Australia doomed to become a nation of renters
We know Australians love home ownership and the ideal way of life has always been owning your own slice of paradise, but for many people that mindset is beginning to change. Not necessarily because they want it to, but because they may not have a choice. It’s become that hard to buy a property for a lot of people.
But is this an Australian problem? Nope. In fact, other countries have had a different way of looking at things for a long time.
Think about New York. You don’t hear a lot of people there talking about buying property. It’s more that they’re looking for the opportunity to rent something for a half decent deal. As long as they are in the city, they put home ownership dreams on hold until they are in a position to move out to the suburbs somewhere. Of course in other parts of the USA, outside the big cities, home ownership is as ingrained as it is here in Australia.
It could be that places like Sydney are headed down a similar path to New York while other parts of the country may still be affordable.
What lies ahead?
As inflation begins to ramp up in Australia, it may well become harder and harder for people to buy properties.
Some may think high inflation will burst the property bubble, while others aren’t so sure. B Invested founder Nathan Birch believes the rising costs of building materials is evidence values won’t fall.
He says the cost of tiles has gone up dramatically in recent times. The cost of labour has gone up dramatically. Copper pipes, concrete, electrics…the list goes on. So unless there is some type of deflationary crash, which seems very unlikely, the cost of building a property will not come down at all.
If property prices were to fall so that it wasn’t worth it for builders to construct new properties, then the supply would fall and prices would be pushed up again due to demand.
So how could we deal with renting permanently?
Housing affordability has sparked plenty of debate about helping people get into the market.
One thing that makes long term renting more bearable in other countries is that tenants have more rights to personalise their homes. Look at Berlin, for example, where 80% of residents rent their homes.
They have freedom of decoration and are able to perform some renovations to rental properties. They also have unlimited leases and can only be evicted in extreme circumstances.
Then there is Ireland, where long term leases, or even unlimited leases are common. They also have laws capping rental increases at 2% annually.
This sort of thing may not prove popular with investors who have already amassed portfolios, but if it helps more tenants afford more properties and also keeps them happier, it will mean they look after landlords’ assets with more care.
I don’t want to give up on the dream yet
If you want to own property and build an investment portfolio, you can always go about it differently than everyone else. That’s what Nathan did. He invested for years before he bought himself a place to live in. For so long people have been obsessed with buying their own home first and slogging away before maybe one day getting an investment property or two. Flip the switch and do it the other way round and you might find you can get to where you want to be faster.
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