Does your house in Melbourne earn more than you do?
Does your house earn more than you? As the property market booms, homes in several suburbs have risen in value more than residents were paid in wages over the past year.
A third of Victorian suburbs recorded house price increases that were higher than the annual household income over the year to June, new Domain analysis shows.
Despite sluggish wages growth, house prices have soared on the back of ultra-low interest rates, high savings rates during lockdown, government stimulus measures, tax cuts and parental gifts to homebuyers.
The effect is pronounced in several bayside and eastern suburbs, where property values have risen by more than $200,000 a year.
In Brighton East, for example, the median house price has risen $285,000 in the year to June, to $2.05 million on Domain data, compared to the previous year. With an average annual household income in the suburb of $119,813, the average resident’s house would have earned $165,187 more than they did.
The premiums are also north of six figures in neighbouring Brighton ($112,169), Hampton ($132,845), Ormond ($148,474) and McKinnon ($125,530).
In the east, residents’ houses earned a $158,144 premium above incomes in Glen Iris and $121,929 in Canterbury.
Domain chief of research and economics Nicola Powell said she expected the trend to continue over the coming year, even if house prices could not keep rising at the same breakneck pace.
“I do think we will see the pace of [property] price acceleration ease,” she said. “But we have seen a rate of growth that wages growth hasn’t been able to match.”
Strong demand for spacious family homes with room to work remotely and home-school during lockdown has been driving the trend.
Brighton agent Nick Johnstone, of the eponymous real estate agency, has seen some houses in his area rise in value by as much as $450,000 in the past year, to about $3 million.
“There are not many people earning $450,000, are there? It’s been incredible,” he said. “It’s really family homes that are going berserk.
“We’re getting a lot of people from the eastern suburbs wanting to be near the beach and have more space. If they have to do lockdown they don’t want to be cooped up in an apartment again.
“When you can borrow $1 million for $20,000 a year, it’s pretty good.”
He recently sold a home for $5.01 million for a vendor who had lived there for four decades, and worked out it had gone up by $119,000 a year over that time – tax-free.
The property price gains come as ABS figures this week showed wages growth at a lacklustre 1.7 per cent, and although the unemployment rate fell to 4.6 per cent, many people stopped looking for work or could not get as many hours as they wanted during lockdowns. But with little opportunity to spend, homebuyers who don’t get a pay rise might still have more cash in the bank.
“When you look at the capital gains people have made during the COVID period, it’s been quite incredible,” Marshall White’s John Bongiorno said. “People aren’t spending money on holidays and vacations … we’re not going out, you don’t have to go and buy that ballroom dress.”
They are spending up big on beach houses, with prices soaring on the Mornington Peninsula, Surf Coast and Bellarine Peninsula during the pandemic.
After an extraordinary jump of 75.1 per cent in Somers’ median house price last year, houses there earned a premium of $646,575 compared to local residents.
Enormous premiums were recorded in Blairgowrie ($407,998), Sorrento ($344,088) and Portsea ($341,907), as well as Barwon Heads on the west side of the bay ($270,571).
Kay & Burton Portsea director Liz Jensen said she had seen the boom after hearing accountants say for years that buying a beach house was the worst investment.
For example, she just sold a house in Portsea for more than $3.5 million that last traded for $1.55 million six and a half years ago – without a renovation.
The difference is that many buyers are not locals. Instead, they have been coming from the affluent inner-eastern and bayside suburbs of Melbourne, especially after the first lockdown last year.
“People were saying the cities felt sinister,” Ms Jensen said. “They wanted a bit of peace and tranquillity and a nice place to look forward to. Sellers are shocked every time, they are over the moon with where they end up.”
Dr Powell said that, in the secondary home market, buyers were purchasing with cash from their city jobs.
“What part of this data is showing in some of these areas is locals perhaps being priced out by people buying their second home,” she said.
Although demand has been stronger for houses than units, some apartment owners are making more money from their home than their job.
Units in Blackburn increased in value by $89,920 more than their owners earned over the past year, the research showed.
Unit owners were also sitting pretty in East Melbourne ($18,922), Thornbury ($17,188) and Surrey Hills ($11,323).
Ref: ELIZABETH REDMAN | SENIOR NEWS PRODUCER (on 20 Aug 2021). Does your house in Melbourne earn more than you do?. Retrieved from https://www.domain.com.au/news/does-your-house-in-melbourne-earn-more-than-you-do-1081814/.
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