Rising property prices may change the social dynamic in Australia by pushing young people out of the market, a leading economist has warned.
“We need to be conscious that if first home buyers are squeezed out of the market or find it a lot harder to get into, that will change the social dynamic in Australia,” AMP chief economist Shane Oliver said.
Mr Oliver explained Australians have long prided themselves on home ownership.
“The Aussie dream was to buy a quarter-acre block with a house on it,” he said.
That dream has changed “by necessity” as the constrained supply of land and rising prices make home ownership unaffordable to many young people, he said.
“When I was in my late 20s, the amount of money I had to borrow the first time around seemed quite daunting," he said.
“But for people today, it’s an even higher multiple of their income than it was for me 28 years ago.”
However, Multifocus Properties & Finance CEO Philippe Brach said concerns about housing affordability may be overstated.
“Once you put everything in balance, we are not that stretched financially,” Mr Brach said.
Although property prices have risen, consumer goods and services have become cheaper, Mr Brach explained.
“There are a lot of expenses we used to have in the past that we don’t have anymore,” he said.
He offered the example of televisions, which now cost hundreds of dollars when they used to cost thousands, and the price of new cars, which has not changed for 20 years.
“The interesting things about cars is that in real terms, they’re getting cheaper because the prices really don’t move, but as time goes by, wages go up,” he said.
Households also have a greater awareness of how to manage their finances, relying on cash rather than credit, he said.
“Credit card usage has experienced a record fall in usage. So people are not spending on credit cards anymore,” he said.