We have all seen the headlines regarding property prices in Australia with cities such as Sydney seeing a massive increase in the cost of housing. Indeed official data shows that house prices have increased by 60% in Sydney over the last five years with apartments also showing a healthy rise of 44%. When you bear in mind that wages have not increased anywhere near that kind of level it is obvious that first-time buyers in areas such as Sydney are slowly but surely being priced out of the market.
However, a number of charities in New South Wales are promoting a shared ownership scheme which could be the answer to the prayers of many looking to climb aboard the property ladder.
Property market in Sydney
As we touched on above, property prices in Sydney have increased dramatically over the last few years and when you bear in mind that someone on AU$85,000 a year is struggling to buy property in Australia, this highlights the problem. It seems to be those in the median income bracket, often defined as middle-class in the UK, who are struggling the most. On one hand they do not qualify for social housing or council properties while they are unable to save enough to cover the initial 10% deposit required when buying property.
This means that many are pushed into the rental market which increases demand for property from buy to let landlords and ultimately pushes prices higher and higher. This is the ultimate in vicious circles and something which we have seen in areas such as the UK.
The coalition of charities in New South Wales is looking to work together with first-time buyers earning between AU$70,000 and AU$100,000 per annum. The idea is that the first-time buyers will raise as much money as possible and the charities will cover the balance. As and when buyers are in a position to invest more in their property they will simply buy out a share of the charities investment. The only potential downside is that as shared ownership becomes more popular, this pushes prices higher and there is a greater cost when buying out shared ownership partners further down the line.
However, on the upside the element held by the first-time buyer will also be going up in value offering them potential to remortgage their share to buy out the remaining share. It can get a little complicated but for many people it could be their one and only chance to climb aboard the property ladder – before the buying frenzy in Australia pushes property prices even further away from them.
The various charities involved in this scheme are also looking to invest directly in property developments and use the rent from these developments to assist those going down the shared ownership path. We can assume there will be various tax breaks for charitable investments and it will be interesting to see how this particular initiative pans out. Will it have a major impact upon Sydney property prices? Could it reduce demand for private rental arrangements and take some steam out of the Sydney property market?