Proof the boomers did have it easier: Photo exposes alarming truth about Australia's property market
A modest two-bedroom home in Paddington has become a symbol of Australia’s generational housing divide after selling for $3.25 million - more than 100 times the price it fetched in 1971.
Vendor Neil Wilson bought the classic Victorian terrace home on Hargrave Street as an investment property before moving overseas for work.
'I paid $28,000 and had to take a second mortgage at 9 per cent interest,' Wilson told the Australian Financial Review.
He said that at the time, people told him he was 'crazy' because the boom in Paddington was over.
Adjusted for wages, the transformation is even starker. When Mr Wilson bought the Hargrave Street terrace in 1971 for $28,000, the average Australian earned about $5,000 a year, meaning the home cost roughly five to six years’ salary.
Today, with the property selling for $3.25 million and the average full-time wage sitting just above $100,000, it equates to around 30 years of income.
More than five decades later, the market others once doubted has transformed beyond recognition, with the median house price in Paddington now $3.65 million.
But there are now signs that rising interest rates are beginning to cool conditions, with Sydney and Melbourne values slipping over the quarter.
This Victorian terrace home in Paddington (pictured) sold for 116 times what it was purchased for back in 1971
AMP chief economist Shane Oliver (pictured) said home prices had stalled in Sydney and Melbourne and the mid-sized capitals could follow if there are further rate hikes
AMP chief economist Shane Oliver said home prices had stalled in Sydney and Melbourne, while Brisbane, Adelaide and Perth continue to record strong growth, albeit with some slowing since late last year.
He said that if rates rise significantly further, home prices could fall.
'The broad picture remains one of a slowing in price gains since October as the February rate hike and talk of more to come along with poor affordability is increasingly biting after last year's surge in average prices to record highs,' he said.
'Sydney and Melbourne are getting hit harder but even the boom time cities of Brisbane, Adelaide and Perth have seen some loss of momentum since late last year.'
Mr Oliver said that while he believed the RBA could leave rates on hold, inflation surprising on the upside again in January meant there was a high risk of further hikes.
'The buying capacity of home buyers will remain well below the levels seen in 2021-22, and may even start to fall again, at a time when home prices are 15 to 20 per cent above their 2021-22 high. This will limit the upside in property prices.'
Mr Oliver said more rate hikes, a sharply rising trend in unemployment and a sharp slowdown in net migration could result in a resumption of property price falls.
'On the flipside a resumption of rate cuts and faster than expected population growth could drive a stronger rise in property prices,' he said.
Prices in Melbourne (pictured) have stalled with home prices falling by 0.4 per cent over the rolling quarter according to Cotality
Cotality research director Tim Lawless said Sydney and Melbourne have been less resilient to the February rate hike.
'The clear slowdown in housing conditions across Sydney and Melbourne could signal an easing in growth conditions elsewhere down the track,' he said.
'Vendors are looking more motivated in Sydney and Melbourne, possibly looking to beat a further softening in selling conditions as clearance rates ease and demand slows.'
Ray White chief economist Nerida Conisbee said that if talk of potential changes to the Capital Gains Tax discount for investors looks like a done deal ahead of the May Budget, it could lead to a drop in transactions.
'Last time it was up for discussion (ahead of the 2019 federal election) we saw a massive decline in the number of properties being listed and sold,' she said.
On the ground, selling agent Laing & Simmons' Sebastian Maxwell said that while prices remained strong, the rising cash rate had begun to hit buyers.
'Last year when rates were trending down, we were seeing 10 to 15 groups through an open house, now if we see eight to 10 groups, that's a good open,' he said.
