A senior chief executive has claimed the hugely expensive housing market left out of control by successive governments is the “root of all evil” in Australia.
Matt Barrie, chief executive of Freelancer.com, said the staggering rise in house prices has had widespread ramifications on Australians’ finances and how they view the world.
His comments come as more young Australians admit they may be waiting for their boomer parents to die so they can get a foot on the property ladder, a bleak view of their future that leaves many of them feeling guilty and conflicted.
Despite the Reserve Bank raising interest rates to control inflation, property prices in Australia’s capital cities have continued to rise by another 20 per cent in the last year.
Barrie said economists consider a home “astronomically unaffordable” if it costs more than five times the median wage.
In Australia, the average household in the capital is nine times the average salary. In Sydney, they are 13 times dazzling.
‘The root of all evil in this country is the astronomical price of housing. “Once you understand all the ramifications of this, it really is the root of all problems,” Mr Barrie said.
Independent chief executive Matt Barrie (pictured) has taken aim at successive governments for allowing the housing market to become hugely inflated and wreak havoc on the economy.
In Sydney, the average house costs around $1.6 million, according to Domain’s House Price Report for the March 2024 quarter, and the company forecasts the median price could reach $2 million in the next three years.
It is the second most expensive city in the world to buy a house, behind Hong Kong.
Barrie said it was now mathematically impossible for a middle-income household to pay a mortgage in Australia.
‘The average salary is about $94,000 a year, while the take-home pay is about $5,900 a month after taxes. On a $1.2 million mortgage at current rates, that’s about $7,000 a month (in mortgage payments).
“Salaries can no longer afford houses in Sydney,” he said.
Young Australians may be ‘waiting for their parents to die’
The decades-long housing bubble shows no signs of bursting as housing supply lags far behind demand, leaving many young Australians fearing their only path to home ownership is to wait for their parents. die
Alan, 43, said his heritage now weighs constantly on his mind every time he sees his mother.
“You know the only way you’re going to get your inheritance is if that person in front of you, who you love, dies,” he said. SBS News.
‘How would that make you feel? Because that’s how I feel and it’s pretty rubbish.’
A 22-year-old Sydney resident, who asked to remain anonymous, said that despite earning $75,000 a year, she estimated she would need 27 years to save enough for a deposit on a median-priced home in Sydney.
She said she was discouraged when she realized that the only conceivable path to affording a house before age 50 would be to inherit money after the death of a parent.
“It’s just horrible that people can’t afford to own a home without having to rely on inheritance… I think it’s unfair and it bothers me a lot.”
Ari Sharp, a single mother, said she can’t afford to buy her own home. However, she feels lucky that her parents own four properties, which she will eventually inherit from her.
This financial security has given him the freedom to explore jobs that are not well-paying.
“I’ve had the freedom to explore things I really want to do,” he told SBS.
Ari Sharp, a single mother, can’t afford to buy her own home. However, she considers herself lucky because her parents own four properties that she will eventually inherit.
Barrie said an “astronomically unaffordable” house costs more than five times the average salary, but in Australia the average house in the capital costs more than nine times the salary (file image)
Australian wages fall as house prices rise
Barrie said it was notable that Sydney was just behind Hong Kong in terms of housing affordability.
‘Hong Kong is a beautiful and attractive little island, extremely dense, very small and located next to the most populated nation in the world.
“So why would Australia… a relatively out-of-the-way place, 10 to 20 hours by plane from any major action in the world, have the most expensive homes in the world outside of Hong Kong?”
‘It’s not because we are having more babies, because every woman on the planet needs to have 2.1 children to maintain the population. Australia is about 1.5 or 1.6.
‘Wages are not increasing at the rate that housing is. In fact, wages are currently experiencing the largest decline in purchasing power in history.
‘In the last year, for people aged 20 to 24, the real purchasing power of wages has returned to 2008 levels. Now the price of everything else is not.
‘So what is going on? Why does Australia have some of the most expensive homes in the world?
Whose fault is it?
Barrie said the blame fell on successive governments who have allowed population growth to outpace housing supply over the past six decades to the point where they are now unaffordable for the vast majority of the population.
He said all successive governments have had a role to play, but the Albanese government had gone “completely crazy” with its immigration policy during an unstable economy (pictured in Sydney).
Barrie said the Albanese government could not be blamed alone for the housing crisis, but it had not exactly improved the situation by going completely crazy with its immigration policy during an unstable economy.
He said the policy, which brought 518,000 people to the country in the 2022-23 fiscal year, has increased demand for housing and further inflated the cost.
“House prices have risen 61 times in 86 years and the reason is that politicians have chosen an easy path of relentless growth,” Mr Barrie said.
‘Instead of talking to engineers, scientists and entrepreneurs about what to do to grow the economy and actually build a diversified, strong, complex and sophisticated economy.
“Instead, they have boosted the housing market into the mother of all bubbles.”
He said Australians desperate to own a home were taking on huge amounts of debt that dwarf the rates seen in the US during the global financial crisis.
Homeowners and banks are already twice as indebted to the housing market as Americans were in 2008, he said.
He said high immigration was sustaining the housing bubble.
‘So we bring a lot of people to this country, an astronomical number of people, and they do it because it keeps house prices up.
‘The more people have growth in a given area, the more house prices will rise and remain stable.
“And the path to easy, relentless growth for governments is to keep blowing the biggest bubble you can blow.”
The solution?
Economist Yanis Varoufakis told the Equity Mates podcast that another million homes would be needed in Australia in the next three years.
He said any measures to increase housing affordability, such as lowering interest rates or government subsidies, would only increase prices.
‘The supply is not produced by either the private sector or the public sector… so anything that drives demand will make the affordability problem worse,” he explained.
“They should be shouting from the rooftops: ‘Let’s find a way to build public and private housing.'”