The ‘first step’ to buying a house is to get a ‘highly paid job’

Federal Victorian MP Michael Sukkar who is in charge of tackling housing affordability issues has said that the ‘first step’ to buying a house is to simply get a ‘highly paid job’.

The assistant minister to the treasurer and former taxation lawyer gave advice to young Australians on Sky News that getting a high paying job is the first step into entering the housing market. He uses his own experience as an example; he left university because the economy was ‘so good’ and had a great start and was able to make a good career.

As an MP he receives a base salary of $199,040 per annum and an additional 25 per cent as an assistant minister, which excludes travel allowances. However the average salary wage is $78,832 per annum; less than half of his base salary. He also calls for a $48.7 billion corporate tax cut because it will benefit everyone and enable young Australians to ‘forge a career’. He also owns two properties, one for investment purposes and the other for residency.

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The statement is a reminiscent of former Treasure Joe Hockey’s advice back in 2015, that to buy a property they need to ‘get a good job that pays good money’. If they had security in relation to the job, ‘then [they] can go to the bank and [borrow] money … that’s readily affordable’. Hockey also said that even though Sydney is an expensive place to live houses were still affordable and ‘if housing were affordable… no one would be buy it’. However in 2014, housing prices in 2014 surged by around 12 per cent. He also stated that the housing affordability issue is simply a supply and demand issue, and that increasing the supply of houses was the key.

In one way, supply would increase if people invested in new housing and could counter the increasing demand, but investors are interested in existing property and have no incentive to invest in new housing.

If it was as simple as Sukkar and Hockey says, many  people would have done it. But unlike the middle class from twenty or thirty years, who could buy houses in their mid twenties with an average income, the property price to income ratio has sky rocketed since then.

In 2016, Sydney had a median house price of $775K (and average house price of $1 million within 20km of the CBD), and 8.1 property price to income ratio. In Melbourne,  the median house price in $555K, where the house price had grew 13.7 per cent since the year before, and by 83.5 per cent since 2009.

The Government is neither willing to restrict negative gearing or capital gains concessions, which they believe would heavily affect the value of the house prices.

If this carries on young Australians will be completely locked out of the housing market, and cause a widening gap between people who do and do not own properties, and so the only way to gain a property may as well be through inheritance.

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16 Comments

  1. what approach should be taken to ensure tough Australians have the opertunity to by a house if they want to? In my opinion, expecting the m to just get a high paying job is madness and there has to be another way. I would recommend the approach taken by some European cities what caps the prices of houses in some areas and also gives immense right to renters, making both owning a house and renting close to the cities pheasable for the younger population.

    Liked by 1 person

    1. Another approach could be for governments to help subsidise the housing industry by dumping more tax money into new property – which they do to some degree. Although, this still raises the concern of whether investors would be willing to purchase non-existing properties rather than pre-exisiting ones.

      Liked by 1 person

    2. I agree here, and putting a cap on house prices in certain areas is an interesting idea that I’ve never thought about, but regardless I agree that the senators seem very ignorant, it’s easy for them to say all these things about getting a good job but I. Reality it’s never as simple as that, and the stats clearly are indicating that there is a massive problem with house prices

      Liked by 1 person

  2. *Bangs Head against wall*
    Why is there a belief that young people who cannot afford a house are stupid? The facts are here. It’s somewhere between 2-4 times harder to by a house for anyone looking now than it was for their parents. Wages have been stagnant while house prices have tripled in the past 15 years. But what’s really insidious about this is the Liberal Party pandering to its buisness supporters by implying young people are lazy and stupid instead of actually attempting to fix the problem by abolishing negative gearing and changing capital gains regulations so young people are at least playing on fair terms when they compete against investors.
    /endrant

    Liked by 1 person

  3. I agree with your statement, that if the government is not going to do any intervention, young people in Melbourne and Sydney may be locked out from housing market. As more and more foreign investors entered into Australian, the housing market causes dramatically increase in house price at first tier cities such as Melbourne and Sydney. The speed of the change in property price can not match with the increase in households’ income. In addition, it is really difficult for young people to get a high-paid job just after graduation.

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  4. Why is it so important for young people to be able to buy property? If a person doesn’t have a down payment, stamp duty, and can’t afford repayments on a mortgage (even when interest rates are low) they are very likely to default on their loan. This bad debt and irresponsible lending is exactly what caused the GFC. With rising populations in large cities and a low elasticity of supply in housing, the price of housing will go up inevitably. Can our economy afford to allow house purchases by people who DON’T have high-paying jobs?

    **Note – my comments do not necessarily reflect my personal opinions. I am being argumentative on purpose to draw out ideas and perspectives.

    Liked by 1 person

  5. Really good job! I think the idea of only being able to buy a house when you have a high paying job is crazy and that the government should at least reintroduce the ‘first home buyers’ scheme where they subsidised people wanting to buy their first homes (correct me if I’m wrong but this is what I remember it being). Not every body is able to get a high paying job but everybody should be given a fair chance to be able to buy a house.

    Liked by 1 person

  6. In order to decrease the relative price of housing, there needs to be either a decrease in demand or an increase in supply. As housing in Australia has a high degree of necessity, it would be hard to decrease demand (like trying to decrease the demand for water or medicine), so therefore an increase in supply would be the most realistic option. By discouraging negative gearing, investors are more likely to sell their property as they aren’t making as much profit from it, which would also result in an increase in supply (shift to the right) within the housing market. This would, in theory, result in a lower equilibrium price and a higher quantity in the market, however, if supply increases too much, it will result in very low prices and high quantity supplied with the same quantity demanded which is exactly what caused the GFC. So whatever the government does, they need to be very careful and sure of what the outcome will be.

    Liked by 1 person

  7. I for one plan to live with my parents for the rest of my life because of how expansive it is to buy a house. The logic that to get a house is to get a highly paid job seems flawed its like saying to become a billionaire the first step is to get a job that pays billions. There is always going to be people that are not highly paid yet everyone needs a place to live. With housing prices increasing by 13.7%, wages cannot keep up. The government needs to step into the housing market as housing is a need a necessity that everyone should be able to afford.

    Liked by 1 person

  8. I think curbing investors buying property here could help this, give Australian citizens first priority before investors both local and foreign. This could help reduce prices and make houses more affordable to young adults.

    Liked by 1 person

  9. Why should real estate agents lower the cost of housing just because young Australian people cannot afford their houses? They clearly have buyers, or else they would be forced to lower their prices. If people aren’t able to afford houses that other people can afford, to the degree that there’s a class of people completely unable to buy housing, isn’t the problem that their wages are too low rather than the price of houses being too high?

    Liked by 1 person

  10. With the current housing prices, it seems evident that the market is not targeting young people as their primary consumers as even without the demand from young Australians the demand for housing is still very strong, strong enough to continue driving housing prices up. As of now, the housing market has no incentive to lower their prices to appeal to young Australians as they already have a strong market targeting richer older Australians.

    Liked by 1 person

  11. Excellent points from everyone. Also worth considering are the sub-markets’ in the housing industry. Apartments in the CBD, old homes in South Yarra, and newly released land in the Western Suburbs all have their own individual supply & demand. A large portion of what is driving up house prices is high demand for ‘leafy’ suburbs where homes for sale are in scarce supply. People are willing to spend huge amounts of money for a 2-bedroom townhouse in Toorak, but are not as willing to pay for homes further from the city.

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