Australia’s housing affordability crisis is forcing young people to take extraordinary steps — whether it’s a home a long way from the city or a tiny spot in a block of flats.
Sydney IT accounts manager Rob Cooper is one homebuyer who’s looked outside the square.
He rents in Woolloomooloo but can’t afford to buy there, so he’s purchased a rental property in a trendy city suburb more than 1,000 kilometres away, in Adelaide.
The median house price in Adelaide is $455,000 compared to Sydney’s $900,000.
“So, West Croydon is the suburb. It’s about 7km away from the city and it was just under $700,000 for a three-bedroom house,” Mr Cooper told 7.30.
“I feel it’s good value for what you get and certainly has the potential to grow, which is the main thing.”
Mr Cooper is part of the generation dubbed “rent vestors” — people who rent where they want to live and buy an investment property somewhere they can afford, with the help of tax perks like negative gearing.
“I think it’s a good option for people unsure of how to get on the property ladder and I’m still able to afford the occasional smashed avocado,” Mr Cooper said.
He bought the rental with the help of Bryce Holdaway’s property-investment firm.
Mr Holdaway, a buyer’s agent, described the purchase price as “laughable”.
“In some cases you can’t even pick up a one-bedroom apartment in the same distance, let alone a three-bedroom house on a parcel of land,” he told 7.30.
Mr Holdaway first saw an opportunity in Adelaide about 18 months ago, because homes were affordable and rental returns were good.
“The reason we went to Adelaide were the three Ls — location, land and looks,” Mr Holdaway said.
“You can get terrific locations … within 5km of the Adelaide CBD that’s got a beautiful period home on a 600 or 700 square-metre land, well under $1 million.
“If you did the same in Melbourne or Sydney — same position, same house, same land size — you’d be paying definitely double and in some cases triple.
“Being in that early part of the growth cycle, where you could pick something up that seemed ridiculously cheap by Melbourne and Sydney comparison, was really enticing.”
There is no official data to show how many homes are being snapped up by investors but according to realestate.com.au there had been more than 1 million internet searches on South Australian properties from the eastern states in the past six months alone.
The number of searches from Victoria was up 68.6 per cent.
It is a trend noticed by Adelaide real estate agent Mandy Doolan.
She has sold 10 properties to interstate investors this year, from first-timers to those adding to established portfolios.
“The reason they are interested in the area is because we are only five minutes from the city, you can see it at the end of the street,” she told 7.30.
The interstate interest is a shot in the arm for a state in the economic doldrums.
South Australia has the highest unemployment rate in the nation and in October will lose its local car-manufacturing industry.
The state also has a housing-affordability problem.
Adelaide single mum Claire Mills sees interstate investors as unwanted competition, who could drive up prices.
“I don’t particularly like investors,” she told 7.30.
She has saved a big deposit but because her income is not stable the banks have knocked her back for a home loan — twice.
“I’m paying $370 a week in rent, which is pretty expensive as it is,” she said.
“To not be able to be given a home loan that would be approximately the same repayments is pretty heartbreaking.
“Even once I get pre-approval, I’ll be looking at probably getting a home loan for about $230,000.
“I don’t know what you’re going to find for a family of four for $230,000.”
University of Adelaide housing researcher Associate Professor Emma Baker said there were a growing number of people paying too much for housing.
“I think a lot of people in Adelaide find their housing unaffordable,” she said.
“It might be lower than in Sydney but we still have about 14 per cent of South Australian households who are paying more than 30 per cent of their income on housing costs.”
The possibility of higher interest rates could also make things more difficult, not just in Adelaide but in Sydney and Melbourne as well.
“I don’t know where I’m going to end up,” Claire Mills said.
“My goal is still to be in my own home by next year. What that home will look like I’m not sure.
“I’d like to be given a go. I’d just like someone to give me a go.”