When property prices continues to rise without any relevance to the economic growth, salary growth or whatever growth, you should be worried. Property bubble is building. Once property becomes unaffordable to everyone and no one could buy anything and suddenly the sellers realised it and starts to offload their properties into the market with each trying to outdo the other, the bubble has burst. How do you know whether the property is affordable or not affordable then? Well, a median income to median housing price would be a good indicator. Remember a report which was on front page of many medias in Malaysia recently? Here: Demographia said Malaysia is grossly unaffordable? When median property prices are over 5.1 times compared to median annual income, it’s grossly unaffordable. Okay, what happens when it is grossly unaffordable? Well, most of the time, the bubble bursts and house prices come tumbling down. Okay, what happens when it is twice that 5.1 times mentioned by Demographia? Well, nothing happens since it’s Melbourne Australia. In Melbourne, the median annual income is AUD$57,400 while the median property price is AUD$680,000. This is 11.8 times.
Well, no one knows what would happen now but today, less than 1.3 million Australians actually own an investment property. This is 6% of the total population. It meant that potentially, these are the people who is driving prices up? Of course, not just them, perhaps also the Asian buyers from outside Australia too as Australian property market is already considered an international one. Besides that, ANZ Bank executive Phil Chronican warned that currently, most people ‘would be better off in assets other than housing’. ‘Executive’ here meant Senior Management and ‘better off in assets other than housing’ meant that if you are investing, you better not buy property. Buy other things instead. In fact he said that these property investments were driving property prices to unaffordable levels. If Demographia’s study is to be believed totally, then he is not just right. He is VERY RIGHT. Fortunately, the property prices in Australia has not been rising like previous years. The article in Daily Mail further stated that house prices increased just 1 percent over October when all major cities are combined and an average is taken.
Many of my Malaysian friends studied in Australia and many of them are now staying there. Many have gotten PRs too. Many of them are not staying in the city centre but more on the suburbs. I think you can see the reason why. Also, with such high prices, after paying for one property, there’s hardly anything left for savings so not many would ever be able to join the top 6% Australians who have investment properties. As for Malaysians who have made it big and intends to invest overseas, always read more. Be reminded that as much as property prices in Malaysia are considered way too high, especially the hotspots, the Australian properties are also considered risky in my personal opinion. When economic in China slows, the appetite to invest overseas typically lessen. When property prices in Singapore slows and starts decreasing, the Singaporeans would invest within before external. As for Australians themselves, just google for ‘Australian property market’. Read the articles and decide for yourselves what is happening today.
written on 6 Oct 2014
Next suggested article: 53% of Gen-Y owns a property……. in Australia.