Is the Australian dream of homeownership gone for first time home buyers on low to mid incomes?

Buying a home for low to mid income earners is fast becoming an un-affordable dream

Higher interest rates, over the top land prices and tougher credit rules conspire against first home buyers trying to break into the property market.

Renting a home is cheaper, not rents are raising too

A recent survey examinds the cost of owning or renting a house or unit for six household “types”, comprising different family and wage structures, in 16 metropolitan locations across the country. It shows owning a median-price home in almost any location in Australia requires a combined household income of a minimum of $100,000, while the average annual wage for workers is $55,000 a year.

Since that finding things have gotten worse, and land prices are to blame.

According to the report, not one of the 16 locations studied offered a median-priced home that was affordable on that level of income. In calculating affordability, the report used two different measures – that no more than 30 per cent of household incomes should go on housing costs, and a property should cost no more than three to four times the median household income.

If  workers necessary for society and the economy to function are being denied basic necessities of life, we have to rearrange our values. Either land prices must half or wages must double. Its a simple equation.

So who’s to blame?

1. Constant pressure to lower wages. They are too low.
2. Constant land rise hikes for no apparent reason. Land is too expensive.
3. Governments at every level wanting a share of the land price, they say for infrastructure that is never built.
4. Utilities are sold to profit centres who then charge twice for the needed infrastructure, or just bill higher to make instant profits.
5. Taxes on new homes rising 400 per cent over the last seven years.

Federal, State and local governments have added over $100,000 to the price of a new home in the form of unsubstantiated home buyer infrastructure levies. Land is priced at $100,000 over what it ought to cost.

Governments, Banks, and mortgage brokers and land developers have all got a vested interest ing keeping the gravy train rolling, but the poor first home buyer that has to pay the freight. This has to stop. Government Big Picture Flawed The State Governments has added to the problem by deliberately refusing to release sufficient land for development, hoping that people would live in shoe box high density units, so they would have to invest in infrastructure. As it is they charge for the infrastructure and then get Utilities to charge higher prices for utilities to pay for that infrastructure twice.

About: Rick Adlam: Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers. Website: http://www.mrmortgage.com.au