According to a report by Johnston Dixon Real Estate, median property prices in Brisbane will be up over $36 million by 2050. By that time the average annual salary will be $910,000, it will take around 40 years of average annual salary to pay off the family mortgage (up from 10 years of salary today), and Brisbane will have moved into the sphere of “inherited mortgage” or “generational ownership”.
It sounds massive, and the general response seems to be one of disbelief and ridicule. At our local ABC Radio website, people are saying things like:
“I am surprised that someone could seriously suggest that the housing bubble of the last 37 years is something that could be counted on to keep on going indefinitly.”
“House prices have historically(100yrs previous to the last 30 yrs) tracked inflation. The housing market is in a speculative bubble and the bubble is now deflating.”
“Exponential growth never happens there is always a limiting factor.”
I spoke with a real estate agent about the Johnston Dixon Report today, and he said that everyone in his office had a listen to the interview with John Johnston this morning, and well, they thought it was a bit unrealistic. Johnston Dixon have applied a basic mathematical assessment to the data from the past 37 years, and if life was a maths equation they’d be right. But there are a lot of factors to consider here, including some significant economic and social issues.
For example, it is assumed that Brisbane’s population will be up around 4.7 million by 2050. Somehow, a lot of those people will be able to afford the $36.5 million it costs for an average home (what will council rates be like then?), and those that can’t afford to buy will be able to rent one of these average homes for the measly sum of about $36,000 a week, which will be close to twice the average weekly income. So presumably a couple will have to work full-time just to pay their rent, leaving them with practically nothing to pay for the essentials of life like food and clothing. And yet this is how Johnston Dixon suppose 4.7 million Brisbane residents will live 42 years from now.
I’m not an economist, but it seems to me that they’ve misused the statistics. It’s a bit like looking at an experienced cricketer, and seeing that he or she has a very healthy batting average of 52, then assume that he or she must make exactly 52 runs in their next innings. There’s more to the game than just statistics from the past.