,000, you could look into other states. 

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That's why I provide that service through Search Property, a buyer agency, because that's exactly what we specialise in. 

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You wouldn't just go out there and say: Okay, I'm going to learn something completely new, and spend the next six months as the market continues higher, and all that money you’ve lost is time in the market. 

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Treat this like a business just like you might pay for Xero to manage your accounting needs, or you pay for a domain on GoDaddy, Crazy Domains, or Squarespace, you almost need to 

pay to play at the speed required to keep up.

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I understand that this is a very difficult time, with so many conflicting arguments around whether to buy or not. 

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If you look back at the long-term averages of all assets, they pretty much go up because the currency they’re denominated in always goes down. 

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Therefore, the following are the things you need to consider:

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Even if you’re just focused on shares, not every share will go up by 100%; some may actually go down to zero. So, you want to be very careful with your research process.

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Just keep in mind the importance of speed, because if you're ready and you want to go, you need speed on your side. Another six months out of the market is costing you money, and there’s no guarantee that in six months it’s going to be a better time to buy anyway.

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I hope you guys have enjoyed this article. I’ll catch you in the next one.

Thanks, guys!