State Of Housing Affordability in Brisbane, Sydney and Melbourne in 2018
With the recent growth in Sydney and Melbourne housing unaffordability is at an all time high. Given Brisbane is twice as affordable now as Sydney how will this affect the market going into 2018?
With the racing growth in the Sydney and Melbourne market over the last couple of years, housing affordability is becoming even more of an issue now than it has been in the past. In this episode I talk with Ben Everingham from pumped on property about the housing affordability in Sydney and Melbourne and we compare that to the housing affordability in Australia’s third largest city being Brisbane. So I apologize that in this video my Webcam was out of sync so I apologize for that. But regardless, it’s really great content and I hope that this helps me and Ben, I’m really, really excited for 2018. Um, some big things are happening in 2018. I’m way together. Want to help like over a hundred people buy properties in 2018, which will be super cool. I’m really excited for that. So I guess we’re really turning it up a notch and trying to deliver you guys more value then we have in the past though, I think we’ve done pretty well in the past,
but yeah, it was just looking the other day. I think we’ve helped over 150 people from your community buy in the last couple of years now, which has been amazing surf. We can help another hundred in the next 12 months. That’d be amazing as well.
Yeah. So we’re really excited for the new year. We hope you guys are excited as well to grow your property portfolio and move towards financial freedom and experiencing, you know, being able to do what you want with your time. So just to get us started, some stuff’s been happening in the market. Obviously stuff’s always happening in the market, but housing affordability is a big topic that a lot of people are talking about lately with Sydney and Melbourne having gone up so much and being so expensive then you know, a lot more about this than me. What’s kind of the state of housing affordability at the moment?
Um, as you know, Ryan, I really only look at the Sydney, Melbourne and Brisbane housing markets. Um, they’re the three that I spend the majority of my time and attention learning about and focusing on. So, um, I’ve got a really good email from Michael maturity seek, um, yesterday which had some really interesting data. The cool thing about Michael because he’s such an analytical guy, is that he doesn’t just trust the data that he receives from other people.
He really goes through the back end of it and sort of rips it into pieces and actually puts his own take on it. So, um, when he talked about buying affordability in Sydney, he basically looked at average property prices for houses and units and then he looked at the affordability in terms of um, basically the average household income in relation to that affordability and sewing in Sydney. It was shocking to me that the buying affordability for housing at the moment in particular was about 12 point seven times your average annual household income.
I’m just bringing this up for people so people should be able to see this on the screen now as, as we talk along with it. So where it says like buying affordability, 12 point seven, is that 12 point seven, the annual, I guess average income of Australians. Yeah. So the average household income. So that’s taking into account, you know, mum and dad saw a partners
combined income, not just a single person in the household income,
which Michael metastatic described, you know, that type of affordability is, you know, I can’t remember the terminology if it’s in front of you, Ryan, I don’t have the whole report, but it’s basically chronically unaffordable. Like it is severely severely unaffordable for people. And what it means when we are in that severely unaffordable, affordable state is that people stay in their properties longer. Paypal, renovate those properties. Um, you know, people don’t enter and exit the market as often and um, you know, new people find it very, very difficult to enter the marketplace and begin to choose to rent and invest in other marketplaces instead. So, you know, historically I’m Michael said that people sort of thought anything over five times annual salary was unaffordable. But as things have changed in the cost of living has changed and the average incomes changed. He was sorting sort of saying that something over eight times average household income is, is severely unaffordable in today’s marketplace. So you know, he was saying that Melbourne at the moment, based on his daughter, the houses was about 10 point one times annual income and then he went on to say that Brisbane at the moment we’re still unaffordable, but at six point three times the average annual income it represented, you know, he didn’t really have a thought on what it represented here.
Just let that interpretation up to the marketplace. It’s crazy to see the difference between Sydney and Brisbane. Sydney being like double Brisbane in terms of like unaffordability basically I’m just going to shut my door because that’s some works outside.
I’ll be back in one second. Has Funding or that cmos?
Yeah, sorry. They’re building a pool like right next to my office. So, um, but yeah, I was just saying it was just crazy that Brisbane is twice as affordable as Sydney, like six point three times the average income instead of 12 point seven versus Sydney.
And what was also interesting is he looked at not just buying affordability for people that want to own in the marketplace in Sydney, Melbourne and Brisbane, but also rental affordability. And historically we’ve always had this thing as someone that owns a property management business myself. Um, you know, we always look for at least 30 percent of the income to be able to be dedicated to the rental return like that is, that’s been the historical average. But in Sydney at the moment, you know, the average household is requiring at least 36 percent of their income for houses and 29 percent of their income for apartments to actually service the service. The rental thing. And what was really interesting for me from Brisbane’s perspective is that I’m only 21 percent of the income was required for houses and 23 percent of the income was required for apartments.
