What’s driving the boom in Australian property prices? | Four Corners

What’s driving the boom in Australian property prices? | Four Corners

the great australian dream has been about home ownership it's now become a lot of people's nightmare the last zoom auction we were on we had 28 people registered to bid and it went nearly a million dollars over the guide at the start of the covert outbreak economists warned house prices could fall by 10 to 30 percent i think that buyers have seized on the opportunity in lockdown to pounce and to purchase right now twice now we thought it would stop for a pandemic but it hasn't we are selling and i think it's gone against all of the experts and predictors out there it just keeps going what was asking the president office over okay properties in tasmania are literally selling within around about 48 hours i'd say that for every property that we sell we could probably sell it 10 times over this year house prices have risen at the highest rate in at least three decades when you have a rapid rise in house prices it widens the gap between those who have property and those who don't have property sometimes people go through and they actually say like oh this is gonna be my fault investment property and it's it's hard it's pretty gut-wrenching nine trillion dollars is now sunk into australian homes three times the entire pool of money and superannuation housing has become the great divide between the young and the old the well-off and the less so for my generation it means a lot less home ownership i feel it's very unfair i'm surprised there isn't more anger among younger people about the way in which the housing market has been rigged against them and their life chances by their parents generation the situation's left me feeling completely defeated i did everything right i did everything that every politician has ever told us to do and it goes we sell we sell welcome home we are soldier 100.

[Applause] tonight on four corners the extraordinary cost of home ownership in australia we take the pulse of prices and hear from people frozen out of the market as we investigate what's causing the housing affordability crisis [Music] [Music] hey good afternoon how you going [Music] i'm good i'm good thanks for taking the time to booking the inspection i'll uh give you a little bit of it welcome to real estate covered lockdown style so this is sevenulabar avenue in elwood it's a three-bedroom double-fronted bungalow it was built in the 1940s it's in a nice little cul-de-sac street agent adrian cervalis is showing a prospective buyer through this bungalow at earlwood about 15 kilometers from the cbd in sydney's inner south west there's a shortage of stock at the moment so buyers are forced to compete a little bit harder due to less opportunity the average number of bidders at our auctions has increased from five to ten since going into lockdown and the number of properties that we're carrying on the market is about 50 percent [Music] earlwood is classic middle class suburbia for decades seen as the domain of your average family earlwood is a nice middle-class electorate not quite the bluest of the blue but nonetheless held comfortably by the liberals for the last 28 years it's the suburb where former prime minister john howard grew up now if you own a house here outright at least on paper you're almost certainly a millionaire [Music] across earlwood a typical house value has gone up about 66 since mid-2019 so you're talking about a median house value that's gone from about 1.1 million to 1.8 million [Music] thank you so much for joining evening they're us tonight is the personification of the australian dream isn't it it's a home that retains charm and character of its era it's soaring ceilings on auction day the agents are working prospective buyers and bidding for one on the phone one three five clarence okay let's start it away there at a million three hundred and fifty thousand dollars [Music] bidding climbs to 1.5 million more than double what it sold for 10 years ago but it's not enough we understand big decisions for our vendors big decisions for our buyers surely you don't let it go for that chips are down ownership beckons clarence we're selling there you go the magic words once twice third last chance is there any better bid we let it go we sell it through at uh one million seven hundred ten thousand dollars it is sold congratulations well bought uh bitter number six adrian will be on the phone do you very sure go back a year would you have imagined that a bungalow like this in this suburb would be selling for more than 1.7 million no definitely not if rewind 12 months ago um i'd say this would probably be a 1.2 1.3 million dollar house by way of the way it's configured um you know we thought when we took on the job we thought 1.5 maybe 1.6 and that was consistent with our feedback throughout the campaign across the nation house prices have skyrocketed [Music] australia-wide housing values have gone up 20 over the past 12 months and that's the strongest annual growth rate we've seen in about 31 years in june the australian bureau of statistics put the price of the average australian dwelling apartments and houses combined at 836 000 in the cities it's even higher on our numbers it's actually just a little bit north of a million dollars now that's a huge amount of money it is a significant amount i never would have thought i'd see that in my career as effectively being the average across the capital cities for a majority of australians the property market has been an escalator to ever greater levels of personal wealth and if you've been able to get on that escalator at the bottom you've done exceptionally well over the following 30 years if you've been able to hop onto it at different points during that period you've also shared in those games but if you're part of an increasing minority of australians who haven't been able to get the first foot on that escalator you've missed out we have created some of the least affordable housing in the world that isn't just a failure that is equivalent to intergenerational theft since the early 1990s house prices have risen about 550 percent home ownership's now fallen to its lowest level since the mid-1950s what's really striking is the decline in the home ownership rate among people under the age of 45 which at the 2016 census was lower than it had been at the census of 1954 and i suspect when the 2021 results come out that the home ownership rate among younger australian adults that is say between their 20s and mid 30s will be lower than it was at the census of 1947.

