The latest house price data has been released from the Australian Bureau of statistics (ABS) this week which shows Sydney house prices growing by 5.2% from September 2016 to December 2016 and 10.3% from December 2015 to December 2016.
The most recent data on wages during the same period, ABS data for Australia shows an increase of full-time earnings from November 2015 to November 2016 totaling 2.2% to $1,592.40.
This means whilst wages grew only 2.2%, house prices in Sydney grew by an amazing 10.3%. While some may say that the market is booming and it is a typical Sydney boom after a decade flat line of growth, others say that it is a low-interest credit-driven property bubble which is about to burst.
Regardless which scenario may be true if either, the amazing growth of the Sydney property market is seen as incredible being on of the best performing asset classes in Australia for 2016.
This price level only pushes housing further out of reach considering at last count, the average house price in Sydney is $1.123 Million & the Sydney house price ratio is now at an all-time record of 14.
The graph below illustrates just how crazy the house prices have become for the average person, when tax is taken into account the actual ratio is closer to 20x net annual income.
No matter what the state of the economy is, even if it is booming, housing prices increasing almost 5 times income (10.3% vs 2.2%) is not good for the average citizen as houses are first and foremost a means of shelter for themselves and their families. The social cost of booming house prices is not accurately measured for the younger generation.
Generation rent (generation Y) will be forced to live at home for longer and face greater commutes to their place of work, hardly a sign of a prosperous wealthy community.