If the price of housing is currently outpacing your ability to increase the total of your savings account, you have only one group to blame: Students.
That’s the opinion of Luci Ellis, head of the financial stability department at the Reserve Bank of Australia. Speaking at an urban planning seminar held at Sydney University on November 3, Ms Ellis opined on the recent focus on medium- and high-density housing in the Harbour City.
“[W]here do students want to live? And where are former students like recent graduates likely to want to live? Well, it’s not big family homes on the fringe, it’s apartments in the inner areas near the universities,” she told the audience.
University education is one of Australia’s biggest exports, she explained, but has the net effect of bringing more foreign students into the country, who want housing close to their place of study. Population growth is thus concentrated in students and graduates, who tended to get permanent residency once they have finished studying. A walk around Sydney would show you evidence, in the way of construction of inner city apartments, she said.
This has the consequent effect of making the premium involved in being closer in to city centres even higher, she explained, making it difficult for the average buyer to afford a home.
House prices continue to grow
Prices for capital city properties have certainly grown dramatically over the last year, as the recently released RP Data CoreLogic October Hedonic Home Value Index results show. Although price growth has begun to bottom out, growing by only one percent across the capitals during October, the rising values have nonetheless continued to impact on the affordability of home loans.
The median price for all dwellings in the capitals has grown by 8.9 percent year on year, with many of these gains being concentrated in Melbourne and Sydney — the latter the location of Ms Ellis’ speech.
Sydney has seen a 13.1 percent year-on-year growth of its median home price, the highest in the country, while Melbourne sits a place behind with 8.9 percent. Their median prices are currently $680,000 and $555,000, respectively.
Units, specifically, have seen substantial growth over the last year, with their prices shooting up by 7.3 percent for the combined capitals.
Don’t lose faith in the property sector, says Ellis
Despite the seeming negativity involved in this news, Ms Ellis had tempering words for her audience about the state of the Australian property market.
“[T]his is not a country where we haven’t experienced house price falls,” she said. Ms Ellis pointed out that house prices had dropped in three recent periods: In 2004, in 2009 just after the global financial crisis and around 2011.
In fact, the Australian housing industry was still trying to keep up with demand, rather than creating a state of oversupply. So despite the continued influx of students, Australian home buyers needn’t lose hope in housing affordability in the future.