Melbourne Sydney property is overpriced

For many Australians, having their own living space remains a dream

Miranda M. has given up looking for a home. "I will stay my life as a tenant," says the 29 year old in Sydney. The tone in her voice shows bitterness but also shame. "Don't say my name," she says. Although she has a "very good salary", her savings are not even enough for the customary down payment of ten percent of the purchase price.

The office manager of a lawyer is not alone with her fate: Millions of young Australians will hardly ever have the opportunity to realize their dream of buying a home or even an apartment - in a city where parking costs a fortune. There is a double parking space for sale in Sydney city center for A $ 400,000. The seller is happy to say that there is great interest.

A millionaires thing

That's extreme - definitely, but not unusual. In the greater Sydney area, the average price for a house is over $ 1.1 million. Melbourne is a little cheaper at $ 825,000. Brisbane is downright a bargain: $ 655,000 is enough for a home there. However - as in the other cities - only in the suburbs. If you want to live in the city center, you can quickly put millions on the table in one of the major Australian cities. Anyone looking for a two- or three-room apartment with a sea view in Sydney has to be a millionaire or have a rich father.

The unstoppable price increases for residential property in many areas of Australia for years are having consequences for private households. In a global comparison, Australians are already above average in debt. Today they are pumping 39 percent of their income into paying off their mortgage, twice as much as 30 years ago.

Housing stress is increasing

The high prices are eating away at the foundations of Australian society. Since the post-war period, the country has had one of the highest proportions of home ownership in the western world: in 2011, 67 percent of all households owned their own four walls, compared with 71.4 percent in 1966. It was a matter of course that you would buy property at a young age after marriage, pay it off over 30 years, sell the property and use it to finance your retirement.

Not anymore: Australia will become a land of tenants in the course of a generation, fear commentators like the sociologist Bernard Salt. Not that renting is any easier. There is a chronic shortage of apartments, especially in the big cities, and prices are developing accordingly. It is the norm that dozens, if not hundreds, of prospective customers turn up even for low-quality and obviously overpriced rental apartments. Analysts speak of the growing danger of "housing stress": Even medium-sized high-income earners suddenly find themselves on the street because they cannot find or pay for a rental apartment.

"Unfair" discounts

"Negative gearing" is the name given to the deduction of all costs associated with an investment in the tax return. Critics see this privilege granted by the tax authorities for investors as one of the main causes of the crisis. Whether it's mortgage payments, renovation costs or a new gas stove - if owners spend more on investment property than they earn from renting, the taxable income on the owner's personal balance sheet shrinks.

Critics, especially from the left political camp, have been calling for the abolition of what they consider to be "unfair" benefits for years. Even Luci Ellis, a member of the Central Bank of Australia, says: "If an investor buys a property, an owner-occupier does not buy it."

But the abolition of "negative gearing" would be political suicide. With average returns of four to more than ten percent, depending on the location, real estate in Australia is one of the most popular forms of investment. Every sixth taxpayer owns a rental property. That's millions of voters.

Finger pointing

Supporters of the status quo claim that "negative gearing" does not contribute to supply shortages and price escalation. On the contrary: investors risked their own capital - or the money of their bank - to create housing for tenants. They see other reasons for the malaise. Conservative Chancellor of the Exchequer Scott Morrison blames the states for a shortage of land.

Indeed, in the greater Sydney area in particular - with five million inhabitants the fastest growing city - there is a chronic lack of building land. Bureaucracy, a lack of financial means for roads and public transport, but also simple incompetence of the politically responsible increase the pressure on the existing stock.

Another reason for the development in the big cities is almost taboo: increasing immigration numbers. Sydney is traditionally the first and often permanent place of residence for New Australians. For years the conservative government has managed to keep the public concerned and angry with xenophobic polemics against a few thousand asylum seekers.

Immigrants as competitors

On the other hand, there is hardly any discussion about the fact that Australia allows up to 200,000, usually professionally qualified, people into the country each year and equips them with permanent residence permits and provides thousands more with more restricted residence permits. This increase has consequences. The pressure on the already meager housing stock is not only growing. Many of the immigrants are wealthy - especially those from China. At auctions they prove to be determined and financially strong opponents of local prospects.

Miranda M. sees herself as "the loser of the real estate boom". But there are also many winners. Early retirees armies sold their Sydney home, moved to the country and looked after forever. Or women like Joanna Robinski. She paid $ 192,000 for her townhouse in the 1990s. In January it decided to sell it - via an auction. The hammer fell at $ 1.7 million. (Urs Wältin from Sydney, July 17, 2017)