The latest figures from Demographia’s international housing survey in 2017 have been released & it does not make for good reading if you are a potential first home buyer looking to lay roots for your family in Sydney.
The report ranks Sydney the 2nd most expensive property market in the world. It is only second to Hong Kong which has restricted land boundaries and has run out of room to build horizontally hence the number of highrises, not to mention it’s the financial hub of Asia and an international city so where is Sydney’s justification of price?
We have ample land (over 12,000km2) in the Sydney metro area yet the prices are sky high. Money is being poured into mortgages instead of productive assets, the median price as of December 2016 in Sydney was $1,123,991 according to Domain and explains why the highest valued companies on the Australian stock exchange are banks. This is because everyone is essentially a debt slave to the bank through their housing mortgage which is normally a 30 year commitment.
The table above shows just exactly what the problem in Australia is. Out of the top 5 companies by their market cap, 4 of them are banks. This is a big danger sign to anyone with an understanding of economics. If you look at the United States stocks exchange, there are no banks within the top 5 and that says a lot.
The Sydney multiple of earnings are 12.2 is simply unsustainable and if you take into consideration Domains latest price the actual ratio is 12.8 and that number of $88,000 could also be incorrect as the SMH published an article stating their average wage in Sydney was $80,000 not $88,000 as reported by Demographia.
This now takes the ratio further at 14 times annual earnings before tax. At this ratio it can almost be considered a housing bubble as people cannot afford homes to live in, a basic human need
14 times pre-tax earnings! When will this madness end?