[Music] and the affordability problem has spread beyond the bigger cities housing in hobart used to be cheap no longer it now costs more to buy an average price house in hobart population 220 000 than it does in adelaide brisbane or perth which are cities that have between five and ten times as many people as hobart does but at the same time average wages in tasmania are about 15 percent below those on the mainland so the difficulty that people face in getting into housing in tasmania has deteriorated quite dramatically it's a picture postcard hobart home buyer's agent kafka dornam tassel is house hunting on behalf of interstate buyers who want to move here her boss jasmine rankin is stuck in melbourne amid the covert lockdown [Music] hello how are you going good how are you good how'd you go good yeah it's a really good example of a 1900's federation home um 200 square meters but the front portion of the home is currently occupied as an airbnb and grossing about 50k per annum mainlanders and expat buyers have been fueling a frenzied market oh i've never seen anything like it it's ridiculous most of the time properties are listed on thursday or friday and it's not uncommon for them to be under contract before the weekend's open home has even been conducted the competition is fierce and yeah it's it's it's crazy out there to compete buyers are throwing caution to the wind people are buying properties sight unseen from another state people are waiving their rights to finance even though they they clearly require financial approval in order to be able to proceed they're you know they're not doing um building inspections just basic checks and balances people don't have the time to to conduct so you know there's a there's a lot of people taking a lot of risk properties in tasmania are literally selling within around about 48 hours i'd say that for every property that we sell we could probably sell it 10 times over and i'm not exaggerating the demand is through the roof and people are just paying well over the odds in order to secure a piece of tasmanian real estate [Music] about 20 k's from hobart is this renovator's delight [Music] a potential first home for a young couple i think i'll give you a ration i'll just grab your contact details yes i have a wander through so this one's been advertised for the first time in 45 years or just over 45 years definitely with a renovation i could see ourselves living here it's uh it's a nice place so the location is perfect yeah the further out of town you go the bigger you can get obviously and this one's about as big as we could get for our price range cool thank you thanks jonathan and ella have been looking for more than a year like many of their generation they're employed on short-term contracts which made it hard to get approval for a loan yeah it's stressful because you don't know what's going to happen in a year's time whether you're still going to have a job and whether you'll still be able to pay your mortgage or pay your rent but we're afraid that if we wait another year when we might have more stable income we won't be able to afford anything renovate the kitchen and the bathroom a little bit the only way they've been able to save a deposit is by living with ella's dad because rents in hobart are sky-high all my friends have done the same thing they lived with their parents or their in-laws and then went from their parents place to buying a house i don't know anyone that has rented [Music] another open home and this house looks like it could be the one yeah i really like it it's a really nice view really nice street offers over 419 for this house yeah and our limit is 500 000.

