Growing Gap Between Wages and House Prices

Thursday, March 26th, 2015
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The growing gap between what Australians earn and what they’re paying for property will become a concern if it continues for much longer, analysts say.

In its annual mortgage report, consultancy firm Deloitte said stellar price gains seen in the Sydney and Melbourne housing markets would remain strong through 2015, at a time when wages were growing at a snail’s pace.

While Sydney property prices had risen around 15 per cent in the past year, wages had only grown around two per cent.

Although lenders were unperturbed about any potential housing bubbles just yet, some agreed that the widening gap between salary and property price growth warranted close monitoring, Deloitte analysts said.

If the gap continued over several years and became a nationwide phenomenon, rather than limited to Sydney and Melbourne, alarm bells would start ringing, Deloitte partner James Hickey said.

“There were certain views that `hey, if (property price growth) keeps outpacing salary growth, then absolutely, it’s something we need to worry about,” Mr Hickey said.

“But many people felt it was a catchup following a period of stagnant growth.”

Deloitte financial services director Michael Thomas said although wages growth was very low by historical standards, the latest Reserve Bank research showed that people who were taking out the biggest loans were those in the best position to service them.

Many borrowers were ahead on their repayments and defaults and losses were at record lows.


By Belinda Merhab
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