The great Australian dream of owning a home with a backyard or any kind of property is looking increasingly like that - a dream, at least for many young people.
After two months of house hunting, 27-year-old mining engineer Richard Blattman and his partner Jen, 29, are starting to give up on their dream of owning a two-bedroom cottage in inner Brisbane.
“We want to maintain our lifestyle which is probably a bit unrealistic,” he said.
“We’re almost at a trade-off where we are thinking perhaps instead of trying to find a place further out, maybe we should work on our deposit until we have enough to buy a home in the inner city.”
The situation is so dire across Australia that first home buyers make up just one in eight home borrowers – a record low.
Australia is also home to some of the world’s most expensive property, with Sydney considered the world’s third most unaffordable city – behind Hong Kong and Vancouver.
This is the city where a small three-bedroom home in suburban Eastwood last year sold for $2.385 million – $1 million above its reserve price.
Rundown homes in suburbs close to the harbour city centre regularly sell for more than $1 million, leaving many would-be buyers in despair.
The median price of a Sydney home stands at $655,250 – after growing by 14.5 per cent throughout 2013.
The RP Data-Rismark home value index for December had grim news for other aspiring home owners across the nation, with capital city prices rising by almost 10 per cent last year, marking the fastest annual pace since 2009.
University of Queensland housing expert Peter Spearritt says first home buyers face a grim situation. “The picture is most grim in the big growing cities of Sydney, Melbourne, Brisbane and Perth,” he said.
“It’s also very grim in the big mining towns, including Mackay in Queensland and Karratha in WA where the house prices are unbelievable and there’s hardly any properties to let.”
Even buying an apartment is difficult, with new projects favouring investors over first home buyers.
“Most investors want to have a car space, gym and pool because they think that’s what tenants want,” Prof Spearritt said.
“Your average first home buyer, because of their restricted finances, would be quite happy to buy a cheaper apartment without a garage, gym and pool but developers are not catering for them.”
In May 2009, during the dark days of the global financial crisis, almost one in three borrowers was a first time home buyer.
But that was thanks to a one-off multi-billion dollar stimulus policy from the Rudd government that saw first home purchaser grants doubled and tripled for existing and newly built homes.
Almost five years later, the story is very different with 12.3 per cent – or just one in eight – home borrowers being mortgage virgins, housing finance figures for November released this week show.
This was also a record low since the Australian Bureau of Statistics began compiling data on this in July 1991, immediately after the last recession.
The story is even more ironic when you consider that interest rates have been at a record low of 2.5 per cent since August last year, with state government first home buyer grants of $7000 apparently failing to entice renters into the housing market.
Richard Denniss, the executive director of the Australia Institute think tank, says negative gearing tax breaks for property investors is part of the problem and needs to be reviewed.
“If our major concern was to increase the supply of rental properties then we should obviously restrict negative gearing to the construction of new rental properties”. .
“We have this very strange debate in Australia where politicians simultaneously pretend that they’re trying to help people buy their first home, and they want to encourage people to become landlords – and they’re out there talking to both groups as if they’re on the side of both groups.”
Steep population growth, which sees skilled migrants move to the big cities like Sydney and Melbourne, is another factor which has Australia saddled with some of the world’s most expensive real estate, he added.
The US Demographia survey released last year rated Hong Kong, Vancouver and Sydney as the world’s most unaffordable cities, with Melbourne regarded as more expensive than London, Adelaide dearer than New York or Los Angeles, with Perth and Brisbane also in the top 20 list.
But the younger generation could be to blame, say some experts.
Commsec economist Savanth Sebastian said young people were choosing to rent in inner-city apartments or to continue living with their parents to maintain their lifestyles, which explained the low level of first home buyers.
“Investors seem to be putting excess cash to work in terms of property and equities but the younger generation seem a lot more focused on experiences and lifestyle,” he said.
“Young people are choosing to rent closer to the city rather than taking on the burden of a mortgage.”
By Stephen Johnson and Petrina Berry