Lessons from property and inequality

Lessons from property and inequality

There are more people without a property

Many of my friends remain unconvinced that property is a necessity and prefers to spend their money in to stuffs or invests into everything they believe will be the future and skip property totally. Well, actually property is really not necessary especially if one is earning well above spending or that one is investing and earning returns which are way above the usual average. In this case, property is just taking too much time and not necessary at all. Don’t believe me? People often cite Elon Musk as someone who does not own a home. Great example… Haha.

Anyway, here’s the reading today ‘wealth inequality in Australia and the rapid rise in house prices‘ about Australia, a country where most of my friends’ kids are studying in a university there or may be be studying at in the very near future. Not my first preference though, I would prefer my kids to have a UK qualification instead. Just personal choice yeah and with lots of debates if someone disagrees. πŸ˜› Here are some learnings from the article.

#1 – Australians are on average 4th richest people in the world!

#2 – Despite Covid-19 pandemic and recession in 2020, Australia’s overall household wealth has grown as much in last 3 years versus the previous 15! Reason is because of soaring cost of residential properties across the country during the 3 years’ period.

#3 – Over two-thirds (69%) of the overall increase in household wealth during the pandemic was in residential property, which rose in value by 22% through the year to December 2021β€”the highest annual increase in 35 years.

#4 – There are now over 130 billionaires in Australia and in 2021 their wealth grew, on average, by $395 million or 12%. It means they now hold almost as much wealth as the 2.8 million households in the lowest 30% of the population,” 

#5 – Between 2003 to 2021:

  • home ownership among people aged 25 to 29 fell from 44% to 38% and among people aged 30–34 it fell from 57% to 50%
  • the proportion of median household disposable income required to service a typical home mortgage rose from 27% to 41%
  • the proportion of median household disposable income required to pay the median rent rose from 26% to 31%.

#6 – Out of almost 50,000 rental listings surveyed by Anglicare Australia in May 2022, only seven were affordable (costing less than 30% of income)

Please do read here for the full article. A very interesting read. ‘ wealth inequality in Australia and the rapid rise in house prices

Lessons from property and inequality

If we read carefully, we should be able to note that one of the reasons for this inequality is caused by property. Owning one ensures the homeowner is within 50% of everyone aged 30-34 and this meant that they would not have to look at property listings and realised that only 7 of 50,000 listings were considered affordable for many of them.

If the median household proceeds to buy a property, the typical disposable income required to service home mortgage has risen from 27% to 41%. Yea, that means every month, there is just 59% of the salary left as soon as home mortgage is paid. Any household paying 27% of their median salary is likely to enjoy a higher disposable income on everything else every month.

It’s about time and rising prices

Do not simply buy a property yeah, that’s called foolish. However to think of property as not important may be on the same track too. Renting seems cheap only because we look at it by monthly. Paying for a mortgage would have a fixed period but paying for rental? That’s forever and generations after generations. Plus the fact that all data points to the fact that inflation does happen and this will continue to push up prices of everything and that includes property prices too.

Happy learning from an advanced property market. Else, just earn way an income way above our expenses and we do not need to own any property, just like the man often cited by everyone as having no property, Elon Musk. Cheers.

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