The growing gap between the money needed to buy a home and household incomes, especially in younger demographics, has led many commentators to declare the dream of homeownership over. The rate of homeownership among Aussies aged 25-34 plummeted between 1982 and 2011 to just 34%. House prices have been outstripping growth in wages so, in this article, we’re investigating the concept of building an affordable home in Sydney.
Runaway Housing Costs
McCrindle Research estimates that the average annual income for Australians had increased about tenfold from 1975 to 2015. Sounds like good news, doesn’t it? Until you realise that during the same period, house prices increased more than thirtyfold! Negative gearing and the capital gains tax have served to compound this situation, driving up house prices and the cost of rent.
By favouring buyers who are on their second or third investment property, these measures have locked first home buyers out of the market. In Australia, investment properties now outnumber traditional, owner-occupier homes. Combine those soaring prices with widespread under-employment of millennials and you have a fairly grim outlook for the future of home ownership.
Affordable Housing to the Rescue
The creation of more affordable housing is one way people are dealing with this situation. Affordable housing is not a social initiative; it simply creates high-quality homes in areas people actually want to live, the cost of which can be shouldered by a low-to-middle income household without leaving them impoverished.
What Counts as Affordable Housing?
The parameters of affordable housing naturally shift from place to place, depending on the incomes of those living there. Generally, properties that cost $600,000 or less are considered to be within the means of most first time home buyers. That makes sense, especially if the home buyers are coupled. You need $30,000 for a deposit on a $600k home – two people netting $55k p.a. could afford that in less than two years by saving 15% of every paycheque.
Finding Affordable Housing
The traditional way of finding affordable properties was to look just a little further afield. The cost of housing reflects demand and demand tends to cluster around certain areas. Generally, the more central a suburb, the higher demand will be and that will push the prices way up.
However, in Sydney and other Australian cities, looking further afield is becoming more difficult. As recently as 2013, houses at or below the $600k mark could be found in more than 200 Sydney suburbs. By May of 2017, that number had dropped to just 37 suburbs, all of them more than 35 kilometres from the CBD. For people whose lives are based closer to the city, that is a pretty major disruption; hence a lot of people are opting to build their first home rather than simply buying.
Building for Affordability
Purchasing land and building a home is another way to make the process more affordable. While the price of land has also risen, greenfield land can still be purchased for less than $300,000. With New Living Home’s first home buyer’s special you could have a brand new, 3 bedroom house built on that land for $234,000, meaning you’d be getting your home for well under $600,000.
If you have any further enquiries or would like to see the options available to you, contact New Living Homes today on 1300 366 766 or simply visit us online!