Australian Property Market at Boiling Point - McCarthy Group

With only 11% of Sydney’s properties affordable to people earning an average wage, it’s no wonder that the high cost of land and property in Australia’s capital cities has drawn increasing amounts of criticism and attention.

Industry experts suggest the key to more affordable properties lies squarely in government hands.

For example, a recent RP Data study found that 62% of suburbs within Sydney’s CBD had a median price of over $1 million, with many properties being small and in need of a lot of work. “Governments have just allowed this to happen because of inaction and negligence,” says Aussie Home Loans founder John Symonds.

Part of the problem is the cost of connecting utilities to new blocks of land. This cost is borne by developers, and passed on to home buyers, forcing prices up by as much as $100,000.

In the view of some industry experts, governments could ensure that more land is released by:

> Cutting bureaucracy
> Ensuring local councils are more efficient in releasing land, and
> Making sure infrastructure is in place to serve residential areas

Three key trends have emerged that have caused the cost per square metre of new blocks of land to virtually triple in the past ten years. The trends are:

> The median lot size is falling
> The number of lots being produced is also falling
> The median lot price is rising.

In Melbourne, for example, the price of land in 2000 was $100 per square metre. By 2009 it had increased to $313 per square metre, with this tripling in cost in under a decade driving the cost of new properties further and further out of reach of first time buyers in particular.

Other factors noted in our consumer guide about why land prices have become so expensive include:

> The lack of a national housing plan
> Long delays in planning and rezoning processes
> Environmental compliance requirements
> Soaring infrastructure charges
> Lack of co-ordination
> High price expectations of sellers of raw land
> High and rising property prices are actually welcomed by many
> Banks are withholding finance from developers

Despite the clear causes of high land prices, and the need for change, we don’t expect to see anything happen that will reverse these trends.

The bottom line is that if you own property, the increase in its underlying value puts you in an ideal position to buy more. You can simply access the growth in your equity and use it as the deposit to buy an investment property (or two).

If you want to learn more about the property market in Sydney be sure to click here.

Kind regards,

Stephen McCarthy
CEO McCarthy Group

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