Prominent baby boomers who achieved great success in business have acknowledged that it was easier for them to purchase a house than it is for younger generations today.
The Reserve Bank recently increased interest rates for the tenth consecutive month, prompting many older Australians to remember their struggles when rates reached 18% in 1989.
Recent interviews with Daily Mail Australia with both Aussie Home Loans founder John Symond and AMP Capital chief economist Shane Oliver showed that it was ‘easier’ for them to buy a home when they were younger.
The data supports this claim, as house prices were significantly cheaper in comparison to incomes 34 years ago than they are in 2023, despite the current low cash rate of 3.6%.
The article provides examples of house prices in Sydney, comparing 1989 to 2023. The median price of a Sydney house today is $1,217,308, costing 10.4 times the average full-time salary of $94,000 for a buyer with a 20% deposit.
In 1989, the equivalent home in Australia’s most expensive capital city was priced at $170,850, just five times the average $26,874 salary after the mortgage deposit.
John Symond, who now lives in Sydney’s eastern suburbs, said that real estate remained affordable in the late 1980s for the average earner, despite the share market flatlining after the 1987 stock market crash.
Professor Allan Fels, a former head of the Australian Competition and Consumer Commission, is concerned about the declining home ownership rates among young people.
He believes that baby boomers had it a lot easier than the younger generation, who face a future of much less home ownership and associated mental health stability.
The trend of rising prices adds to the stress because many used to think that they could buy their own house, but they keep missing out because prices continually rise beyond their reach.
AMP Capital chief economist Shane Oliver explained that interest rates in 2023 didn’t need to rise to the very high levels of the late 1980s because houses compared with incomes are now so much higher.
However, Australia’s household debt as a share of income is now 188 per cent, compared to 68 per cent in the late 1980s, which is one of the highest levels in the world.
The Reserve Bank recently raised the cash rate for the tenth straight month to an 11-year high of 3.6 per cent, with a 32-year high inflation rate of 7.8 per cent well above the central bank’s 2 to 3 per cent target.
The article includes interviews with young people who have given up hope of owning a Sydney home due to the high cost of living, even with high salaries.
Homeownership rates among the young have plunged in recent decades as property value increases vastly outpace wage growth. In 1981, 61.1% of Australians aged 25 to 34 owned their own home with a mortgage, but four decades later, in 2021, the rate of home ownership for those aged 25 to 39 had plunged to 43.1%, even accounting for those in their late thirties.
Median house prices in Sydney and Melbourne are still beyond the reach of an average income earner, even with falling prices.
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