4 Corners

So i think we can put in a competitive offer for this place so hopefully we can get it yeah i think we're in with a good shot if we put an offer on this place jonathan and ella offer 46 000 over the asking price and miss out i think it's pretty dire if like jonathan has a phd and i have a master's and we can't break into the market like i feel bad for people like you know single parents like i don't know how they're meant to get into the market if we can't i've often said over the last 15 years that i'm surprised there isn't more anger among younger people about the way in which the housing market has been rigged against them and their life chances by their parents generation but it would seem that instead of taking to the streets and demanding change in australia's housing system australia's younger adults are taking out their revenge on their parents generation by refusing to move out of their homes i'm the intake coordinator and educator for a small mental health hospital here in tassie and i'm also a carer for my mother when i'm not at work i don't have a bank of mum and dad my mother was disabled since i was a child [Music] when i first came into nursing you know everyone was like oh you know now you're a nurse you'll be able to save a deposit get a house and in my suburb houses at the time were going for two hundred thousand dollars so a five percent deposit was nothing and then those prices have doubled in the past eight years easily um so now it's just unless i suddenly produce you know thousands of dollars out of nowhere it's probably never gonna happen [Music] ashley lives with her mother in social housing she yearns to buy a home for them both owning a house would mean the world the absolute world to me i mean i don't want a luxury apartment in the cbd i just want a place to call mine i would feel safe i would feel secure i would be i would feel like i had a future because i wouldn't have to worry about what would happen in 20 years time if you know i had a house but as prices saw she's had to accept she may never buy a home i i did everything right i did everything that every politician has ever told us to do you know we were told growing up that you know the australian dream owning your own house all you have to do to get that is you go to school go to college go to university get a good job and boom bob's your uncle you'll be able to get it but it's just not turned out that way even trying to save as hard as you can to get into the market doesn't tend to matter anymore it's more about who your parents are and what kind of wealth they have in their home and can help first home buyers with only the children of people who already have wealth will be able to acquire homeownership in the in the future people who come from poorer backgrounds won't it's really become a class divide [Music] just as the english have been called a nation of shopkeepers so australians might be called a nation of homeowners the cost of housing is undermining what was once a defining characteristic of australian society [Music] despite the twin penalties of mortgages and lawn mowing australians crave a home of their own our national monument might well be a suburban cottage on a quarter acre block for this is what most australians spend their lives working to pay off how important is it to a woman to have a home of her own oh very important it's a wonderful feeling to have your own home nothing to be terrible not to have your own home at the end of world war ii only about half of australian households owned a home then government made lifting home ownership a national priority our choice on december the 10th is between a socialist government and a liberal government prime minister means he saw it as a bull walk against communism applauding the instinct to have a little piece of earth with a house and garden to call our own products the liberal party believes that every worthwhile australian wants to own his own home in the menzies era they started out by making loans available from the commonwealth to the states which built housing for returning soldiers and various other lower income households to get into home purchase and the home ownership rate rose by about 20 percentage points from 52 at the 1947 census to a peak of 72 at the census of 1966 and the reason why we were able to achieve such an extraordinary increase in home ownership was because governments focused on boosting the supply of housing and didn't do anything beyond running a high immigration program to inflate the demand for housing in particular governments built quite a lot of houses themselves either for rent to people on low incomes or after the election of the menses government for sale to people who had modest incomes but not quite high enough to qualify for loans from the private savings banks i think in many ways that was a sort of golden era in which australia was seen as a place that for people living here or moving here migrating here it was actually a realistic possibility to work hard save money buy a piece of land and build a house it was actually attainable for for most people so housing was actually a method of attaining equality in that era no longer these days you can't escape the headlines about crazy house prices wages can't possibly keep up it's creating a kind of mania where people think if i don't buy now i'll never be able to what's important over this period is the sentiment is the worry of missing out is the fear of missing out is the panic buying behavior professor of economics shu ping chu calls it housing fever they probably