Migrants and returning Aussie expats say the unchecked rise in real estate prices over the past decade is a major barrier blocking their entry to the local housing market.
And the trend - exacerbated by the rising Australian dollar - may force skilled migrants to think twice before moving Down Under, an analyst said.
One former expat, Daniel returned to Sydney from a five-year stint in London. Now he and his wife “don't intend to go anywhere near the Australian property market” despite having saved more than $200,000 for a deposit on a home.
“The price of property (and living) is more expensive here than most places we have travelled,” he said, declining to give his full name.
Only those who bought into the boom ten to 15 years ago can really benefit from the price rises, Daniel said. In the current market, however, “people are locked in to paying back a massive debt for their entire lives”.
Median home prices in capital cities have increased almost continually since at least 1986, jumping 28.1 per cent from 2003-04 to the June quarter 2009 alone, data from Australian Bureau of Statistics shows. Those prices show no signs of abating with the latest figures from Residex showing a national increase of 1.7 per cent last month alone.
Spiralling home prices are spurred in part by a shortage of available stock and a growing population in most capital cities.
Rental repellent
Dutch-Canadian Frans Kuiper and his Australian wife sold their home in the Netherlands in 2004 on the expectation of buying after moving to Adelaide. But five years later the couple continues to rent.
“If prices do not come down in the future, we are prepared to move overseas again,” said Mr Kuiper.
Coming from overseas, Mr Kuiper said he had no experience with house auctions, while his wife, who had lived outside of Australia for 10 years, had little inkling of how far property prices had risen during her absence.
“Although we can ‘afford’ to buy a home in Australia we have chosen to rent as we believe house prices here are grossly overpriced,” he said.
ANZ economist Julie Toth said high property prices won’t put people off immigrating to Australia over the long term but housing affordability is proving to be an impediment for returning expats and others.
Immigration becomes less attractive for British, Canadians, and Americans leaving more affordable cities in their home countries for Sydney - historically the most popular destination in Australia.
“If you’re comparing, say, Sydney to San Francisco, or Los Angeles or Seattle, you’d think twice about whether it’s a good idea to move.”
“But if you’re coming from London you’ll still come because you’re still more likely to buy a house here than anywhere near London.”
The Australian dollar’s rally over the past year hasn’t helped, with big gains against the pound and the US dollar in particular.
No relief
With interest rates expected to rise, no big increase in household income projected and no tax cuts on the cards, housing affordability is set to worsen, the ANZ’s Ms Toth said.
Official interest rates rose earlier this month, starting a series of increases which may last at least a year, markets predict. That means now might offer the most affordable prices for several years, Ms Toth said..
The difference between Australia's house prices and those seen overseas has grown even more stark since the financial crisis pricked the housing bubbles in the US and Europe, say recent migrants.
Ben Schonveld came to Australia with his Australian wife, moving to Sydney in 2004 from the UK. After initially looking to buy a home for their growing family, the couple have resigned themselves to renting, an option Mr Schonveld is “fed up” with.
The couple, both with middle-income jobs, pay $600 a week in rent for a three-bedroom home in Ryde, NSW.
“I don’t feel like I get value for money,” Mr Schonveld said.
Coming from the UK where he recalls past house price falls, Mr Schonveld doesn’t feel confident borrowing a “great deal of money” to buy in Sydney, especially because he fears real estate values could one day sink as they have in the British Isles.
“My view is coloured by my experiences elsewhere,” he said, adding that Sydney is now more expensive than in London - but people earn more in London. “This doesn’t add up.”
The couple is now considering a move to rural Australia in order to avoid prohibitive urban house prices.
czappone@fairfax.com .au
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