So again, that also suggests to me that Brisbane rental yields at the moment is sitting too low in comparison to historical averages, which should sit around about that 30 percent mark and probably have, you know, an uplift of somewhere around about 30 percent before they, you know, re align to those historical averages. So Brisbane is an affordable city to not just buy in, but also renting. And I sent Ryan another piece of data I spent yesterday reading a 90 page document by the Real Estate Institute of Queensland on Brisbane Sunshine Coast Gold Coast. And what it looked at was, um, in relation to Sydney’s premium to Brisbane dwelling values. And what that really means simplified is I’m basically the Sydney has always been more expensive than Brisbane. Um, and, and year on year there’s a percentage difference. So the story actually that percentage difference, um, or the average prices that Sydney is more expensive than Brisbane is been 54 percent, but at the moment it’s 84 percent more expensive than Brisbane houses. So this data goes back to 1987. So that’s a 30, 30 years worth of data. And historically, um, you know, it swings in waves based on the property cycle, but Brisbane is probably, you know, based on that data, 30 percent more affordable than it has been historically in the last 30 years in relation to Sydney property prices. Ryan, you might be able to explain that better, man. I’m on board with this stuff.
Well, just think it’s really interesting. A lot of people probably don’t realize like if you’re living in Sydney and Melbourne than you’ve kind of experience how much the property, like prices have grown in the last couple of years and how hard it has been in those markets and you might just assume that that is happening all over Australia that if you’re in Sydney and stuff scuffing up by massive amounts every single year that that’s happening all over but does not actually the case like Sydney and Melbourne had huge, huge growth. Whereas other capital cities including Brisbane haven’t had as much growth as Sydney and Melbourne. So I think what you’re trying to say Ben, is that in the past Brisbane’s always been more affordable but it’s kind of like stayed at a similar affordability level compared to Sydney in terms of like being cheaper than Sydney. But recently Sydney and Melbourne have just shot up. Whereas Brisbane hasn’t showed up so much. So now Sydney is just that much more unaffordable than Brisbane. Not just a little bit more unaffordable. And so that could obviously have some repercussions in 2018 and in the future, you know, because as people can’t afford Sydney, if they can’t afford Melbourne, like where are they going to look next? And Brisbane being the third biggest city I’m sure will attract some people.
Yeah. And I think I saw an article from Macquarie Bank, I’m basically their data analytics team, put out a report very recently around, you know, what type of effect these, you know, buying affordability and rental affordability is going to having the Brisbane market and they’re suggesting that 140,000 people will move out of Sydney and Melbourne selling out of their houses and buying into southeast Queensland in the next two and a half years. Um, for some reason the Australian government has massively turned up immigration in the last 12 months. It’s up over 50 percent on what it was in 2016 already. So I think that had probably something to do with a fear around a property bubble. And you know, the way to reverse that is to create more demand in the marketplace so that prices stay level. Um, and so, you know, you’ve got, um, over 14,000 people moving into Brisbane per quarter, we took international’s, um, which are basically people on new faces moving into the country for the first time and that’s the first time we’ve seen that type of immigration coming into Brisbane, you know, historically it’s always been very Sydney and Melbourne, focused in the majority of the people.
Maybe he asks, are moving there, but that’s a significant spike and then you’ve also got a thousand people moving into Brisbane per week at the moment. So again, I don’t know what any of these things mean, but more demand and more pressure as well as more cashed up buyers in the marketplace because to get these phases you do need to have cash. Most of the new people moving, you’re not refugees. They’re actually people that have bought their way into Australia. And I think the long term affordability of Brisbane, um, means one of two things, either Sydney, Melbourne to completely overcooked and don’t represent any value at the moment or Brisbane is significantly undervalued right now.
Yeah. So it’s exciting to be. I’m excited to be in the southeast Queensland market going into 2018 because like Sydney, Sydney is so kind of up in the air in terms of how much growth that they’ve had in the past, whereas Brisbane hasn’t quite kept up with Sydney, but it’s still, you know, a really big city and so it’ll be exciting to see what happens in Brisbane in 2018. So I hope you enjoyed this episode on housing affordability. The fact that Brisbane is so much more affordable than Sydney, like twice as affordable was absolutely shocking to me. How this is going to affect the market will play out in 2018, 2019, etc. So it’d be really interesting to watch this and to see how this affects each different city and the growth in those cities. We did talk at the Start of this video how we want to help 100 people this year invest in property.
One of the things that I’ve seen over the last 10 years or so of running on property is that so many people actually never take action and never buy that first property. And so we really want to help you take action this year, so if you’re at the point where you’ve saved a deposit but you need help with the next step, so you need help with your strategy, you need help finding the right areas and stuff like that. Then we want to help you take action and buy that next property. So what we’re doing is we’re offering listeners to on-property afraid strategy session with ben’s team, so head over to on-property dot, you forward slash session and you can book a time over there. It’s about half an hour or an hour where you can actually say, okay, here’s my situation. And they can help give you clarification as to what your strategy could be and what your next steps could be as well. So again, get on property.com.edu forward slash session to check that out. And until next time, stay positive.