want to house in the near future but they worry that in the near future the price will go up so much that they won't be able to apply uh to afford it therefore they decided to purchase now so you get a diabolical situation where people jump in for fear of missing out and that pushes up prices even further that's exactly the self-excitation process that we're seeing at the moment in the market we hear all the exciting stories that's going on in the market and the media report about how house price auction results exceed owners expectation and those reinforce their expectations of the market and attracted more and more people to go into the market with a colleague at yale university she's devised an economic model to take the temperature of housing markets sydney melbourne and brisbane are running hot [Music] brisbane and southeast queensland are extremely popular markets at the moment largely because people are wanting somewhere safe to live as we come out of the pandemic due to limited supply in those markets property prices are just going up and up and up folks say very good afternoon we'll get this afternoon's auction underway when we get 286 thousand dollars and playing for ownership one million three hundred thousand dollars anything further shaking the head might be good news for you sir we sell welcome home we are salty at one or three hundred thousand dollars well done went hard yeah thought we had a good crack but not enough in this market really it's been insane honestly it's been insane but you can only do what you can do the one next door sold 120 grand less and it's a five bedroom compared to this three bedroom so market's going up it is definitely the hottest i've ever seen with the low supply the high demand the lower interest rates and the cost of borrowing money being so cheap in melbourne we've just come out of a period where buyers were not able to actually inspect a property private property inspections were not allowed allowed let alone public property inspections despite these restrictions the market has continued to rise which i find very surprising indeed [Music] not too many people like to go and purchase a property worth hundreds of thousands of dollars without actually inspecting it and seeing it now that buyers can access properties that has now really opened up the marketplace once again and uh the buyer interest is is stronger than we've ever seen buyers the ball is in your court how much would you like to pay we have a seller who wants to sell so put your bids up on the chat for nearly 40 minutes people with their heart set on this melbourne home nudge the price higher and higher at one million seven hundred thousand we are selling and playing for keeps one million seven one five virginia final call at one seven five nine about to go going twice third and final call this is a absolute marathon of an auction ladies and gentlemen 7.91 is the price virginia hammers up in the absence i will sell sold at 1 million 791 000 virginia you have succeeded what an amazing auction time that was um amazing competition grueling and tiring uh and i'm i'm done just ferocious bidding that we're seeing on property at the moment yeah crazy [Applause] [Music] sydney for example to get into the market right now you would have to be earning close to at least a hundred thousand dollars per annum it's proving very difficult for those who are on uh below the average income [Music] well sydney is obviously the least affordable city in australia at the moment requiring something like 44 of average income to service alone at that middle income level only 30 of dwellings are comfortably affordable for households it's even more staggering when you look at low-income earners people who are on lower incomes can only afford about 1.9 percent of properties across sydney [Music] rob stanley works as a buyer's agent in sydney's eastern suburbs today he's off to meet some clients and look at a three-bedroom semi it's up the hill from the beaches in a back street of bondi been being basically being buyer's agent for the last 15 years and there's been some ways but the last two years have just been i use the word incredible that i just don't believe how much prices have jumped and these prices have been seen recently are far exceeding what i think is a fair and reasonable market price but it is because people are paying it so that's where the market is now the last time eight bennett street bondi changed hands was back in the post-war years well it's a original semi and first time offered since 1953 so 68 years of continuous family ownership this owner purchased this property for a thousand pounds or thereabouts and um so it's an interesting story from a thousand pounds only 68 years later to a guided 2.2 million dollars so that's quite an increase over over those years what's your daughter's name amelia hello amelia rob's clients have a two-year-old and want to upgrade from a unit to a house [Music] they're willing to spend about 2.5 million leaving aside some money for renovations that to me is a really reasonable budget so i don't know whether it's just a crazy spike in the market and you know maybe we're looking at the wrong time or whether this is just the way forward but it seems quite unreasonable that you know looking for an average house that you're looking up to to spending up to three million dollars is just seems it seems quite bizarre the unrenovated home is a window on how much housing costs have soared on auction day rob's clients had no luck we were expecting uh five or six registered bidders but to be 17.

