Young Sydneysiders Priced Out of a Home

October 1st, 2014

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High property prices in Sydney have locked young people out of the housing market, according to Eamon Waterford, director of Youth Action, in The Sydney Morning Herald.

While a few can borrow a couple hundred thousand dollars from their parents, most can’t even save for a deposit. Young people are also paying a higher percentage of their weekly income in rent, and “it now takes more than nine times the average salary to buy a house in Sydney”, Waterford adds.

There are affordable homes outside the city, but if the young people who are expected to keep the economy running in the future can’t even afford to buy a home with 50km of the CBD, this will pose serious long-term problems for the rest of society as well.

Quality jobs are often found in the city, and Sydney’s young people spend an average of 20 hours a week travelling to work from their apartment/home outside the city. Waterford believes that if they could live in the city, they can spend these 20 hours “networking and exchanging ideas – the things that create innovation and growth in 21st century cities”.

Moreover, there are other young people who help make the city work but can’t live near where their services are required, e.g. hospitality workers, nurses, teachers, firefighters, cleaners and drivers.

The younger generation is also competing with the older generation who see housing as an investment rather than a place to live. “We are creating a city for millionaires” who are planning to retire or are already retired, said Waterford, thus creating a great divide between the older and younger generations.

The governor of the Reserve Bank of Australia, Glenn Stevens, warned older investors that if they continue to invest in the property market, it may cause a sudden massive rise in house prices that could threaten Sydney’s economy if interest rates increase, and he’s right. However, high house prices are also affecting young people by pricing them out of the property market, Waterford says.

He argues that Sydney needs diversity to function properly. People need to recognise that high property prices are not only hurting young people, but also Sydney’s future prosperity. Stevens can try talking down house prices, but Waterford says that what Sydney really needs is more housing options, such as:

  • Low-income housing
  • Services for the homeless
  • Dense, apartment-style living in the city.

Furthermore, the population of Sydney has grown by 1% each year since 2002, but housing delivery has halved, which is unsustainable, said Waterford. To solve this issue, existing property owners should support change. Although creating more affordable properties may reduce their investment options, if they want their house to increase in value over time, it should grow in a more sustainable way. If not, the boom in house prices will be just a bubble that will pop when the economy can no longer sustain it.

Therefore, to keep property prices strong in the long term and prevent a housing-bubble bust, old people need to stop borrowing and re-mortgaging, and young people must be given the opportunity to afford to live in or close to the city centre, Waterford says. This will also help create a sustainable economy that can be maintained for years to come.