Household income!

Hey everyone,

Haven't posted for a while but have been here just sitting back reading everyone's thoughts on the current market within Australia.

Would love everyone's thoughts on what they believe is the biggest factor in long term sustainable growth. I believe household income is the biggest contributor and for that reason am a little worried about my investment property on the Sunshine Coast with a median household income of only $840 a week.

Im currently looking for my 2nd Ip and am looking at suburbs with household income of $1200 and median value of under 450k.

Couple of suburbs I've found in Melbourne are Epping and Sydenham.

Any advice or constructive criticism would be greatly appreciated.

Thank you all in advance

 

That's an interesting criteria to look for!

Not saying you're right or wrong but how do you think that translates into growth?

 

Obviously along with few other factors, proximity to CBD, train lines etc.

I just believe household income is massive due to the fact that people can only pay for what they can afford. If a suburb has a household income of $800 they may only be able to afford a property worth $450k and as we all know property prices are dictated to by what everyone is willing to pay.

So how can a property in that suburb be worth 600k in 5 years if household income doesn't increase? And no one can afford repayments of that loan amount.

That is why places like the Sunshine Coast have a higher rental yiejd because the low household income allows only the minority of people to buy property and therefore higher demand for rental properties.

Sorry if that doesn't make sense haha. Half asleep typing this

 

I'd never thought of looking at this when looking at an IP.

Where do the figures come from? Are they reliable?

 

I'm generally more a believer in changing trends allow for changes in asset prices, more than the static figures which present the current values.

ie, is an area with 2k per week average household income good - if it's declined from 3k over the last 5 years?

Or the inverse, an area which has gone from $700/wk to $1000wk over the last two years?

The transitions are where the real money is made.

 

This makes a lot of sense

 

Are they up to date or are they still using information from the 2011 census?

 

I'd be concerned the figures are too dated and they also rely on self reporting rather than declared income. I still like the logic behind it, I wonder if the ABS have yearly data like this.

 

Household incomes have an impact price growth but they are one only part of the picture–a slew of factors are involved. And as Corey points out, the trend is worth looking at...

Riddle me this.

Household income halves in a suburb from $150,000 to $75,000.

The standard variable rate drops from 5% to 1%.

What happens?

 

Great minds...

 

@Steven Ryan makes an absolute killing with more loan applications than ever before

 

If I remember correctly, you bought very close to the beach and the town centre at Caloundra. A property like that will not only rent to a retired person but also a school teacher, nurse etc who would rather live close to the beach than inland near the hospital. I wouldn't be too concerned about SC as this city has two types of demographics -- retirees and sea changers. The sea changers may well have demand for high end housing which will keep up demand for the higher-priced properties close to the beaches, whereas properties inland would have less demand I would think - that is what will keep growth subdued further out but higher on the real coast.

I cant say anything about Melbourne suburbs, but this is my shopping theory anyway. As long as you have a hospital or a university, you are in the right place. Be in a suburb that has a hospital AND a university and it should work for any capital city.

 

So, a suburb like Bundoora (in Melb) could fit this criteria? There is a hospital (and numerous medical clinics) as well as to uni's - RMIT and Latrobe. (If you stretch the topic, the 2 major Northern Suburb hospitals are pretty close to this suburb at opposite ends - ie Northern and Austin hospitals).

What are peoples thoughts?

 

Prices could rise if the household income income of the people buying into the suburb increases. if i suburb begins to become more desirable the average household income will increase as more people are attracted to an area, those with a bigger budget will get the properties. You dont need the existing residents to get a pay rise, you just need people who are paid more to move to the area.

 

I think this is a really good post.
Plenty of independent people are talking up the Sunshine Coast as a growth area for prices.
Some major developments in the pipeline etc.
However, whist I am not necessarily saying I would not invest there, I would be cautious.
Just not 100% convinced there will be the income growth there to drive prices to any great capital gain.

 

I don't think of it as "interesting". More obvious, like the obvious correlation of the mining boom incomes alongside vast parts regional WA and QLD, compared to some of these places now.

 

In yet the money was made if you bought in those areas prior to the median wages sky rocketed.

If you owned at the peak of the median wages, you're most likely to be underwater now.