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Property price? Higher by 6 figures in this country.

Property price? Higher by 6 figures in this country. That’s just within one year. If you have a property in Australia, this is an extremely good news. If you do not own a property in Australia like me, then we can just read the news and get to know about it.

First property just got harder

If you are an Australian who’s working very hard to buy that first property, then it just got harder. Covid-19 has not really pushed down property prices. Let’s look at some latest detail in a country where Covid-19 is considered to be generally under control.

Article in www.abc.net.au In context, Australian property values are 18.4 percent higher currently versus this time last year. It also meant that this is the fastest annual rate of growth in 32 years (since July 1989 to be exact)

“The annual growth rate at the moment is trending higher — in fact, it is 3.6 times higher than the 30-year average rate of annual growth.”

In dollar terms, Australia’s median property price has risen by around $103,400 (RM315,820) in the past year (which equates to about $1,990 (RM6,078) per week).

In comparison, Australian wages are growing at a much slower pace (about 1.7 per cent annually), underscoring the worsening affordability issues.

Image source: https://www.abc.net.au/news/2021-09-01/property-housing-corelogic-house-prices-rise/100423896

Salary must catch up, else property market price is not sustainable

If we have to spend ever bigger portion of our salary just to pay for a home, this meant that the financial pressure will get ever higher. The reason is a simple one, when we have to spend more for a home, we have lesser to spend on other things. Our quality of life will then start to deteriorate. We may have to eat lower quality food for example. That’s not such a good thing on a longer term.

If we have to spend a very high portion of our salary on a home and some unforeseen expenses come in, we will suddenly be short of cash and we may incur additional debts for this unforeseen expenses and our financial healthy has just gotten worse. These are two examples why property prices which is rising much faster than salary growth is unlikely to be sustainable.

Average salary of professionals in Sydney?

As per payscale.com, it’s an average of AUD76,000 (RM232,000) per year. Monthly wise, it’s AUD6,333 (RM19,343). Do take a look at the median home price in the chart below to have an idea about whether it’s getting easier or harder to buy a property if the property price continues to rise at the same rate as the past 12 months.

Stay focused on earning higher and spending lower for housing

What we can do is to keep earning higher through growing up in career or even have another income stream. What we can do to keep spending lower for housing is to buy smaller units to manage the home price or buy further and just manage the travel time. Over time, home prices only need to rise following inflation and this home will help us hedge against inflation.

Waiting may not be the best option when we look at all the advanced property markets in the world today. Oh yeah, for those pointing out that perhaps a financial crisis may happen and property prices will all be dropping, you are right as well. In fact in all past financial crisis, home prices usually drop too, in-tandem with all other investments.

Just need to remember that during a financial crisis, it may be quite scary to buy a property. We may fear uncertainty with our job security during that time. Secondly, financial crisis, whether 1998, 2008 or even the next one will usually recover. When they recover, prices do rise again. Happy deciding. Any investment is okay, does not need to be into property.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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