Those looking to purchase a property in Australia’s already booming housing market are facing some grim news, with AMP Capital’s chief economist Shane Oliver warning prices are not likely to slow down.
“House prices are up 8 per cent already this year based on CoreLogic numbers. There’s another 2 per cent coming in May alone,” Oliver said.
“As this year settles down, we’re going to see house price growth at 15 or 20 per cent in some cities.”
By the end of this year, house price growth could outstrip wages growth by more than 10 times, leaving low- and middle-income earners locked out of the market.
“If you’re in hospitality, food services and accommodation, you might have got an increase, but you’re still on the minimum wage on which most people can’t get in [to property ownership]. It doesn’t really help,” Oliver said. “Affordability is getting worse.”
The predicts that economic growth will be powered by 5.5 per cent growth in consumer spending in 2021-22 - but this is a “highly optimistic assumption” and simply won’t happen without a “significant increase” of 3.5 per cent to the minimum wage, in it’s report.
“Higher wages for low and middle-income earners translates directly to more consumer spending in local economies,” it said.
“Put simply, if people don’t have enough hours of work, or if their hourly rate of pay is insufficient to meet the growing costs of living, they won’t have sufficient money to spend into the economy.”
The prices of million-dollar homes in many outer metropolitan and regional suburbs within commuting distance of CBDs were much higher in March 2021 compared to the previous year, as workers relocated to regional areas en masse in what’s been dubbed the biggest property trend of the 21st century.