The odds may be against us, but buying a house is still an attainable dream

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How many times have you heard it said that if Millennials stopped buying avocado toast they’d be able to afford property?

There have been endless hot takes in the media about how Millennials need to pull their fingers out, budget in a more savvy way and then magically will then be in the position to purchase their dream homes. However, the reality is, the trajectory of the Australian property market over the last few decades has been completely unprecedented.

Sydney’s median house prices now sit 27 times higher than it did in 1976.Credit: Dionne Gain

If we take a step back in time to 1976, the median house price in Sydney was $36,800 and $32,900 in Melbourne. Today, Sydney’s median house prices now sit 27 times higher.

This would be all well and good if the average Australian wage had followed a similar growth pattern, which would see workers today bringing home $162,000 annually on average, but they’re not – the median salary in Australia last year was $65,000.

The reality of wage growth paints a vastly different picture, spotlighting the increasing gap that is the property affordability paradox. This discrepancy between property prices and wage increases didn’t occur in a vacuum. In fact, several socioeconomic shifts have been instrumental in shaping the current property market.

First among these is the increase in households where both partners are actively participating in the workforce, thereby collectively contributing to the family’s disposable income (you’d think this would be a money win, it hasn’t helped us get ahead when it comes to property). This economic dynamic, rarer in the 1970s, has not only amplified purchasing power for many families but has also inadvertently driven demand in the property sector, nudging prices upward.

Another pivotal element in this narrative is the substantial reduction in interest rates. In stark contrast to the 1976 standard variable interest rate that hovered around 9.88 per cent, contemporary interest rates have been nearly sliced in half. This fiscal environment implies that individuals today are burdened with paying significantly less interest for the same loan value compared to their counterparts from four decades ago, supposedly making property acquisition a seemingly more affordable endeavour.

A retrospective glance at the property prices in 1976 across various Australian capital cities reveals a tantalising scenario for modern investors and potential homeowners. With Sydney’s median at $36,800, Canberra’s at $35,100, Melbourne’s at $32,900, Adelaide’s at $29,800, Hobart’s at $31,575, Perth’s at $33,000, and Brisbane’s at a mere $26,275, the property landscape looked incredibly different. Interestingly, these numbers not only spotlight the relative affordability of properties at the time but also reveal that Brisbane, now a bustling metropolis, boasted the most economical property prices among the capital cities.

Entering the property market as a Millennial in Australia is clearly a challenge. With strategic planning and savvy decision-making it is not an impossible goal to achieve, though it can definitely feel that way sometimes. And we do need to acknowledge that the goal posts have changed.

If you or someone you know is about to dip their toes in the property water, start by educating yourself about the market trends, different types of available properties, and the areas where these properties are located. There is a plethora of free resources available online nowadays. Be informed about the nuances of the Australian property market and the economic factors influencing it. Engage with real estate experts and mortgage brokers long before you start bidding at auctions to make sure you’re properly equipped and ready to take the next step.

Knowledge is power, and having a solid understanding of the market and how the property buying process works will equip you with the confidence and skills necessary to make informed decisions.

It’s imperative to acknowledge that entering the property market in today’s economic climate is arguably more challenging than ever before. With property prices soaring at an unprecedented rate, contrasted against the not-so-proportionate increase in average wages, the dream of property ownership has become increasingly strenuous and stress-inducing for many.

Understanding that the property landscape has shifted tremendously over the decades, and is fraught with challenges unknown to previous generations, is key to alleviating some of the pressure that I know so many hopeful homebuyers are feeling.

“Why are you harping on about property this week Victoria?” I hear you ask over your Sunday morning coffee. Well, my friend, for two reasons. The first being, we need to cut Millennials some slack. Things are harder now, especially during a cost of living crisis (and let’s not even get started on the rental crisis, which makes things feel like an even heavier burden).

The second reason is slightly more self-serving. My book, Property with She’s on the Money, comes out on October 3 and has been written with all of the above in mind. Whether you are gingerly stepping onto the property ladder for the first time, hunting for your dream residence, or meticulously planning the acquisition of an investment property, the challenges are formidable.

With soaring property prices and oscillating interest rates acting as hurdles, the aspiration for property ownership can appear elusive. I wrote my book to change that.

Property with She’s on the Money will be available for purchase from Tuesday, October 3 from all good book retails in store and online.

Victoria Devine is an award-winning retired financial adviser, best-selling author, and host of Australia’s number one finance podcast, She’s on the Money. Victoria is also the founder and co-director of Zella Money.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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