The American dream might be to go take a bunch of narcotics and spend all your money in Vegas, but the Australian dream is even more absurd: to own a house (preferably a big one, by the beach).
Talking about property prices has become a national obsession and there’s a good reason for it: house prices in Australia – for desirable suburbs at least – have lost the plot.
Sydney, for instance, today commands some of the highest prices for property (compared to residents’ average annual salaries) anywhere in the world, with residents willing to spend more of a percentage of their paycheck on a home than Londoners or New Yorkers, some studies have found. As previously explained to DMARGE by Investment Manager James Whelan, this mindset comes with both pros and cons.
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What’s not up for debate is that the housing market in Australia’s most populous city is a far cry from how it used to be in the 1970s, when prices would only be around five times the annual salary. Today, that number has risen to around 12.
The ABC earlier this year reported Australian house prices have returned to record highs, even exceeding the peak reached in 2017.
But high prices (usually) also bring with them some incredible architecture or stunning, unobstructed views…at least, if you find yourself in the right area. And with that, also comes the ideation of ‘house porn‘; homes so beautiful in their design and aesthetic, that we simply can’t get enough of seeing enough of them… and how much they cost.
Case in point: this Reddit thread that asks Australians to reveal what $1 million dollars would buy in their “neck of the woods.”
The original poster says he was going through “bit of a ‘house porn’ phase lately, comparing how little I’d get in my area with other parts of Australia.”
His ‘area’ happens to be the Eastern Suburbs, easily one of Sydney’s most sought-after precincts, where house prices can easily stretch from seven into eight figures, and include properties such as this ultimate man pad. He begrudgingly admits that “being the eastern suburbs of Sydney, you’re not getting a house for < $1,000,000 [sic].”
He, therefore, posts a sold listing for a two-bedroom, one-bathroom apartment in Rose Bay with a generous 72 m2 of floor area that was snapped up for $975,000.
Many users were quick to post what they could get for a cool million in their own respective areas (something to be discussed in more detail below).
Others posited this ‘house porn’ trend could explain Australia’s housing market bubble. One wrote: “this whole thread plays into the broader issue that many countries don’t have – straight up fetishizing housing.”
“Whilst you are right it’s just posting pics, it’s symptomatic of a broader issue in the country which is what separates us from other countries who all have the issues you listed above, but don’t have insane prices like Aus[tralia].”
The original poster of the thread disagreed, writing, “Actually I think the reason why is probably a combination of…Record low-interest rates, easy availability of credit, tax incentives like negative gearing, population growth and immigration.”
“I’d say ‘a bunch of redditors posting pictures of houses for fun’ is probably fairly low down on the list of why property prices will never collapse in this country.”
Nevertheless – chicken vs. egg debate aside – Australia’s ‘house porn’ trend is almost certainly a symptom of a society obsessed with property.
Founder of The Rubinstein Group at Ray White, and one of the Eastern Suburbs’ top performing real estate agents, Gavin Rubinstein, told DMARGE, “Generally speaking, everyone around here has an interest in property – whether they own it or whether they are aspiring to [own it].”
“Another reason would be property prices are relatively high and [buying a house] is a great avenue to build wealth,” Rubinstein told DMARGE. “People are aware of that and as the market rises the economy changes, people just want to make sure they’ve made a good investment.”
“Australian culture in general just has an interest in property.”
That said, Rubinstein also told us that, to a great degree, house prices are “a hot topic everywhere” not just in Australia, as it is “such an important sector.”
The r/ausfinance community is full of threads where users admit things like, “Sometimes I’ll look up houses that I could never afford and/or in areas that I’d never feasibly be able to move to.”
“I bought a new house 12 months ago and still look at house prices in the area just to make sure I got the best deal possible. It’s a weird obsession.”
As if to prove the popularity of the topic, within seven days of the “what would $1 million get you?” question being posted, the thread has amassed nearly 300 comments, many of which come from other Australians heeding to the original poster’s call to upload listings of sold properties that met the AU$1,000,000 criteria. We’re sure they had an absolute field day browsing the listings of their local area, to see what sort of architectural masterpieces they could find.
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In stark contrast to the Rose Bay apartment – stunning, though it may be – if you up sticks from Sydney and head north to Cairns, you could bag yourself something similar to this beachside mansion, complete with six bedrooms and three bathrooms for AU$1,085,000 (if you move closer to the CBD, however, expect prices for similar homes to rise).
The poster, deejay1974 adds, “For context, Cairns region (ie, its suburban area) has reasonable entry-level units and townhouses for $125-200K, and reasonable houses in the $350-500K range. Prices above that get you varying levels of ‘extra’ and/or beachside locations. (There is also cheaper, but you’ll usually want cash to improve them). In Cairns city, which can be a market of its own, $1M will get you a 3 bed/2 bath waterside apartment with views.”
Sydney’s high prices – and penchant for quality, however ostentatious – are closely followed by Melbourne, with the former world’s most liveable city also demanding prospective buyers part with large sums of cash if they want to be close to the hustle and bustle of the CBD, or just far enough removed to revel in everything suburbia has to offer.
Take this two-bedroom townhouse in Glen Iris, as a prime example. It hadn’t even been built when it sold in November 2020 for $989,000. Sure, it offers the very latest in design, materials and fixtures and fittings and could easily be described and “pure, unadulterated house porn”, but, as the poster says, “$1m for a 2 bed off the plan townhouse next door to a childcare center, on a fairly busy road.” Mind-boggling.
What the Reddit thread ultimately confirms, is that if you value space and size, but don’t have endlessly deep pockets, then you have no choice but to extend your search beyond the confines of a CBD. To do so also greatly enhances the chances of coming across homes that you simply want to admire, from both the outside and in, even when on a budget.
Not that that’s a bad thing of course. Rural areas can present houses like this one, in WA’s Margaret River, which offers six-bedrooms, parking for four cars and over 2,000 m2 of floor space, with $50,000 change from the $1 million budget.
Experts have attributed the snapping up of property in recent months to the global pandemic and the uncertainty it caused. In Australia at least, to help alleviate a repeat of the 2008 financial crisis, the RBA reduced interest rates to an unprecedented 0.10 per cent in November 2020.
Naturally, the national interest rate plays a huge part in someone’s house buying decisions, and so the end of 2020 suddenly became considered a prime opportunity for Australian house hunters to score a pad for the first time.
As for the future: if Australia continues isolated from the rest of the world, prices across the board could remain (relatively) stable (or even fall). If business as usual resumes, however, the property market could start to skyrocket again (provided interest rates don’t then jack up too hard alongside them). As ever, zones with limited supply and high demand will likely retain their value, even if Australia remains isolated from the world (or unless they suddenly lose their demand).
Happy house hunting.