We're expecting the magic numbers like 2.5 to buy it that's what we heard to the agent we started the auction off at um at 2.4 2 5 2 6 and actually hit 2 7 12. so we were weren't surprised uh clients were slightly disappointed but with that much interest it just it just it just kept going it just kept going and they said the fear of missing out was there had this 2.7 million plus property merely tracked the inflation rate over the past 68 years it would be worth about 37 000 what do you think is causing this i mean the big one would be low interest rates um the the lower the cost of debt the more people are incentivized to to borrow and buy so that's put a lot of additional pressure on the housing market old houses are full of stories in another semi we find a little piece of history when they pulled up the flooring in this room they found a bunch of old newspapers and have a look at this one have a read of that headline this is the sunday telegraph from august 11 1963 it's extraordinary to think that all the way back then the headlines were about young people being frozen out of the housing market but the issue then wasn't high prices it was strict lending standards banks were very conservative about how much people could borrow this will leave you approximately 950 pounds which you haven't got and is commonly known these days as the deposit gap to buy most consumer goods on long-term repayment requires very little if any deposit but to buy a house the purchaser needs up to a third of the total price yes well this is what i'm interested in the kitchen you need a big kitchen we had an issue of rationing of credit perhaps too much rationing of credit at that time but after they do regulation of the financial sector lending really opened up no doubt when we considered the past 30 years the deregulation of the financial sector has been one of the key drivers behind the rise in dwelling prices over that period of time generous tax concessions for property investors including the halving of the capital gains tax under the howard government have also played a part what of course that's done has been to put investors in competition with would-be home buyers for what's a limited supply of housing people who might otherwise have been able to buy can't afford to do so in competition with investors who get their interest costs subsidized by other taxpayers through negative gearing and who pay less tax on the capital gains they ultimately intend to make than the tax people pay on their wage and salary income labor took a policy to wind back these tax concessions to the last two federal elections and lost now it's dropped the plan were extremely disappointed in labor for doing that we don't think that you can do anything meaningful about rebalancing home ownership in australia without addressing those tax settings to compete against investors and break into the market first home buyers are having to take on eye-watering debts you see a listing that you like and you start imagining you know what it would be like to live there or start imagining you living in that particular suburb or where you would put up certain furniture and you know you go from there and perhaps you know rather than later you realize that you know the price guide is way beyond what what you initially hoped it would be [Music] pat luang thong is looking for a one-bedroom flat within reasonable distance of her work in sydney um so we can only have one through at a time yeah do you think it's going to be in your price range probably on the edge off her family are stumping up half the deposit but she's still going to have to borrow so much that beyond basic needs there won't be much left for anything else with the maximum borrowing power um and current interest rates you know i'm looking at 40 to 50 percent repayment um which would be really difficult 40 to 50 percent of your income um yes yes and you know that's taking into account the current interest rates so if that goes up um it i'm going to be put in a really difficult position it wouldn't take much of an increase in interest rates to put some people in real trouble i think it's a huge concern and it's a concern not just for individuals but for the economy fearing soaring housing debt could destabilize the economy regulators have intervened banks must now ensure borrowers have a bigger buffer against rate rises but that won't help first home buyers ultimately what they intend to do is to make it harder to take out a loan uh given your level of income that you're earning right now it's gonna stop as many people over extending themselves but it also means that people on lower incomes first home buyers won't be able to borrow quite as much and may stop some people from getting into the housing market for decades both sides of politics have responded to concerns about affordability by offering grants and subsidies to first home buyers a strategy embraced by the morrison government yet the coalition mp chairing parliament's latest housing affordability inquiry concedes such measures often make things worse we have tried to fix the problem over time by stimulating demand by tipping the scales in favor of first home buyers and what that has ultimately resulted in is that we have forced up prices in the major markets so the beneficiary has not been the home buyer it's actually been the home seller and on every occasion during the past 30 years when it seemed as though house prices might fall governments have intervened by providing ever larger grants to would-be first home buyers on ever more generous eligibility criteria and the reserve bank has cut interest rates to in every cycle new record lows the result of those steps has been to reignite the property price fire on every occasion when it's looked like going out the heat in the market extends to regional areas especially the coast [Music] beautiful beaches a stunning natural environment and a warm climate have made noosa and the sunshine coast a mecca for holiday makers the areas become a magnet for people no longer tied to city offices as people have found that they can work from home and their employers allow them to work from home it's become a very viable option to move to a coastal region not necessarily noosa bring the children with you have them enjoy the lifestyle that maybe you grew up with and you know happy days and i think some national advertising is really important for this one so maybe tom offerman and his daughter rebecca work in a tightly held market that's been deluged by buyers i started in real estate in the mid-80s and if someone had told me where prices would be today i would have laughed i think everyone would have we've been through some very strong cycles before and i think this is unprecedented this is the uh the strongest market that i've experienced in over 30 years so can you tell me a bit about what you're looking for and then i'll see what i have that might suit i guess