The latest price figures represent bad news for aspiring new home owners in the Illawarra, an academic says.
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Property information and analytics provider CoreLogic recently released its median house and unit prices for September.
Professor Alex Frino, economist at the University of Wollongong said the news is good for home owners.
The median Illawarra house price for the year to September increased by a little over 15 per cent and is currently $674,000.
Prof Frino said unit prices in the region set a new annual record for the pace of increase. The median unit price increased 17 per cent for the year to September, coming in at $542,000.
According to the CoreLogic numbers, the median house and unit price have increased by almost 70 per cent over the past five years.
“This means the wealth the typical home owner has tied up in their house has increased by almost 70 per cent,” Prof Frino said.
“Owners are clearly getting richer – especially unit owners.
“But the news is bad for aspiring new home owners. Five years ago, the median house price was around $400,000, implying that the monthly repayment on a fully financed typical home loan was about $2135, or around $25,000 for the year.
“Move the clock forward, and a $674,000 loan for the median house implies a $3600 monthly repayment or $43,200 for the year.
“Problem is, all the data that we have at our disposal suggests incomes have risen precious little and therefore home ownership keeps slipping further and further away.”
Prof Frino said the CoreLogic data shows that the number of houses sold in the Illawarra peaked in 2015, when about 8000 houses were sold.
“For the year to September, the number of houses sold barely scraped past 7000,” he said. “Unit sales show a similar pattern. So less and less property is being turned over, but at higher and higher prices.”
Prof Frino said historically low interest rates have been supporting the buoyancy of prices in the Illawarra.
The state government introduced a housing affordability package which kicked in on July 1, including scrapping stamp duty on first home buyers on existing and new homes up to $650,000.
“There is no doubt that the acceleration in the price of units has been fed by this grant,” Prof Frino said.
“The increase in unit prices since the introduction of the measures in the three months to September was five per cent, or roughly $24,000.
“The stamp duty saving for new home buyers under the scheme is $20,000, so it doesn’t even cover the hike in house prices in the three months since the introduction of the measures.
“My verdict on the home affordability package introduced by the NSW government is that it has done nothing for home affordability.”