it's this period where people have had time to really reconsider where they want to be and nursery is coming to the top of the list for a lot of people [Music] my role in sydney was already working remotely so being able to move to noosa was actually quite an easy transition for james and meg finding a house was far from easy we were going to open houses and they'd already been sold to sight unseen from melbourne or sighed unseen from sydney we looked at one property that i inquired on uh it had come on the market that day and by the time i'd made the inquiry that afternoon it had already gone under contract so things have been going same day at the pelicans they tried to rent while they were looking to buy that was even harder there's also a huge shortage of rental properties up here so even trying to rent a place for a while while the market cooled that wasn't really an option either the prices of rent and the fact you might need to give six months rent in advance just to get a look in on a property that's very hard for people when they don't have that much of a cash reserve if they're young and just starting out what was the bingo was it numbers or was it worse in the end the summertimes found their noosa home and have no regrets have you got your math test back i have not no next time yeah and they did it yesterday so there'd be some speed markings i think well surely they know the answers yeah it's been great it's been really good financially we managed to reduce our mortgage significantly by taking the sale price from our house in sydney and converting that up here so you get quite your money goes quite a long way since the answer of covert there's been a significant reversal of the long-standing population flows from regional centres to cities instead people are moving in the other direction and that's the main reason why since the onset of covert property prices in regional areas have risen at a faster rate than in the capital cities and rents even more so it's meant that higher income people are moving into regions which have traditionally been occupied by lower income people and those lower income people get displaced and that's happening in rental markets in ownership markets all over australia we're seeing it as a really noticeable effect adrian pizarski is the executive officer of national shelter which advocates for the housing needs of people on low and modest incomes he also happens to live in nusa and he's watched the ripple effect from rising house prices extend along the sunshine coast the place that i live in we purchased about nine years ago it has nearly tripled in value over that period of time people on the sunshine coast and right throughout regional australia and also in our capital cities are just priced out of the market so more and more people are therefore reliant on rental housing and that puts more pressure on the rental market and it means that ultimately there's going to be more homelessness at the end of the day [Music] parliament's latest housing affordability inquiry is putting the emphasis on boosting supply what do you think is at the root of the problem i think the root of the problem is that we haven't allowed people to build enough houses for those who want to buy it both zoning and the application of zoning and whatever else is going on in the marketplace has meant that you don't have as much housing getting built as you have demand for housing it's not quite that simple economist cameron murray has studied the financial accounts and annual reports of the big property developers which show that they limit the supply of new land and homes to maximize prices and profits i don't see that private land and property markets have any incentives anywhere in the system to rapidly supply housing and depress the price he's also crunched the numbers on claims we can build our way out of the affordability problem so if we doubled construction hypothetically for 10 years we're talking about a 10 to 15 price reduction and we've seen prices rise by more than that in the past nine months so you can see the futility in many ways of trying to tackle prices through the supply side it's going to take a number of our solutions to resolve that and we're not going to solve it over the short term in my view we'll have to make reform in taxation we'll have to make reform in housing supply will have to make reform in terms of housing credit we'll have to make some big decisions in terms of what we wish to do with big australia because there's no doubt about it when you have a booming population that can hurt affordability as well whether politicians will have the will to tackle affordability is another question when millions of australians accumulate so much wealth by doing nothing other than owning real estate the attitude we have to housing not just investors and landlords but every homeowner in australia is really it's about speculation at the end of the day and you'll hear it at barbecues about people's homes being an investment the stock of australian dwellings is worth nine trillion dollars and if you create interventions that reduce the value you are wiping trillions of dollars of value off the balance sheets of australian homeowners now i don't see any political appetite for that politicians shed crocodile tears for the difficulties faced by young aspiring home buyers there's an awful lot of wailing and gnashing of teeth by politicians of all political persuasions as to how difficult that's become yet politicians keep doing the same things you know it kind of reminds you of einstein's definition of badness that's doing the same thing over and over again expecting that this time you'll get a different result [Music] i think there's been a shift in the australian psyche where because so much wealth is generated from housing over time housing has become rather than a place of security where you raise a family something that you seek to create wealth from and speculate on so that's a really big shift over the last 40 years and it's really one that i don't think will serve the future well [Music] unless things change australia is on course to become a more unequal society with a growing gulf between the wealth and the lives of those who own homes and those who never will maybe we're only really talking about housing affordability or being concerned with housing affordability when it starts to affect middle to higher income first home buyers and we're not really looking at the long term and saying what do we do to stop that bigger divergence in home ownership rates between low-income households and high-income households the situation's left me feeling completely defeated you know like there's no point you're not rich enough you know and we're just going to keep letting the prices rise and rise and rise and you know you're just gonna have to put up with it [Music] [Applause] [Music] you

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